Writing checks that can’t be cashed: Bay St Louis is broke

Horrifying isn’t too strong of a term to describe what I witnessed back on May 6th during the City Council’s finance workshop.  Hopefully I’ll be able to explain why I was horrified as the subject matter is somewhat technical in Mississippi Municipal Finance.  From a big picture standpoint, financially the City of Bay St Louis is a rogue municipality, making loans without any statutory authority to do so while spending fantasy tax revenue, unrealistically budgeted and never received.  Worst of all is the Mayor is in deep denial – either that or he gets his kicks from telling whopper after whopper about the state of the City’s finances. It does not serve the public interest.

To me, there were two moments that encapsulated the entire two hour workshop the first was when auditor Jennifer Bell was giving her presentation on the internal control and legal compliance findings.

To set up her finding on purchasing, rumors have been swirling since last August the City was financing its deficit using what is most commonly known as its trade payables, or in Mississippi Governmental parlance its claims docket.  Whether a local government or a struggling business, when cash gets tight the first way operating cash flow is financed without a bank is to simply let bills ride until the money comes in to pay them.  Robbing Peter to pay Paul is a time honored way of buying time in the business world for cash starved entities public and private. Unfortunately Mayor Fillingame and City Clerk David Kolf have been telling whoppers about the City’s cash flow being A-OK for months so when the rubber met the road the Mayor essentially accused the auditor of fabricating her results.  Dwayne Bremer’s story on the workshop made it sound like it some sort of difference of opinion.  Here is the salient snippet:

Falgout said the draft audit states that the city is experiencing a cash-flow problem and that bills were being paid in order of priority, rather than order received.

Fillingame said that he challenged the assertion and pointed to the fact that the audit is not yet complete.

Audit results are true/false propositions folks. Either the City has delayed paying its bills for 100 days or they didn’t. And since business do not run their bills late 100 days for no reason, a cash flow problem would be the only reason it would do so.  Here is the draft finding: Continue reading “Writing checks that can’t be cashed: Bay St Louis is broke”

My Professional Opinion: Horrifying

Yesterday’s Bay City Council finance workshop was horrifying on two levels in fact folks. I put the workshop out on Twitter yesterday via my smartphone while Dwayne and Jennifer took pages of copious notes old school style. The long and short of it is the City is broke and has been broke for several months. Now the Mayor is pitching a new plan to refinance the City’s debt just weeks after telling Dwayne that City finances were groovy. The plan hizzoner is pushing will plunge the City deeper into debt to paper over the accumulated deficit the City has been financing off the back of its trade vendors and claims docket.

Accounting, legal compliance and related financial concepts are arcane, sometimes mind numbingly so thus I get a charge when audit presentations are recounted by the print media. I’ll be back with a detailed post on this exact topic but first here are the takeaways from the other two media organizations in attendance on this issue of vital public interest:

Bay eyes audit; tax hike may be near ~ Dwayne Bremer

Bay St. Louis council passes measure supporting LGBT residents ~ Jennifer Lenain

No word in either story on whether the City Council authorized the Mayor to begin discussion with Butler Snow to begin the bond refinancing process as proposed by Mayor Fillingame. In fairness to the Echo, Dwayne was fighting deadline issues.  The Sun Herald is not in the game.

Sunday Links: May 6th looms larger, Oooops Greenlit no more, sorry plus new GOP bagmen

First up from denial is a very dangerous thing file:

Mayor says no shortfall for Bay ~ Dwayne Bremer

Fed judges: ‘Jammer1954’ wasn’t federal prosecutor ~ John Simerman

All eyes now on Aircheck.

Finally this blast from the recent past that is well worth highlighting:

The Real Face of Mississippi Government ~ James @ Jackson Jambalaya

Steppin’ out: Those “new” wards will be the death of me……

Wards 5 and 6 were annexed around 2007ish 2006ish so better late than never……

Mayor says residents’ failure to pay bills is keeping Bay behind ~ Geoff Belcher

Speaking of better late than never I also have this:

Three defendants settle out of court in Bay Tech lawsuit ~ Cassandra Favre and Geoff Belcher

Court documents raise questions about Bay-Waveland School District’s purchase of the old Bay Tech Building

Last month the Seacoast Echo reported the Bay-Waveland School District had purchased the Old Bay Tech building on Second Street in Old Town Bay St Louis to house the district’s administrative offices and alternative school. This purchase would mark the beginning of the final phase of school district’s recovery from Hurricane Katrina and breathe new life in a building that has sat empty since the storm.

In a way that piece also encapsulates the state of the school district in 2012, which has found itself at odds with local good government activists over several issues that I will not go into on this post.  That said today the FEMA funded transaction the district executed to purchase the Bay Tech building will be examined in detail because the Seacoast Echo got it wrong, which is strange considering the editor of the paper is married to the school board president. To kick-start things let’s visit with that story I linked above:

The Bay St. Louis-Waveland School District has purchased the old Bay Tech building in Bay St. Louis, hoping to turn it into a new district office and alternative school.

The building and 1.6 acres of land located at 200 N. Second Street were purchased for $580,000. According to county tax records, the previous owner was Magnolia Group LLC of Shorewood, Ill.

Now when I say the Echo got it wrong I do not mean the reporting was lazy, as I think the reporter faithfully reported everything that was said in the meeting. We need to examine another snippet though, before Slabbed tells the in-depth story:

Project Coordinator Brad Barlow said buying the building made sense for the district.

“We’ve explored many routes and found that this was a cost-effective way,” he said.

Although the project has been delayed over other projects, Ladner said, the district wanted to get the schools rebuilt first.

Funding will come from FEMA proceeds and district funds.

I’ll admit I saw this piece last month and came away thinking $580K for a building and 1.6 acres of land in old town was a bargain. That is until I learned that it was sold on June 7, 2012 by the Magnolia Group to a LLC owned by 3 local business people for $325,000, that public records show owned the property around a month before flipping it to the school district for a $255,000 profit. Let’s establish that via the Multiple Listing Service aka the MLS.  I have made certain redactions to protect certain individuals that I do not believe were involved in the transaction: Continue reading “Court documents raise questions about Bay-Waveland School District’s purchase of the old Bay Tech Building”