For the second time in less than two years, a state official has expressed “substantial doubt” about the city of Terre Haute’s “ability to continue as a going concern.”
The statement by State Examiner Paul Joyce comes in the State Board of Accounts audit of city finances for 2015, which was released Monday.
Joyce made a similar statement in the city’s 2014 audit.
The city prepared a financial statement assuming it will continue as a going concern but has suffered recurring losses after that statement was prepared, Joyce said, and “the statement does not include any adjustments from the outcome of this uncertainty.” Joyce’s comments are in response to an acknowledgment by city officials in their financial statement, said Tyler Michael, communications director for the state board.
“According to auditing standards, when a unit puts in a note regarding their going concern status, we have to include an emphasis of matter paragraph in our report,” Michael said.
City Council President Karrum Nasser, D-3rd, said the audit “should be a wakeup call. The state is starting to hold cities and towns responsible for their budgets and they’re tired of Terre Haute having deficit spending.”
Mayor Duke Bennett has not responded to a request for comment on the audit. At least one city official finds the state board’s “going concern” reference puzzling.
“One might ask if the city of Terre Haute ceases to be a going concern, what entity takes its place?” said City Councilman Earl Elliott, R-2nd, chairman of the council’s finance committee.
That’s not a question the State Board of Accounts is prepared to answer. Asked about what might happen if the city cannot get its financial house in order, Michael said, “That is more of a question that should be directed to the Legislature.”
Michael said his agency cannot give advice to the city.
But, at the same time, Mayor Bennett’s administration and City Council leaders are hoping the State Board of Accounts and Indiana Department of Local Government Finance can provide guidance on complying with a state mandate to reduce general fund spending by $7.9 million yet this year.
Meetings with Local Government Finance officials are scheduled today in advance of a special City Council meeting at 5:30 tonight. Bennett has said it would be impossible to make such a reduction in one year. The city’s financial statement for 2015 noted the general fund deficit swelled from $5.4 million in 2014 to nearly $9 million at the end of 2015.
The general fund was one of 14 funds with negative balances. The total shortfall stood at $19.4 million. Four of the funds totaling nearly $400,000 were grant funds awaiting reimbursement. All others involved expenses exceeding revenues, in some cases for several years.
In notes accompanying the financial statement, city officials listed more than a dozen areas in which they are seeking to address deficit spending.
Those include reducing the work force through attrition and a hiring freeze except for “key personnel in essential positions,” increases in payments in lieu of taxes and administration charges for the wastewater utility, a new trash collection fee and golf course privatization.
They indicated they would continue the lobbying of state lawmakers for a food and beverage tax and a casino and noted an increase in the state gas tax will reduce the reliance on property taxes for street projects.
In a supplementary audit, state officials found that the Terre Haute Sanitary District continued to manage wastewater treatment plans for the towns of West Terre Haute and Riley even though contracts with those communities had expired.
State auditors also noted for the third year in a row that neither the Redevelopment Commission nor the City Council approved a budget for the city’s Redevelopment Department and that tax increment financing funds cannot be used for the commission’s operating expenses.