RACELAND — Raceland may have to borrow money to keep the city afloat after the Internal Revenue Service swooped in and seized $97,000 from its bank account Wednesday.
The IRS took the money to cover taxes withheld from employees over the last six months of 2007, plus interest and penalties, said city clerk Ramona Barber in an emergency city council meeting later that day.
The arrearage to the IRS piled up because Barber used the money to pay other bills, she said.
However, no money is missing from city accounts, said Mayor Don McKee.
Barber said she contacted the IRS in January to inquire about arranging a payment plan but didn’t hear anything back until she got a call from the bank Tuesday.
The IRS temporarily released $14,000 that will allow the city to meet its payroll, but that will have to be paid in 30 days, McKee said.
To stave off the crisis, McKee has furloughed two part-time city workers and ordered all city vehicles to remain parked. He has frozen overtime. Firefighters will be able to answer fire and emergency calls but not much else.
McKee said the arrearage resulted from overspending by the council, but several members said the IRS debt was never in their monthly financial reports.
The seizure left about $21,000 in the city’s account, according to McKee, with no relief coming until November at the earliest when property tax receipts start coming in.
The city has expenses it will have to meet, including payroll and payments on its fire truck and police cruisers.
The council authorized McKee to apply for loans of between $50,000 and $75,000 and will decide at a later meeting how much to borrow.
After the meeting, city attorney James Lyon Jr. was reluctant to comment about whether the city will face legal difficulties rising from the financial snafu.
“We’re going to have to work some things out,” he said.
MIKE JAMES can be reached at mjames@dailyindependent.com or (606) 326-2652.
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IRS seizes $97,000 in Raceland
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