The city of Vernon could be facing bankruptcy, if immediate spending cuts are not made. Mayor Joe Rogers said bankruptcy is a very last option for the city. But it is a very real representation of just how serious the financial problems in Vernon are.
"If we don't correct something, it would be a possibility," said Joe Rogers. "If you spend more than you take in, then bankruptcy would be an option."
An audit alerted city commissioners that financial problems have been looming over the city for the past three years, according to Rogers. That audit showed commissioners that yearly expenses and income numbers for the city have been reported incorrectly.
Rogers was elected as Vernon Mayor in May of 2014. He said going into his term he had no idea of the city's financial strains. It wasn't until November, 2014 that Rogers and the commissioners became aware of the problem.
It was the inaccurate documents and drought conditions that contributed to the city's excess spending, according to Rogers.
"What's happened is the drought has affected us," said Rogers. "Our income has gone down and our expenses have remained the same, so that's the problem." Rogers also noted that, that wasn't the only problem. "We've had some problems getting our numbers correct at the end of the year," said Rogers. "I'm not sure why, but we're going to work on it."
The audit showed a roughly $600,000 deficit, according to Rogers. In order to maintain operations the city has been borrowing funds from the Employee Benefit Trust.
The trust includes money the city pays for employee benefits, primarily for health insurance, according to Rogers. The borrowed funds roughly total around 1 million dollars.
The transfer of those funds was never authorized by the city commissioners.
"The city manager handles our finance; basically he sets up the budget for us to look at each year."
The City Manager, Mitch Grant, declined an on-camera interview, but did speak with Newschannel 6 over the phone. He said the city administration did approve borrowing money from the Employee Benefit Trust something he said did not require commissioner approval.
The Grant also said that the fund is designed to be borrowed from, and had a surplus of more than a million dollars. But Rogers said the borrowing does create a problem if continued.
"We either, have to generate more income or cut expenses," said Rogers. "In the city it's hard to generate more income."
Rogers said, as of now, the city cannot make a debt payment for the fall. In order to do so, Rogers said, the city must borrow even more money, and start making dramatic spending cuts.
"The good news is that we know what the problem is and we're going to be able to correct it now," said Rogers.
City Commissioners will start making spending cuts immediately, and they will tackle the problem head on, according to Rogers.
The audit will be presented to officials Tuesday at the City Commissioners meeting. The meeting starts at 6:30 p.m. at City Hall.