Editorial: Financial Stewardship First

On Tuesday, July 13th, the residents of Jones, OK will go to the polls to decide on the proposed 1 cent sales tax increase. On May 4th, after a close and heated April election, the very first vote from the brand new Board of Trustees was calling a special election for an increase in taxation. Stating that the new Board wanted to be marked by action, the Board justified their decision explaining that the Town’s crumbling water and wastewater infrastructure was in dire need of repairs. I’ve made it clear before that I am for the water and wastewater improvements but against a sales tax increase to fund it. I’ve explained previously how this will negatively impact our small businesses, but that is not the only reason I am against this proposal.

For starters, the language of the proposed ordinance is so loosely worded, that technically, the new Board or any future Boards could spend the money on any capital project they want. In fact, what you may not know is that the Town of Jones currently has sales tax revenue dedicated to the purpose of sewer line replacement. This tax was established in 2004 and designated as Additional Revenues. Currently, the Town of Jones levies a 4% sales tax on all retail sales, with 1% of that being designated as “Additional Revenues.” The Town Ordinance 5-4-04 lists specific purposes for the “Additional Revenues,” namely that 20% of this 1 cent sales tax be reserved for capital improvements such as drainage and sewer line replacement.

“Restricted sales taxes are not always being accounted for or used in accordance with the ordinances that established them.”

FY 2018 Annual Audit, Finding 2018-6, page 23

During the FY 2018 Audit, Audit finding 2018-6 on page 23 (listed as a repeat finding from prior years) states, “Restricted sales taxes are not always being accounted for or used in accordance with the ordinances that established them.” While this was corrected in FY 2019, this problem existed for at least 14 years.

In addition, during the June 1st Trustee meeting, the Town’s FY 2022 budget was presented to the Board with a $193,000 unbudgeted surplus. Here is the audio from that meeting. Reference time 2:40:00, as the Town administration has not (at the time this was written) provided a full copy of the Budget on their website.

June 1, 2021 Trustee Meeting (Full Audio)

Here is the other thing that the Trustees are not including in their narrative. Sales and Use Tax revenue is higher than ever. As the main source of income for the Town’s operations, Sales Tax is a great indicator of economic health of our town. Looking at Sales and Use Tax Revenues over the last decade, we can see that the natural growth within our community has been astounding. Comparing FY 2011 to FY 2020, there was a $441,041 or 76.9% increase in Sales and Use Tax in just nine years.

Need more proof that the money is there? Earlier today, the July sales tax check was issued to the Town. Sales Tax was up 25.1% and Use Tax was up 35.8% compared to last year, for a combined increase of $26,852 over the prior year. Let’s just pretend they receive a $26,000 increase in their sales and use tax revenue each month for the entire year. That would total $312,000. While that is just a quick extrapolation, that number sounds awfully close to the $314,000 needed to fund the water and wastewater annual debt service payment.

The annual audit findings that come up year after year state the Town has poor financial controls that have never been addressed. The Town administration shrugs the findings off, stating, “Since we are a small town, we will never be able to have sufficient segregation of duties.” That is simply untrue. There should not be repeat findings for a decade, ESPECIALLY, when there is a known investigation into the mishandling of public funds. The warning issued by the Auditor each year emphasize the risk and now the consequence for not addressing these issues. According the the FY 2019 State Auditor Inspector’s investigation into the Town of Dougherty, here are five suggestions they gave to a town of 224 people to institute proper financial controls (see page 10 of the report):

  • Retaining an accounting firm to reconcile bank records to Town records
  • Mailing bank statements, with check images, to a board member for independent oversight
  • Requiring two signatures on checks at the bank level. Although checks are required to have two signatures per Town policy, checks are allowed to clear the bank with one signature;
  • Utilizing the ‘Audit Trail’ feature in the QuickBooks software used by the Town. This feature maintains a record of all activity and corrections made to the financial records and can be password protected from the primary user
  • Consider hiring a part-time employee to integrate segregation of duties into the daily receipting, depositing, and/or expenditures of the Town

I brought up in a previous article that the Town is under investigation from both the OSBI and the State Auditor’s office for suspected embezzlement. While the actual amount of the municipal malfeasance has not been publicly disclosed at this time, we can tell just from the Annual Financial Report that the dollar amount in question is significant. From FY 2015 to FY 2016, Fines and Fees Revenue dropped by 48.4% or $80,274 in just one year! Knowing that the internal investigation spans at least three years (including FY 2016), we can assume the embezzlement exceeded this amount.

While no one disagrees that water and wastewater improvements NEED to be made, the poor planning over the last decade and solely sales tax increase based approach for financing are not in the best interest of the Town long-term. I believe the poor condition of the Jones water and wastewater system is the result of poor stewardship and not a lack of funding. The Board will tell you that there is no other way for the Water and Wastewater improvements to be made, except through this sales tax increase. Once again, that is simply not true, and I will still argue that a blended approach to financing is the BEST way to fund these improvements right now. Should this sales tax increase pass approval from the voters, Jones would be in the top 20 cities in the state of Oklahoma for highest municipal sales tax rates. Only two Cities in the State would have a higher municipal-only rate than Jones.

If the new Board of Trustees wants to be marked by making a positive difference for this Town, may I suggest they start by getting the Town’s financial house in order.

But I say that wisdom is better than might, though the poor man’s wisdom is despised and his words are not heard. The words of the wise heard in quiet are better than the shouting of a ruler among fools.

Ecclesiastes 9:16-17

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