Fiscal Health
“The fiscal health of our City is the foundation for future success.” — Mayor Karin Wilson
The fiscal health of our City is the foundation for future success. After taking office and creating the first budget for FY2017, I was surprised to see budgets from the past only included previous budget numbers for comparison. There were no actual figures to determine if goals were met because audited financials were approved after the budget passed.
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One of the most concerning realizations was that most of utility profits were used to operate city government. Therefore, gas, electric, water and wastewater utilities never had the money to invest in necessary upgrades and critical maintenance. In addition, everything was expensed to the general fund leaving no way to make financially sound decisions.
Establishing a Transparent Honest Budget
After establishing a transparent honest budget, this administration was able to turnaround a City from a $6M deficit (requiring over 50% of utility profits) to a fiscally self-sustaining state in three years. In addition, we are now paying expenses out of the same funds for which it was generated. Expenses are now paid out of the same fund for which it was generated, and our Utilities and City budgets financially operate independently setting the foundation for future prosperity. Because the City relied on half of the Utility Department’s net profit to pay for government expenses, important upgrades and necessary annual maintenance of Wastewater, Water, Electric and Gas were ignored. It was critical to focus on creating a self-sustaining City budget so our Utility Department could reinvest its profits in long-overdue infrastructure upgrades. As of FY2020, which began on October 1, 2019, this practice has ended.To put this in perspective, if we continued hiding City operating expenses in the Utility budget and transferring profits to pay government expenses, the City would have falsely reported massive surpluses each year.
This shows you how much better we are financially comparatively in addition to what we have been able to keep in utilities to continue needed upgrades.
Hired a new outside attorney for litigation and land-use planning tasked with settling long-term lawsuits, preventing potential lawsuits in the best interest of taxpayers, and charging an hourly rate covered by our insurance. This change lowered legal fees for litigation and planning by 54%!
Unfortunately, the Council-appointed City attorney expense has been increasing while the level of service and accountability have declined. He has proven to be a bias, political appointment who has a serious conflict with me. An ethical issue I hope can be addressed next term.
Hired professional directors to fill in experience needed to reduce City and Utility liability and established collaborative planning for department improvements.
Discontinued the practice of Mayor drawing two salaries (one for Mayor and one for Superintendent of Utilities). Forgoing $60k of the $90k historically paid to the Mayor, I was able to put this towards hiring & paying an experienced Utility Operations Director who has put in place a strategic long-term plan to fully upgrade all utilities.
Discontinued offering new hires free family insurance – practice that has been in place for many years. This was simply not financially sustainable for taxpayers. I influenced Council to discontinue offering this for hires. We value our employees and remain very competitive.
However, Council passed an ordinance give free family insurance to future elected officials! I vetoed the ordinance stating it lacked transparency with the wording “The Mayor and members of the City Council will have the option of participating in the City of Fairhope's Group Health Insurance Plan Option I” Option I was the old option no longer available. There is no cost attached to this option because they did not want you to know.
Understand, serving as a councilmember is a part-time job. The family insurance package benefit value was $17,200 in 2017 and $15,576 in 2019. Unfortunately, Council overrode my veto and here is the total benefit council and mayor had last term, this term and next term.
For the first time in Fairhope history, the 2020 City Budget proposal requires zero dollars of utility profits to balance.
The City was finally self-sustaining financially last year and can operate independently from our Utility Department. There are ZERO Utility dollars paying for government operating expenses. I’m not sure how many ways I can articulate it, but this is a very good thing and something to be celebrated!
And in case anyone tries to tell you “it’s all City money,” know this is patently false. City operates with tax dollars. The Utility Department operates with rate fees. These budgets must operate separately, or we will end up in the same place as we were before I took office. The City required over half of utility profits to operate which prevented necessary annual maintenance and critical upgrade needs in each utility (gas, electric, water and wastewater). Utilities could not afford both, so, the City budget was presented each year as if it were fiscally healthy when in fact, it was running at around a $6M deficit.
Since there has been some confusion about what this really means, I want to show you how the City and Utility financials would look if we made no changes. The City would have robbed the Utility Department $4.86M in 2017, $4.2M in 2018 and almost $4M in 2019.
The City was running at an almost $6M deficit annually before this term. During the last three years, the City has taken over 100% of its own expenses leaving the utility department in a position to afford its long overdue upgrades and rehabilitation. The co-mingling of money is what put our utilities in the state they’re in today.
This Administration has exceeded budget goals every year this term while at the same time paying off debt, increasing cash funds and creating a City budget requiring zero utility profits to pay government expenses. From the last presentation, here is what the City financials would look like if no corrections were made in reporting expenses in appropriate departments:
IF THIS ADMINISTRATION INAPPROPRIATLY REPORTED FINCIALS LIKE BEFORE, THE CITY WOULD SHOW A FALSE SURPLUS.
