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”
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”
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”
I have a part two coming on Muckraking Job Security plus I hear heated words were exchanged last week at the Bay St Louis City Council between certain interested citizens in the presence of the Sun Herald reporting duo assigned there to.
Man o man is it raining cats and dawgs but the summertime heat is on down here in Soggy Bottom. All that and more on tap.
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”
Mayor Fillingame of Bay St. Louis can not get a free pass on the city’s current financial crisis. Before the last election several citizens had determined that the city was going down a financial path of going broke. Mayor Fillingame did nothing but deny, deny and deny our findings. And at every turn in the downward spiral of the city’s finances he gave excuses. He proclaimed all would be fine in two months, three months, next month,, tomorrow. Then City Council would capitulate and let him keep doing the same things again and again depleting all of our reserves.
The Administration is still in a state of denial believing that they can borrow their way to prosperity. All they are doing is kicking the can and financial crisis down the road. The Independent Auditors Draft report presented to City Council on May 6, 2014 is page after page confirming what we concerned citizens have been telling City Council for months about mismanagement and deception by the incumbent administration.
Until we have at least four council members who are strong enough to stand up for and take charge of this city, the present administration with denial, delay tactics and deception will continue to lead the city into a collision course with reality.
This Administration has champagne taste but the city of Bay St. Louis can only support a beer budget.
Bay St Louis
As I hear the other night at the Bay-Waveland School Board meeting the fact student enrollment declined from 2012-2013 school year was discussed:
‘Just a buzz about the Bay’ as population rebounds in Bay St. Louis ~ Anita Lee
Sales tax is flat at best, record number of properties are being turned over to the state after failing to sell at tax sale, the local Casino is not doing as well as it has in the past as the gaming market has become saturated both locally and regionally. I think the polite term here is “headwinds” and not at all indicative of a Town in the midst of a population boom.
Not that the Bay doesn’t have a lot going for it beginning with its location. What those census numbers, if they are completely accurate, show is a place in the midst of a secular demographic change typified by new residents such as James Carville and wifey. Somewhere out there in cyberspace right now is a picture of me and my bride at a nonprofit event where we sat with a very nice older couple that are coming home to the Bay after a successful business career in the greater New Orleans area. Not that Carville and company are not quality additions to the taxpayer pool here because they are, but it’d be nice to see the community get younger overall.
In-substance defeasance is an accounting term for removing debt from an entity’s balance sheet though the debt itself is not cancelled. The debt is considered paid from an accounting standpoint if a dedicated sinking fund is created with a financial intermediary that is sufficient to extinguish the original debt over time. In the case of the City of Bay St Louis, the proposed Utility Fund refunding bonds would In-substance defease the previous refunding bonds that In-substance defeased the original bond issue.
In layman’s terms this would mark the second time the original Water and Sewer capital improvement bonds have been refinanced. Having a bit of experience with the back end of this type of transaction, I can say first hand that it is complex and carries hefty legal and professional fees as the Bay City Council found out first hand at last night’s meeting.
In other news:
Bay eyes cuts, new projects to fix budget ~ Dwayne Bremer
To the council’s credit, public input was welcomed, even on an impromptu basis, though the nice lady from Ward 6 that wore out Mayor Fillingame did end up being gaveled by Council President McDonald. Continue reading “The Technical Term is “In-substance defeasance””
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