Sharpening the Pencil: Fernandina Beach Begins FY 2012-13 Budget Formulation

David Lott, Deputy City Manager, Presents Budget Preview

Submitted by

Suanne Thamm

Reporter – News Analyst

The Fernandina Beach City Commission (FBCC) met in a 2-hour working session on Tuesday, June 26, 2012 to receive a progress report on the city’s work to date on fashioning a budget for the new fiscal year, which begins October 1. City staff presented a gloomy forecast, mirroring the tropical storm conditions outside city hall chambers that may have led to the small public turnout. About 7 members of the public joined more than 20 city staff for a slide presentation designed to educate the FBCC on the work already done by city departments to reduce expenditures in anticipation of the continuing track of decreasing revenues next year. The 43-slide presentation may be viewed on the city’s website under “news.”

Deputy City Manager Dave Lott conducted the first hour of the briefing, with City Manager Joe Gerrity taking over the final portion. The presentation was considered to be a draft, since it is a work in progress. According to the city, the FY 2012-13 budget represents the perfect storm for several reasons: the city’s financial position at the beginning of the new year will not be as strong as expected; continued declining revenues are anticipated in FY 12-13; and the city has new expense obligations in FY12-13, including an increased pension contribution, beach renourishment project costs and reserve, and funding capital expenditures. The only viable solution, the city believes, is a combination of significant expense reductions balanced with revenue increases. During July, the commission will workshop budget issues and explore options to cover anticipated revenue deficits before it adopts a tentative millage rate on August 2.

Preliminary reports from the Nassau County Property Appraiser indicate that ad valorem tax revenues will decline by 2.9% for FY12-13, reflecting the continuing decline of property values.

The budget issue is extremely complex, involving seven different funds, the largest of which is the General Fund, the primary operating fund for the city that represents 22 separate budgets ranging from administrative offices in city hall to public safety, streets, parks and recreation. The FY2012 revenue projected for that fund was in fact $220K lower than budgeted, but expenditures for the same period were $260K less than budgeted.

The city had anticipated beginning FY11-12 with $5.709M, but in fact began with only $5.431M, a negative difference of $278K. The drop resulted from citizens’ successful appeals of ad valorem taxes that resulted in lower ad valorem tax receipts, a drop in franchise fee revenue owing to a warmer than expected winter and a reduced amount of state shared taxes.

Shortfalls in revenue have also resulted in a drop in the city’s cash reserves.  The city has always sought to maintain a strong cash reserve in the general fund at more than 25%.  The reserve would be used to keep the city running for 90 days in the event of a major disaster, such as a hurricane. This is consistent with government and financial recommendations. In looking at projections for FY12-13, and based solely on reductions in operating expenses, the cash reserve would drop to $864K, representing a shortfall of $3.4M from a 25% reserve level and a shortfall of $2.5M from a 20% reserve level. Deputy Manager Lott stressed that the $1.4M covering the McGill lawsuit has been set aside and is not factored into the current general fund reserve.

After a first pass at formulating the FY12-13 budget, the City Manager, Deputy City Manager Lott and the Finance Director Patti Clifford went back over information provided by the departments to identify additional expenditure reductions and revenue opportunities. While initially the departments had identified 5 positions to be eliminated, the second review upped the number to 10 full time and 2 part time positions.  They eliminated pay increases for unionized employees and merit increases for salaried employees. They also recommended deferring funding for the Nassau Humane Society Shelter for one year, reducing computer purchases, reducing Capital Improvement Plan funds for beach renourishment and transferring non-TIF Community Redevelopment Agency (CRA) funds to the general fund. Expenses built in included returning commissioners’ salaries to $1,000 per month from the temporary reduction to $800 per month, approved by the last commission; hiring a pension attorney/actuary; and adjusting personnel levels. Still to be decided are the future of the city lobbyist’s contract and the grants program for city non-profit organizations.

Even with $1.1M reductions in expenditures, the city will experience a budget shortfall unless revenues can be increased.  One recommendation is to increase the franchise fees in the range of 5.5 to 7.32. This would mean that Fernandina Beach residents who use electricity would pay between $5.50 and $7.32 per $100 of electricity used per month.  Another is to increase property taxes from 0.16-0.34 mils above the rollback rate.

Increasing millage is neither easy nor simple.  For example, a simple majority is required to approve the roll back rate or an adjusted millage rate that would reflect a change in the FL statewide per capital personal income. But a super majority vote is required to approve a levy of 2/3rds maximum millage rate. A unanimous vote of the commission is required to approve a levy of increased millage more than 110% above the adjusted millage rate.

