As an instrument rated pilot, I was taught to think several moves ahead. It is not only more efficient, but it can literally save your life, and when situations denigrate you must act decisively and with precision.
I recall an incident during my flight training years ago while on a cross-country flight of about 1500 miles. We were cruising at about 9,000 feet through the clouds when I noticed crystals beginning to form out of my left window on the forefront of the wing. It’s one thing to read about it and quite another to experience it. I mentioned it to my instructor who was in the right seat, and he said to call the center immediately and request a different altitude, preferably higher to try to get out of the icing that was now forming, while giving us more altitude to maneuver should the icing overtake us. We were immediately cleared to 11,000 feet, and as we ascended, we broke free from the cloud layer and from the danger zone. The experience taught me four valuable lessons: 1. Don’t ignore danger signs, 2. Don’t delay to act, 3. Listen to your instructors, and 4. When in danger, adjust your present course.
These are great life application lessons for any situation. They must be meted out with balance as well, neither ignoring nor overreacting, but responding with both calm and clarity. This is the mentality I use when dealing with the affairs of city council, and most recently with our rapidly increasing budget. Having been asked to respond to my position, I hope to shed light on my concerns all the while holding the great optimism I see at the opportunities before us.
Some have chided me for “breaking from the pack” when it comes to our recent vote on this year’s budget. Let me say that I respect my colleagues and as in any team, each one brings something to the table that helps give a varied perspective to hopefully make sound decisions. However, there are times that each of us must make decisions that may run against the grain. When we do, it should be for good reason and not for political rancor or personal feelings. Based upon my 30+ years of experience dealing with active budgets, and armed with my pilot’s training, I will seek to explain in a nutshell my concerns.
The key word is “sustainability, ” and it is the goal of any healthy economic venture. We want growth, but it must be sustainable, or we only experience a temporary benefit, followed by painful corrections. There will always be hiccups along the way, but sustainable growth is best when steady and incremental.
With any investment, we must look at key indicators to make decisions. No one has the proverbial crystal ball, but indicators can keep us ahead of the curve and riding the wave, rather than being overtaken by it.
The “icing on the wings” for me is the three main indicators of our sustainability: taxing, borrowing, and reserves. We can handle negative direction in one, and even up to two at a time, and still maintain a positive net gain, but when all three are showing warning signs we are in danger of overheating, as in our national economy where our debt has surpassed the 20-trillion mark!
Thankfully we are not in that situation locally, and Apopka was left in a very positive cash position by its former administration, even to the point that they were accused of saving too much. We have been handed the baton, and there is a clear desire in the public to see growth specifically in the areas of shopping and dining. We are at the perfect time in history with both the beltway and new hospital, and room for growth to the west. There is much reason for optimism, and I see a bright future.
Having been involved for many years in the business community through the chamber of commerce, I know that growth will naturally happen when the market can sustain it. It takes money to make money, and seeding into worthwhile projects is a part of growth. Nothing ventured, nothing gained. But we must also do it with balance and sustainability which brings us back to our indicators.
The heart of the issue lies with our present trajectory which leaves us no meat on the bone and no room for error. Our budget session began with the caution that our present course was unsustainable, and that was before adding necessary things that forced us both to borrow and to use reserve while increasing taxes. These are the three indicators that if the course is not changed, it will lead us out of balance and into danger. Without a clear projection that growth will sustain it, it is a gamble that will definitely lead to the only thing left which will be raising taxes.
The GFOA (Government Finance Officers Association) gives us safe standards and practices* (see the link below) and recommends a reserve that starts with two months of expenses and then adds above other incidental expenditures such as storm recovery, governmental mandates, and investment savings. Based on ALL these indicators we are to come up with a reserve policy that is both healthy and stable. The same GFOA says that having a reserve policy is important for financial stability, bond rating, and should be adopted by cities. The numbers are subjective at that point, but should be reflective of the unique situations in every city.
My concerns led me to propose a reserve policy that will allow us to both use and replenish our reserves. We have simply gotten ahead of the growth curve, and are supplementing without a clear recovery policy. We are borrowing on lower ticket items to make up for the lack, which is against conventional wisdom.
After much study and discussion with experts in the field of city government, I proposed a 25% reserve policy which is moderate compared to other similar cities, with a five-year window to accomplish this goal. It is a policy that gets us above the “icing” and allows us enough altitude to maneuver in critical situations such as hurricanes or state mandates. It does not preclude us from using our reserves when needed but is simply a promise to ourselves and to our taxpaying public to put ourselves back in a sound pro-growth position.
I was (and am) willing to examine and negotiate the percentage and terms, but not to merely go on with no policy. This while not readily apparent to some is dangerous to the future, and it became my line in the sand, as there was not any willingness to discuss or consider it. My proposal was deemed a luxury, a point to which I strongly disagree. However, this prompted my no vote because I won’t support an unsustainable path with no future plans to correct our course.
Let me be clear, our reserves though now dipping to 18% are not in the red; however, we will have to use them for the estimated $5-million cost for storm debris, not to mention other repairs to our city’s infrastructure. We have a backup plan to borrow against our other funds, so we stay solvent, and over 75% should be eventually paid back by FEMA with an estimate of 4-5 years turnaround time. (at least that’s what Washington promises). The state could possibly help with another 12.5% of costs, leaving a balance we will have to replenish, and a time factor we must endure. We can and we will.
Let me end with this. It takes money to run a city and provide services that people want and need. I believe those decisions should be approached from a priority basis with policies in a sustainable manner. Taxes are one source and necessary to accomplish these goals, but it is incumbent upon elected leaders to minimize cost while maximizing performance in a manner that is attractive to the businesses and jobs we seek to attract. I think everyone on the council would agree with this and would work toward these goals. Our present taxes are low and are also a compelling factor to draw growth to our city. If we increase services, we also must be willing to increase spending. If we pace ourself with growth, we can increase our tax base without having to raise the tax rate. I believe we can do so in a manner that is both responsible and sustainable.