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Council approves tentative budget

By Staff | Sep 18, 2019

Kevin Ruane

The City of Sanibel Council gave a nod to its Fiscal Year 2020 budget last week, approving a rolled back millage rate.

The second and final budget hearing, required by law, will be held at 5:01 p.m., Monday, Sept. 23.

Finance Director Steve Chaipel said one of the key points is that overall taxable property valuation saw a 1.6 percent increase.

The Lee County Property Appraiser set the total taxable property value for fiscal year 2020 at $5,279,612,650, 1.60 percent higher than the previous year at $5,196,520,865. According to the city, Sanibel property values have again reached an all-time historical high.

A resolution adopted by the City Council in July set a proposed millage rate of 1.9139 mills. The budget the council discussed Monday, Sept. 9 proposes a millage rate of 1.8922.

One mill is equal to $1 for every $1,000 of taxable valuation.

“The tentative budget was prepared at a 1.8922 operating millage rate, so that is the rolled back rate. The rollback rate is what will bring in the same amount of taxes as last year. That is a little lower than the draft budget prepared, which was a 1.9139. The city does have three voted debt mileages as well. When you take a combined millage rate, it is 2.1855 millage rate and we are pretty much at a historical lowest operating at a total millage,” Chaipel said.

The operating millage rate is the lowest rate since 2007, a little more than a 24 percent decrease. Chaipel said the total operating millage, including voted debt service, is down from a historical high of 2.8983 mills, about 24.6 percent decrease in the total millage rate, the Sanibel millage rate that is levied against the citizens.

Mayor Kevin Ruane said the rollback rate theoretically gives them enough funds to operate the budget and many things they would like to cover.

“The highest millage rate we ever had was 2.8983, we are down to 2.1855, which is obviously 25 percent rounded up decrease in that regard,” he said. “Probably the clearest way to explain why it is prudent to go back to rollback is the transportation from our draft had an intended transfer from the general fund of $450,000. As a result of a favorable interlocal agreement that we came up with the county we no longer have to transfer that $450,000. The rollback is only going to cost us $160,000. Theoretically there is $300,000 to the positive, or $290,000 if I want to be exact.”

The FY 20202 budget for Oct. 1, 2019 through Sept. 30, 2020 is $73,365,546. Chaipel said the major changes in the increases from the draft budget include the capital plan for the Donax Project, as well as the reserves increasing from FEMA, as well as state reimbursements the City of Sanibel has received over the last three months.

The city’s debt was also discussed. The city’s debt in 2007 was just about $78 million, compared to the debt ending at the end of this fiscal year in about three weeks is around $25 million. Chaipel said that is about a 68 percent decrease since 2007.

“The biggest decrease is in the sewer fund,” he said. “The sewer fund debt is down almost 80 percent, based on being able to satisfy those obligations, refinance when we have the opportunity to refinance and then paying off the existing debt.”

The government debt lies within two voter debt issuances, one for the Sanibel Recreation Center and the other for the purchase of Pond Apple Park. Chaipel said taking advantages of some refunding and paying down that debt has decreased to almost 61 percent.

The city also runs two pension plans, one for general employees and the other for police pensions. Both of those combined, the unfunded piece that is determined annually, he said, is down 31 percent, again after a previous historical high.

Ruane said they are paying approximately $4 million down a year. In 2021-2022, approximately another $12 million will be paid down.

“At the rate we are paying debt off, the city gets really close to being at a very low level of debt,” he said. “It is important for the citizens to know how quick we are paying debt off. We pay as we go and not deferring things.”

The City of Sanibel has a total amount of reserves of about $16.8 million in various categories. The city maintains a cash flow reserve for operating needs for the first two months of the year to keep the city running operationally until taxes get collected in early November and December.

“When I was part of the council in the early days we came up with a 17 percent cash flow requirement where we have $2.4 million in this budget, if we had no other money it would get us from Oct. 1 through Dec. 1 until we get funds from Lee County,” Ruane said.

There is a little over $9 million in reserves in the general fund.

“The biggest increase from last year is the disaster reserves. We have received a good portion of revenue from FEMA and the State of Florida. We were able to replenish our disaster reserves to the $4.5 million, which are the pre-Irma levels that were maintained,” Chaipel said.

