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Large county budget shortfall for the next two years

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Dec. 18, 2018- George Zoettlein, Budget Director for the county, presented commissioners with a bleak outlook for the county’s general fund- which somewhat blindsided them.  In June 2018, $7.9 million of funds had to be transferred into the General Fund in order to keep it afloat- preventing a roughly $3 million shortfall.  Such a shortfall is likely to occur again, but in 2019 it is approximated to be around $9 million.  

Zoettlein’s presentation to the Board states, 
“Without major changes negative cash flow will occur again at the end of fiscal year 2019. (The amount will be even greater) This time there WILL BE NO funds available to transfer. You will need to borrow funds.”

He explained to commissioners that if the general fund balance reaches zero, they would either have to call an emergency meeting and/or borrow the money to continue payroll.

Allocco referred to the ‘teamsters’ contract enacted about three years ago in which the board agreed to a 5% salary increase per year. Referring to the teamsters contract, Allocco remarked, “How could anybody look at that financial statement- with that contract and say ‘That looks good.’”

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“I can’t imagine if someone walked up to that podium and said over a three year period you’re going to see a 15% increase in your salaries – no business can run like that.” 

Zoettlein’s presentation states that the Union contract is one of the main reasons why the county will have difficulty outgrowing the shortfall.

Cost of living = 2.8% 
Salary increase = 3.0% 
Total personnel = 5.8%

In FY 2020, If all personnel budgets (including Constitutional Officers) go up 5.8% Personnel budget increase is $3,210,165.
The general fund is expected to be depleted by September 2019.  

Zottlein’s presentation explains, “Board will need to borrow between $15 to $20 million to cover the end of fiscal year 2019 and beginning of fiscal year 2020.”

He stated that the best option would be to borrow the money from another fund or funds.  In 2020, Zottlein estimates the shortfall will be roughly $12 million.  He recommended the following to overcome the shortfall:

• Increase General Fund Revenue 

1. Millage Increase (Approx. 1.5 Mills) or

2. Payment in Lieu of Taxes (PILOT)  
( approx. $1 million)

3. Payment in Lieu of Franchise Fees (PILOF) ( approx. $1 million)

4. Franchise Fees (electric, cable, phone) (Have to negotiate with utility – current industry standard is six percent) 

• Decrease General Fund Expenditures 

1. Reduce all budget by given percent 

2. Reduction in force – RIF (layoffs) 

3. Reduction in services 

4. Close departments

• Dependent Special District 
• Municipal Service Taxing Unit (MSTU) 

(If MSTU established now will not help FY 2020 but will help FY 2021 and into the future.)

Zottlein provided the example of a Parks and Rec/ Libraries MSTU, but he mentioned that the county would need the City of Brooksville and Weeki Wachee to opt in.  The MSTU would need to be established by March 26, 2019. It represents $4 million that would be available in the general fund.

Mitten remarked, 

“I think we have to be very careful to say no new taxes and then turn around and raise a fee.”

The controversial discussion of the Sheriff’s Office MSTU was also briefly revisited.  Sheriff Nienhuis has taken a strong stance against it over the past few years.  

Another revenue source brought up was a half cent sales tax.  

Leonard Sossamon stated that the Firefighter’s contract is up for renegotiation Jan. 2019. The teamsters contract will be up for renegotiation Jan. 2020.

This contract allows the 5.8% salary increase per year. County Attorney Jon Jouben advised Sossamon that the pathway to opening the renegotiation sooner would be to send a letter to the Business Agent for the teamsters. Mr. Sossamon read from the letter advising the union that the county would not be able to fund the contract. 

“Please be advised that Hernando County will be unable to fund the economic terms of the existing 2017-2018 Collective Bargaining agreements with your organization during calendar year 2019.”  The letter explained that the inability to fund the agreement is the result of a “projected shortfall of approximately $12,373,726.”

“We are declaring a financial urgency effective Jan. 2, 2019, pursuant to Sect. 447.4095 Florida Statutes.”

The letter states that there would be a negotiation period of 14 days to seek an amicable resolution.

There was approval from the commissioners to send this letter.

Commissioner Mitten recommended county residents take a look at the Firefighters and teamsters contract on the county website so they are aware of what they are paying for.

Attorney Coller stated that they would need to research whether they can hold a shade meeting to discuss elements of the union contracts.

If the shade meeting is not possible, then the county will hold a planning meeting in reference to the shortfall.

Champion remarked, “There’s got to be some serious talk about freezing and cutting.”

In the opposite vein, Zottlein reminded the board of major upcoming project costs: New/renovation (circa 1980’s Pinebrook building) county building ($25-$30 million), Radio system ($14-$16 million), Upgrade/New finance software for the Clerk’s office ($3 million).
The debt service on $49 million over 30 years at 3% interest rate will be $2.5 million per year.

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