July 24, 2020
Honorable City Commissioners, Residents, and Staff of the City of Fernandina Beach:
Please find following this memorandum the City’s proposed 2021 budget. The proposed budget reflects total revenues and expenditures in the amount of $163,067,648. Approximately one-third of that amount, however, is related to cash, revenues, and expenditures associated with the Trust and Agency Funds. With those funds excluded, proposed revenues and expenditures total $107,356,495. In both instances, the revenues and expenditures reflect an approximately 5.4% decrease in relation to the 2020 budget.
The portion of the proposed budget that typically draws the most interest is the General Fund, which is the primary operating fund for the City, and principally financed by property tax receipts. The proposed General Fund expenditures total $23,117,124. The proposed General Fund budget is supported primarily by a proposed operating millage rate of 5.8553 mills. This proposed millage rate eliminates the 0.5000 “conservation levy” (as pledged by the City Commission) that was included in the City’s operation levy last year. The proposed millage rate, as defined by state statutes, is considered a tax increase, but the City tax payment of most property owners will decrease.
The foundation for the proposed millage rate is based upon comments from the City’s auditors in March, 2019. During the presentation of the 2019 audit, auditors expressed concern over the growing negative balances associated with the City’s Marina (2019: approximately $1,500,000) and Golf Course (2019: approximately $1,100,000), and urged the City to develop a plan to address the negative balances. At the recommendation of City Comptroller, the City retained Stantec Consulting Services to conduct an Integrated Financial Sustainability Analysis, which was subsequently presented to the City Commission in August, 2019 (final report issued November, 2019). The report offered the following conclusions and recommendations (p. 10):
• The City’s current millage rate, property value projections, and other sources of revenues are expected to produce sufficient revenues to meet the General Fund’s ongoing capital and operating costs through FY 2029.
• The Golf Course Fund’s and Marina Fund’s cash flows are structurally unsustainable and will require significant increases to revenues or annual cash support from the General Fund in order to fund ongoing operational costs, debt service, and capital requirements.
• The General Fund is projected to have sufficient cash flow surplus to support the Marina Fund and Golf Course Fund if the City chooses to do so.
It is upon that recommendation that the millage rate is proposed to be set at 5.8553 mills (the current millage rate less the “conservation levy”). With that millage rate and by incorporating other Stantec recommendations, the structural cash flow deficiencies in the Golf Course Fund and Marina Fund can be mitigated, eventually reducing General Fund supplementary support.
The total proposed millage rate consists of the 5.8553 mills levied for operations, and 0.1553 (down from last year’s 0.1683) mills levied for voter-approved debt service. The proposed property tax levy, at a collection rate of 96%, will generate approximately $15,860,947. The City’s aggregate taxable value increased by approximately 9.6%. The comparable taxable value (an effort to compare “apples to apples” from the preceding year) increased by 6.6%. Despite these substantial increases, the increase in the Assessed Value of many properties (if classified as a “homestead” property) is limited to no more than 3% or the rate of inflation, whichever is less (in this case, the 2020 rate of inflation is 2.3%). Under “homesteaded” circumstances, a property owner would see a decrease of approximately $37 per $100,000 of taxable value.
For the fourth consecutive year, the City’s continued growth will forego the need to increase fees for water and wastewater services (as stipulated in related bond covenants). In fact, a recent rate study recommended a nearly 15% reduction to wastewater fees, and that reduction is reflected in the proposed budget. The anticipated revenues for those utility services are expected to continue to increase due to the growing number of users and associated usage.
The Capital Improvement Project Committee prepared a detailed five-year Capital Improvement Plan (CIP). Capital expenditures, funded through property taxes, utility fees, impact fees, loans, and grants, are approximately $5,600,000. Significant projects proposed in the draft budget include the acquisition of riverfront property (for incorporation into the proposed waterfront park, to enhance shoreline stability, and to accommodate railroad safety improvements), the “re-pointing” of the iconic Peck Center (other recent improvements have included hundreds of windows and several doors), relocated Fire Station No. 2 construction, waterfront park development (principally the realignment of Front Street) maintenance, various recreational center and ballfield improvements, the completion of Simmons Road park, and several beach-related projects.
Proposed staffing changes in the General Fund include additional part-time support for the Human Resources and Code Enforcement Departments, and the transition of one part-time support to full-time staff in each of the Finance, Code Enforcement, and Facility Maintenance Departments (tied to a part-time reduction in the Streets Department).
In accordance with the City’s reserve policy, approximately $4,623,559, roughly 20% of General Fund expenditures, is budgeted for reserves. The restricted reserves of the Building Department, separated from the General Fund, sit at $1,977,188, placing the City’s total reserves (albeit with some restrictions) at 26.6% of the City’s operating budget.
This proposed budget was developed with the outstanding expertise and assistance of City Comptroller Ms. Pauline Testagrose. Ms. Testagrose has displayed outstanding leadership and professionalism in the City’s Finance Department. I also wish to express my appreciation to the Department Directors for their assistance, not only with preparing the budget, but throughout the year as they strive to support this community, especially during the current pandemic.
I have now served this community for nearly five years. Expectations continue to be high throughout the community, and the current City Commission has taken significant strides to meet many of those expectations. At least two new City Commissioners will be elected later this year to assume a critical local leadership position in this community. I look forward to working with the City Commission and the community as we struggle with the present conditions and prepare for our new future. I remain honored and privileged to serve the residents of Fernandina Beach. Thank you for your support.
Dale L. Martin