FIRST EVER SELF-SUSTAINING BUDGET!

For the first time in Fairhope history, the 2020 City Budget proposal requires zero dollars of utility profits to balance. The City is finally self-sustaining financially and can run independently from our Utility Department. There are ZERO Utility dollars paying for government operating expenses. I’m not sure how many ways I can articulate it, but this is a very good thing and something to be celebrated!

And in case anyone tries to tell you “it’s all City money”, know that is not true.  The City operates with tax dollars. The Utility Department operates with rate fees.  The money is not the same and going back to the old way of doing business should never happen again.   

Since there has been some confusion about what this really means, I want to show you how the City and Utility financials would look if we made no changes.  The City would have robbed the Utility Department $4.86M in 2017, $4.2M in 2018 and almost $4M in 2019.

The City was running at an almost $6M deficit annually before this term. During the last three years, the City has taken over 100% of its own expenses leaving the utility department in a position to afford its long overdue upgrades and rehabilitation. The co-mingling of money is what put our utilities in the state they’re in today. 

If any future elected official tries to reverse this, citizens should demand a Utility Board be put in place.

OVERALL OBJECTIVES & GOALS OF THIS ADMINISTRATION

ESTABLISH A PLAN FOR RESPONSIBLE GROWTH

This was the number one concern in 2016 for Citizens and why I decided to run for office.  There was no strategic plan in place and the City was allowing developers to define it for us.  The Comprehensive plan ties in all city services, environmental impacts and smart growth objectives which will serve as a true roadmap for our future.  The $850k RESTORE-funded, community-engaged plan will start soon. 

How to Manage Growth?

Two-thirds of the area that makes up Fairhope is un-zoned. Therefore, pretty much anything can be developed and it will affect your quality of life. Planning must include enforceable regulations for development through a comprehensive land-use plan. Contiguous property, if annexed, would enable the City to fully enforce a standard for which property owners, developers and their neighbors will benefit.

To start this process, there must be a value for those who live outside the City limits. Otherwise, there is no incentive to change anything. The map below shows the blue areas inside and white areas outside our City limits. The Airport is the non-contiguous South parcel. As you can see, developers have a great deal of flexibility to do what they want in most of the area that makes up our great City.

Proper planning encourages those who own contiguous property to annex into the City and become part of a bigger more collaborative development plan. Because this has not been in place for so long, developers are defining our future.

In order to manage the growth and ensure the quality of life you enjoy, the mindset must shift from “I want to be able to do whatever I want with my property” to “I want to be a part of a bigger plan that elevates us all.” When this happens we all benefit: property owners, developers and our neighbors! Otherwise, the very things we love about living in a Utopian Village will change and change quickly.

Police Jurisdiction

Another way to incentivize annexation and manage expenses is to reduce our Police Jurisdiction or eliminate it through a planned transition with the County. The Police Department has been grossly understaffed for many years and we currently extend the PJ three miles outside the City limits. Each year the department’s budget increases while the revenue collected from the PJ does not come close to offsetting its portion of expenses.

Blue shaded area inside City Limits. Most of the white shaded area makes up the Police Jurisdiction

It is not financially sustainable nor fair to taxpayers inside the City limits paying for the majority of the budget. The revenue received in the jurisdiction does not come close to offsetting its share of the overall PD. Council cannot continue to ignore this unsustainable issue. We work for constituents, the ones who voted us into office.  You expect us to plan Fairhope’s future.

A stop gap measure to increase revenue would be to add a City gas tax. Believe it or not, The City of Fairhope is the only city in Baldwin County that does not have a city gas tax! Like many revenue opportunities that should have been in place long before now to operate the City, the “Utilities can pay for it” mentality was always the solution.

Now, before anyone gets upset about this proposition, understand the price of gas includes all taxes. Businesses who sell gas must be competitive.  The City can either continue to give the additional profit to businesses or collect its share to help offset PD expenses in the PJ and street infrastructure needs inside the City limits.

To give you an idea of the income this brings in for the City of Daphne, one penny for their corporate limits brought in $228k in 2018 and there’s no PJ.

