Friday, June 25, 2010


What went wrong? How did we get in this pickle?
6 factors caused crisis
St. Augustine Record


St. Johns County's 2011 budget will certainly be lean -- but maybe also mean, if programs and services beloved by residents are cut.

County Administrator Michael Wanchick has vowed to listen to all budget-cutting suggestions, but mostly he wants to know what people value in their government.

Still, the question arises: Why is one of the richest counties in Florida so broke?

Administration and budget officials believe the causes are a combination of lower revenue and higher costs.

The causes of the lower revenue are:

1. The recession, which dried up sales tax revenues while also increasing the cost of public services. In the last three years, because of declining revenues, the county cut its budget by $122 million. Next year, it expects to cut that by another $25 million more.

2. Two property tax reform measures totaling $30 million a year in lost revenue to the county. One in 2008 cost the county $23 million, while the second was a voter-approved change to the Florida Constitution effective in 2009 that added an additional homestead exemption and costs the county $7 million a year.

3. Declining property values and, hence, taxes, caused by the real estate bubble popping in 2008.

The causes of the higher costs are:

1. State and federal mandates that require the county to pay for projects -- the county calls them the "High Five" challenges -- it might have deferred but can't.

Here they are, with cost estimates:

* New emergency communication system, required by the FCC by Oct. 2011, $15 million to $30 million;

* Fire rescue plan, $5.6 million, required by 2013;

* Essential infrastructure projects, $500 million of which are unfunded, although most can be deferred until annual funding of $24 million can be implemented

* Stormwater mandates requiring that discharge be brought into compliance, $33 million by 2013, more than $100 million within 10 years.

* The jail is expected to reach capacity within three years, with another 1,000 beds anticipated in the next 20 years. Intermediate housing for 300 inmates, $7 million.

2. The cost of essential infrastructure to support development already approved. In the last three years, more than $500 million in transportation safety, maintenance and capacity projects have been unfunded. Most will be deferred until annual funding of $24 million a year can be found.

3. Over-borrowing by previous county commissions, which left the county $190 million in debt and in effect blocks further borrowing until 2030.

"The county's paycheck shrunk and its expenses rose," Wanchick said.

Former County Commission Chairman Jim Bryant, now running for the District 4 seat, offered another possible reason: The commission's decision to lower the millage rate from six to five mills in 2008.

"That cost $26 million a year," Bryant said. "In two years, we lost $50 million to $52 million."

70,000 houses come at a cost

Analysts would probably agree that over-development and over-borrowing by the County Commission from 2002 to 2006 were causes of the economic crisis the county administration faces now.

During that period, the commission denied only a handful of the thousands of residential applications filed. This led to a local construction boom.

But it also resulted in an enormous backlog of 70,000 approved but unbuilt homes.

And all those homes require infrastructure.

Developers built roads, water and sewage pipelines, street lights and other amenities within their own boundaries.

Bryant said the developers had to build roads for those projects. He called that "pipelining" and saw it as a way to save the county millions in roads it got up front and didn't have to pay for.

However, a number of projects eventually died or were put on hold when the recession hit. Many of those roads remain unbuilt.

The last two segments of County Road 2209 remain the only case where the county must step in and finish the project. The road was mandated by the state because a new outlet mall was preparing to take all available I-95 concurrency.

The state wanted a new north-south corridor.

The northern section is due to be started by 2013 and the southern part by 2018.

Jesse Dunn, assistant director of OMB, said, "This project is currently estimated in the county's work program at approximately $118 million."

'Mortgaged the future'

The current County Commission floated a $17 million bond for public safety: Jail expansion, courthouse renovations and a new Emergency Operations Center.

But these commissioners are rank amateurs compared to some previous boards who have borrowed nearly $200 million since 1998.

Wanchick said the county still owes $190 million of that and estimates that it won't be able to float any more bonds until 2030.

At his Town Hall meeting last week, Wanchick said, "A person born today will graduate high school before we repay those bonds."

Bryant said the commission was paying for capital projects but realized it wasn't using its sales tax bonding capacity for infrastructure.

The half-cent returned to the county brought in a high of $12 million a year and a low of $10.5 million to $11 million, he said.

A county official who asked to remain anonymous because of his position said that in 2006 the county was bringing in unprecedented amounts of income.

"But the commission spent that, plus bonded the county to the max. They made questionable purchases, such as the equestrian center. That was irresponsible spending. Their fiscal responsibility was zero."

The board showed "poor governance" in approving Nocatee, he said.

St. Johns got all the residential and Duval got all the industrial, plus the county allowed JEA to control that potentially lucrative territory.

"They mortgaged the future and the future is today," he said.

Projects become drain on budget

No elected official or county staffer would go on record and condemn the previous board's borrowing sprees due to political reasons.

The only one to comment was OMB Director Doug Timms, who said the previous commission had been "overly optimistic" about its future income.

"The county was growing very rapidly and revenues were coming in," he said.

Former County Commission Chairwoman Karen Stern of St. Augustine, who is running again for the District 2 seat she lost in 2006, said the commission at the time responded to public pressure to build quality-of-life projects.

"The county still had 50 percent of its bonding capacity available when I left the board in 2006," she said.

People wanted dirt roads paved, renovation of the Emergency Operations Center, a library branch on St. Augustine Beach, construction of a new medical examiner building and many other projects.

However, Wanchick said that while the projects were desired by residents, they were not revenue generators and required money to operate.

"They were unproductive business investments. We want the commission to look down the road," he said. "Those expenses make it difficult for us to approve any new facilities."

Last words

Stern said that one of her goals was getting public pools approved.

"For a county our size and a coastal county to not have public swimming pools is unheard of," Stern said last week. "Business and commercial development is what has gone south on us. (Our board) had economic development incentives, which ended when I left. They were replaced by high impact fees."

Bryant said the severe cut to the millage and the loss of valuable employees by the commission "reduced everything to a downward spiral. That put the county in a bind, knowing the state was coming in with its unfunded mandates and property tax cuts."

Stern says that outside businesses look at St. Johns County and its high impact fees and thinks: Why am I paying this?

"It really does drive business away," she said. "There are some things we can look at (to draw more business here)."

She attended Wanchick's first town hall meeting last week.

"It's easy to blame the last board for things going on now," Stern said. "(But) I don't think it'll ever be the way it was."

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