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City coffers boosted $827k by unanticipated FY ‘13 revenues

(Sept. 13, 2013) City Hall might be rethinking charging waterfront property owners an extra fee for possible canal dredging work, although the $827,000 savings the city will be carrying over from last year’s budget could go towards any number of projects.

The city budget for the 2012-2013 fiscal year, which ended June 30, originally anticipated a $3.8 million dip into the town’s standing unrestricted reserves. But in closing out the books for the recently finished cycle, town Budget Manager Jennie Knapp said that number would cut below $3 million, giving an $827,000 boost to the 2013-2014 fund.

“We were able to take less money out of fund balance than anticipated due to some unanticipated revenues,” Knapp said.

Chief among these was almost $1 million in additional room tax, which is collected from hotel and condo rental transactions. Part of this tax must, by state law, go toward the city’s destination marketing and tourism promotion efforts, but the rest is unrestricted in use.

The town also realized over $1 million in additional grants from state and federal agencies, although much of this funding also went to specific initiatives and did not roll over in to the city’s general budget.

Some losses occured, notably $85,000 less than anticipated in inlet lot revenue and $40,000 less than anticipated in revenue from other parking lots. Street parking performed as anticipated. Lot revenue for the beginning of the current fiscal year, the lucrative months of July and August, has recovered, Knapp said.

“This year, we are doing better,” she said. “It looks like it was just the spring that was down.”

Room tax for July was also up 5.11 percent to over $3.7 million, putting the city in a good starting position for the $13 million in total room tax revenues it has projected for 2013-2014.

By design, the city maintains a cash reserve, referred to as “fund balance,” to cover its operating costs throughout the year in times when expenses are incurred before revenues are realized, allowing the real-time operation of the fiscal year’s budget.

The ratio of fund balance to anticipated annual operating costs is often used by City Hall as a measure of the city’s financial health. In the spring, the council voted to establish a self-enforced policy of budgeting a year-end fund balance value at no less than 15 percent of the year’s general expenses.

The city’s 2013-2014 budget, approved in April, is already designed to maintain a 15 percent fund balance ratio, meaning the $827,000 surplus from last year will provide a headroom that could be spent freely, without compromising the city’s self-enforced policy.

One possible use would be canal dredging, the effort to remove silt and accumulated debris from the resort’s bayside waterways. Discussed in the past, the council originally proposed funding canal dredging with a fee levied on those whose property abuts the canals.

“Some of the lagoons on the south end of town are getting pretty severe, and they’re going to start affecting property values on some of these folks,” said Councilman Dennis Dare, who motioned that city staff put together a projection of which canals would be ready to dredge in the shortest timeline.

Council supported the idea unanimously.

Dare also said, as he has before, that the city should abandon the idea of charging waterfront property owners and pay out of its general revenues. Although they receive the most benefit from the canals, such owners already pay higher taxes because of their higher waterfront property values, he said.

Further, the city’s bayside waterways are a public amenity, much like beach, which all properties benefit from. When beach replenishment was implemented, the town decided against charging oceanfront properties a fee to subsidize the effort, Dare said.

“The public does have the right to use the canals, and exercises it,” he said.

Councilwoman Margaret Pillas said she had received feedback from residents who contended that, while anyone can use the beach, only those with boats and boat access can truly utilize the canals, making them less of a public amenity than the beach precedent.

“If we’re not going to go forward with [the dredging fees], I need to be sure that people know we’re not going to discuss it any further,” Pillas said.

However, Dare said, the city’s stormwater drains feed into the bay.

“Everybody’s stormwater drains into these canals, along with sand and debris and mulch and everything,” Dare said. “That adds to the need to dredge them and degrades not just the canal water quality but the whole bay. There is a benefit to everyone, even if you never boat in the canals.”

“I think it’s a good point that we all do use the canals for the dumping of stormwater,” Pillas said. “If that’s the rationale, we need to communicate that to the public.”

But City Manager David Recor cautioned that dredging, while the topic du jour, was not the only possible use staff would bring forward for the $827,000 surplus.

“Our thought was that we would have a comprehensive discussion about our unfunded needs,” Recor said. “We’re just shy of our $2 million policy for street paving, and there’s been some discussion about the roof projects being pay as you go instead of bonding them out.”

The city has set a goal of providing $2 million in street paving work each year, to catch up on the estimated $40 million of road repairs that need to be done in the resort. This year’s allocation is just over $1.4 million.

The council originally budgeted the roof replacements at the Public Safety Building and the city’s maintenance garage to be paid outright, but decided to borrow money for them instead due to increasing operating expenses earlier this year. A bond sale for all of the city’s capital projects is slated for the end of this calendar year, with a combined value of around $12 million.

“The point is that there is any number of other issues or uses,” Recor said. “I’d like to encourage you to look at the bigger picture.”

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