By Sheldon Gardner
Posted at 6:46 AMUpdated at 6:46 AM
  
The city of St. Augustine Beach’s debt is manageable, but only if it doesn’t grow.
As early budget talks gear up, City Manager Max Royle is advising commissioners not to add any new programs that would require new debt, though nothing like that has been proposed.
“The point at this time is, no more,” Royle said. “We should not do any more debt.”
Commissioners will be able to set the tone for the city’s finances next fiscal year at a budget meeting on Tuesday — the regular meeting is Monday. Along with avoiding more debt, officials are focused in part on building the city’s reserves and preparing for possible hits to revenue.
Debt has grown to one of the largest categories of spending in the city. From fiscal years 2013 to 2017, the cost of debt as a percentage of the total budget grew from 9.66 percent to 36.6 percent, according to the city.
The city’s total debt is about $8.8 million, with close to $3.5 million of that coming from the city’s purchase of land for Ocean Hammock Park.
“It was the last vacant oceanfront piece of land in our city that could be protected from development,” Royle said. “There’s nothing else, other than the Pier Park, which is owned by the county. This is the city’s commitment to preserving the maritime hammock and doing something to at least show for future generations we have done within our means the best we could to set aside some land in its natural state.”
The city levies two millage rates, 2.3992 to go toward government services and .5 that goes toward debt on the land purchases.
Other debts include leases for police cars and bond refinancing. About $1.9 million of the debt is being paid by St. Johns County utility revenue for a sewer project, though the infrastructure will be on the city’s books until it’s paid off, according to city Chief Financial Officer Melissa Burns.
The city could, according to its Debt Management Policy, take on debt equal to up to 2 percent of the total assessed property value in the city. Two percent of the taxable value is more than $23.4 million, and total assessed value is typically higher than that, according to the city.
But, “We don’t have the funding sources [to take on more debt] unless we do an additional levy,” Royle said.
The city is considering adding a collection fee for solid waste. But that’s not to take on new debt. Rather, it’s to recoup more of the costs associated with the solid waste program.
Royle said the city’s current debt level is at its largest.
“Years ago, debt was a dirty word. The Commission for years resisted [taking on any],” he said.
Commissioners preferred to pay as they went from savings. They bought the land for the current City Hall building and police station out of savings, and they built the police station out of savings. But commissioners realized that a new City Hall couldn’t be built with what remained in savings, he said.
“So that’s when we decided to join with the Florida League of Cities that does the issuance for bonds of small cities,” Royle said.
While it takes up a chunk of the budget, debt isn’t keeping the city from providing basic services and maintenance, Royle said. But there are other issues associated with it. The city used savings to help pay for the land.
“The unrestricted savings the city has for its general fund is way down. It’s the lowest it’s ever been since I’ve been here,” Royle said.
The unassigned fund balance can be tapped into in emergencies, though the city would use other funds with specific uses before using the savings, according to Burns.
The total in the unassigned fund balance is $60,944, according to Burns. It should be $317,044 to meet the city’s policy of having 20 percent of annual operating expenses set aside.
Even if a disaster were to occur now, the city would be able to operate for several months, Royle said. The city expects to get a $1.5 million state grant in June to replenish its unassigned fund balance, according to Burns. That grant is a partial reimbursement for the purchase of Ocean Hammock property.
Mayor Undine George said she doesn’t have major concerns about the city’s financial health.
“We’re getting back into the place we were and where we planned to be when we took on [the Ocean Hammock property],” George said.
In addition to managing debt, the city is also preparing for a possible increase in homestead exemption if voters pass the measure in November.
“Our debt levels are lower than the recommended thresholds, and they should be,” she said. “We’re all kind of waiting and watching to see what happens in November with the revisions that might impact our income stream, but if we need to tighten our belt we can do it — we’ve done it before.”