2020 Budget Waiting Approval: Fiscal Year 2020 Started Oct 1st

The fiscal year started Oct 1st.  After two work sessions on Monday and Wednesday, we are now waiting on Council to pass. The next regularly scheduled Council meeting is not until Oct 28th.  If you have not read the Budget Overview with multiple updates over the course of the last six weeks, I urge you to do so here.

As you can see, Council was presented a balanced budget without the use of Utility profits which are needed to fully upgrade Gas, Electric, Water and Sewer.  Council was concerned about increased expenses and I explained it is a combination of reporting expenses in the correct departments, adding full-time employees with 41% population growth, purchasing new equipment and investing in capital improvements. Moving City expenses from Utilities is not adding expenses, it is correcting the reporting.  In addition, we’ve cute wasteful spending, improved efficiency and increased revenue to cover corrections made.

The biggest investment was in our Public Safety.  The Police Department was extremely understaffed with only 36 sworn officers.  Here is a breakdown of other cities with similar population (and much less) and the number of sworn officers in 2016:

Today we have 41 sworn officers and 4 open positions (as of a few weeks ago), which comparably is still low.  We must plan our Police Jurisdiction because based on the growing population of the 3-mile PJ, the City cannot afford to hire and expand this budget without more funds.

In 2015, the City of Fairhope was spending only 19.85% of its budget on Public Safety and this was when the City required 50% of Utility profits to balance!  Here is the percentage of the budget for Public Safety in other cities in the State from 2014 compared to Fairhope’s percentage of budget the last 5 years with 2020 proposed budget.

Additional Cuts and Edits

Council decided to reduce revenue projections which were evaluated on trends since 2015.  The original budget were estimated projections for FY2019, but overall actual figures came in higher. While I was out of town Monday, Council met and stated the revenue needed to equal $30M. Wednesday, we presented the three revenue estimates in question with more detail:

Real Estate Tax revenue is not a number pulled out of the air.  The figures come directly from the County and historically entered into the budget as is.  In the 2020 proposed budget, we already reduced it by 3%.

Sales Tax revenue (combined from above graph Sales Tax and SSUT/Online Sales Tax) has increased 9%, 8%, 5% and 9% from 2015-2019.  We proposed a 4% increase in the original budget presentation. When Council wanted to keep the estimate the same as last year, this would have required a great deal of unnecessary cuts.  We then broke out regular sales tax and online sales tax to better evaluate figures. Regular sales tax increased 7% and online sales tax 183%. In the third edited budget, we reduced regular sales tax to 1.13% and online sales tax 30%. Online sales have been increasing exponentially and changes in the law recently will increase even more.

The Lodging Tax rate was at 4% in 2018. Since Spanish Fort is at 8%, Daphne 6%, Foley 7%, Gulf Shores 7%, Orange Beach 7% and Mobile 8%, I proposed increasing lodging tax to 7%.  Councilman Burrell stated he didn’t want to raise taxes.  I advised that this tax would not affect local citizens, it is a tax visitors expect to pay and is in line with neighboring cities.  Council, however, did support Burrell and only increase the rate to 6% and the City missed out on $175k in revenue FY2019 – revenue which can be reinvested in the department that promotes tourism and shopping locally to increase the revenue even more.  I am, once again,  recommending the rate be 7% for FY2020 (increasing 1%). An amount not figured into this budget.

When reviewing the budget, we overlooked including a $1/mo increase in Sanitation starting in Jan.  $94,500 was added to revenue in this department (based on growing zero customers).

This budget does not include these potential adjustments:

  • Council asked the Fire Dept to contribute $200k of the County ad valorem taxes they collect to go towards equipment needed.  The City has included $331k in the budget for the $531k needed.  If the contribution is not made, Council stated the City’s portion would be pulled about a month ago and there has been no word on whether or not the department will contribute funds collected for this purpose.  The Fire Department has collected ~$954k from the County since 2015.
  • The proposed 1% Lodging Tax increase needs a separate approval which would add $175k in revenue.

The sudden need to be extra conservative with revenue as if this administration needs to be micromanaged in the financial department is nothing more than politics. If Council’s goal was to be genuinely conservative, they must do so where it matters the most – Capital Investments and Comprehensive Planning.

Capital Investments Should be Council’s Main Focus

The City built up cash reserves this term and invested in many long overdue facility maintenance needs.  As mentioned in the last presentation, building maintenance was not even a funded department before this term and largely ignored.   There is not currently a short-term capital budget plan in place because the main focus was taking care of emergency needs and creating a self-sufficient City.  We still have urgent facility and infrastructure needs that need to be paid out of capital investment funds.

The total Cash funds available for Capital improvement today is ~$5.2M.  The approximate amount needed for urgent facility needs is $3.3M.  The unknown amount needed for capital projects needed in the very near due to capacity issues and quality of service for citizens: FEMA Storm Shelter for First Responders, City Hall, Public Works, Utilities, Police Station and the  future use of the K-1 Center to name a few.

Capital Spending Priorities

Council is moving forward on purchasing 113 acres on 13/32 for $2.65M for future ballparks – a decision made during the budget process with no communication with me as to how this was going to be paid.  The budget had already been finalized. The likelihood of the City affording its development in the near future with the priority needs above would take years.  The balance in Impact Fees for Parks would not cover the expense.

Parks Director, Pat White, reevaluated the opportunity of expanding Volanta Park with four additional ballparks. This would resolve an immediate capacity need for up to ten years.  The estimated the cost is $1.5nd could start in 2020.  Lighting expense could be paid out of 2021 impact fees:

(Note: 2020 expenses in the Fire Department do not have qualified expenses for impact fee use)

Council and the Rec board unanimously agree that this would be a good decision. What do you think? The issue now is the City cannot afford to do it all.  As you can see above, Impact fees would need to be used in the 2020 budget and a portion in 2021 to build four more ballparks.  The 113 acres would have be to paid out of Capital Funds which would drain the balance by around 50%.  Do taxpayers want to put the purchase of 113 acres on parkland that cannot be developed for years ahead of the urgent needs in our most valuable assets?  Ahead of moving forward on the K-1 property?  There must be strategic capital spending plan in place with your input before this money is spent.  In a fair democracy, your involvement is key in making important decisions.  Our City government is not  dictatorship. The property is scheduled to close in Nov 2019.

(note – the parkland on Twin Beech was to be paid out of impact fees over a 3-year period.  The Volanta Park expansion would have to start end of 2020 to cash flow. However, it would still allow purchase of additional parkland close to town and solve the immediate ballpark capacity needs and not be touching capital funds)

This Administration has exceeded budget goals every year this term while at the same time paying off debt, increasing cash funds and creating a City budget requiring zero utility profits to pay government expenses. From the last presentation, here is what the City financials would look like if no corrections were made in reporting expenses in appropriate departments:

The City would have be falsely reporting a surplus and continue leaving Utility profits too low to afford maintenance and needed upgrades.  And it would be wrong. Unethical even.  With all these significant financial improvements to both Utility and City financials, we just want to move forward with another productive year.

Mayor Karin Wilson

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