Finances scrutinized in Tupelo annex trial

By Emily Le Coz/NEMS Daily Journal

TUPELO – The city’s annexation trial resumed Monday with attorneys arguing over whether Tupelo can afford the multi-million-dollar expansion.
The municipality’s legal team, headed by Guy Mitchell, spent the morning painting Tupelo as a fiscally strong entity with abundant reserves. It can easily annex 16.15 square miles of county territory without hurting its financial stability or triggering a tax hike, Mitchell showed through documents and testimony.
“We could pay for these costs without any new revenue,” said City Clerk Kim Hanna, under questioning by Mitchell.
But Lee County’s legal team, headed by Chad Mask, spent the afternoon trying to dismantle the city’s case.
Lee County, in addition to the cities of Plantersville and Saltillo, and more than 100 residents, oppose the annexation.
Mask used the city’s own figures to show annexation would knock a dent into Tupelo’s general fund budget. And he questioned the municipality’s fiscal strength, citing a loss in sales tax collections during the past two fiscal years.
“Year-to-date, six months into the fiscal year, you’re down $100,000” in sales tax revenues compared to what was originally projected, Mask said.
Hanna confirmed this, but she added the city has collected more sales-tax revenues year-to-date than it had at this point in 2009.
It will cost an estimated $24.7 million over the next five years for the city to fully implement services and facilities to the newly annexed areas, located at various points around the existing borders.
Of that amount, roughly $6.1 million will cover annual operating costs like additional employees, administrative work and maintenance. The rest – about $18.6 million – will go toward capital costs like sewer and water facilities.
Hanna told Mitchell the city could absorb much of those costs by issuing new general-obligation bonds. Tupelo already sets aside 4.66 mills to pay for bonds issued after its previous annexation in 1989, she said.
Those bonds soon will be paid off, meaning the municipality will have 4.66 mills to spend on new bonds for the currently proposed annexation.
“We could leave our millage at 4.66 and pay $18-20 million of debt with no increase in millage easily,” Hanna said.
The city’s current total millage rate is 34.27.
Mask suggested that method unfairly burdens those residents not benefiting from the improvements. Some of those residents, he said, were annexed into the city in 1989 and still don’t have municipal water or sewer.
“If someone’s not getting water and sewer next year or in 21 years,” Mask said, “they’re still going to be paying a portion of that, right?”
Hanna agreed, but she likened it to residents who pay taxes for police protection even though they might never need it.
Mask then asked if bonds could pay for all the annexation services. Hanna said some would come from the city’s general fund, which this year was set at $36.5 million.
When asked to add the non-bond costs, Hanna came up with an estimated $2.8 million in general-fund expenses over a five-year period. Mask suggested that would place a financial burden on the city.
Earlier in the day, Hanna said otherwise. The city has $20 million in a rainy day fund, of which $3.8 million is budgeted for this fiscal year. That’s more than six months worth of savings compared to the recommended three months.
Hanna is expected to take the stand again today.

Contact Emily Le Coz at (662) 678-1588 or emily.lecoz@djournal.com.