Here is the prepared text of Mayor A.J. Holloway's address on city finances, made Monday, March 4, 2002, to the Biloxi Kiwanis Club, at the Holiday Inn Coliseum.:
Good afternoon. I'm glad that you invited me to speak to you today.
Today, we're going to talk about one of everybody's favorite subjects - money.
Some people around here like to say that the city has more money than we know what to do with. And, believe me, there are a lot of people in this town who are ready to tell us what to do with it.
Others claim that we can't spend the money fast enough. Or they say that we're sitting on a huge surplus, and we should give it back to the people. And then there's my personal favorite: Where is all of the gaming money going?
The public dialogue that we're seeing on city finances comes at a critical time in the city's economic life. It's important than ever to separate fact from fiction. Today, I'm going to give you some insight into Biloxi's financial condition and how my administration is managing the city's money.
I also want to tell you about a few warnings we've gotten from the financial community on Wall Street.
Frankly, I'm proud of the way that we are managing the city's revenue. I'm not going to apologize for being conservative.
If there's anything I want you to remember today, it's this: Biloxi IS in good financial shape, but that doesn't mean we are rich. It means we are HEALTHY. It means we must continue to be prudent and conservative.
We HAVE money. But having money is one thing. Knowing how to manage it is something else. And I'm going to do my best to make sure we keep managing it wisely.
A lot of people talk about how much money the city has received from taxes on gaming revenue. Ever since the last election, I've heard that we have anywhere from 35 to 50 million just sitting in the bank - and it's not even drawing interest.
We have 45.4 million dollars in the bank in cash and investments such as T-bills and CDs. We spend it as work begins on projects, and we're doing a lot of spending, whether you realize it or not.
You hear a lot of talk about what we have coming in, but you don't hear much talk about what we have going out. Let's talk about that for a minute. (Explain budget process.)
We've gone from spending 1 million dollars a year on major projects before gaming to an average of between 10 and 15 million a year just on major projects. In the next three years alone, we're going to spend about 60 million on major road projects.
With that much work planned or going on, it's getting tougher and tougher to follow our auditors' recommendation that we always keep a three-month supply of operating cash on hand.
Running city government has become big business.
Right now, on average, we spend between 8 and 10 million dollars a month on operations and capital projects. That's a lot of money. 8 to 10 million a month.
We're going to be constructing a new fire station in Woolmarket. Then, we're going to have to add 10 more firefighters to man the station.
We're also going to have to build a sewage interceptor line, collection system and million-gallon water storage tank in Woolmarket that's going to cost 7 to 8 million dollars.
We're investing 15 million dollars over three years - that's city money leveraged with state and federal grants -- to revitalize neighborhoods and businesses in east Biloxi.
Our public safety budget was about 5 million dollars before gaming. The current budget for police and fire is close to 25 million a year. We had to do that to keep our city safe, and these high rise hotels meant we needed to have more and bigger fire trucks otherwise everybody's fire insurance rates would have gone up.
While all of this is going on, we need to keep in mind that the economy is flat right now as far as major new development goes.
There was a time when we'd see a new hotel or a new casino come on line every year. We're not seeing that right now.
And, frankly, there was no way we could sustain that pace of growth.
On top of that, several of the major casino hotels in Biloxi are right now contesting their property re-appraisals, and the county may very well reconsider those cases. That WOULD affect our revenue.
I've heard some people say that if we're not going to spend the money, we should give it back to the people. Well, we have, and I'll talk on that later.
The tax on casino revenue now accounts for 33 percent of our revenue. Sales taxes account for about 15 percent of the revenue. That's 50 percent of the revenue from gaming and sales taxes. Property taxes, on the other hand, are only 17 percent of the budget.
Earlier I mentioned our work on city streets, but one of the most important streets is in New York and it's called Wall Street, where they decide the city's bond rating. They watch what's going on in this city because the majority of the companies that own casinos are publicly traded.
In the past several years, we've benefited greatly from casino revenue, but at the same time, when I took office, our debt service every year was 30 percent of the budget. That first year, we had to spend 8 million dollars of a 26 million dollar budget on debt service.
A couple of years ago, we paid that down to about 4 percent of the budget. For FY 2001, it was about 9 percent, or 6 million dollars, because of the work we have going on.
We also adopted a policy early on of spending the gaming tax money on onetime expenditures, like roads and buildings, and we avoided recurring expenses except in public safety.
As a result of this stewardship, our bond rating has improved each year. Our most recent rating from Wall Street bumped us up from a B to an A on our bond rating.
We're very proud of the success we've had with the city's bond rating.
By the way, let me explain why you should care about our bond rating. A bond rating is similar to a credit rating, which is the same thing that you and I go through when we go to finance a new car or a new home.
A good credit rating will save you thousands of dollars on a new home. A good bond rating can save the city HUNDREDS of THOUSANDS of dollars.
But let me read from the most recent rating from Moody's Financial Service. It was Sept. 4, 2001, just a week before the terrorist attacks:
Gaming proceeds are currently 32 percent of city operating revenues. And they have become a progressively larger, relatively stable revenue source since 1992.
Moody's concerns over the vulnerability of this revenue source are somewhat mitigated by the city's policy to spend the majority of gaming proceeds on capital projects rather than ongoing operations.
As gaming revenues have been a steady source of income for the city, however, the millage rate has been gradually reduced, resulting in gaming revenues currently supplementing operations to a limited extent. The ability of management to trade off decreasing property taxes without becoming too reliant on gaming revenue will be a key credit factor in future ratings.
In the first few years of casinos, we had reduced city property taxes by 10 percent, and we reduced that tax rate by 50 percent after reappraisal to offset the tremendous jump in property values.
That was the first time our property had been appraised in 12 years.
We had seen a lot of development since that time, particularly when casinos came online. In fact, we've seen about 2 billion dollars of development on Point Cadet alone. That drives up the value of property.
The plain fact is that you pay more in COUNTY taxes than you do in CITY taxes.
Let me say this: Supervisors Eleuterius and Rockco have worked with us on some projects, and I appreciate their support.
The county is paying for a couple of bridges in the city (at Iroquois Street and at Hiller Park), they've helped us with beautification on Highway 90, and they helped us on the property at Popp's Ferry causeway, and are going to help us on some work in Woolmarket.
We need to make sure we get every thing we are due from our county taxes.
I think it's a little unfair to look only at property taxes as the measuring stick. There are other ways we have given money back to you.
That brings me to my favorite question we hear from time to time: Where is all of the gaming money going?
I have to laugh when I hear that one. Where is all of the gaming money going? Three words: Just look around. The impact is all around you.
Public safety centers, recreation centers, hundreds of police cars and fire trucks, free recreation and the lowest water, sewer and garbage fees on the Coast. We have the lowest millage in Harrison County, except for the city of D'Iberville. I say that not to brag, but to remind people of where the gaming money is going.
So, in conclusion, I want you to remember my points:
No. 1, are we a rich city? I think a HEALTHY city is a better description.
And No. 2, when someone says, Where's all of the casino money going? You look Žem in the eye and say, It's all around us, and it's going to be working for us for years to come, just like A.J. Holloway.
Thank you for having me here today.