EDITOR’S NOTE: Contributing columnist, Steve Nicklas, expresses his views and insight on various topics in Marketplace column.
The past is colliding with the present for the Fernandina Beach city government — creating reverberations into the future.
It is a past marred by deficit spending, impractical decisions and a gross miscalculation of how much property values would decline (and constrain tax receipts). In the aftermath, a budgetary mess has been heaped on the laps of a revamped city commission.
The city’s budget is saddled with liabilities and encumbered with revenue shortfalls. A painful budget process has ensued this summer, with few answers. To complicate matters, two major legal decisions (airport, impact fees) could easily go against the city — with potential verdicts costing millions of dollars.
City officials have grappled with solutions in recent budget workshops. Miniscule cost-cutting measures have included closing one or both of the city pools; revenue-seeking ideas have included a pay-for-parking scheme at the beach. Hopefully another property-tax increase will be avoided.
To help city officials with what is a difficult and thankless process, here are some potential answers to the financial test before them. Some can be employed now, others later.
1- Eliminate the full-time status of the city attorney. A part-time practitioner would be sufficient, especially since the guidance of current attorney Tammi Bach has been suspect. And she earns more than $100,000 a year. You would have at least 10 local attorneys apply for a part-time position at half the salary. Potential annual savings: $50,000.
2- Reduce the use of outside planning and engineering firms for projects — and utilize city personnel instead. If existing city engineers and planning officials cannot handle such projects, hire someone who can. Potential one-time savings: $200,000.
3- The city currently owns property valued at $60 million or more. So why not sell some of it? If the city is hurting for cash, liquidate assets — regardless of current property values. That’s what European countries and any corporation would do (i.e. Bank of America). And as an added bonus, selling property into the private sector would eventually produce tax revenues. Potential earnings: Unlimited.
4- The city has a fleet of vehicles valued at more than $2 million. Why not sell the newer ones and replace them with older ones that still run — or eliminate some altogether (think of the savings on insurance, fuel, maintenance, etc.). In terms of square miles, the city is tiny; there are so few blocks that city vehicles must cover. Potential savings: $100,000 to $200,000.
5- Even though the financial situation is bleak, the city is borrowing money for non-essential projects that it believes will miraculously reinvigorate downtown. Listen to Commissioner Charley Corbett and return $1 million of the amount already borrowed, saving interest and principal payments that would be due over the next year. Potential annual savings: $50,000 or more.
6- If police and fire constitute at least half of the budget, any personnel or spending cuts must involve these essential services. The police department has purchased nine new cars each year as part of its union contract. Skip a year of new purchases (if they are due again), for instance. Potential savings: unknown.
7- Former and existing city employees have been promised a pension as part of their compensation. They deserve this. However, let’s convert the pension plan to a 401K-type plan (like the private sector) for the future; any pension benefit that existing employees have earned should be given to them at retirement. But for employees who are new or who have only a few years of service, convert them to the 401K plan, which requires employees to contribute. This would alleviate the city of the huge burden of making annual pension payments (the pension is currently under-funded, by the way). Potential savings: Vast.
8- Renegotiate union contracts. With the pessimistic employment picture, all employees should be glad to have jobs. Union contracts are often embellished by politicians seeking support for election purposes; times are lean now, and amending the terms is fair and necessary (think: Wisconsin). The savings on increasing healthcare deductibles, for instance, for the city’s union and non-union employees would be bountiful. Potential annual savings: Enormous.
City Mayor Arlene Filkoff apparently feels misery loves company. Filkoff passed off the city’s bleak financial position as something that everyone is dealing with, across the state and around the U.S. Look no farther than to the Nassau County government to contradict Filkoff’s rationale.
County officials have anticipated the cliff-like falloff in tax revenues, and have been cutting department spending by 10 percent for several years now. Former city officials (and a few current ones) have not been as proactive, and must now settle up.
These are only a sample of prospective cost-cutting measures. There are many more to explore. A sick patient must take his medicine for past ills to be remedied — and for the future to be brighter.
Steve Nicklas is a financial advisor with a major U.S. firm who lives and works on Amelia Island. His business columns also appear in several newspapers in North Florida. He can be reached at 904-753-0236 or via eMail at firstname.lastname@example.org.