Analysis: It sure is sunny here at Slabbed

But first, a timely word from a sponsor:

Labor, as a percent of Bay St Louis Water and Sewer Find Revenue: Source Annual Single Audit Reports
Labor, as a percent of Bay St Louis Water and Sewer Fund Revenue: Source Annual Single Audit Reports

Continue reading “Analysis: It sure is sunny here at Slabbed”

Since everyone likes a nice graph

If the City of Bay St Louis only looked at revenues and continued to allow General Fund salaries to be paid by the Water and Sewer Department here is a graphic representation of the new $60/month minimum billing broken down by current unfunded liabilities.

Source: Slabbed New Media notes, other external media accounts
Source: Slabbed New Media notes, other external media accounts

My brother Darryl tries leading my other brother Darryl down the primrose path: A Going Concern Update

Last Thursday evening the Bay St Louis City Council held a recessed meeting that was devoted almost entirely to the troubled state of the City’s finances. Audit report excerpts were read, sweeping proclamations regarding accountants being meek were declared and into nonsalient side subjects was the discussion frequently steered. And yet through it all the public still managed to learn a few things.  I thought Geoff Belcher did a great job with his recap of the meeting for the Seacoast Echo so it is there we start:

Kolf said one of the reasons the city’s mandated audit is being held up is because the auditor is concerned that the utility rates aren’t high enough to pay everything and are a “going concern.”

If the city fails to raise rates, he said, that could make the bank trustees in charge of the bond nervous and they could legally require the city to pay the funds back immediately.

Falgout countered that the auditor is concerned about far more than the city’s utility budget.

So we getting this folks, we have the City Clerk blaming the Going Concern opinion on just the Utility Fund while the Auditor’s are telling the City Council they are concerned with the entirety of the City’s dismal financial situation. Kolf used that misconception in an attempt to strong arm the City Council into adopting the Mayor’s Utility rate hike, a proposal that according to Councilman Joey Boudin the council saw for the first time just before the start of the recessed meeting.

But there is more because the finger wagging from Clerk Kolf and City Attorney Rafferty was just beginning:

City attorney Donald Rafferty told the council he felt the proper thing to do would be to announce to the bank trustees that the city likely not be able to make the first payment on the refinanced bond.

This is too rich folks it really is and one has to wonder who Mr Rafferty’s client is at this point.  You see folks it would be one thing if this was just a simple case of the pot trying to give the bums rush to the kettle but the level of dishonesty in the “advice” that was being dispensed last week to the council was simply stunning. The scare tactics worked too: Continue reading “My brother Darryl tries leading my other brother Darryl down the primrose path: A Going Concern Update”

Proposed Bay St. Louis utility rate hike fails

Last night, the $9/month water and sewer rate increase proposed by Mayor Les Fillingame failed to gain the support of four of the City Councilmen. Councilmen Doug Seal, Lonnie Falgout, Mike Favre and Joey Boudin all voted no on the Mayor’s proposal.

City Clerk David Kolf addressed the outstanding FY 2013 audit, specifically the proposed going concern opinion on the City’s FY 2013 Financial Statements, which Kolf blamed solely on the Utility Fund as he attempted to use the proposed going concern opinion to justify the Mayor’s rate hike. Kolf was countered by Councilman Falgout, who indicated the Auditors’ proposed opinion, per his discussion that day with Auditor Jennifer Bell, was derived from the overall poor financial condition of the City.

Falgout, explaining his no vote on the rate hike, wants to undertake a comprehensive review of the City’s finances as he indicated the latest financial reports show that several revenue sources in the City’s general fund, including sales tax collections, continue to decline year over year.

Public input on the issue of the Utility rate hike was mixed.  In a particularly colorful symbolic display, local Realtor Avra O’Dwyer scolded the Council Continue reading “Proposed Bay St. Louis utility rate hike fails”

Chapter 9 Bankruptcy: A primer for the Citizens of Bay St Louis

The notion that the City of Bay St Louis was experiencing financial problems is not by any means new. Just over a year ago the citizenry heard lots on the topic during the municipal election with Mayor Fillingame unequivocally proclaiming the City was in good shape financially. The irony is by that time, the City was already using its trade vendors as its financier. You see folks, when the bills don’t get paid the trade vendors become an unofficial bank. Even worse, it is the kind of unofficial bank that must make forced loans that bear no interest. It was a sign of things to come in a fools game where the passage of time is the ultimate enemy.

The warning signs were literally everywhere and yet for month after precious month the City Council did nothing. Worse, it appears certain members of the Council were simply going along with the Mayor because it was easy. Last October the City Council, at the request of the administration, finally took action on utility rates to fix the problems the administration identified in the Water and Sewer operations. The increase was targeted at high volume water users which it turns out was the very segment of the City’s customer base that was in decline. Now the Administration claims the rate increase was insufficient.

Last January Slabbed published a detailed analysis of the irresponsible budget practices that lay at the heart of the City’s financial decline. Since then the City has spent money it was legally required to set aside for debt service on municipal operations. Broke, the city made a loan with a local bank that it lacked statutory authority to make.  The proceeds of that loan, mistakenly called “a line of credit” by the Mayor and Council, was split between the water and sewer fund and the general fund. Despite being at every meeting the City Attorney was evidently checked out MIA allowing the Mayor and City Council to step out making what Councilman Lonnie Falgout now terms an illegal loan. I fear it’s gonna take the elected officials here to have to pay big dollars out of their own pockets before they’ll learn the value of operating within the law.

