Why Baton Rouge can’t use reserve funds as local match for drainage projects

    In the search for a source of matching funds needed to draw down $255 million federal dollars earmarked for critical Baton Rouge drainage projects, could the city-parish tap into its reserves to find the money it needs?

    In short, the answer is no—or at least it’s not advisable based on the limited excess funds available, as councilman Matt Watson found out when he recently posed the question to the East Baton Rouge Finance Department. 

    One reason is because the city-parish is still trying to replenish reserves from the budget stabilization fund used for the 2016 flood. The flood cost $5.6 million in rainy day funds, says finance director Linda Hunt. According to budget policy, the funds should be replenished within three years to return the stabilization fund to its recommended amount: at least 5% of general fund appropriations, or about $16.1 million.

    The city-parish is currently $1.6 million short of that goal, Hunt says, and must present a plan to restore the funding by the end of this year. 

    In addition to the budget stabilization fund—which can only be used for temporary revenue shortfalls or extraordinary expenditure increases—Baton Rouge also keeps excess dollars in something called the “unassigned fund” that can be spent on any lawful purpose. 

    But that fund is at just $5.6 million, much less than in previous years, and some of which is already planned to be used for needs in other city-parish departments. The unassigned fund had $12.9 million at the end of 2016, driven, says Hunt, by higher sales tax collections after the flood. In part, the $7.3 million drop over the past two-plus years is due to some dollars being transferred to the budget stabilization fund. 

    In other words, Baton Rouge does not have enough excess funds to put toward a local match for the federal drainage dollars. While officials could technically use some money from the unassigned fund, Hunt says it is not advisable as it could nearly deplete city-parish reserves, which is risky.

    Bond rating agencies, for instance, keep tabs on government reserves. As Baton Rouge prepares to issue bonds for MovEBR, Hunt says it’s important agencies know the city-parish uses best practices and has sufficient rainy day funds. Also, city-parish officials maintain if the St. George incorporation passes, Baton Rouge could face a significant budget shortfall, requiring the short-term use of reserve funds. 

    Ultimately, some $65 million is needed in local match money to move forward with key drainage projects. Officials say the Army Corps of Engineers has made $25 million available, which Baton Rouge would have to repay over 30 years. That leaves $40 million the local government would need to find—and quickly, based on pleas from residents.

    Watson says he looked to the reserve funds, not to cover the entire $40 million, but perhaps some part of it. 

    “I was looking at every place you can turn stones over to find some money and put it in a bucket to fill up,” he says. 

    The mayor’s administration has combed through the budget, as well, in an attempt to find available funds, says Chief Administrative Officer Darryl Gissel. But he adds that other major projects like this have had the federal and state government help with funding—like the West Shore Lake Pontchartrain project, funded via a federal, state and local partnership.

    “People always think we have a huge excess,” Gissel says. “There is no local government just sitting on $40 million.”

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