TALK OF A TOWN NO. 1: Why now?

Editor's note: This is the first in a summer-long series regarding Lakewood Ranch incorporation.

For some, the question is “Why now?”

But for others, it’s “Why not?”

For supporters of the incorporation of Lakewood Ranch, each day that passes is a day of lost state shared revenues that could be used to better Lakewood Ranch and its residents, specifically.

For those who oppose the idea, the floundering economy holds only the promise of trouble for a start-up city.

Neither side is budging, and both are hopeful residents will be fully educated and have weighed all the evidence before taking a side on the issue.

NO REASON TO WAIT
The pro-incorporation group argues now, indeed, is the time to move forward with becoming a city and that there is no good reason to wait. The group touts a feasibility study conducted by economist Hank Fishkind as conclusive evidence that incorporation, even in the current economy, is economically feasible without raising taxes on residents.

And once incorporated, some monies currently going to Manatee County, specifically those from the Municipal Services Taxing Unit revenues (about $1.5 million), as well as $2.2 million in state-shared revenue, would go directly to the city of Lakewood Ranch, giving the entity more control over when it fixes its roads as well as other issues.

“It really comes down to why not (incorporate) now,” Incorporation Study Group Chairman Tom Thomaides said. “There is no good reason to wait.”

State-shared revenues for road projects currently go to counties and municipalities. And although CDD supervisors and their staff have pushed for months, at times, to get even potholes repaired, the city of Lakewood Ranch would be able to set its own priorities and schedule for road improvements and repairs.

“The county would do county roads: Lorraine, University Parkway and Lakewood Ranch Boulevard,” fellow Study Group member Keith Davey said. “Public roads within neighborhoods could be done by the city, and you’d have $960,000 a year from the state-shared revenue. … We could pave all the roads in Summerfield in the first year.”

Furthermore, supporters of incorporation also believe that the city of Lakewood Ranch would be in a much stronger financial position than many other cities because of the future city’s proposed financial structure, which bases only 10% of the future city’s revenues on property values. The rest, under the feasibility study, are based on per capita numbers from comparable cities and on fixed assessments by lot (Community Development District assessments).

And those numbers bode well for Lakewood Ranch, especially when looking at county and city municipalities that obtain significant portions of their revenues from property values. In Manatee County, for example, $154 million or 34% of its $454 million recommended budget comes from property values, which have dropped from $34.4 billion at their peak in 2007 to an estimated $23.6 billion now. Its other revenue sources generally include licenses and permits, intergovernmental monies, charges for services and other taxes.

In the city of Palmetto, which has a population of about 14,000 — about the same as existing Lakewood Ranch — 36% of revenues come from property taxes, according to Palmetto’s budget documents.

“The economic problems don’t have any affect on incorporation,” Davey said. “The feasibility study already takes (that) into account.”

Thomaides agreed.

“We ran 0% growth over 10 years, and it still showed a very, very favorable financial picture,” he said. “Instead of $37 million (in reserves) over 10 years, it drops to about $30 million.”

A BAD TIME
Anti-incorporators don’t believe the Fishkind study is credible, nor do they believe the timing is right for becoming a city, especially with many people still unemployed and so many foreclosed homes on the market.

“This plan is being put forward at a bad time,” Friends spokesperson Gary Berns said. “(Pro-incorporators) admit cities across the nation are having a hard time.”

Furthermore, Berns said the figures included in the feasibility study are too optimistic — and don’t take into consideration cuts at state level.

“There’s no guarantee,” Berns said. “He who gives can take it away. To build your whole (financial) structure (on that) makes no sense to us.”

The Florida Revenue Sharing Act of 1972, which funds the state-shared revenue dollars, was created by the Florida Legislature under Chapter 72-360 as a way to ensure a minimum level of revenue equality across units of local government and has funded county and city governments for nearly 40 years.

On the point of $37 million, Bonita Springs, population 23,000, netted $41.6 million in revenue in its first five years of incorporation (1999 through 2004), and Wellington, original population of 25,000, netted $31.2 million in its first years from 1996 to 2000.