Approximately $3.3 million of the $3.9 million has been received from FEMA and the State of Florida for expenditures related to Hurricane Irma.

Chaipel said there is a little more than $9 million in the disaster reserves.

“By no means as I exit this council next year would I ever think we should do away with our line of credit,” Ruane said. “The line of credit is a facility that costs us no dollars and no cents. It puts us in a great situation if we ever got hit with a Category 4 like we did when I got on this council. My recollection is we borrowed about $15 million.”

He went on to say that he struggles with even potentially having more money in reserves. There are special accounts and enterprise accounts in the general fund.

“When we transfer $225,000 into the Rec sinking fund, as well as $1.450 for the supplementation of the Rec Center, we are going to leave that fund higher than we have in quite some time. $225,000 through 2032 gives us $2.7 million and I understand the roof and other components are necessary from that $2.7 (million),” Ruane said. “That fund already has a million dollars in it. We found a way of reducing expenses, and/or, streamlining revenues where that is in better shape.”

He said he would pause on transferring the $1.450 and the $225,000 and reduce that by $100,000. Ruane said his reasoning is it is in the general fund, which they get to appropriate and spend.

“It gives council the flexibility,” he said. “We transfer $1.675 out of the general, I’m advocating $1.575, $100,000 less. I’m trying to pay that back because we are in better shape. I would keep it in general fund it keep it in appropriate funds.”

Chaipel said it would move from an ending fund balance in the recreation fund to the general fund.

“It will reduce the budget by $100,000,” he said. “The money would stay in the general fund instead of transferring out.”

Ruane highlighted three areas of discussion towards the end of the budget hearing, which included the Donax Plant, as well as renovations to the police building that is 40 years old and the Center 4 Life facility.

“We have the opportunity to bundle debt. In bundle, not only the Donax plant, but we can bundle in a note faction and do bank notes as opposed to bank bonds. There are no prepayment penalties, so when you get that extra million dollars from Tallahassee, or it comes in $250,000 less, we only have to borrow, or pay down, whatever we would like to,” Ruane said. “Here is the beauty. In three years time we will pay off $12 million. If we are fortunate to maybe get a million this year, or next year, we basically are going to be pretty close to not taking on any additional debt. The millage rate stays where it is, and probably the voted debt will go down because we don’t’ need to make those huge payments. Perhaps the only thing we have to ask the citizens to do is maybe extend the debt a year or two in the worst case scenario.”

Ruane said they have achieved everything they wanted to do with the budget.

“We have gone back to rollback. We worked out a deal with Lee County and that certainly worked to our favor. We certainly went through collective bargaining and I believe we did that in good faith with everyone. We made our pension obligations. We certainly paid back some money into the Rec. Items on their request list we have certainly been able to achieve. I want to live to one promise I made, at least to the seniors that I would do this,” Ruane said in the one more budget cycle he has in his term. “This will not have an impact on anyone’s taxes, if anything I will probably say your debt will go out longer, but your taxes will be equal to or less as a way we structured our debt.”

He said the Center 4 Life building is only going to cost them more money in the future.

To bundle, Ruane said it allows the chief of police to go out and be competitive when recruiting people.

“I can’t thank the chief enough. I never thought I would ever get a call that Sunday that Thanksgiving weekend of a shootout on Periwinkle. We need to give our police officers the best facilities we can and the best tools,” he said.

Councilmember Richard Johnson said he would challenge anyone to come up with a better plan that what they heard.

“I was here for the Rec Center and I want to be here for the Senior Center,” Ruane said.

City Manager Judie Zimomra said they brought forward some of the options for the Center 4 Life, Plan A and Plan B, a two-story addition. She said at the staff level it looked like the two-story addition was more prudent and efficient way to go.

“You get more square space. A lot of it is a fixed cost. If you acquire the building it is a fixed cost. If you are removing the old existing building it is a fixed cost. You would gain that additional space, you would get privacy of CHR being in their own dedicated space. On Sanibel, nice government grade office space is at a premium. We have a shortage of government space for city operations now. The option with two stories you do pick up some more storage space for Center 4 Life,” Zimomra said.

The plans are a difference between $1.425 million and $1.879 million.

The board unanimously voted yes on Plan B, the second story for the Center 4 Life building.