IPC taking close, final look at the 2019 budget

Published 6:00 am Sunday, November 25, 2018

When Iberia Parish residents failed to pass a recent ¾-cent sales tax to fund road maintenance projects, it meant the parish government would have to find other ways to maintain more than 400 miles of roadways in the unincorporated areas of the parish.

This week, residents will find out what the unintended consequences of their votes will be. The Iberia Parish Council will be making its final pass through the 2019 budget Wednesday night, with the administration presenting its solution for a $475,000 budgetary hole. Council members voted to move that amount from the District 10 Road Maintenance fund back to the parish’s Royalty fund to meet bond payment commitments.

The Royalty fund, which is where revenues from mineral and gas royalties are placed, has been the only real source of revenue for road projects in the parish for decades, a problem the road maintenance tax would have solved. There are additional funds – from state sources, federal grants and other entities – but those are usually for specific projects and for a limited amount of time. Many of those funds also require a local match in order to be granted.

The problem, however, is that a slowdown in Royalty fund revenues is not the only challenge facing the current administration. A perfect storm of economic issues has made keeping the parish budget on the rails a full-contact sport.

Royalty first

When oil money was coming in, funding road work and other capital projects from the Royalty fund was easy. Administrations spent money, and each quarter another check would show up, steadily replenishing the money spent.

That all changed when the Romero administration was leaving office at the end of 2015. What many thought then was a seasonal downturn in Gulf oil activity stretched into the spring of 2016, and is still hanging over the Gulf Coast.

For example, Iberia Parish received more than $2.3 million in royalty payments in 2015. That number dropped to $1.1 million in 2016, and less than $900,000 in 2017.

Some government watchers have pointed out that at the end of 2015, there was still a fund balance of approximately $12 million. That number is misleading, though. The Royalty fund is committed to several bond payments, including the parish’s previously passed road maintenance bonds and $6 million in new bonds for bridge repair and replacement — a project now coming to completion. It also commits the parish to bond payments until 2027.

The Royalty fund is also a source of money for drainage projects and, in the past, other “lawful purposes as may be necessary,” according to the parish’s budget document.

The council voted to put money moved into the road maintenance fund during the 2019 budget discussion back into the Royalty fund because of the legal requirement to make bond payments which are taken from the fund. Projections showed that if the money was spent elsewhere, the parish could have come up short on its bond payments from the Royalty fund at the end of the 2019 fiscal year.

The Royalty fund is not the only one hurting.

Dropping residents, businesses

Even as the parish fights to keep the same level of service it has provided in years past, it is doing so for a smaller number of residents. The latest U.S. Census data shows Iberia Parish’s population at just above 72,000, which is down 1.5 percent since the last census in 2010.

The parish has also seen a big drop in revenue from occupational licenses. In 2015, the parish received just over $800,000 in fees from the business licences. This year, the projection is for $660,000 by the end of 2018.

Aside from the $140,000 drop, it is an indicator of a drop in commercial activity, which affects sales tax, employment, and consumer spending in the parish.

A positive sign has been the stability of the parish’s ad valorem tax, which has remained fairly steady at $1.5 million in 2015, rising to just over $1.7 million in 2017 due to a reassessment year in 2016. The 2018 projection, though, is conservative and predicts a  small 1.7 percent drop.

Right-sizing government

The administration has taken steps to curtail expenditures. Some positions in the administration had been eliminated through attrition, but not on pace with the decline in revenue. Training and travel budget lines have been either reduced, zeroed out or removed. Purchases of equipment and software has been delayed.

Many of the cuts have come through either putting off deferred maintenance or pushing projects farther down on the calendar until revenues improve. But those are short-term solutions that cannot be counted on for continued financial relief.

Also, there are some instances where cuts can’t be measured because employees may be working outside their assigned area in the budget, or paid from a separate funding source. For example, the Iberia Public Works roads maintenance department shows 11 employees on its manning chart, but only two in its personnel budget line items.

There are also cases where expenses increased drastically. The Public Works drainage maintenance payroll jumped from $650,000 in 2015 to more than $1.1 million in 2017 as drainage became a hot-button issue for local governments after the August 2016 floods.

What’s next

Wednesday night, Parish President Larry Richard will lay out his plan for covering the budget shifts to produce a balanced budget. Although the administration has been careful not to telegraph any moves, one possibility is that some funds may be found to cover some of the road maintenance shortfall in other funds. During the last regular council meeting on Nov. 14, Finance Director Kim Segura walked the council through adjustments to some funds that ended the year slightly over their budgeted targets.

If some funds can be found to supplement the Royalty fund cash, the administration may propose moving a portion of the $475,000, but leave enough that the parish’s bond payments are secure.

A third option could involve using some Royalty fund money, found cash from other budget lines and selected cuts to balance the budget and give the parish a reserve to work through 2019. 

Only time will tell.