Unable to make the scheduled debt payment on Water and Sewer debt due in July 2014, the City Council again kicked the can, refinancing debt dating from the 1990s that had already previously been refinanced.  The City, caught in a downward financial spiral incurred hundreds of thousands of dollars of debt issuance costs that could have been used to pay for City operations.  From a financial management standpoint, the performance of the City’s elected officials really can’t be much worse. Continue reading “Chapter 9 Bankruptcy: A primer for the Citizens of Bay St Louis”

City Auditors considering Going Concern Opinion on Bay St Louis Financials

Four hours into a marathon Bay St Louis City Council meeting that lasted almost five hours, City Clerk David Kolf disclosed to the City Council that the municipal auditors have been in discussion with City officials regarding the issuance of a going concern opinion on the September 30, 2013 City of Bay St Louis financial statements that are included as part of the annual Single Audit of the City’s finances and compliance with applicable laws and regulations. The single audit report for the City is due on June 30, 2014, a due date which Kolf admitted would not be met as the auditors are still waiting on the Administration to provide the firm with crucial information needed in order to complete the report, a complete list of which was provided to the Mayor on  May 6, 2013 when Auditor Jennifer Bell presented the audit firm’s preliminary findings to the City Council.

Mayor Fillingame, who has previously steadfastly maintained the city’s finances were solid, made no public comments on the City’s dire financial situation to the Council before Slabbed’s deadline for publication instead relying on Clerk Kolf to explain the auditor’s proposed  opinion.  Kolf blamed the City’s Utility fund for the financial problems leading to the rare proposed audit opinion, which essentially means the City’s solvency is doubtful absent a bankruptcy filing within one year of the date of the opinion.

Douglas Handshoe, a CPA that is publisher of the Slabbed New Media website explains:

Auditors are reticent to issue going concern opinions as it often represents a financial kiss of death for the entity being audited.  While the academic research on this topic has been fairly exhaustive, it mostly focuses on the instances where an entity fails without the auditors ever issuing  a going concern opinion.  Business solvency, bankruptcy and auditor reports are closely intertwined by operation of the legal system so there is a compelling interdisciplinary interest in this topic.

The academics find that reticence in their study results. Handshoe noted that in a Wall Street Journal article on the topic, Anne Simpson, senior portfolio manager and director for corporate governance at California Public Employee’s Retirement System (CalPERS) said “A going concern warning from an auditor is rarer than a hen’s teeth, you have to be dangling off a cliff, hanging on by your fingernails before the auditor blows the whistle.” Continue reading “City Auditors considering Going Concern Opinion on Bay St Louis Financials”

City of Bay St Louis at financial cross roads: Budgeting hope versus reality

What I witnessed yesterday evening at the City of Bay St Louis budget workshop gave both reason for hope and horror. Let’s start with the hope and not as a budgeting tool.

The City Council, at least 4 of ’em anyway, are providing the kind of financial oversight the taxpayers deserve in this time of fiscal crisis. A Water & Sewer bond payment the City can’t afford is due in less than a month, as is the City’s audit to the Single Audit Clearinghouse. Part time City Clerk David Kolf is officially missing in action, out on medical leave according to the Mayor and certainly une victime de la guerre. The City Council’s oversight is vital and that is where we get to the horror part.

It appears Mayor Fillingame’s financial plan to deal with the crisis is hope – hope that the rains stops so people will water their yards more and use more water, hope that unrealistically budgeted revenues will be realized, hope that no one notices the almost $1MM in salaries the Mayor is expending in the Water and Sewer fund, which fund City Council sources are indicating to Slabbed the Mayor has pushed salaries the general fund could no longer afford to pay. Even worse is he contradicts himself with his financial explanations. Frankly folks, I’m not sure if Hizzoner is that slick or that financially clueless but either way the results are proving disastrous.

Lest people think I am gratuitously bashing Les what we need is a real life example and it is encapsulated in one exchange between Hizzoner and Jennifer Lenain, a free lance writer for the Sun Herald. Jennifer was looking at the latest budget actual report and she evidently did some homework and nabbed the 2013-2014 approved budget from the City’s website. Slabbed covered the financial concepts behind Lenain’s question to the Mayor back in January such question as salient today as it was then. Continue reading “City of Bay St Louis at financial cross roads: Budgeting hope versus reality”

PSA: Town Hall Meeting for Bay St Louis Ward 2 residents and business owners

Councilwoman Wendy McDonald will be hosting a town hall meeting for residents and business owners in Ward 2 next Thursday evening, May 22, 2014 from 5:30 to 7:00 PM in the Bay St Louis City Council Chambers.

Topics for discussion may include parking, speeding, activities and events such as runs, festivals, Second Saturday etc., noise, harbor opening and other topics of interest to the residents and business owners in our Ward. Because there will be a 2 ½ hour workshop related to the city budget starting at 3 PM on Tuesday, May 20, 2014 with a council meeting to follow at 5:30 PM we will not get into the budget at this meeting but use this time to address other concerns such as those outlined above.

Mike Favre, Councilman at Large and Les Fillengame, Mayor are attending this meeting as well and are interested in your input and feedback as it relates to Ward 2. Please feel free to send in topics of interest ahead of time if possible so we can allow time to cover topics of interest and for participation from the residents and business owners.

Wendy McDonald, Councilwoman Ward 2