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Longboat Key Monday, Oct. 28, 2019 5 months ago

My View: Town debt doesn't rise to $100 million

Editorial's figures generally accurate but misleading.
by: Tom Harmer

This is in response to the editorial entitled “Town Debt to Top $100 Million” in the Oct. 17, 2019 Longboat Observer. While your figures taken from the 2018 Comprehensive Annual Financial Report are generally accurate, they are somewhat misleading as to our total debt, the rate of increase and size of the town budget, as well as the disproportionate impact of our one-time utility under grounding project.

Tom Harmer

Fiscal integrity: Longboat Key has a reputation for the highest fiscal integrity and stability.  At the time of our second undergrounding bond issuance, we were awarded a AA+ credit rating, a two-step upgrade and the second highest investment grade status.  Our Town Charter contains strict controls on borrowing with all major bond issues, including our undergrounding and beach re-nourishment projects, requiring a voter referendum.  We have the second lowest general tax rate in the region, at 2.1144 mills, bettered only by the city of Anna Maria, a municipality that does not fund fire or police protection from its general millage.  We froze our defined benefit pension plans in 2013, blocking the growth of unfunded liabilities that plague many communities, and we have booked sizable reserves to prepare for possible storms, economic and natural.  All this is acknowledged by the rating agencies and translates into lower rates paid on our debt.

The General Fund and the town budget: Municipal finance can be confusing.  It is true that our General Fund is about $16 million.  This fund provides for principal operating expenses for local government and is approximately 61% devoted to fire and police.  But, the overall operating budget for Longboat Key is $100.8 million and includes enterprise operations and funds, such as water and sewer, as well as the costs, revenues, and expenses associated with special projects, such as road maintenance, undergrounding and beach re-nourishment.  It is far more accurate to view Longboat Key’s debt burden in the context of our overall budget than our general fund. 

Undergrounding and beach debt: The implication of the  editorial is that we have quite suddenly generated a “shocking” amount of new debt.  This is not a fair characterization.  First, our undergrounding debt is listed as $49 million.  Both undergrounding project borrows (GMD and Neighborhoods) occurred in 2018 based on referendums approved in 2015 and 2016.  While the entire project for both GMD and the neighborhoods was capped at that level, the total combined debt issued only totaled $34.6 million, 30% less than reported.  Moreover, as “non ad valorem, special assessment” bonds, they have been regularly prepaid by taxpayers, especially when properties are sold, and further prepayments appear likely as the project continues to proceed under budget.  As for the beaches, while we hope taxpayers will approve by referendum in March 2020 bonds to fund the Beach Management Plan Update that was just approved by the Town Commission, the five groin installation at the north end is not slated to take place until 2021 and the island-wide sand fill will occur no earlier than 2022.  The six-year repayment plan for that new debt is purposely timed to begin only after our current beach project debt is fully repaid in 2021.  Taxpayers should also know that the town exhausts all possible avenues for outside project funding, which includes over $7 million in government contributions received for prior storm damage, and expected 26.94% contribution from the Florida FDEP and regular payments from the Sarasota and Manatee County tourist development taxes. 

To conclude, the town government wholeheartedly shares your interest in and commitment to maintaining the fiscal soundness and integrity of Longboat Key.  Along with public safety, it is our top priority, and we will also become constructive dialogue on the subject.  As a further step in that dialogue, we have attached a table outlining the town’s projected debt as of 2021, including the date incurred, the purpose, the source of funding and, where applicable, the date retired.  As you can see, our projected debt for all purposes in 2021 should be approximately $67 million.  This is not an insignificant sum, but it has been well planned and is well within our means to repay.

Tom Harmer is the town manager of Longboat Key


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