The City of Indianola adopted its fiscal year budget last month under the assumption that the municipality had zero General Obligation Bonds.
That turns out to not be true.
This says Indianola City Clerk Angela Goodwin, who presented the mayor and board of aldermen this past Monday night with two invoices she received from the People’s Bank of Biloxi on October 12.
The invoices, according to Goodwin, are for two interest payments totaling a little over $31,000 on two loans totaling about $1.9 million.
“The city has two outstanding loan debts in the amount of $1.2 million and another for $705,000, totaling $1.9 million,” Goodwin said.
Goodwin said she investigated and found that the loans were from 2011, originally at $4.5 million and $2.8 million respectively.
“They are set to mature in July of 2026,” she said.
The city apparently has not missed any payments on the loan, in fact making one for a little over a half million dollars this past July, according to Goodwin. Any issues stem from the fact that the FY 2024 budget does not reflect the interest payments due apparently January 1, 2024, and the subsequent loan payment.
“Our 2024 budget was adopted under the assumption that all GO bond debt was paid in full. Therefore, an amendment will be made at the next board meeting,” Goodwin said.
The magnitude of a proposed adjustment to the fiscal year 2024 budget was not discussed but would likely be much more than the $31,000 interest payment.
Featherstone asked the board if any members were aware of the bond prior to Monday night’s meeting. Most were silent at first, but it appears after a lengthy conversation that the loan is much older than 12 years.
The situation was ripe for finger pointing as Ward 1 Alderman Gary Fratesi called
out newly-contracted Certified Public Accountant Dr. Phyllis Rhodes for presumably missing this information while preparing the budget.
“How did Dr. Rhodes miss this? This is what we hired her for,” Fratesi said.
Fratesi was the lone no vote when the board adopted the budget 3-1 last month.
Rhodes was on the phone during the exchange and spoke in her own defense.
“We did communicate with (former) Mayor (Steve) Rosenthal and were under the impression that the bonds were paid off during his administration,” Rhodes said, later adding, “There was nothing to indicate this bond was out there.”
Rosenthal told The Enterprise-Tocsin this week that he did speak with someone about General Obligation loans, but he said there must have been a miscommunication about this debt.
“I told her we refinanced it early in my term, which lowered the length of the loan, but I never mentioned that it had been paid off,” Rosenthal said.
After Fratesi spoke again about the issue, Goodwin suggested Fratesi should have been aware of it having been on the board throughout the life of the loan.
“I wasn’t hired to do the budget,” Fratesi said. “We hired Dr. Rhodes to do the budget and research everything. We knew we were upside down, and we didn’t know what was going on.”
Rosenthal, who was in attendance Monday night, clarified that the 2011 loan was a refinance of a 2001 bond that had been secured for infrastructure projects.
Some Good News
It is hard to know exactly what effect, if any, this revelation will have on the fiscal year budget, but there was some positive news that came out of the discussion.
According to Tray Hairston, with the Butler Snow law firm, the city has a bonding capacity that far exceeds the current $1.9 million outstanding.
The city, which is currently asking for $4 million tops, apparently has capacity for about $12 million, Hairston said.
“Given that, with only $1.9 outstanding, you have very low debt that’s outstanding,” he said.
The city is taking advantage of what is now a 100% reimbursement of taxes paid to the state through the Infrastructure and Modernization Act of 2018, otherwise known as use tax or internet sales taxes.
Those funds can be earmarked for roads, bridges, maintenance, water and sewer, and storm drainage, according to Hairston.
Hairston walked the board through the initial stages of the process to help secure the bond.
The board voted to hire Butler Snow as bond counsel and begin the process and voted in favor of the resolution of intent to issue the bonds. Hairston said Butler Snow would return to the board on November 27 to adopt the “no protest” after it has been published in the newspaper.
The bond resolution will be adopted on that date presumably as well, he said.
The potential $4 million could be paired with $4.2 million in American Rescue Plan Act funds that are due the city, according to past conversations with the city.
These funds could pave the way for some significant paving in Indianola.
