SOUTH PITTSBURG, Tenn. - South Pittsburg is in one of the worst financial situations it has ever seen, and that was before a massive flash flood struck downtown in July.
The City Commission voted unanimously last month to nearly double the property tax rate, to 99 cents per $100.
Mayor Jane Dawkins said the boost was necessary because of "indebtedness and lack of sufficient funds to run the city."
The money will repay the city's utilities division more than $800,000 for money former Mayor Mike Killian transferred from the division to the city's general fund, Dawkins said.
Killian did not seek re-election in 2011, and last week he pleaded guilty to federal gambling charges related to operating an illegal lottery and running video poker machines at his South Pittsburg business.
According to city officials,the city once had arranged a loan with its utility, Marion Gas Systems. In 2008, the city stopped making payments on the loan.
In December 2009, Killian sent a letter to the utility asserting that it owed the town $20,000 per year since 1990, which he calculated to be $744,802 with interest.
Dawkins said $441,170 was moved from the city's utilities department to its general fund on Dec. 31, 2009.
In September 2011, the state comptroller's office accused Killian and the board of illegally transferring almost $750,000 from the town's utilities department.
Officials said they believe the money was used to build a retaining wall in the Richard City area, buy police cars and other, smaller projects.
Dawkins stressed there is no evidence the money was misused or stolen.
City officials at the time were "avoiding" a meeting with comptroller's office representatives for a final judgment on the matter.
"The prior administration and their attorney would never schedule one of these closing meetings," Dawkins said.
"It was, in other words, stalled," she said. "It was still hanging out there. It wasn't going away."
Dawkins, who took office in December 2012, said she found out in March "by rumor" that representatives of the state comptroller's office were coming to town.
"After being advised to not meet with these folks when they came to town and making the decision to meet [anyway], I made myself available," she said. "I was here, pretty much by myself, facing this. But I'm a big girl, and I can handle it."
The city has five years to pay back $802,890, officials said.
The commission fired longtime city attorney Tracy Wooden in June, and former city administrator Bently Thomas resigned in January to take a position in Bradley County. City recorder and certified municipal finance officer Mary Faye Payne, who is Killian's sister, resigned in May.
"All of this happened, and we thought that was the greatest cloud we had," Dawkins said. "Then the rains came. We've got to dig out. I am not going to let this town go bankrupt. It's time to pay the fiddler."
Ryan Lewis is based in Marion County. Contact him at ryan firstname.lastname@example.org.