If the city of Terre Haute doesn't take steps to reverse its financial losses, it risks running out of money, an official with the Indiana State Board of Accounts said Tuesday.
That statement came a day after the city's 2014 annual governmental audit was released on Monday.
The audit uses accounting terms that may not mean a lot to an average reader. But in layman's terms, Todd Caldwell, board of accounts director of audit services, in an interview with the Tribune-Star on Tuesday, put it this way: "If things don't change, if the city continues to go down the path it is going, it may very well be out of money at some point."
The state audit states the city "has suffered recurring losses, subsequent to the financial statement date, that raise substantial doubt about its ability to continue as a going concern."
In response to the Board of Accounts audit, the city outlined its proposed course of action. That response outlines plans to reduce expenditures and increase revenue that includes fees to process sludge from other governmental units and a trash disposal fee. The city also states it will "lobby the state legislature for a food and beverage tax." Other revenue options are listed.
On Tuesday, Earl Elliott, a Terre Haute certified public accountant who won election to the city council in November and will take his District 2 seat in January, stated that before any new source of revenue is considered, "Council needs to learn about all possible sources of revenue that are available and discuss them. These discussions will determine which sources of revenue impact which citizens and which sources make more sense than others," he said.
Elliott, who will be the council's lone Republican, will join three other new council members, Democrats Karrum Nasser, Curtis DeBaun and Martha Crossen. Crossen has been completing the term of John Mullican (who resigned) and also won the November election to the District 6 seat.
Council president Todd Nation, D-4th, said the audit is the second post-election confirmation "that our city government is in bad financial shape, yet Mayor Bennett reportedly 'feels good about it.' I don’t feel good at all about not being able to pay the city’s vendors on time, leaving infrastructure repairs undone, or the $13.4 million in overdrawn cash balances at the end of 2014 that this audit details. We must do better."
Some of the overdrawn cash balances included general fund, $5.4 million; Hulman Links non-reverting, $3.1 million; and wastewater utility-capital improvement, $3.1 million.
In the audit, the city administration says it has a financial plan in place which forecasts a positive general fund balance in 2017. "As a member of the city’s fiscal body, I’d like to see that plan," Nation said. "The sooner Mayor Bennett shares it with the city council, the sooner we can help address the city's financial problems."
Nation further states that he is "wary" of the administration’s projected "enterprise cash flow" from processing sludge produced in other communities. The contracts related to trucking sludge into the wastewater treatment plant from surrounding communities "were badly bungled by the administration, and it appears we have been losing money on them. I hope Mayor Bennett has learned not to count revenue until it is in hand — Powerdyne should have taught him that."
The city, working with financial adviser Umbaugh and Associates, is preparing a comprehensive financial plan that Mayor Duke Bennett says will be presented next month. The plan is expected to outline possible revenue options.
Nasser, a Democrat who will represent District 3, agreed the audit is one more independent report that outlines the city's dire financial situation. Recently, a report released by the Indiana Fiscal Policy Institute ranked Terre Haute 18th among 18 of Indiana's largest municipalities — at the bottom — in fiscal health.
"We need to tackle our financial situation and quit kicking the can down the road," Nasser said. He anticipates it will require a combination of cuts and increased revenues.
Nasser said he has spoken with the mayor and told him "our options are limited when it comes to what the city council can do." The mayor supports a trash pickup fee, "but there is not will among the council to do that until he is able to show on his end he can manage that money" and also make necessary spending cuts.
A trash fee "won't be a cure-all for everything; there also must be cuts involved," Nasser said.
He also believes the mayor must show leadership and reach out to the county to initiate discussion about possible areas where the two units of government can work together, such as a local option income tax (LOIT).
"They (county officials) are willing to discuss it, but they have not been asked," Nasser said.
Crossen, who hasn't had an opportunity to carefully review the audit, said the audit findings "are of great concern to me and all city council members. It's another indicator that we are in need of major work on our budget, our budgetary process and our revenue. We all need to be working hard on it and not saying it's business as usual, but something we have got to take a new kind of action to repair."
City council member Don Morris, D-at large, said the audit "confirms the seriousness" of problems in the general fund. "We have to generate some new revenue streams and continue cutting from within."
Discussion has begun as far as a trash pick-up fee, he said, and it must be studied as well as the challenges it may cause those on fixed income. Morris said he has met with the mayor about some of these issues. "There is more that must be looked at before I'll be behind it 100 percent," he said.
He's also asked the city to begin studying the option of moving from a city-operated transit system to a public transportation corporation, which would make it a separate entity that governs itself and is paid for with its own tax levy. It's been done in Indianapolis, Bloomington and Lafayette, he said. Morris wants the city to "see if it's viable" for this community. If it could become reality, it would be "another way to reduce from within" as far as the city's budget, Morris said.
Terre Haute also needs to talk to state legislators about a possible food and beverage tax, Morris said.
Council member Neil Garrison, D-5th, commenting on the negative audit findings, said, "Where this is all leading to is increased fees and taxes." Some members of the council have warned about the city's fiscal problems for several years and tried to correct them — to no avail.
Now, pressure will be on the new council members, as well as other council members and the mayor, to solve those problems, he said. He's also frustrated about state reports that have repeatedly warned about these issues, yet nothing, he said, has happened.
Debaun, a Democrat who will serve in an at-large capacity, said he wasn't surprised by the audit. "I know the council has a lot of work to do next year" and for years afterward. "It's something we need to get on very quickly. We're not going to be able to solve things overnight, but we need to start implementing solutions as soon as possible," he said.
Elliott said Monday that auditors "do not report 'going concern' issues without a lot of care and consideration." He added it was "a pretty serious comment."
A "going concern" in reference to a commercial business would raise questions about whether it will stay in business, Elliott said. For a city, "I'm not sure what that means. I'm not sure what other options there are" or what would happen, he said. In past years, Elliott has been a financial adviser to the Terre Haute City Council.