Marksville takes first step to cover lost sales tax

First steps were taken, but the journey is far from over to solve Marksville’s financial dilemma caused by the expiration of a 1-cent sales tax for general operations.

The City Council adopted an initial plan of budget cuts to make up about $900,000 in sales tax revenues over the remaining five months of the city’s fiscal year.

That plan calls for laying off eight employees and not replacing an employee who recently resigned. Those layoffs would include one in the Police Department, three mayoral administrative appointees, five part-time employees in the Beautification Department and the unfilled vacancy in the Street Department.

It also calls for reducing engineering costs by $10,000 a month, cutting allocations to the Bethune Center by $1,000 a month, eliminating all overtime pay to save $5,000 a month and cutting $1,200 a month for cell phones.

The budget cuts include another $16,000 in reductions in other monthly expenditures.

After the discussion ended and the dust cleared at the special meeting, the council had identified monthly reductions of approximately $52,000.

Aloysia Ducote, the city’s independent auditor, said it will take about $130,000 a month to offset the loss of revenue from the 1-cent sales tax.

During the meeting, it was mentioned that making $100,000 in monthly cuts might be enough to get the city through the rest of the fiscal year.

Even with that optimistic outlook, the council was only halfway to home plate with the Jan. 22 proposal.

FORGOT TO RENEW

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 error was caught earlier this month. All of the 1-cent sales tax that was collected since Jan. 1 will be put in escrow until a legal ruling is made on whether the city can keep and spend it.

Marksville isn’t the only area municipality to collect an expired sales tax.

The Evangeline Parish village of Pine Prairie failed to notice when its 2-cent sales tax expired. It also collected the tax for a year before it was noticed the tax had expired.

Pine Prairie was allowed to keep the proceeds from the expired tax. When the tax was put back on the ballot in March 2019, it was approved by 97 percent of the voters.

In addition to the per-month cuts, the City Council also adopted one-time savings by banning any unnecessary repairs and putting about $170,000 of utility infrastructure projects on indefinite hold.

REVISIT AFTER MAY 9

Those repairs and projects will be revisited after voters decide whether to restore the 1-cent sales tax in an election on May 9.

“If the tax doesn’t pass in May, the state will be in here to tell us what to do,” Councilman Clyde Benson quipped.

The mood in the special meeting was reminiscent of the city’s last financial crisis, when it was facing a significant deficit and was in danger of being unable to meet payroll and pay its financial obligations.

Ducote said the council will have to do what it did then, come up with another one or more plans with a combination of new revenue sources, additional spending cuts and possibly imposing personnel furloughs and/or layoffs.

It was noted several times that “nobody wants to send anyone home” and “no one wants layoffs.”

An alternative mentioned was to cut hourly workers’ hours, such as having them work only four days instead of five, until the current crisis is resolved.

The council did not act on that suggestion.

Ducote said officials will need to look at the overall budget issue to “see if the cuts you’ve approved are working, maybe working too well, or if something more needs to be done.”

The problem is a citywide problem and not just a General Fund problem, Ducote said.

“Think globally,” she added.

The expired sales tax revenue was distributed to all operating funds and not just into the General Fund, Ducote
noted. For that reason, the city is justified in sharing the pain of the budget cuts among General Fund departments such as police, fire, streets, beautification and City Hall as well as the Water and Sewer Funds.

“You need to look at how the whole city will absorb this loss,” Ducote advised. “There is no fund in the budget that can survive without help from that 1 percent sales tax.”

Ducote said any excess revenue earned in the Water and Sewer Departments could be transferred to the General Fund to help pay for salaries that would have been covered by the sales tax.

However, she added, “it has been quite some time since there was any significant amount of excess revenue” in those departments.

BORROWING OPTION

Mayor John Lemoine asked if the city could borrow funds to cover the deficit if the sales tax is approved by voters in May.

Ducote said the city can incur a 90-day loan to cover an emergency, but the loan would have to be repaid in full after 90 days. Since the city would not have the available funds to repay that emergency loan, that is not a viable option.

She said the city can apply to the state Bond Commission for permission to incur emergency funding.

The city would have to make its case to the Bond Commission as to why the funds are necessary.

“That shouldn’t be a problem,” she noted.

The Bond Commission might expect the city to use any accumulated reserves it has on hand, but those are minimal, Ducote said.

“If you go before the Bond Commission, be sure you ask for what you need,” Ducote said. “If you ask for $400,000 and you find out you really need $500,000, it will be almost impossible to get the commission to approve that additional $100,000.”

By the same token, the city shouldn’t ask for $1 million bond issue if it does not need that much.

“Remember, you have to pay it back,” Ducote added.

Councilman Frank Havard, who serves as the finance commissioner under the City Charter, presented the core of the Jan. 22 proposal.

“I guess I’m the S.O.B. here,” Havard said, “but we have to do something.”

He said the plan adopted at the special meeting “is a start. We can always change the plan.”