State comptroller warns Memphis is headed toward financial crisi - Action News 5 - Memphis, Tennessee

State comptroller warns Memphis is headed toward financial crisis

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MEMPHIS, TN -

(WMC-TV) - A daunting economic development surfaced out of Memphis City Hall Tuesday.

The city received a letter from the Tennessee State Comptroller's Office saying the city is headed towards financial crisis.

"They've cautioned us against what's called a 'scoop and toss', which is taking today's fiscal problems scooping them up and then tossing them into the future," explained the city's Chief Administrative Officer George Little.

If the city doesn't make emergency adjustments, the state will make cuts or taxes will go up.

Tuesday, Mayor A C Wharton addressed the city council about the matter, asking them to approve his plan of corrective action.

"The idea of deferring debt is now off the table," the mayor declared.

The state says the city will go under, if they don't relieve some of the debt that is now eating into the operating budget.

"We borrow too much and we spend too much and we have to get it under control," Councilman Jim Strickland told Action News 5.

The comptroller found negative balances in four funds dating as far back as 19 years, including the New Memphis Arena fund from the construction of FedEx Forum.

The comptroller found the following city funds are in the red and out of compliance with state law:

  • Fleet Management -$5.5M
  • New Memphis Arena -$4.1M
  • Unemployment Compensation: -$1.2M
  • Capital Projects: -21.6M

Council members were livid to learn that the mayor had received an April 19th letter from the state about the financial problems.

"It puts us in a very bad position to have to process all this," said Councilman Kemp Conrad.

The mayor told the council he assumed the comptroller had sent them the letter.

Wharton says it's unclear how the problems with the funds could go undetected for nearly 20 years.

"We'd gone through a number of audits and nobody had ever raised anything," he further explained.

Money will have to be shifted around to replenish the four deficient accounts, which puts a greater burden on the already strapped budget.

Council members are bracing for drastic action.

"Hogwarts is closed. There ain't no magic left in the hat," Councilman Shea Flinn told fellow council members.

The council must approve the mayor's plan of corrective action by May 28th or the city will lose its right to issue bonds, a mark the mayor calls a "Scarlet Letter".

Read the entire letter sent by the state comptroller's office, click here: http://ftpcontent4.worldnow.com/wmctv/memphis-funding.pdf

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