It’s safe to say there are no stacks of gold bullion in the mayor’s office.
But the finances are not as bad as Detroit before that city filed bankruptcy.
Last week the city internal auditor released a just completed report to the Perkins administration and the Shreveport City Council.
It’s not a good read.
Even if you are an economics geek.
And if not, it’s real dull.
Bottom line, the report is dismal.
The report is dated Mar. 29. It covers a 10 year period from 2008-2017.
The audit was conducted by the city internal auditor. This office is funded by the city. Its operations and staff are totally independent of other city agencies and officials.
In 2017 , Moody’s Investors Services reported a negative outlook for the city. The city’s bond rating was downgraded due to increasing fixed costs and long-term liabilities.
The so-called operating reserve is a major issue. Technically this is the unassigned fund balance (UFB).
The Government Finance Officers Association recommends a minimum fund balance of 2 months of the general fund revenues—16.67%. The International City/County Management Association recommends a minimum of 5% of the annual operating expenditures. The city budget sets a goal of at least 7% of expenditures.
The reserve (UFB) has declined steadily from 2009-2017. This despite transfers to the general fund from the Riverfront Development , Streets Special Revenues and other funds. In 2017 these transfers were $18.3 million.
The 2017 year-end reserve UFB was only $155 thousand. This was only 0.08% of the general fund expenditures.
Actual city revenues, compared to budgeted revenues, have fallen short. The 10 year average through 2017 was 98.9% revenues of the budgeted amount.
Using net operating revenues without budget transfers, the city has run a deficit from 2012-2017. In 2017 it was $3 million. Expenditures have increased by an average of $.11 million per year over revenues.
The budget breakdown is 67% salaries, contractual services 16%, other 9%, materials and supplies 5%, and improvements/equipment 3%.
A major anchor on the city’s finances is the unfunded pension plans. At the end of 2017 this sum was $217 million. This represents a funding ratio of 47.5%.
Simply put, the employee retirement system contributions and investment returns have not kept pace with the amount needed for the current costs plus an additional amount to finance the unfunded actuarial accrued liability.
A "bright spot" reported was the $18.6 million decline in General Obligation Bond (GOB) debt in 2017. By the end of next year $21.5 million in GOB Bonds will be paid.
The auditor evaluated the following financial indicators:
3. Operating position
4. Debt structure
5. Unfunded liabilities
6. Condition of capital assets.
For better financial management, the audit made the following recommendations:
1. Reduce spending during a revenue decline
2. Streamline or consolidate processes where appropriate
3. Limit budgeted revenues to 98% of previous year’s actual revenues
4. Increase operating reserves and establish a contingency fund
5. Improve collections
6. Maintain Employee Retirement System (ERS) funding policy.
Lastly the audit made the following recommendations for operational efficiencies:
1. Cross train personnel
2. Enhance use of technology
3. Implement continues monitoring over financial processes and controls.
The audit confirms what many sages have been saying. Bottom line, Shreveport is not in a good financial posture. This reality must be accepted, and elected officials should act responsibly.
This will not be fun. Or popular.
The mayor and the council inherited this financial black hole. How they deal with it will certainly be a measure of their "success" as elected officials.
Shreveport citizens should not shoot the messengers.