END WASTEFUL SPENDING & INVEST IN PRIORITY NEEDS

Legal Expenses

When I took office I made it clear that the City would no longer spend tax dollars on unnecessary lawsuits.  Many of these were the result of inconsistent development decisions for special interests. In our City, the Mayor’s role is to hire the outside firm to handle litigation and Council’s role is to appoint a City Attorney (and prosecutor which has always been one person). I had to sell each councilman on my choice to hire Matt McDonald as the City litigator and Ken Watson as our Planning attorney. Council does not have to involve the Mayor at all in their appointment for the City attorney and they did not. Here are the results of the average annual legal expenses for the last three terms.

As you can see, each category has significantly decreased except for the council-appointed City Attorney. Contributing factors include duplication of litigation work and the lack of knowledge in responding to routine, municipal legal questions. The unfortunate fact is not only that expenses are increasing, but the level of service is poor and the City attorney has proven to be a bias, political appointment. This conflict should no longer be ignored because you are paying over $130k a year for his part-time work.

Litigation & Planning legal expenses have gone down 54% and Utility Department legal expenses down 21%. The only legal expenses that have increased are the City Attorney’s. When I tried to manage these expenses and ask questions about exorbitant fees, Council passed a resolution to have all his invoices paid directly by the Treasurer – no questions asked.  The solution? Another City attorney should be appointed or a full-time in-house attorney should be hired to focus on one client, the City.

Reducing Contracted Engineering Expenses

This term’s average annual savings in engineering expenses over last term is $425k/year and $460k savings in 2019. Savings like this have enabled us to balance the budget and invest in critical needs. I’d like to thank our Professional Civil Engineers “The RICHARDS” for their huge contribution in this area. Before this term, the City and Utility Departments contracted out every single dollar of engineering services.

The real savings from hiring both Richard Peterson, our Operation Director of Utilities and Richard Johnson, our Public Works Director, has been realized in liability exposure by having the day-to-day oversight. Technical experience is still needed though, particularly in each utility department (water, sewer, gas and electric) because it pays off in more ways than dollars and cents.

Incentivize Health & Wellness

City of Fairhope should be committed to the health and well-being of our employees and retirees.

This term, the City finally addressed offering Free Family Insurance for all new hires. This was simply unsustainable for taxpayers, but no one wanted to address it. This highly competitive benefits package is still in place for current employees and will be considered in this year’s new personnel comp study.

We are self-insured and this expense continues to increase each year. In order to maintain this expense and continue offering City employees the most competitive benefits package, we must incentivize health and wellness. Establishing a policy requiring employees to complete a biometric screening at the Annual Employee Health and Wellness Fair is something many municipalities and counties do and it pays off for everyone. 

PROTECT AND INVEST IN OUR CITY ASSETS

Municipal Pier Our first RESTORE project for the Municipal Pier and South Park is moving forward now.  This green infrastructure project will include a South Beach Park bluff stabilization, improvements to our Bayfront shoreline, upgrades to drainage infrastructure that will provide new opportunities for our community and visitors to engage with the Bay at our Municipal Pier, an area that is our unofficial “town center”. The project includes upgrades to drainage infrastructure, storm-water management facilities, construction of shoreline structures (breakwaters, jetties and groins) and upgrades to seawalls.

Quail Creek Golf Club New enhancements to the Clubhouse have been a huge improved service for citizens and visitors.  We will continue this effort as we have the funds for the interior.  The greens are in the best condition they’ve ever been, and overall play-ability of the course is significantly improved because of investing in professional training and experience.

Fairhope Docks Taking back the management of our city-owned marina has paid off in a short period of time. It was the right decision. Long-neglected maintenance and capital projects have been completed with more budgeted this year. The dredging of our waterway is finished, a new fuel dock has covered the operational expenses. Because of the recent closure of the fuel dock at the Grand, Fairhope Docks is already seeing an increase in fuel sales. The 2020 budget includes the purchase of dredging equipment to maintain our boat slips that will pay for itself after its first job.

Library

The library runs as a component of the City with an appropriation. I proposed making the Library a department of the City to save in administrative costs, manage expenses and increase the funding for books and programs. This idea was met with great push back. In 2019 City funded $1,039,183 or 96.2% of the total operating which increases every year.

As we all know, the infrastructure improvements for the library have been put off for over 10 years. With every passing year, the problems got worse and the cost to fix it increased. This year, the project which cost over one millions dollars was finally completed.

It’s important to point out that all of these very expensive capital improvement accomplishments over the last 3 years were accomplished without borrowing funds because of the significant improvement in our financial health.