RESERVES
The pro-incorporation group also asserts that Lakewood Ranch CDDs do not have sufficient reserves in place compared to “typical” governments. Davey said many governments have reserves of at least 5% of their total revenues.

The city of Palmetto, according to its Fiscal Year 2010-2011 budget documents, is putting 10% to 25% in reserves — enough to fund expenses for three to six months.

At the end of Fiscal Year 2010, the city had a roughly $17 million fund balance, with $11.4 million of that unreserved.

“We have much less than that,” Davey said. “The CDDs collectively should have almost $3.6 million in reserves. They (had) $1.3 million (in Fiscal Year 2010).”

The $200,000 line of credit several CDDs have agreed to secure — which has since been negotiated to $300,000 — “won’t go very far” if a true disaster strikes, pro-incorporators said.

“The purpose of the reserve is (to pay) for unanticipated expenses,” Davey said. “For example, if we have a hurricane, there’s no money anywhere to pay for cleanup. Your insurance will pay for damage (to buildings), but (not) if it blows down a bunch of trees.”

However, Lakewood Ranch Town Hall Interim Executive Director Steve Zielinski questioned the notion that the Ranch’s CDDs have insufficient reserves. A former chief financial officer for a county in New Jersey, Zielinski said governments generally reserve 10% to 15% of their operating budget, but the numbers do fluctuate according to the entity.

Lakewood Ranch CDDs 1, 2, 4 and 5 had a combined $721,763 in their operating reserves as of May 31. Although Districts 1 and 2 have monies set aside both for infrastructure and for a “rainy day,” District 5 has nearly drained its reserves — $654,000 — over the last two years because of problems with storm-water drains in the community. CDD 4, however, traditionally has not put much money aside for reserves until recently.

“Would we like to see more (reserves)? No doubt about it,” Zielinski said. “But you start crossing the line. Once you start building tremendous reserves, you might feel you are assessing the homeowners more than you should be.

“You have to look at the individual entities and assess what their overall needs are on an ongoing basis and determine if that level is going to be sufficient,” he said.

In CDD 2, for example, supervisors had reserves of 22% and have opted to give some monies back to residents in Fiscal Year 2012, resulting in 5.4% decrease in the overall budget.

Additionally, Zielinski said he expects districts to have items come in under budget, and the boards could opt to put those unused monies into their reserves at the end of the fiscal year, if they so choose.

Berns, a supervisor in District 1, said he’s “comfortable” with the level of reserves in his district — about $400,000 in total, currently.

Davey and Thomaides, however, say the overall reserve numbers for districts are still too low, especially if the CDDs have to undertake serious improvement projects, such as an overhaul of the districts’ irrigation system.

The city would have the ability to borrow money at a lower rate and even could loan money to the CDDS, if necessary.

If a hurricane strikes, for example, CDDs can only raise assessments to pay back their line of credit or pay for damages, if they do not have sufficient reserves. The city, however, through financing mechanisms, could spread the costs of those repairs to homeowners over a longer period, so residents would not feel the financial impact at once.

Contact Pam Eubanks at [email protected].

CDD RESERVES
Numbers indicate un-audited reserve figures as of May 31, 2011.
District 1: $169,516 in operating reserves; $230,000 in reserves for infrastructure improvements (primarily irrigation)
District 2: $425,074 in operating reserves; $573,915 in road reserves
District 4: $66,369 in operating reserves
District 5: $60,804 in operating reserves; $115,232 in road reserves. (The district has spent $654,000 in operating reserves in the last two years because of litigation and stormwater drain repairs.)

SALES RECORD
Despite the economy, Lakewood Ranch’s real estate market has exceeded projections in the feasibility study. In 2010, nearly 250 new homes sold, and Schroeder-Manatee Ranch anticipates hitting or beating initial projections of 350 new home sales for 2011. From January to May 2011, 173 homes had sold — up 240% compared to the previous year.

The study projected 174 new single-family homes in 2011 and another 322 singe-family homes and 610 multi-family homes for 2012.