Dale Martin
City Manager
Fernandina Beach
July 20, 2018 12:00 a.m.
The 2018/2019 budget is due to the City Commissioners next week. I anticipate that my article next week will be the budget message that accompanies the proposed budget, offering a summary of the highlights. I further expect to provide a short presentation of the budget highlights at the August 7 City Commission meeting. To provide a foundation for those budget summaries, let me offer a description as to how the annual City budget is organized.
The City’s finances are organized as “funds.” Consider these funds as separate and distinct “pots” of money. The City has seven different such pots. In the actual budget document, these funds are presented in this order: General Fund, Enterprise Fund, Special Fund, Debt Service Fund, Capital Fund, Internal Service Fund, and Trust Fund. For this overview, however, I’ll review in the reverse order.
The Trust Fund is the City’s pension accounts. The City’s total annual budget is nearly $150,000,000, but more than a third of that total amount is associated with funds reserved for pension costs (without the Trust Funds, the budget falls below $100,000,000on). The monies in the Trust Fund are generated by City and employee pension contributions as well as interest and investment earnings.
The Internal Service Fund can best be described as the City paying itself for services- more specifically, fleet maintenance and utilities. As will be described later, the main users of these services are the City’s Enterprise Fund activities (Golf Course, Airport, Wastewater, Water, Stormwater, and Marina). Those operations, like City residents and businesses, are treated as customers of the City, and those operations pay for the City services through their user fees.
The Capital Fund provides for the large-scale, long-term needs of the City, primarily land, facilities, vehicles, and other equipment. Each department prepares and maintains a five-year Capital Improvement Plan (CIP) to assist with long-term planning. The most significant source of funding for these projects is property taxes (transferred from the General Fund; described later), although additional funding can be secured through grants, other governmental agencies, and loans.
The Debt Service Fund manages the City’s long-term debt. The City has several debt obligations, including obligations associated with software, public safety, Golf Course, Airport, Marina, and Utilities. With the anticipated Marina repairs, additional debt will be added to the budget.
The Special Fund captures the revenues and expenditures of a variety of operations that are somewhat unique. These operations include law enforcement forfeiture funds, federal and state block grants, water and wastewater impact fees, utility taxes, cemetery operations, and the City’s Community Redevelopment Area (CRA).
The City’s Enterprise Fund has several components (as mentioned earlier). As has been discussed previously, these components are treated as separate “business entities”: the intent is to fund their operations through user fees, not property taxes. The Golf Course, the Airport, Wastewater, Water, Stormwater, and the Marina all charge user fees. The revenue from those fees (and other revenues such as grants) is, in theory, supposed to cover expenses related to their operations. In the case of the Airport and the utilities, revenues do exceed expenses; the Golf Course and Marina, however, require subsidies from the General Fund, mainly due to debt service costs, not operational costs.
The General Fund is the “grand-daddy” of the City’s funds. This is the City’s primary operational fund, gaining the preponderance of revenues from City property taxes. Property taxes are calculated based upon the value of property (as determined by the Nassau County Property Appraiser) and the millage rate, or tax levy, set by the City Commission. The operating millage rate for the current year was set at 6.0000 mills ($1 for every $1,000 of value). The proposed budget is based upon a slightly lower millage rate to accommodate from rising property values, but the City Commission has yet to establish the “tentative” millage rate which may be different. The tentative millage rate is scheduled to be set at a special meeting of the City Commission on July 31.
Other General Fund revenues sources include licenses and permits; grants; county, state and federal contributions; and fines, rents, and reimbursements. The expenditures in the General Fund include all City departmental operations. Over half of General Fund expenditures are related to public safety: Police Fire, Building, and Code Enforcement.
I look forward to providing additional nitty-gritty details of the budget in my budget message next week.
I like how the City always likes to tell us the golf course and marina would be self-sufficient and not require General Fund subsidies … except for their debt service costs. Technically true but in my opinion this is an attempt to soft pedal the fact that they are both tax sucking leeches on the City. Their debt service costs ARE PART OF THEIR EXPENSES … they can’t cover the costs of loans taken out to support or fund their capital expenses. This is like folks telling you they only need a subsidy from the government or their parents because of their mortgage/car/credit card payments. An expense is an expense.
If the City is unwilling to sell off all or part of these operations they need to take a hard look at finding ways to increase revenue or reduce expenses.
But a good summary of the City’s funds by the City Manager.
One person’s “tax sucking leeches” are valuable assets to many in the community. Capital financing is essential to maintaining these valuable assets.
An enterprise fund … which the golf course and marina are … are supposed to be self-financing … self-sufficient. They are not, haven’t been for years, and there is no expectation that they will be anytime soon. So why are they enterprise funds? To give the illusion that they might someday be able to self-fund their operations? OF COURSE capital financing is essential to maintaining any asset such as these … but you miss the point. The debt servicing of this financing IS AN EXPENSE to these entities … continually reporting that they are self-sufficient except for their debt service costs is an exercise in making it seem their finances are not so bad. If the City wants to concede it can’t make these “assets” self-sufficient … let’s stop this accounting charade and cease treating them as enterprise funds. Incidentally I’m not “one person” … a lot of people in the community are tired of subsidizing the recreational activities of people who should be able to afford their hobby.
In support of Mr. Cain’s comments, I would also add that the three entities within the City’s Enterprise Funds also suffer from self-serving “advisory” commissions. As an example, despite a qualified recommendation from a City hired consultant to increase hangar rental rates, members of the Airport Advisory Commission during their June 2018 meeting voted to increase rental rates by only 1/3 of the recommended rate over the next three years. Meaning of course, that at the end of the three-year period, the hangar rental rates will still likely be below market. The recorded reason being that that current tenants/advisory committee members provide many community and airport-related benefits and that this type of activity may not be present if rates are increased and tenants from “outside the area” (whatever that means) replace the existing tenants at the airport.
There is an essential unfairness in continuing to tax all city residents so a few can enjoy cheap golf. Sell the asset to those who want to use it or to a private operator. Regarding the marina, it should be scaled back to a size that can be self-sustaining: a charming park area and a handful of slips for day visitors…..not a full service marina. Remember with rising ocean levels, that area will be continually battered and in need of repair.
Gerald, the City went out with an RFP for companies to manage or take over the golf course with full financial responsibility (the sale would require voter approval). No interest by anyone in the latter. The golf course industry continues to struggle. I agree that the “membership” pricing needs to be reevaluated as I think there is an increase potential. As Ms. Corso stated, advisory boards composed just of users are hardly ever going to favor increasing prices they will have to pay. That is why it is important to use an independent evaluation. The marina is not a “full service” marina. The money making elements of a marina besides transient boater slip rental is dry storage and boat maintenance/repair. The last two have never been possible due to the lack of upland availability. If the reconfiguration will allow almost full utilization of all available slips year-round, then the marina stands a good chance of generating some black ink instead of continued spillage of red ink.