BATON ROUGE – Louisiana officials need to figure out ways to force municipalities to get their finances in order, State Treasurer John Schroder said Wednesday.
“We’re on the verge of a crisis,” he said. “We’re helping them hurt themselves.”
Schroder spoke during a meeting of the state’s Fiscal Review Committee, which can recommend that a professional fiscal administrator temporarily run a town or city, though a judge has to agree. On Wednesday, the committee heard progress reports from towns currently under administrators and updates about “fiscally distressed municipalities” that might be in the near future if nothing changes.
In some cases, towns have used bond revenue to pay for things outside the stated purpose of the loan. Some officials are unable or unwilling to scale back government employment and services when their town loses population.
Many have undercharged for city services, creating persistent deficits. Often towns will use utility revenue to subsidize general operations while neglecting maintenance of their water and sewer infrastructure, leading to expensive problems down the road.
The Louisiana Legislative Auditor provides voluntary training for local officials. Schroder suggested maybe such training should be mandatory.
He wondered if it might be possible to prevent towns from using utility revenue for purposes that have nothing to do with the utility. Perhaps the Public Service Commission should regulate local utilities, he suggested.
Schroder also acknowledged his own role in the potential “crisis.” The State Bond Commission, which he chairs, often approves local efforts to borrow to pay for operations, which he compared to paying your mortgage with your credit card.
He mentioned the small town of Sterlington, which racked up some $20 million in debt partly by building a sports park that didn’t live up to “rosy” revenue projections.
“The flags went up on Sterlington,” he said. “In hindsight, I should have never said ‘yes.’”
Schroder said some legislators assume the state should be responsible for bailing out struggling towns. He said lenders bear some responsibility as well.
“I don’t understand how some of these folks are getting loans, whether we approve it at the Bond Commission or not,” Schroder said. “I don’t know what these bankers are doing. Maybe their relationships [with local leaders] are too close.”
Part of Wednesday’s discussion involved the difficulty of finding qualified administrators willing to take on the job and the expense of paying them. Schroder said maybe the Legislative Auditor should have accountants on staff to do the work, though Daryl Purpera, who chairs the Fiscal Review Committee and heads the auditor’s office, said he’s already $3.5 million short of what he needs for next fiscal year’s budget.
Purpera said he expects a bill will be filed this year that would create a state utility fund.
By David Jacobs of the Center Square
