Editor’s Note: This article was originally published in The Apopka Voice as part of “The Budget Debates” series.

Analysis

By Reggie Connell/Managing Editor of The Apopka Voice

The Budget Debates: Part Four – Kilsheimer and Nelson bring a vastly different approach to a budget process

Don’t tell me what you value, show me your budget, and I’ll tell you what you value.”

–United States Vice President Joe Biden (2008-2016)

 There is nothing more important to a city than its budget. It’s a roadmap of how the coming fiscal year is going to go. That’s probably why discussions about budgets, reserves, and how to spend the Apopka taxpayer’s money create such passionate debates on the City Council.

And no one will have more impact on a budget than the mayor.

Apopka is approximately five months away from choosing a mayor. Incumbent Joe Kilsheimer and Orange County Commissioner Bryan Nelson are squaring-off in the 2018 Apopka mayoral election, and their approaches to creating a budget could not be further apart.

Nelson’s attitude is forged in the experiences he had during the recession years while he was a member of the Florida Legislature. At that time he was forced to make tough decisions, and still watched a healthy reserve evaporate.

“Before commenting on the financial condition of the City of Apopka, I think it would be prudent to share my experience in the area of public finance,” he wrote to The Apopka Voice. “Having served in the Florida Legislature during the great recession I understand the value of reserves. During those devastating years, our reserves dropped from FIVE billion dollars to almost zero in 4 short years. I was a member of the Government Operations budget committee and will never forget having to lay-off hundreds of employees; thankfully mostly unfilled positions but to not even know their names before letting them go was a heart-wrenching exercise for me. Each budget cycle we asked the department heads to bring us a budget with a 10% reduction in spending just to keep from depleting our reserves. Our state budget went from $72 billion all the way down to $66 billion in the depths of the recession. I never want anyone at the State, County or Municipal level to have to grapple with that type of financial disaster.”

As an Orange County Commissioner, Nelson has also been involved in its budgeting process as well. And it’s this approach that he would like to bring to Apopka.

“While serving on the County Commission we have made reserves a top priority and have added each year to the reserves without raising taxes. We have also instituted a $300 million dollar INVEST bond program adding additional long-term capital improvements to the county without touching our reserves. This program only invests in projects that have a 10-year lifespan or longer. Our current reserves are $1.05 billion with a $4.0 billion dollar budget which is just north of a 25% reserve.”

Orange County Commissioner Bryan Nelson

Nelson has watched the budget in Apopka increase, and according to his figures, it is trending towards a reserve amount that concerns him.

“For the last three years the City of Apopka’s revenues have increased but expenses have consistently outpaced the additional revenue. To bridge the gap, the city has seen fit to spend reserves while at the same time, increase property taxes in order to meet the ever increasing obligations. It is detrimental to continue to dip into reserves for wants (not needs) and to borrow money for assets with such a short useful life. Without reserves how do you pay for debris removal if FEMA doesn’t reimburse you for several years? Four years ago we had $41 million in reserves with $28 million in unrestricted dollars. According to the September 24, 2017, public notice in the Orlando Sentinel, the city of Apopka recently passed a budget that will essentially erase the reserves and leave a reserve balance of only $3.7 million at the end of this budget year, none of which will be in the unrestricted general fund. This is financially dangerous when one considers that Apopka has a population of 50,000. In comparison, Winter Garden has reserves of $105 million with a population of 38,000 and Kissimmee has a population of 65,000 and reserves of $39 million. Based on current budgets Kissimmee has reserves of 23% of their spending and Winter Garden has 61% reserves based their 2017 spending. When compared to its spending levels, Apopka’s reserves are now less than 3%.

His plan to rebuild the reserve to a healthy percentage is a simple allocation of a specified amount each budget cycle.

“With spending increasing and reserves plummeting we must first stop digging Apopka into a hole. Allocating $500,000 to $1,000,000 each year to replenish reserves would go a long way toward a healthy rainy day fund.”

Over the past two budget cycles, Kilsheimer’s approach is to begin the process at the staff level, and through a series of workshops go line-by-line through each item until it arrives at a budget that all key staff members, department heads, and a consensus of the City Council can agree on. He maintains that a two-month reserve is essential (as outlined in the Government Finance Officers Association standards), but does not believe its essential to go beyond that reserve amount.

“The City of Apopka’s policy is to maintain an unrestricted general-fund budget reserve adequate to meet unforeseen events,” he wrote to The Apopka Voice. “That was the case when I took office and it remains the case today.

 Apopka Mayor Joe Kilsheimer

The reserve policy is expressed in Apopka’s approved 2017-18 budget this way: “The City’s practice is to maintain a reserve equivalent to two month’s operating needs in the General Fund and three month’s operating needs in the Utility Fund.” (Page 18). It should be noted that the standard established by the Government Finance Officers Association is exactly the same: two month’s worth of spending.

In practice, two month’s worth of spending equals about 16 percent of the City’s general fund budget. In reality, according to the 2017-18 budget, the City’s reserves stand at about 20 percent of the general-fund budget, or four percent above the standard.”

Kilsheimer also points out several projects that the City has taken on during his tenure that he believes are essential to Apopka’s future that goes beyond a debate about reserve amounts.

“Those numbers are important guideposts, but by themselves don’t tell the entire story in Apopka. Here is some context to consider:

  • In the past two budget cycles, the City of Apopka has budgeted for the staffing and operation of two additional fire stations from its general-fund budget. We are building and equipping Fire Station No. 5 off Jason Dwelley Parkway. We will open Fire Station No. 6 this year in temporary quarters at the new Florida Hospital Apopka in December. These public safety improvements are vitally needed to cover our growing city and so that we can maintain our fire department’s ISO-1 status.
  • Many cities pay for the construction of facilities like new fire stations from an impact-fee fund. These are funds paid by builders and developers when they pull building permits. The purpose of an impact-fee fund is to make new construction bear the burden of providing expanded facilities. In Apopka, we established public-safety impact fee funds in 2017. It will take several years to build up the savings in these accounts to pay for the cost of additional facilities. In the meantime, we have to rely on the general fund, which is supported by all taxpayers.
  • We have also budgeted for additional police officers and planning staff in the Community Development Department. These are all general fund obligations.
  • The attached chart shows that Apopka is in the middle of the pack among similarly sized cities in Central Florida with regards to a reserve policy. At the same time, the chart also shows that the City of Apopka has a lower millage rate than most similarly sized cities in Central Florida. Additionally, Apopka has a larger population and a larger geographic area to cover than its contemporaries.
  • From Orange County’s 2017-18 budget document – available at Orange County’s website – it appears that Orange County’s policy target for unrestricted fund balances is “no less than 7%.” See page 72.”

He also believes other revenue streams the City is about to realize will bolster any potential crisis that could threaten the general fund reserves.

“Finally, it should be noted the Apopka City Council recently voted to proceed with the sale of surplus land at the intersection of Park Avenue and Sandpiper Road. This sale will return this vacant parcel to the tax rolls, as opposed to generating no property tax revenue today. Moreover, the expected $1.3 million sales price – when put back into the general fund reserve, will boost the City’s reserve ratio in the 2017-18 budget to 23 percent.”

To review the Apopka budget for the fiscal year 2017-18, go here.

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