When it comes to the city of Macon’s financial picture, Mayor Robert Reichert and Councilman Rick Hutto see things completely different.
In recent weeks, Hutto has gone public with his criticism of the mayor and the state of Macon’s finances. He bases his criticism on a recent city audit report that Hutto says shows a $13 million deficit, a lack of funds in the city’s reserves and a number of citations about the city’s bookkeeping practices.
“In short, it was the worst audit in my seven years on council,” Hutto wrote.
But in defending his administration, Reichert says that many of Hutto’s points aren’t in the proper context — or are just incorrect.
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For example, Hutto wrote in a column published in The 11th Hour that the city “spent $13 million more than it took in last year,” implying that Macon has a deficit in that amount. But Reichert and city Finance Director Tom Barber say that’s an incorrect interpretation.
Barber said the $13 million difference comes from a valuation of the city’s net assets, which were valued at $88.8 million in the 2008 audit but were down to $75.2 million in the ’09 audit.
The difference wasn’t from the city’s spending more than what it took in from revenues, he said.
“That’s what the change was,” Barber said. “It wasn’t an income statement.”
Reichert said he strongly objects to what he considers mischaracterizations by Hutto, as well as Hutto’s word choices. In one passage, Hutto refers to a “shell game,” connoting that the administration has deliberately mishandled the city’s funds.
Reichert, however, said moving the funds as part of “due to/from” transfers is a common business practice.
“The transfers are legitimate and made good business sense at the time,” Reichert said. “Unfortunately, it was referred to as a ‘shell game.’ I’m a little bit offended by that.”
Reichert said the Ward I councilman has done a disservice to himself and his constituents.
“I think he’s seeking some sort of public recognition through this,” the mayor said.
Hutto, who said he has told Reichert he doesn’t want his job when it comes open next year, insists it’s his job to ask tough questions.
“What is my motivation for pointing out what the auditors are asking?” Hutto said. “Do I not have the obligation to ask these questions?”
A matter of perspective
The dispute between Hutto and the administration gets into minute details, including whether the audit should be classified as late.
Hutto said the audit is usually presented to the City Council in December, but this year it wasn’t presented until late June. Reichert noted that the city requested and was granted an extension until June 30.
But there are much broader issues that Hutto addresses. Perhaps the most notable are his questions about the city’s financial health.
Hutto said the audit shows that the city has about $607,000 in a reserve fund known as the “Filomena fund,” named for the late Councilwoman Filomena Mullis. Hutto said the fund should have $6 million to $7 million.
Hutto likened the discrepancy to borrowing $1,000 from his wife and promising to repay her next week.
“Can I claim to have a $1,000 fund balance?” Hutto wrote. “And can she claim that amount as well since it is owed to her and is thus an asset? This shell game seems to be the basis for stating that we have millions in reserve rather than barely over half a million.”
Barber, however, said the city needs to better define the reserve aspect of the Filomena fund. It’s a separate account that’s still part of the city’s general fund.
Much of the accounting is based on “due to/from” accounts, in which the city is either owed or owes money to another fund.
Reichert used an analogy of someone who has rent due at the beginning of the week but isn’t paid until the end of the week. That person borrows from his savings account to pay the rent, then repays that money once he receives his paycheck.
Barber said when discrepancies appear, it’s usually because the city pays bills for each department out of the general fund, then is repaid the next month by the respective departments.
“It’s always a month behind,” he said.
Because the summer months are usually the leanest for the city in terms of revenue collection, the city often has to borrow from the general fund to meet its financial obligations, then repays the money when property taxes are collected in the fall. The council recently passed a resolution authorizing Barber to draw up to $6 million from the general fund with the understanding that the money would be paid back by Oct. 15.
Perception vs. reality
Hutto also has alleged that the city owes the landfill closure account about $9.78 million.
Barber said, however, that the amount represents the estimated cost to the city when the landfill eventually closes in the next several years.
So far, the city has set aside $340,000 in the fiscal ’08 and ’09 budgets for landfill closure. Barber also said the city is considering closing the landfill in sections rather than taking on the full expense at one time.
The council passed a resolution last week that directs Barber to find $4.5 million to be used for landfill closure.
Some members of the Bibb County Commission have seized on Hutto’s public displeasure.
In a recent letter to the editor in The Telegraph, Commissioner Lonzy Edwards wrote about the recent failed special purpose local option sales tax referendum. Edwards — a SPLOST supporter — wrote: “The SPLOST issue will be back. Unfortunately, when it comes back it will be under far different circumstances than those we face this year. I hope the city will last that long. Given the city’s 2009 audit, there may be reason for doubt.”
Edwards said later he didn’t “take any pleasure in the findings.”
“I was disappointed that this information wasn’t out there with the SPLOST,” he said. “The city walked away from $12 million in debt retirement. There’s transparency required. They need to share this with the community.”
Councilman Mike Cranford, chairman of the council’s Appropriations Committee, bristled at the suggestion that the city is worse off financially than the county.
“I don’t know why (Hutto and Edwards) are insisting the money isn’t there. Trust me, it’s there,” Cranford said.
Cranford and Reichert pointed to a change in the way the city and county split sales tax proceeds in 2003, when the city’s cut dropped from 80 percent to 60 percent. That resulted in a swing of $4 million.
“For the county, that’s like found money for them,” Cranford said. “As far as Lonzy saying we’re broke, most of the audit findings had to do with (the city’s Economic and Community Development Department). There’s nothing wrong with our cash flow.
“I’m getting sick and tired of people saying the city is broke. In this economy, we’re doing very well. ... We didn’t dip into our reserves and take out $9 million just to balance our budget like the county.”
Reichert said financial issues are among the reasons the city and the county are at a standstill in negotiating a new service delivery strategy.
“They wonder why I’m so adamant about service delivery,” he said. “I’m trying to right the ship.”
Hutto also cites the ECDD’s spending of money from the federal Department of Housing and Urban Development on homes built in Macon several years ago with HUD grants. The audit noted several instances in which the ECDD failed to adhere to HUD guidelines.
Hutto said the city could be liable for as much as $519,000, plus interest and penalties, if the federal government decides the city didn’t use the money correctly.
Reichert said the grant wasn’t clear in specifying how the funds should be used. The money was used to build houses, with the assumption that the houses would be sold relatively quickly to low-income families who qualified.
The housing market collapsed just as the Reichert administration came into office, however, and the city hasn’t been able to sell any of the houses. In the past two years, some of the vacant houses have been vandalized or have been broken into for the copper wiring.
Reichert said the houses are required by HUD to be maintained to be “sale-ready,” meaning the houses must be repaired, and the ECDD used some of the HUD money for that purpose.
HUD officials said in an e-mail last week that they are still trying to determine if city officials violated the terms of the grant.
In his column, Hutto said the audit lists 30 material weaknesses, more than any audit during the Jack Ellis administration.
He closed his piece by noting the auditor’s comment: “... There was an overall lack of oversight review on behalf of upper management with regards to the work performed by personnel not in management roles. ... As noted last year, we continue to note a lack of accountability at various levels of management (both financially and operationally).”
“Not exactly an audit report on which to base a re-election, is it?” Hutto added at the end.
Reichert, however, had a different take.
“Is it a bad audit? It’s a very helpful audit,” Reichert said. “There are areas we need to improve on. The findings of material weakness give us a road map to continue to improve. We’ve made great strides in improving things from the previous administration.”
To contact writer Phillip Ramati, call 744-4334.