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Budget forecast calls for modest growth
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This slide takes taxable values and applies the millage rate to show property tax revenue over the last several years. This graph shows that over the last five years, revenue has decreased by $147 million dollars or 34 percent.
CLEARWATER – Pinellas County officially kicks off its budget preparation season Feb. 21. But, work on fiscal year 2014 budget has already begun.

County Administrator Bob LaSala and Eric Naughton, the new director of the Office of Management and Budget presented County Commissioners with the budget forecast for fiscal years 2014-2023 at a Feb. 5 work session.

LaSala told commissioners that despite media reports to the contrary, the budget forecast includes no recommendations for any specific actions. LaSala’s plan will come with his proposed budget due in July.

The purpose of the forecast is to identify challenges, weigh potential options and help commissioners make policy decisions. Looking at budget projections over the long-term rather than focusing in on a one-year budget solution drives better decision-making, he said.

This is the fourth year county staff has prepared a formal budget forecast, which includes 10 keys funds: General, Tourist Development, Transportation Trust, Capital Projects, Emergency Medical Services, Fire Districts, Airport, and three Utilities funds – water, sewer and solid waste.

Naughton presented the particulars, including projections for some growth over the forecast period.

“We’re not going to have big levels of growth, instead it will be a slow, steady increase,” he said.

The national economic outlook shows a slow climb out of the recession with the Gross Domestic Product expected to grow by 2 percent to 2.9 percent annually over the next three years.

The outlook for the state and county is dependent on the pace of recovery for the job market and the housing market, Naughton said. Florida led the nation in foreclosures in 2012 with one in 32 homes facing foreclosure – twice the national average. Thus far, improvement in the housing and job markets has been slow.

Tourism is the bright spot for Pinellas County with more than 5 million overnight visitors in 2012 and bed tax collections coming in at a record $28.7 million.

“The sad part is tourism doesn’t have high-paying jobs,” Naughton said.

Two-thirds of the revenue for the General Fund comes from property taxes. The General Fund is the largest and pays for the majority of expenses. Despite projections for about 2.5 percent growth in property values next year, there still won’t be enough money coming in to sustain current levels of service for the coming year or any of the years contained in the forecast.

Naughton said the projected budget in the forecast uses money from the Service Level Stabilization Account to make up the difference between revenue and expenses in FY2014. The SLSA represents savings from previous years when the Commission approved budget cuts above and beyond as recommended by staff to create “a glide path and soft landing” when the economy began to improve, LaSala said.

“We’re starting from a good place,” he said.

However, projections for fiscal years 2015 through 2023 show a shortfall of $18 million to $58 million.

“What’s the major driver for the increase in expenses,” Commission Chair Ken Welch asked.

“Cost of personnel,” Naughton answered.

He said the budget factored in pay raises for employees.

“They’ve gone without for about four years,” he said.

He said there was a growing concern about the county’s ability to recruit and retain quality personnel.

LaSala said some money had been set aside for possible pay raises.

“We’ll wait and look at the market,” he said.

There’s also an unknown for future pension costs.

Problem funds

Money for the Emergency Medical Services Fund continues to be a problem area with staff estimating that reserves will be gone by FY2017, despite millage rate increases the past two years.

LaSala said some savings could come from renegotiating the contract with the ambulance provider. Other ways commissioners could get more money for the fund would be another millage rate increase, increasing ambulance user fees or reducing funding for first responder contracts.

“Money from property tax and ambulance fees never will be enough to pay the cost of the system,” LaSala said.

Officials are currently waiting for results of a study looking at changes to EMS that could save money in future years.

The Fire District Fund is balanced going into FY2014, in part due to millage increases in past years. Naughton pointed out that expenses likely would create revenue shortfalls in the coming years.

Another problem area is the Transportation Trust Fund, which is expected to run out of money in FY2018. Commissioners must take steps to increase revenue or cut expenses no later than FY2017. Suggested strategies include subsidizing the fund using General Fund money, using an independent revenue source to pay for stormwater needs associated with roads, adding local option gas taxes or reductions in service levels.

Other funds

The Capital Projects Fund will remain solvent throughout the forecast period as long as staff continues to successfully match projects to available revenue. Naughton reported that it might not become necessary to borrow $85 million from Solid Waste as previously approved by the Commission.

The Airport Fund also will continue to stay balanced as long are capital projects stay within expected grant revenue. LaSala said no one has shown interest in the former Airco Golf Course property. The commission approved closure of the golf course in 2011 to allow staff to explore development of the property to bring in additional revenue.

Annual rate increases approved through FY2015 will keep a balance between revenue and expenses for Utilities Water, Sewer and Solid Waste funds. However, additional rate increases of 2 percent a year likely will be needed to keep the Water Fund balanced through FY2023. Rate increases of 2.75 percent through FY2023 would keep the Sewer Fund intact. Tipping fees and electricity sales will provide sufficient revenue for the Solid Waste Fund through the end of the forecast period.

Tourist Development Fund Forecast

Again, tourism provides a ray of sunshine for county budget planners. Bed tax collections are expected to grow by 4 percent this year followed by 3.5 percent in FY2014 and 3 percent thereafter.

In addition, by FY2015 the debt service to Tropicana Field and Dunedin spring training facility will be paid. Money could be available for new capital investments and promotional activities. However, reduced funding from federal and state sources to pay for nourishment might mean more bed tax funds would be needed to keep the county’s beaches in sand.

Unknown variables

Many unknowns could affect the budget, including federal and state mandates, actual collection of property taxes, new property tax exemptions, speed of the economic recovery, compensation issues and, new to this year’s forecast - climate change, which Naughton said addressed concerns about the frequency and intensity of storms.

Preparations and next steps

Department managers have a few months to develop their budgets. Overall, staff will continue to streamline operations and look for new funding sources. They’ll be asked to focus on offering sustainable programs and services in tune with the “new normal for revenue growth,” Naughton said.

LaSala said he had a “productive” meeting with Sheriff Bob Gualtieri as staff prepares to “do a deep dive” into the area of public safety. The sheriff’s budget takes a large share of the General Fund budget despite massive cuts in the past few years.

Community involvement will play a part in the budget process with an E-Town/I-Town Hall meeting on April 10 and public hearings in September. Adoption of the budget and millage rates is scheduled for Sept. 17. The next budget year begins Oct. 1.

Commissioners asked if community outreach meetings would be scheduled as in past years. LaSala said no meetings were planned, as attendance did not warrant the expense.

LaSala said this year staff’s strategy of prioritizing funding was based on reaching the North Star.

“It’s a form of art,” he said. “It describes how we’re trying to align the organization on a single focus.”

LaSala said the Commission creates and shapes the North Star through strategic planning and monitoring.

“Steering of this ship (county government) will use the North Star as a pivot point,” he said.
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