NATCHEZ — Restructuring and annexation are two words Natchez Mayor Butch Brown said residents should get used to hearing.

Giving a state of the city address Wednesday at the Rotary Club of Natchez, Brown covered a variety of topics ranging from tourism to economic development.

But Brown spent the majority of his speech discussing the city’s financial situation, acknowledging the city has had problems in maintaining its finances.

“We’ve have some problems in keeping our books, I don’t think that’s a secret, but we’re gradually getting through that,” Brown said. “In general terms, we are still in good financial condition.”

Brown recapped a confusing week for the City of Natchez’s financial outlook as city leaders went from first believing the city was $1.5 million in the hole last week to having a $2.5 million surplus this week.

The deficit was uncovered in a monthly budget report presented to the Natchez Board of Aldermen meeting and the error was attributed to the Natchez City Clerk’s Office. The city’s independent auditor later said the figures were incorrect and found this week the city actually has a surplus.

“The problem we have is cash flow,” Brown said. “We need enough cash flow to operate our city, but at the same time we have money in restricted funds to care of nagging problems that have been going on for years.”

Brown pointed to lease payments the city receives from Magnolia Bluffs Casino as an example of funds that come to the city, but can’t be used for general fund spending.

Brown said the quick solution to replenishing the general fund and alleviating the city’s cash flow problem is to make a loan from one of the city’s funds.

A long-term solution that will also allow the city to be prepared for future expansion and projects, Brown said, will come through restructuring the city’s debt.

Brown said the city’s debt reduction hasn’t been occurring as it should have and that the city is unable to borrow or refinance any of its debt.

“It’s been done too many times in the last 12 years,” Brown said. “We’ve come up with an idea of restructuring our debt.”

That plan would include consolidating all of the city’s debt, making a loan and paying off the debt to have a new set of bonds.

“What we would do is take those assets, restructure the debt and extend the term,” Brown said. “Instead of 10 years before maturity at say seven or six percent, the new debt would be at 20 years at somewhere around three to four percent.”

Brown said the restructuring was necessary, in part, to keep up with the industrial needs of the community.

“We’ve got new industry we’re very blessed to have, but now our water treatment facility was set to handle a No. 4 level and now is being forced to run and operate at a No. 8 level,” Brown said, speaking in an example scenario of how much work is going on at the facility. “(Natchez Water Works Superintendent David Gardner) is going to have to have some help on how you treat the waste, and he’s going to have to have money for more wells and more pipes for water and sewage.

“We can’t keep up with the industrial needs of our community.”

Brown also mentioned annexation — specifically the Beau Pré subdivision — as another way to increase revenue to the city.

“When we annex, you folks that live in Beau Pré better get ready,” Brown said. “We’re handling water and sewage and giving you fire protection… but we don’t get any revenue to offset those things.”

The U.S. Justice Department approved the city’s request in 2009 to annex 2.68 square miles of county land, which was the city’s first annexation since 1981.

“You’re going to be hearing more about restructuring and annexation,” Brown said. “I’m not afraid of it.

“If you study it long enough and pay attention, you’ll find that you won’t be afraid either.”