Volunteer Fire Department

The City of Fairhope has an incredibly dedicated Volunteer Fire Department. Its jurisdiction includes over two-thirds of the County, however County ad valorem taxes collected each year have not been used to help offset its growing needs. Similar to the Library, the City funds most of the operating expense and can no longer afford to do so without these expenses being shared by the County. 

This expense does not include building maintenance & liability insurance paid by the City

I requested a copy of audited financials. We have received unaudited Tax Returns and still awaiting financials. We all want the very best for our Fire Department using all funding from taxpayers.

Hiring more Employees in Building Maintenance Department was a critical need. City-owned buildings were not being taken care of and it has cost us dearly. We went from one full-time, over-worked person to a department of six (including two electricians) to maintain some of our most valuable, appreciating assets.

Prioritizing needs for all City-owned buildings in a comprehensive plan is a must. The lack of funds needed to invest in annual maintenance has left most of our buildings in very poor condition. Most departments have outgrown their facilities.  City Hall, Warehouse (IT, Planning, Public Works, Utilities and more), the Police Dept and the new purchase of the K-1 property all need renovation and/or expansion to best serve our citizens and employee needs.

Parks We’re working with the National Park Service to help with comprehensive planning for connectivity and walkability. We must thoughtfully invest in enhancements for current parks and fund acquisition for additional parkland. With impact fees, we have an opportunity to plan through community engagement. Do we want to keep up with the Jones’ by developing the same thing as neighboring municipalities or develop recreational opportunities that cannot be found close by?

RESTORE TRUST THROUGH TRANSPARENT COMMUNICATION & ACCOUNTABLE LEADERSHIP

We are investing in software that will bring citizens better, more responsive customer service with accountability.

INVEST IN PERSONNEL NEEDS

Full-Time Employees vs Population Growth

http://mayorkarinwilson.com/wp-content/uploads/2019/08/CITY-FT-EMP-VS-POPULATION-1024x339.jpg

City Administrative Role

Most Cities our size (even smaller) have a full-time City Administrative position.  The City of Fairhope has been employing a full-time administrative position since at least 2001.  The job titles have varied but the role filled the need for the day-to-day administrative work for a municipality. Titles included a City Administrator, a General Superintendent and an Administrative Superintendent.

Ironically, with 44% growth, Council de-funded this full time City administrative position during the last council meeting before this term started. Since the election was in August 2016, it does not make sense to de-fund this position in October unless the intention was to limit resources for the office of the Mayor.  Decisions like this and many others over the last three years should concern you. The success of the City is not about me personally or a political agenda.

Auburn University, contracted to update our personnel comp study, agrees that a full-time Administrative role is a priority need.

Something else to note, Council is in the process of passing the new salary increases for Mayor and Council for the 2020 term, a decision that must be made no later than months before the next election. We have time to wait for the completion of the Auburn Study, so what’s the rush? I made sure to address the unsustainable promise of free family insurance during our first year in office. Council and Mayor should be no different. The value of FREE family insurance was approximately $17k a year in 2018! Why is Council increasing its salary without addressing this huge benefit. A benefit no other city gives to its part-time council member roles – much less a full-time position. Our part-time employees do not receive health insurance.

Another consideration is the fact that since the City owns its Utilities, the Mayor can earn a second paycheck for Superintendent of Utilities. The absence of an experienced Operation Director in the past was also a contributing factor in the long-term neglect of infrastructure upgrades and maintenance. With our growth, the Mayor can no longer serve as a full-time Mayor, a full-time Administrator and a full-time Superintendent of Utilities.

UTILITY INFRASTRUCTURE UPGRADES & EMPLOYEE NEEDS

Since Nov 2016, this administration has aggressively pushed the need for upgrading and rehabilitating each utility, particularly the Sewer System. Both the 2017 and 2018 budgets included funds for these projects. Both years, our Operation Director with 28 years experience advised each utility needed more technical experience to facilitate these upgrades. Both years, Council cut the infrastructure from the budget and advised that the technical help needed would not be funded. The 2019 budget, once again, included the infrastructure plan but not the technical experience because we knew Council was opposed to this consideration. It was finally funded and work began last fall.

