City short $850,000 in most recent audit

Published 1:29 pm Wednesday, May 20, 2009

The most recent audit of the City of Picayune shows some progress compared to the last one, but there was still a loss.

A majority of the loss was not in the utility fund this time, but rather in the general fund. The audit for fiscal year 2006-2007 shows that the general fund had a net loss of $787,061. A loss of $63,547 also was reported in the Utility Fund, for a total loss of $850,608.

In the fiscal year 2005-2006 audit, a loss of more than $1 million was reported in the utility department.

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City Clerk Priscilla Daniel said, while she was not city clerk during that fiscal year, the reason for the 2006-2007 loss could be attributed to a decline in the amount of sales taxes collected. When that happened, the city did not regroup in time to avoid a loss.

Ed Pinero, former city manager at the time, said when he came into the position he noticed that the previous city clerk made a budget based on revenue that was not coming in.

“It needed a lot of work,” Pinero said.

When the discrepancy was discovered, Pinero said adjustments were made, such as a reduction in staff. If those adjustments had not been made, the city’s loss would have been much larger.

A high turnover rate in the City Clerk and City Manager positions also was cited as a factor in what lead to the loss. Tenure in those positions will help city officials stay informed about city’s financial standing, said City Accountant Amber Hinton.

Wib Wright, the CPA who prepared the recent audit, said ultimately this audit was better than the previous one. The city had some problems after Hurricane Katrina where utility payments were not being collected, adding to the utility department loss in the 2005-2006 audit.

Hinton said that the two audits show her that the city spent $1 million more in utility department expenses in 2005-2006, which could be why the department did not report a loss in the recent audit. She said those expenses could be attributed to repairs that were necessary after the storm. Interim City Manager Harvey Miller, agreeing with Hinton, said that after the storm, a number of utility repairs were necessary due to clean-up equipment used to remove trees and other debris that damaged water and sewer lines.

Most of the city’s revenue comes from taxes. Wright said 25 percent of the revenue collected by the city is property tax, another 25 percent is from sales tax. Other revenues come from utility services. Even with the sharp decline in sales tax collections post Katrina, Wright said the collections now look good for a city the size of Picayune.

Wright said the city has a total debt of $12 million, with $3 million attributed to a special disaster relief loan from the Federal Emergency Management Agency. Of that remaining $9 million, $6 million is in bonds and the other $3 million is owed to the Mississippi Development Authority. Wright said Picayune’s debt ratio is not high.

For the past couple of years, audits from the city have been behind schedule, but Wright expects to have them caught up soon. He said he planned to start on the 2007-2008 audit in May.

One way to help the city avoid losses such as these in the future could be to increase the amount of revenue coming in through taxes. Daniel said the city could annex land, but the council has not talked with her about doing so. Other ways would involve bringing in more retail chains that collect sales tax for the city. Providing tourism options also would bring people into the city. Sporting events or Picayune Main Street events such as the Street Fair could help with sales tax revenue, she said.

Other ways the city could increase the tax base would be to bring in new businesses. At recent economic leakage meetings, suggestions were made that sale of liquor would bring in new businesses and keep in Picayune tax dollars now being spent elsewhere. With Gov. Haley Barbour’s approval of House Bill 1441, Picayune residents have the option to submit a petition to put a by-the-drink sale of liquor referendum on a future ballot. Daniel said no such petition has been turned into her so far, and without such a petition a date for a referendum can not be set.

Daniel said she has been working to generate revenue for the city by collecting on old fines and cutting off utility customers who don’t pay their bills. Hinton said that the changes Daniel has implemented should help the next two audits look better that the past two.

“The best thing they’ve done so far is hire Priscilla Daniel,” Wright said.

At this point in time, Miller said the city budget is balanced. Hinton said that balanced budget is a product of Daniel’s tight reign on the city’s spending.

Miller said that balanced budget also partially involved the reduction of five positions in the city during the current fiscal year.

“It’s just a matter of running a tight ship,” Miller said.

As with the last audit, Mayor Greg Mitchell could not give a reason for the shortfall. He said the city is trying to reconcile the problem.

Mitchell said even though the audit reflects a loss, the city is still operating without a tax increase. Last year the council approved a city millage increase of 3.3 mills and a school millage decrease by the same amount, which the council said at the time did not amount to an actual tax increase.

Mitchell said the city does not tax to make money.

“In the last year we’ve been able to come back from some of the so-called losses the audit says were in there,” Mitchell said.

Mitchell attributes the reported losses to some kind of error, since he said each year the city starts out with a balanced budget. When asked what kind of error would cause the audit to report losses, Mitchell said he did not know. He also could not say exactly what happened to cause the audit reflect a loss.