Town Manager Dave Bullock plans to work with his department heads to reduce costs by $300,000 to $350,000 before June 1.
At the Longboat Key Town Commission’s first budget workshop of the summer Monday, May 20, Bullock explained he wants to reduce the general fund operating budget by at least that much to offset anticipated pension cost increases and another year of lower- than-anticipated budget revenues.
Bullock must present a preliminary budget to commissioners June 1, and he plans to erase $285,554 needed while keeping an estimated $90,000 to $120,000 in the general fund that the town could use in case of an emergency.
“Having that much on hand allows us to remain on solid footing after an emergency like a storm hitting this barrier island,” he said.
Bullock warned commissioners, though, of another storm, and it came through the news of poor revenue and increased pension costs.
The town began fiscal year 2012-13 with a $4.46 million balance and expects a balance of $4.1 million when the fiscal year ends Sept. 30.
Bullock anticipates a revenue shortfall of approximately $81,000 because major revenue sources, such as electricity franchise fees, aren’t coming in as expected.
“The community isn’t using as much electricity as in years past,” Bullock said.
The town manager also anticipates keeping departmental operation expenditures flat, not proposing any new positions and maintaining current visible service levels.
Bullock estimates that 2013 “looks to be our bottom-out year,” noting the town will likely see increased revenues next year as increases in property values are anticipated to be reflected in the town’s ad valorem revenues.
“But the elephant in this room has been — and remains — pension costs,” Bullock said.
While the town intends on freezing both its Longboat Key Fire Rescue and general employees’ pension plans by the end of the fiscal year, in the short-term, the town is stuck for paying for both pension plans this coming fiscal year.
The town anticipates paying somewhere between $2.7 million and $3 million for its current pension plans in 2013-14. On top of that, the town is paying $941,667 this year to fund new retirement accounts for general employees ($324,880) and to shift firefighters into the Florida Retirement System pension plan ($208,000). Also included in that figure is a $164,000 cost that came with giving general employees a 3% wage increase; $154,725 for an anticipated 10% increase in health insurance costs; $26,940 for long-term disability; and $27,796 for an anticipated increase in workers’ compensation.
“We are essentially funding two pension programs out of our operating budget,” Bullock said. “We need to finalize our long-term plan for unfunded liability in fiscal year 2014, whether it is some combination of voter-approved debt, holding the course for a couple years or a combination of both.”
Further complicating matters: Until the town’s pension actuary releases actuarial impact statements in late June that show how much the town’s pension plans will cost annually once they are frozen, Bullock doesn’t know whether to build a budget based on a $2.7 million number (the lowest number) or a higher amount.
“We’re not looking at a pleasant picture here,” said Commissioner Jack Duncan, who said the commission would have to look at everything during another tough budget year, including a potential tax increase.
Bullock said if pension costs come in at more than $3 million, the town can either reduce its fund balance, further reduce expenditures — reducing the town’s visible level of service — or increase taxes.
“The wildcard is where the pension costs are going to be,” Bullock said.
The town manager anticipates the commission will give him direction on paying for the unfunded liability in the future by this fall.
The town’s preliminary budget is due June 1, and commissioners set a maximum millage rate July 1. The town’s recommended budget is due Aug. 1, and the commission will adopt the fiscal year 2013-14 budget during two public hearings in September.
FUND BALANCE SUMMARY DISCUSSION
FISCAL YEAR 2012-2013
Fiscal year 2013 beginning balance: $4,464,151
Unanticipated revenue shortfall: (81,000)
Ordinances 2013-09 and 2013-11 pay increases: (162,500)
Use of commission contingency
Resolution 2013-01 zoning consultant: (23,000)
Resolution 2013-05 comprehensive plan consultant: (100,000)
Projected fiscal year 2013 ending balance: 4,097,651
* Based on fiscal year 2013 operating budget, the projected fund balance would cover 105 days