Hernando officials raise garbage rates to combat $2.6 million utility shortfall

Key Points

• Financial Crisis: Hernando’s Utility Fund faces a $2.6 million shortfall, leaving the city with a critical two-month “runway” before the fund becomes insolvent.
• Rates Raised: The Board of Aldermen voted to increase monthly garbage rates from $22 to $28—a 27 percent hike—to cover actual contract costs from Waste Connections.
• Internal Friction: Board members are demanding higher standards of transparency and austerity, with some calling the lack of financial reporting “shocking” and “premature” without deeper budget cuts.

(UPDATED STORY)

HERNANDO, Miss. — Facing a looming financial crisis that could leave the city’s utility operations insolvent within 60 days, the Hernando Board of Aldermen voted Tuesday night to hike garbage collection fees and authorized an emergency transfer of funds to keep the city afloat.

The meeting centered on a staggering $2.6 million projected deficit in the Utility Fund, an enterprise account intended to be self-sustaining. Mayor Chip Johnson and Chief Financial Officer Ed Green warned that without immediate intervention, the fund would lack the cash to meet payroll and operational expenses by early spring.

“We are in our straits with a two-month leeway,” Green told the board, noting that the fund holds only about $30,000 in immediate cash.

Board Members Call for Accountability

The announcement of the shortfall was met with sharp rebukes from board members who questioned how the city’s financial health could deteriorate so significantly without their knowledge.

Alderman Kit Kitchens, a new member of the board this year, characterized the situation as a “shocking” failure of leadership. “As a new Alderman, I would have expected that if we were losing millions per year and heading for insolvency, someone would have mentioned that, but there was not one word,” Kitchens said. He argued that instead of increasing costs for citizens, the city should have implemented “government-wide austerity and deep cuts” months ago.

Kitchens also pushed for new reporting standards, noting that the administration was unable to provide a basic breakdown of recurring expenses versus revenue. “Any business or household knows they need that basic information to know how to plan,” he added.

Alderman Chad Wicker echoed the need for transparency, noting that the deficit raises “serious and legitimate questions about budget forecasting, revenue projections, and expense controls.” While Wicker acknowledged the board’s immediate responsibility to ensure the continuity of essential services, he emphasized that the residents of Hernando deserve leadership that “confronts difficult realities rather than deferring them.”

Garbage Rate Hike and Budget Errors

To address the immediate gap, the board voted to increase monthly garbage rates from $22 to $28, with a $1 increase for extra cans. The new rate is designed to reflect the actual cost charged by the service provider, which had not been fully passed along to residents.

Mayor Johnson took responsibility for the shortfall, citing “mistakes in the budget” regarding recurring 16 percent annual increases in garbage contract costs. Additionally, officials discovered approximately $700,000 in unpaid invoices from 2024 that had reportedly been left on a former manager’s desk.

Short-Term Stabilization

The board approved a $270,000 budget amendment to transfer interest from the Mississippi Modernization Act Fund to the Utility Fund for short-term cash flow. However, both Wicker and Kitchens signaled that one-time transfers and rate hikes are not a long-term fix.

“There are only two ways to restore long-term financial stability: reducing expenses or increasing revenue,” Wicker stated, committing to work with staff to identify responsible options that protect taxpayers.

Proposed increases to water and sewer rates were tabled until the February 20 meeting to allow the board time to “dive into the numbers.”

Public Safety and Infrastructure

In other business, the board:

• Approved a $58,000 city match for a Leo grant for new dispatch consoles.
• Approved a grant application for a new tornado siren program.
• Adopted the 2024 International Building Code and 2023 National Electric Code to maintain safety standards.

The Board of Aldermen will reconvene later this month to discuss potential water and sewer rate hikes and review austerity recommendations.