Last term we saw a population increase of 32% and full-time Utility Department employees DECREASED! The net increase for both Utility & City employees only went up around 3%. Population increases another 18% this term and the first two years were spent hiring back the deficit created from last term. Surprisingly, Council made the decision to de-fund the Assistant Superintendent positions in each Utility Departments when the Superintendents retired – Electric in mid 2017, Gas in late 2017 and Water & Sewer in Feb of 2018. In 2019, we finally increased FT employees from 2012 by 7 employees.

Establish a PILOT fee for Utilities

Cities that own their utilities have different structures for benefiting the Cities typically established by utility boards in the form of franchise fees or PILOT fees (payment in lieu of taxes). Richard Peterson found the lowest percentage was 5% of gross revenue in Rolla City MO. There were several in the 8% – 10% range. Again, taken from gross revenue.  I have proposed and included in the 2020 budget, an 8% profit share of the NET projected Utility profits to be used for community development . 


Keep in mind, the City used over 50% of profits for government services before this term.  Now that the City if self-sustaining, a reasonable percentage for community development is an appropriate allocation.  When Utility upgrades are complete, then the City could consider an increased percentage or an amount taken from gross profits. In less than five years, the City and our Utilities will be in a position to do incredible things for our community!

STRATEGIC BUDGET VS YEAR-TO-YEAR WINGING IT

We’ve moved from planning year to year to a strategic budget which includes vision and short & long term planning.  I’m extremely proud of the hard work all our supervisors put into this effort. This year, the budget was developed exclusively through our MUNIS budget module which will revolutionize how we plan future budgets.  Because of this process, the 2020 Draft Budget is formatted differently until all edits are completed through MUNIS during September open meetings. A final budget will then be published online. The draft budget will be posted o the City website this week.

  • Help prevent errors related to the detailed manual system.
  • We can include detailed notes for all to see and the notes are stored for future budget purposes 
  • There’s a place for justifications, whether or not the expense is a one-time investment or a known annual expense.
  • General expenses in each department have been broken out more to manage. 
  • The cuts already made to balance the budget are visible and can be planned for another year. 
  • Will save an incredible amount of time in the future
  • Reduces the time it takes to edit 
  • Allows department heads to strategically plan their department’s future. 

The time-consuming part of the budget process – developing and balancing – has been accomplished.  The City and Utility budgets are both in the best financial shape ever from three year’s worth of managing each department’s revenue and expenses.  We’ve completed more infrastructure maintenance, capital projects and repaired long-ignored damage this term than ever before. We’ve invested in new equipment to increase productivity and decrease inefficiencies and expenses.  Newly established safety measures to protect our city employees has decreased our Workman’s Comp insurance and limit liability exposure.  Without borrowing money.

We have much more to cover during September and I have implored Council to take the time needed to meet and ensure the budget passes on time this year. All amendments to the proposed budget must take place with communication in open meetings for the benefit of citizens, employees and me. This is how all government budgets are developed. Council has avoided this open process the last three budget cycle and it is contrary to State Statute.

This process before has enabled Council to sit on the budget for many months beyond the deadline without any accountability and prevented the ability of employees and I to do our job successfully. Please help us hold them accountable. With Council’s willingness to pass the budget by the 10/1 deadline, we can make 2020 a model year for our citizens.

9-28-19 Update Budget Overview

10-7-19 Update Budget Overview

 

Sincerely,

Mayor Karin Wilson

City of Fairhope, Office: 251.990.0110, Cell: 251.422.0669, Karin.Wilson@FairhopeAL.gov, www.mayorkarinwilson.com 2019 State of the City, Future Fairhope: Moving Forward Together

More about Mayor Karin Wilson

2 thoughts on “FIRST EVER SELF-SUSTAINING BUDGET!

  1. A Brandt

    Very thorough report. Amazing to learn the depth of research entailed and the subsequent planning. I encourage the Mayor’s office and the City Counsel to work together. Remove any ego issues that might be in the mix. Study the numbers, double check the numbers and then do what is best for the future of our wonderful Fairhope. Thank you

    Reply

    1. Mayor Karin Wilson

      Thank you Annie. This blog, the numbers and the research were done by me. My background is finance and the first urgent need was making sure both the City and our Utilities were fiscally healthy and running independently. I would like nothing more than Council to work we me and my administration. Hope 2020 is the year!
      Mayor Wilson

      Reply

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