Under discussion of Capital Improvement Projects, Mayor Filkoff noted that the city-owned train depot at the foot of Centre Street has deteriorated to such an extent that it will cost $250K to rehabilitate it. The Tourism Development Council (TDC) currently leases the building as a visitors center and has agreed to pay half of the cost if awarded a long-term lease agreement. The Restoration Foundation has also pledged to support the project. The proposed budget calls for a city contribution of $125,000 to match the TDC contribution. At this point, the city hopes to obtain a grant for that amount.  Filkoff expressed concerns that unless the city acts on this matter, it may lose the downtown visitors center. She pointed out that the failure to fund regular maintenance on city owned properties results in big bills coming due for major repairs that could have been avoided.  She said that she has been told by an economic development professional that our downtown is exhibiting clear signs of dying because we don’t seem interested in investing in ourselves. As our population ages, the retirees seem only interested in today and don’t seem to care about paying for improvements that they may not live to see.  This is especially true for transplants, who have no children or grandchildren living here. She allowed that part of this attitude is a reflection of the state of the economy nationally, but that the commissioners must think more long term.

The City Manager asked for guidance from the FBCC to move the budget process forward.  Commissioner Tim Poynter stated that with respect to potential revenue increases, he recommended that any proposed increase in millage not exceed the point where such a move could be authorized by a simple majority. He and Mayor  Filkoff attempted to get buy-in from the other commissioners on this point, but the other commissioners were non-committal or indicated that they were not ready to commit at this time.

Commissioner Poynter again raised the issue of pay for parking at the beach as a measure to fund beach renourishment and maintenance. He asked, “Why is it just the citizens of Fernandina Beach have to pay for everyone’s enjoyment of the beaches?” Vice Mayor Jeffrey Bunch said that he was fine with looking at this idea again, as long as citizens of Fernandina Beach do not need to pay. Mayor Filkoff said that the Beach Parking Committee has already done the study, but the Commission needs a proposal to consider.

City Manager Gerrity asked for consensus of the commission with regard to considering beach parking fees. Without some indication of support, he was reluctant to commit staff time to putting such a report together.  Commissioners Sarah Pelican and Charlie Corbett agreed to consider the matter, with Corbett expressing concerns that costs needed to be checked out first. Mayor Filkoff, who served on the Beach Parking Committee said, “If it [beach parking fees] is the will of the commission, it will happen.” The recommendations suggested by the committee did not involve expensive, up-front purchases of kiosks but rather followed other communities in selling permits through beach merchants and hotels. She asked Deputy City Manager Lott, who served on that committee, to reduce the committee’s recommendations to writing for the commission to consider. Mayor Filkoff also got consensus to proceed with considering opening up specific areas of the beach to vendors, an activity currently prohibited by ordinance.

The commissioners offered no other suggestions on ways to enhance revenues.

At 6:30 p.m., Mayor Filkoff opened the meeting to the public with the consent of the other commissioners. She asked if anyone had ideas to offer to help in budget formulation.

Local attorney Clinch Kavanaugh demanded to know the names of the employees whose positions are in jeopardy in the coming year. The City Manager responded that final decisions have not been made and it would be unfair to announce such decisions to the public before the employees were informed. Kavanaugh’s suggestions for revenue increases included:  taking money from released airport lands west of the Parkway from the airport enterprise fund and putting them in the general fund; charging parking fees for people who park boat trailers at the downtown riverfront; and beach parking fees. He also suggested that the Community Development Department could be run with two people, as it was at one time.

Ed Boner, local real estate professional and announced candidate for city commission this fall, voiced his opposition to beach parking fees, stating that they cannot be administered.  He asked if the city could get money from the county with respect to beach renourishment. City Manager Gerrity responded that he would be working with Nassau County on this.

Deni Murray, a city employee, asked the commission to consider savings that could be achieved by consolidating city operations in one building. She suggested the Peck Center, which would free up the land currently occupied by City Hall, a potential site for private development. Commissioner Poynter said that he would not consider selling land to pay for the city’s operational costs. Any land sale proceeds would need to go into a capital improvement project.

Both Mayor Filkoff and Commissioner Poynter indicated that in further consideration of the budget, they wanted to see “fully loaded” costs for programs and activities. Deputy Manager Lott said that was in the works as part of the zero based budgeting that the departments were doing this year.

The only other scheduled meeting on the budget is August 2, but the timetable calls for additional workshops in July.

June 28, 2012 9:52 a.m.

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Charles Burns
Charles Burns(@obakucomcast-net)
11 years ago

Thorough and objective report on an arcane but important topic. Thanks, SuAnne.