Leaders wrestle with funding deficit

The City of Holly Springs held a public hearing on the new fiscal year budget at the Sept. 3 mayor and board of aldermen meeting.

Because of differing views on the financial health of the Holly Springs Utility Department, which historically has funded the city budget with payment in lieu of tax (PILOT) dollars to the tune of $3 million a year, city leaders struggle to find a solution.

HSUD has not been able to make all PILOT payments for the last year.

A budget deficit of $1,384,438 in the new budget has officials searching for ways to balance the proposed budget of $7,926,413. The total expenditures are projected to be $9,310,851 creating a deficit of $1,384,438.

But due to a series of storms and defective automated meter reading equipment, Mayor Sharon Gipson said the current cause of HSUD’s budget woes are caused by meter reading which affects billing and ultimately the flow of cash into the HSUD to pay its bills.

Jim Smith, in making public comment, asked if Holly Springs has woven into the new fiscal year budget money to pay attorneys for defending the city against potential litigation at the HSUD. He cited $275,000 in unrealized revenue (uncollected revenue on the books).

Thelbert Lesure, in public comment, asked if proposed police salaries are the same as last year.

The city has proposed expenditure of $907,561 in police salaries.

City clerk Jerrica Jones said police salaries in last year’s budget was $886,000.

Ward 4 alderman Patricia Merriweather, who has been seeking clarity on the financial status at the HSUD for several years, spoke to deficit concerns in the City’s proposed budget.

She asked HSUD general manager Wayne Jones if the HSUD will be able make the usual PILOT payments to the City.

She said the city faces possible freezing of hiring and raises since the utility department is currently in arrearages of $3 million to the City in PILOT payments.

She is hopeful improved meter reading will help bills to get out on time. Most utilities bill on a monthly basis.

“At the end of the day the facts remain what they are,” she said. “Our revenue that’s coming in, everyone knows. It’s not a secret. Our tax equivalency payments (from HSUD) have been cut in half. That helps to pay salaries and provide service to the city.”

City clerk Jerrica Jones said the city has received $150,000 in PILOT payments so far. She said no salary raises are proposed in the new budget.

“Just equipment,” Gipson said. “And so we had to give the people something (information) and so she (Jerrica Jones) put this together knowing some of the feedback on the utility parameters. The increases were taken out.

“Then, I think it is imperative as we put out different things into the atmosphere, that it’s important to say that ... we have more of a meter reading problem than we do as in a financial problem. So, the meters are not read in a timely fashion and that puts everything behind. That puts billing behind. That puts collections behind.”

She said HSUD has contingency funds (reserves) but was not allowed to release them nor was the utility allowed to obtain a line of credit.

The city clerk recited the last year’s revenue as $9.1 million and “this year it’s $7.9 million.” Merriweather said aldermen asked the city clerk to prepare three renditions of the proposed budget: one with the PILOT payments in: one without the PILOT payments: and one with $150,000 of PILOT money a month.

“We were concerned about the money, the payments from the utility department, and that is why I asked Madam Clerk (Jerrica Jones) to create three budgets.

Merriweather said she wants it to be clear whether the city will get tax equivalency payments before putting those figures in the proposed budget.

The city clerk said, with the cuts already made in the budget, the difference in the proposed budget and the tax equivalency is $626,764. She said $231,209 was received from HSUD.

“There’s still a $600,000 deficit with the tax equivalency money,” Merriweather said.

Without the tax equivalency the budget deficit is projected to be $3,399,430, the clerk said. “That’s the deficit without the tax equivalency payments,”she said.

With a monthly payment of $150,000 in tax equivalency, the deficit will be at $1,599,430, she said.

“So, I say cuts have to be made,”Merriweather said.

Merriweather said she was trying to look for ways to make budget cuts without being too detrimental.

HSUD general manager Wayne Jones explained the accounting procedures set in TVA’s contract with HSUD.

“According to the TVA agreement, HSUD cannot pay the tax in it’s current condition because we are not making the TVA (wholesale power) payments,” he said.

“And there has been money mixed as far as TVA is concerned. There has to be $289,000 put back to the gas department. HSUD cannot pay the tax equivalency (PILOT) that’s in the power contract,” he said.

TVA accountants advised that the HSUD needs access to the audits for years 2021, 2022, 2023, and 2024, he said.

“The auditor looks at your finances and tells you what the state of the company is in,” Jones said. “I can’t make a sound budget, sound decisions, until I have that information.”

He said he is working with meter readers to improve the efficiency of the routes to make best use of the resources available, which includes personnel and transportation (trucks).

Ward 2 alderman Andre Jones said a plan that includes real solutions should be presented.

“We know the payments from HSUD aids the city budget by almost $3 million,” he said.

Gipson said the HSUD cannot pay the tax equivalency if it’s the last thing in the power contract that gets paid – that all expenses are paid first as far as electricity.

Board attorney Garrett Estes cautioned the aldermen and mayor about statements made in open session that could contribute to litigation.

“Exactly,” Gipson said, adding that accounts manager Annie Mason has prepared some information for the HSUD budget

“We don’t have anything to hide,” she said. “But there is a proper way to do things.” Wayne Jones listed several concerns that he sees that need to be addressed.

“There is the matter of meter reading and also a matter of the accounting,” he said.

“The accounting is in a shambles according to the financial consultants for TVA. Accounts weren’t reconciled.”

Ward 1 alderman Bernita Fountain asked Jones if he has a copy of a proposed budget from the HSUD accountant.

“No, I don’t have it,” he said.

Many people spoke at once.

Alderman Jones expressed dismay saying “what I am seeing is kinda distasteful because we are in a position of public service,” he said. “We should all be ashamed.”

“The bottom line is you got $1.6 million worth of checks in the drawers,” Merriweather said. “You have over $500,000 worth of checks in the mayor’s office....If you say that you never missed a TVA payment, somebody’s missing payments somewhere. You (Gipson) are not paying your bills. We are not in the business of maniplation or fear tactics. We want to know the matter of fact, actual financial status of the utility department. Mr. Jones is having to clean up the mess. He’s having to straighten up and try to disentangle the finances. That’s why we invited TVA’s accountant in.”

Jones said he has between $180,000 to $100,000 of uncollected funds in 90 days past due accounts totaling 500 customers.”

Jerrica Jones asked for a motion to pass the tax levy, which is unchanged from last year.

The board passed the tax levy and set the millage rate and the public hearing was closed.