FERNANDINA BEACH WEATHER

How do you solve a problem named “Marina?”

Submitted by Suanne Z. Thamm
Reporter – News Analyst
April 23, 2020

The Fernandina Harbor Marina — commonly called the City Marina — is in a fix.

It is now poised to return to full functionality this summer, with the completion of repairs to the docks in the North Basin.  Fuel services and pump out services will be restored.  The mooring field will be available to sailboats. The boat ramp has already reopened, along with the new attenuator and docks in the South Basin.

So what’s the problem?  In a word:  debt.  According to Fernandina Beach City Commissioner Chip Ross, who has spent considerable time researching this problem, the 2019/2020 debt being carried by the City Marina is just north of $15M.  This number includes current debt obligations totaling $14.79M and a current operating budget deficit of $370K.

In order to understand the magnitude of Marina debt, some comparisons might be helpful.  The total expenditures for Fernandina Beach from the General Fund Budget for the City for 2019/20 is $22,738M.  The General Fund serves as the chief operating fund of a government. The general fund is used to account for all financial resources except those required to be accounted for in another fund. The General Fund receives the total revenue collected through property taxes (ad valorem) for the City.  In the current budget year that revenue is estimated to be $15.759M.  The remaining $7M needed to run the city out of the General Fund comes from a variety of smaller funds, such as sales tax receipts and franchise fees.

In Fernandina Beach, the “other funds” are primarily the Enterprise Funds, those funds established to support a single service from which revenues are received from charges for services to fund the delivery of that service. Fernandina Beach has seven Enterprise Funds:  Airport, Golf Course, Sanitation, Water Operations, Wastewater Operations, Stormwater Management and the Marina.

Hurricane Matthew

A major portion of the Marina  debt was taken on to repair damage done to the Marina by Hurricane Matthew in October 2016.  While costs associated with repairs were fully vetted and approved by FEMA, along with their agreement to fund 87 percent of the costs, to date the city has not received one penny of reimbursement funds for repair of the south and north attenuators, costs of which total $6-8M.  Despite regular and ongoing communication and pressure from City Manager Dale Martin and Representative John Rutherford’s office in Washington, FEMA officials have employed a variety of tactics to delay, obfuscate and deny that they had earlier approved the projects.  Their latest claim is that they have lost the City’s application.

While City Manager Dale Martin remains optimistic that differences with FEMA will eventually be resolved, Commissioner Ross is not so optimistic.  Until or unless FEMA honors its prior commitments to the City, the City remains on the hook for the total cost, as opposed to what the City had been assured was only a 13 percent share of the total, or roughly a million dollars.

Other Marina Debt

But the FEMA problem, while a big portion of the debt, is not the only problem.  There are currently more parts of Marina Debt as Ross presented in a report to the Fernandina Beach City Commission at its April 21, 2020 meeting.

1.  Pre-Hurricane Matthew projects/activities
Capital Improvement Refunding Note Original Series 2016B (matures 2026) 
Annual payment (interest 1.92%) 
CURRENT PRINCIPAL OBLIGATION:  $ 3,528,000   

2.  Line of Credit #1 for southern attenuator repairs/replacement
Line of Credit Note 2018: $ 6,600,000 
Currently interest-only payments
Principal due 7/1/2021 (option for 10-year amortization; interest TBD) 
CURRENT PRINCIPAL OBLIGATION $ 6,100,000 

3.  Line of Credit #2 for northern attenuator repairs/replacement
Line of Credit Note 2019 $ 3,000,000 
Currently interest-only payments
Principal due 7/1/2021 (option for 10-year amortization; interest TBD) 
ANTICIPATED OBLIGATION:  $2,290,000

4.  Utility Fund transfers
Interfund transfers for annual cash balance deficits (approximately five years)
10-year loan (4.3% interest) for southern basin improvements (dredging, docks)
CURRENT OBLIGATION:  $3,800,000

5.  Anticipated 2019/2020 budget deficit
Expenditures (personnel and operations; no fuel, insurance, contribution for future dredging): $832,000
Revenues (dockage; no fuel): 
October – March (actual):  $128,305
April – September (estimated: March rev * 6 mos):  $331,734
ANTICIPATED OBLIGATION:  $372,081

Can the Marina debt problem be solved?

