A Twofer Worth $2.7M

Nov 13, 2014

This week’s “You Paid For It” (or YPFI for short) is a twofer worth over $2.7M.

First, a quick one from the recently published newsletter issued by the Poplar Bluff City Manager, Heath Kaplan.

On Nov. 4, Kaplan released an eleven-page document “to provide information to our community regarding financial decisions I have made thus far and the reasoning behind those decisions.” The final six pages of the document include 18 responses to non-factual information reported in the editorial of the Rust-owned daily (also known as the DAR).

Buried on page eleven, an amazing fact about Health Insurance reads:

Last year the decision was made (past city manager) to fund the plan at rates that were 35% lower than the recommendation. This one decision underfunded the Health Insurance Internal Service Fund by $1,718,304.12.

It appears that former City Manager Doug Bagby gambled with the City’s Insurance Fund and lost big. That’s a $1.7M You Paid For It!

Our second YPFI, has to do with the City of Poplar Bluff’s use of the half-cent sales tax for Capital Improvements. The tax was created by ordinance in 1989 to pay for the Black River Coliseum. The original tax had a sunset date but, like all taxes, government works hard to protect its income sources. In 1995, City Council voted to make the half-cent sales tax permanent.

Using a Sunshine Request, SEMO TIMES received a copy of the expenditures from the funds generated out of this capital improvement sales tax since 2008.

Over the past 6 years, the city has expended $11,849,071.63 from these tax revenues. The findings appear to show the previous administration did not use the tax funds solely for capital improvements.

The city policies state that if an item is less than $1500, it is not a capital improvement but an operating expense. The total of items in the list which cost less than $1500 each is $474,892.

After a cursory review of the ledger listing over 1700 purchases using this sales tax fund, here are a few examples that do not appear to make the CapEx cut:

Non-CapEx Spending
Motor Fuel Gasoline                   $45,638

Motor Fuel Diesel                       $104,400
Motor Pool [parts]                      $105,180
Special Investigations                 $68,330
Mowers                                         $33,840

Though capital improvements are at best defined by grey areas of justification, one cannot find fuel in that grey area. Fuel is an operating expense.

The parts labeled “Motor Pool” were purchased from area stores like O’Reilly Automotive, Auto Tire and Parts, Orscheln, and others. 99 of the 131 items listed were purchased for less than $500.

As for other items in the list above, we included “Special Investigations” on the list because it’s one of those things that make you go, “Hmmmmmmm.”

Lawn care is available as a service-for-hire, so the decision to own and maintain lawn mowers is typically a maintenance cost and not considered a capital improvement.

One item on the list that seemed strange was dated 12/9/2009. It was a payment to Southern Bank for $25,000 for “Tools,equipment,inve.” Unaware that Southern Bank sold tools and equipment, we’ll attempt to go through their drive-thru the next time a pair of pliers is needed. (One would hope this is actually mislabeled and is some sort of debt repayment.)

A total of $645,853 of the fund was paid to Smith & Company (that equates to more than 5% of the total expenditures). $463,820.09 of that amount is listed as “Oak Grove Road Project” and the remaining as “Other Improvements” and “Overlay Program.” There is not enough information to determine how much of these fees can technically be considered capital improvements.

Road repairs of cracks and potholes are considered by most government entities as maintenance of capital assets and, therefore, an operating cost. At least $55,000 appear to be expended for the repair of streets.

SEMO TIMES’ rough calculations estimate that over a million dollars of the funds expended in the last 6 years from the sales tax revenues probably do not qualify as Capital Improvements. For the exact total of potentially misappropriated funds to be calculated, the city would actually have to do an internal audit of the account.

With assurance that the new City Manager will prevent such activity from happening in the future, we cannot see any beneficial outcomes of an audit.

But one thing is for sure about the $1M in potentially misappropriated dollars…you paid for it!