Marksville City Council faces difficult financial decisions at special meeting

Marksville started this calendar year staring with an $800,000 hole in its piggy bank due to the expiration of a 1-cent sales tax for general operations.

The hope was that emergency budget cuts, including layoffs, would allow the city to limp along until May, when voters would be expected to restore the lost sales tax in time for the budget year that begins July 1.

When a state "stay home order" reduced operations for some businesses, closed down many more and sent hundreds of Avoyelles Parish workers onto the unemployment line, what most considered was a near-catastrophe for the city could well have set Marksville up for a Katrina-sized financial disaster. The election date was also postponed to August.

As the state, parish and city gradually recover from the COVID crisis, Marksville's mayor and aldermen are once again facing difficult financial decisions which could include more layoffs. Discussion of cost-cutting measures was on the agenda for the June 10 City Council meeting, but was tabled and put on the agenda for a special meeting set for 6 p.m. June 24.

The motion to table discussion passed on a 3-2 vote, with Mayor John Lemoine breaking a 2-2 tie. Aldermen Clyde Benson and Mary Sampson voted to table. Aldermen Frank Havard and Mike Gremillion were opposed. Lemoine's vote was required due to the unexpected death of Councilman Edward C. Conway, who died June 4.

Appointing a replacement for Conway was also delayed to the June 24 meeting. With the fiscal year starting on July 1, and the sales tax election that had been set in May being delayed to August due to COVID-19 suppression efforts, the upcoming special meeting will also focus on adopting a budget for 2020-21.

When local governments prepare their annual budgets, they mirror former Defense Secretary Donald Rumsfeld's sentiments: "You go to war with the army you have, not the army you might want or wish to have at some time in the future."

If voters had approved the 1-cent sales tax in May, the council could in good conscience include the estimated revenue from that sales tax in its budget. Voters didn't have that opportunity -- and COVID-19 did not delay the start of the fiscal year -- so the budget to be approved June 24 will have almost $1.6 million less in sales tax revenues than the July 1, 2019 budget had.

FOUR OPTIONS

Havard, who is also the finance commissioner for the council, presented four alternatives. He believes the best is to layoff some city employees to save about $13,000 a month. Another option is to furlough all employees 8 hours per pay period, which would basically be one unpaid leave day every other week. A third option would be to keep each employee home one day per week, for a 16-hour furlough per pay period. Another option was a 10 percent across the board cut.

Havard said the layoff option is best for the city and for the affected employees, who will be able to draw unemployment.

"We have to do something," Havard said. "We have requested this emergency interim loan, but the Bond Commission still has to approve it. The commission will want to know what the city is doing to cut costs while we are asking for this loan."

Sure enough, he said, a representative of the Bond Commission called the city's accountant, Aloysia Ducote, the next day to ask what steps the council had approved. She had to tell him the council had decided to postpone a decision until the June 24 special meeting.

Havard said he recommends the layoffs now and the council can make adjustments after the tax is approved in August.

The city is not in bad financial shape at this time because of the cuts implemented earlier in the year and "the department supervisors are doing a good job of keep-ing spending down," Havard said. "I am concerned about what happens after August."

If the tax is approved, the city will probably not get any sales tax revenue until December, he said. If voters reject it, "we will be looking at cuts in the fire department, the police department, the water department. Crime will go up, fire insurance premiums will go up, water bills will go up. People will be paying more for less services."

Havard is working on scheduling a meeting with city employees to discuss the city's financial condition "and get their input. Their input is vital. This affects them, and it wasn't their fault. It is important to discuss the situation with them, get their thoughts and feedback, and make sure we are all on the same page."

Another concern Havard has is that without the sales tax, which was one of the city's largest sources of operating revenue, Marksville will be faced with repaying a loan at the same time it is unable to pay its regular monthly bills.

BACKGROUND

The problem occurred when city officials not only failed to notice its longtime 1-cent sales tax was going to expire on Dec. 31, 2018, but then collected the tax during all of 2019. The tax was taken off the city's books in early January.

This raises the specter that the city might be required to "give back" the money it collected from the expired penny tax.The tax may still be being collected, but any such collections are being placed in an escrow account and cannot be used by the city until the state determines what action to take. If voters eventually restore the tax, the city may be able to keep the money in the escrow account and be relieved of any threat of action for the 2019 collections.

While any large sales/use taxpayer in 2019 might have a legal leg to stand on in asking for a refund, it would be impossible to remit the erroneously collected tax to the average shoppers. Refunding the collections to the stores would serve to punish the city, but would actually benefit the businesses who collected the tax and not the customers who paid it.

Unlike sales taxes in other agencies, this 1-cent sales tax supported all of the city's operating accounts. It was not dedicated to public safety, salaries, a public works bond issue, etc. Proceeds from the tax were used for police, fire, streets, beautification, City Hall, water and sewer departments.

The council approved entering into a $1,125,000 emergency line-of-credit in April, which was to serve to cover costs related to COVID-19's effect on the economy and to cover costs until the 1-cent sales tax is hopefully approved by Marksville voters. The line-of-credit is through Cottonport Bank.

The council will also adopt the budget for the 2020-21 fiscal year that begins July 1.