Recommended budget is incomplete

The town of Longboat Key’s charter requires a recommended fiscal year budget to be completed and sent to the Longboat Key Town Commission by Aug. 1.

Town Manager Dave Bullock’s Finance Department staff sent the fiscal year 2013-14 recommended budget to commissioners Aug. 1, as required, with a note explaining the budget is incomplete until commissioners make pension decisions and review pension cost numbers at a Aug. 14 special meeting at Town Hall.

“There are factors, such as pension costs, that will remain unknown until after the Aug. 14 special meeting,” wrote Bullock in his budget message. “Therefore, the document presented to you in September is likely to have changed by some of the unknown factors.”

The budget is based on the current millage rate of 1.8872, which would generate $8,594,875, or $214,963 more than last year.

The budget does not require the use of any of the $1 million of general fund balance set aside for pension costs, but does require approximately $703,000 of the general fund balance.

But the cost to operate in the next year could rise once actuaries reveal how much is needed annually to pay off the current pension plans.

The town currently has $2.7 million set aside to pay for pension liabilities in the coming year, but that number could be as much as $3.2 million if pension costs are higher than anticipated.

Bullock estimates that 2013 “looks to be our bottom-out year,” noting that the town will likely see increased revenues next year as rises in property values are anticipated to be reflected in the town’s ad valorem revenues.

But Bullock notes in his budget memo that future budgets can’t draw as much general fund dollars to pay off what Bullock has called “the big elephant in the room.”

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 for 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 those employees 3% wage increases; $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.

Bullock likes to operate the town with a fund balance of between 90 and 120 days’ worth ($3.5 million to $4.68 million) of operating costs. But the recommended budget just barely hits that mark and Bullock warns of bigger problems down the road that may lead commissioners to consider raising the millage rate before the budget is approved in September.

“The ending fund balance is projected to be $3,579,087, which represents 23% of general fund expenditures, or 90 operating days,” Bullock’s budget memo reports. “In order to not raise taxes in fiscal year 2014, the recommended budget proposes to use an additional fund balance of $702,611. The habitual use of fund balance is unsustainable if we are to maintain our target levels of fund balance.”

The Town Commission will adopt the budget on first and second reading in September. The 2013-14 budget begins Oct. 1.

Fund Balance
Fiscal Year Balance                                                                     Amount
FY 2012 beginning fund balance                                                $5,010,163

FY net fund balance reduction                                                     -546,006

Non-spendable (inventory and prepaid items)                         116,818

Assigned to offset future pension costs                                      1,000,000

Assigned (encumbrances carried forward to FY 2013)           93,857

Unassigned (available for expenditure)                                     3,253,482

FY 2012 ending balance                                                               4,464,157

FY 2013 estimated revenue reduction                                        -41,895

FY 2013 estimated expenditure reduction                                  $205,000

FY 2013 estimated use of fund balance                                      -$637,500

FY 2013 estimated use of Commission Contingency               -200,000

FY 2013 net fund balance reduction                                            -674,395

FY 2013 Assigned )inventory, encumbrances and prepaid)   -210,675

FY 2013 estimated ending balance                                             $3,579,087

Assigned to offset future pension costs                                       -1,000,000

FY 2013 estimated unassigned fund balance                           $2,579,087

Use of Commission Contingency Funds
The town budgeted $400,000 in commission contingency funds and expects to use $200,000 of this amount this year. The estimated use of fund balance ($637,500) is made up of the following:
Line Item                                                                                                    Amount
3% wage increases                                                                                 $162,500

Addition of assistant town manager position                                      $60,000

Fire Department DROP participants vacation/medical payouts      $215,000

General employees (potential_ DROP vacation/medical payouts $200,000