But this gives you a comparison of how much better the City is doing financially. Utilities can now afford maintenance and needed upgrades. With all these significant financial improvements to both Utility and City financials, citizens must hold elected officials in the future to keep these budgets independent and also consider a Utility Board.
It’s also important to note that the Economic & Community Development and Fairhope Docks were newly created departments this term. In spite of Council not funding the Econ/Comm Dev department to operate in its full capacity, this department has secured millions of dollars of funding.
How was the $6M annual deficit restored to fiscal health?
The average percentage of net profits used was 51%. The minimum average just for last term (more was used in previous years) was around $5.4M. This does not include capital expenditures paid for the City.
Utility profits this term were used for $14M in upgrades.
To put things in perspective, if we continued reporting the financials like before using utility profits subsidizing the City operating budget, this term’s would have reported enormous annual surpluses. And it would have been incorrect.
Police Jurisdiction
I have also communicated over the years the fact that the Police and Fire Department cannot financially sustain their respected jurisdictions without equitable funding from the County due to population growth.
Our Police Jurisdiction is over 80 square miles which is not financially sustainable or manageable. A planned transition with the County to reduce this to City limits would better serve the citizens who are paying the lion’s share of the expenses. It would also indirectly incentivize those who are contiguous to annex into the City. The Police Department was grossly understaffed for many years. The City has increased the PD budget by 37% this term and we are now fully staffed for City limits. It would require much more to adequately manage the current police jurisdiction and the expense to do it would financially strain the City because the revenue collected from the PJ does not offset its portion of expenses.
It is not fair to those who live inside the City (municipal voters) to continue to subsidize this service to the greater jurisdiction.
Volunteer Fire Department
The City of Fairhope has an incredibly dedicated Volunteer Fire Department. Its jurisdiction includes over two-thirds of the County; however, County ad valorem taxes collected each year have not been used to help offset its growing needs. Like the Library, the City funds most of the operating expense and can no longer afford to do so without these expenses being shared by the County.
This expense does not include building maintenance & liability insurance paid by the City. I requested a copy of audited financials. We have received unaudited Tax Returns and still waiting to receive audited financials. We all want the very best for our Fire Department. There are defined restrictions for which your tax dollars can be used. Since the fire jurisdiction is mostly located in the County, the City needs help in funding needs.
Significantly Reduced Contractual Engineering Expenses
This term's average annual savings in engineering expenses over last term is $425k/year and $460k savings in 2019. Savings like this have enabled us to balance the budget and invest in critical needs. I’d like to thank our Professional Civil Engineers "The RICHARDS" for their huge contribution in this area. Before this term, the City and Utility Departments contracted out every single dollar of engineering service.
Even with Hard Work for Fiscal Responsibility, Council Decided to Ignore this Plan
With the new balanced budget, we were also able to significantly increase our cash fund balances for infrastructure upgrades for the City. There is no question we have a list of critical needs and priorities had not been defined yet by you.
I am completely against spending your tax dollars without your knowledge and input. These decisions have unfortunately been happening this term. Which is why it is so important to participate in the Comprehensive Land-Use Plan starting this summer and giving input on capital priorities.
There’s the notion that Council President and I oppose each other’s agendas. I guess this would make sense if I pushed for objectives behind closed doors. The difference between us is I propose intentions through inclusive, collaborative communication and he believes decisions should be made exclusively by Council.
After the 2020 budget was proposed – the first balanced budget without the use of utility profits for government services – Council decided to purchase 117 acres of parkland for $2.65M! Money we could not afford out of impact fee fund balance and would need the cash fund balances this administration worked so hard to establish. I proposed parkland in town off Twin Beach Rd that could fully be paid by impact fees over a three-year period without using your tax dollars and would also give a shot in the arm economically in an underserved area. Council turned this down months before because it did not appraise for the asking price.
Ironically, Council approved the purchase of the 117 acres of land on the corner of 13/32 with an appraisal that was far worse than Twin Beech property. Every “deal” negotiated this term has been accomplished with Councilman Jack Burrell self-appointing himself to do these deals and ALL have not been negotiated with you in mind.
This particular “deal” was purchased based on the following appraisal COMPS:
Have you ever purchased property based on a pending sale or a listing? Neither have I! This appraisal was done in June 2019. As of June 7, 2020, almost a year later, Comp 3 is showing as a listing. It never sold. It’s outrageous and it happened. The only valid comp was the first one which was right across the street that sold for $15k. Council was willing to “overpay” for this property but NOT for the closer property on Twin Beach which served a higher purpose of improving the quality of life in an underserved area.
In addition, this purchase was:
Not in the 2020 budget and would deplete our capital fund balances needed for other priorities.
Not budgeted to be paid in full by impact fees which was the goal from the beginning.
Rushed without a public hearing for no reason. There are plenty of opportunities available East of 98 for many years to come.
Did not wait to be included in the Comprehensive Land-use Plan starting this summer.
Not recommended by the T National Park Service. In fact, NPS recommended Twin Beech location because of its walkability and connectivity.