Commissioner Ross has put forward several options that he has identified for retiring the Marina debt obligations.  They include:

1. Forgive/write off all portion of the Utility Fund transfers (loan).
2. Obtain additional loans, for repayment over a period of 10-20 years at currently low interest rates.
3. Enhance marina revenues.
4. Continue to vigorously pursue FEMA reimbursement and use payments to reduce existing obligations.
5. Utilize existing General Fund reserves to reduce existing obligations.
6. Utilize and renegotiate existing leases (Brett’s Waterway Café, Atlantic Seafood) to reduce existing obligations.
7. Utilize additional City-owned property (101 N. Front Street) to reduce existing obligations.
8. Issue voter-approved debt (General Obligation Bond) to reduce existing obligations over a 10-20 year period.  

Each one of Ross’ options comes with its own set of challenges.  Financial consultants have repeatedly explained that the Marina cannot work its way out of debt through slip rental alone.  There is not sufficient space to add a boat storage facility or a boat repair yard.  

When the City has suggested other possible revenue sources, such as renting event space in a building that would be built south of the boat ramp, leasing the City-owned property at 101 N. Front Street, or adding a barge restaurant to the waterfront, those ideas have been met with resistance from citizens who want to see a low impact park and retain existing waterfront vistas.  

Meanwhile, fixed operating costs continue to rise to fund periodic dredging and ongoing maintenance.  

These options and others will no doubt be considered by the Fernandina Beach City Commission as the City prepares its FY2020/2021 Budget.

How dire is the situation?

Last summer the city engaged the consulting services of Stantec, Inc. (formerly Burton & Associates) to provide an integrated financial sustainability analysis of the city’s General Fund, Golf Fund and Marina Fund.   While they found the General Fund healthy with cash reserves significantly in excess of the 20 percent mandated by law, they found that the Golf and Marina cash flows are structurally unsustainable and require significant increases to revenues or annual cash support from the General Fund.  

The City has moved forward to implement changes to improve the future financial status of the Golf Course, but the Marina problem continues to fester, especially in light of FEMA’s delays and what sounds like an attempt to renege on previous agreements to fund Matthew-related attenuator repairs.  City Manager Dale Martin and Congressman Rutherford either speak with, or try to speak with, FEMA representatives weekly to bring the issue to closure to the City’s benefit.  Martin remains optimistic that eventually the City will prevail.

But it has been almost 4 years since Matthew paid the City a visit, and Ross is not so sanguine.  In his thinking, the City should hope for the best but plan for the worst and develop a plan to do away with all current  Marina debt over the next 10-20 years.  Now with even more uncertainty for the tourism industry in light of the Covid-19 threat and the possibility of another recession, it would not appear that major new revenue sources for the City Marina will materialize in the near future.

Will the plans for a waterfront park once more be moved to a back burner?  Will the City choose to take on additional debt at a time of record low interest rates to consolidate Marina debt and stretch it out over a longer period of time?  Will other capital needs of the City for projects like beach walkovers or a new fire station be sacrificed to pay down debt for an operation that serves a relatively small portion of the population?

These are all questions that the City Commissioners will be grappling with over the weeks ahead.  If you have suggestions that you would like to share with Commissioners and/or the City Manager, now would be the time to do so.  Their email addresses are listed below.

Mayor John Miller – [email protected]
Vice Mayor Len Kreger – [email protected]
Commissioner Phil Chapman – [email protected]
Commissioner Mike Lednovich – [email protected]
Commissioner Chip Ross – [email protected]
City Manager Dale Martin – [email protected]

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