Resorting to reason, facts, and common sense Fernandina Beach City Commissioner Mike Lednovich — formerly known here as “Left Coast” — posted on his Facebook page last week that the current pandemic is a clarion call for the city to stop tossing money around like a bunch of drunken rednecks in a topless honky tonk.
California transplant Lednovich — who tells me he has a background as CEO of a Southern California Construction Company that did $45 million annually building schools, courthouses and fire stations — is making economic sense in the midst of a major crisis while spendthrift City Manager Dale Martin and the other four members of the commission act as though they’ve just won the lottery and are headed to a strip club flush with cash.
Following, in its entirety, is what the fiscally sober and newly baptized financial evangelical Lednovich posted on his Facebook page prior to this past Tuesday’s City Commission meeting:
“We all know we’re in a crisis.
The question for City government is what are we prepared to do about it?
It’s not rocket science to know that we’re in for a major economic recession during and after this pandemic. Economy experts predict unemployment could reach 15% nationally.
As a City Commissioner watching the financial devastation to our local businesses during the coronavirus crisis, it doesn’t take much foresight to recognize that the City of Fernandina Beach cannot continue to operate in a “a business as usual” mindset.
What our current situation demands is a “proactive” methodology to prepare for the challenges the City will face going forward.
For example, there’s simple math that can be applied to the City of Fernandina Beach revenues for the remaining six months of the 2019-2020 budget. Property tax revenues (91% collected as of March 1) are secure. What’s at risk is approximately $4.2 million in budgeted other revenues. Money derived from sales/fuel taxes; charges for City services; franchise fees; licenses and permits.
The Nassau County Tourist Development Council has already readjusted their budget by cutting their Bed Tax revenue forecast by 50%. The City needs to do likewise. Using the TDC economic forecast of a 50% reduction would mean the potential loss of $2.1 million in City revenues. It could be worse. It could be less. At this point we don’t know.
When you don’t know and you’re in charge of taxpayer money, what does common sense tell you to do? Easy, stop spending on non-essential projects and purchases. Hit the spending brakes hard.
The City has $4 million in reserves — meaning that if all revenues dried up — the City could still provide essential services like police/fire/emergency response, water & sewer, trash pickup, etc. That reserve is in addition to the funds remaining in the City budget to keep the lights on.
There are also projects that need to be completed like the Marina’s northern attenuator and dock repairs.
There are two spending items on this Tuesday’s City Commission agenda that total nearly $300,000. One is for DataSavers Information Management Solutions in an amount not to exceed $251,400 to scan Building Department records, by way of a piggyback purchase to a State of Florida Department of Management Services Contract. The other is to Quest Ecology, Inc. in the amount of $99,500 (50% City funded and 50% Nassau County) for the preparation of a Beach Habitat Conservation Plan. Are both of these critical to the City at this point in time or can we postpone spending the money?
There are other City projects in various stages of infancy that aren’t critical to providing essential services to our citizens. The City Golf Course has a $300,000 funded project to install Top Tracer technology bays at the driving range. Is this critical? Heck no.
Do we need to keep spending on consultants for designs for a waterfront park and the realignment of Front Street? The City still has $240,000 in consultant spending earmarked for this year.
How about $400,000 in impact fees to build Simmons Road Park? Or the hiring of an Assistant City Manager at $110,000?
What I’m advocating is a suspension of all non-essential spending until we’re able to determine how firm the financial ground the City finds itself on once we emerge from the other side of this nightmare.
Economic recovery will not be like turning on a light switch – it doesn’t happen instantly. Gil Langley of the Amelia Island Tourist Convention Bureau cites data that shows it took the Amelia Island travel economy 10 years to fully recover from the 2008 financial crisis.
City government needs to begin acting as “business as unusual.” That means every taxpayer penny counts.”
BINGO Commissioner Lednovich! No more callers please, we have a winner!
During the Commission Tuesday, April 7 session Commissioner Lednovich reiterated his message for fiscal conservancy by putting his vote where his mouth is saying “no” and being the lone dissenter on spending votes. But his efforts bounced off City Manager Martin and the other four commissioners like British cannonballs off the USS Constitution in 1812. They all appeared glassy-eyed and dumbfounded by his belt-tightening message. “What are city funds for if not to spend them”, was the message they appear to heed.
While Lednovich continued his appeal for a halt in helter skelter check writing, City Manager Martin feebly disagreed saying: “If you look at the City Comptroller’s report you will see we are nearly $16 million underspent on our expenditures. We had a $13.5 million fund balance as of February 29. I think this staff is doing a darn good job of evaluating what is essential and non-essential. Yes, we need to evaluate the situation as we go forward. But I believe that this city is in a strong financial position.” Martin even defended paying consultants saying that “many are paid out of restricted funds, e.g. airport and stormwater.” He even bullied Lednovich into voting to continue with funding recruitment advertising. Translation: “The city’s got cash and I’m gonna spend it so shut up and go away, you’re annoying me.”
Martin lacky, Commissioner Chip Ross, also a big-time spender and traditional supporter of any excuse to squander tax payer funds, chimed in with his usual mumbo-jumbo doublespeak adding: “I believe the key objective should be to reduce expenses without reducing essential city services. Police, Fire and Rescue and Emergency Services may need to increase their budgets during this time. The other key objective should be to maintain strategic investments that will allow the City to move forward after we get through this.” He also had his greedy eyes on the City’s reserve fund of more than $7 million bucks adding: “I would argue that many of the things we do today are essential and will continue to be so during the recovery. We need to be able to look forward to the future and take advantage of the situation to do things that we perhaps could not do under normal circumstances.” Translation: We’re gonna keep spending, so shut up and go away you’re annoying both me and City Manager.”
Stone-faced Commissioner Len Kreger mumbled something about Florida being the fourth worst state hit economically due to the virus and the obvious drop in tourism, saying maybe the city should cut spending. But he trailed off much like Joe Biden trying to make a policy statement. The other two Commissioners — Mayor Johnny Miller and Phil Chapman — took bobblehead stances, nodding in all directions, just waiting for the session to be over so they could turn off Skype and go have a cocktail or do something, anything but this. I’m sure they’re more concerned about how they can continue to rake in $1,000 a month and health care benefits after the November elections in which neither of them are participating.
Meanwhile, the spending at City Hall continues unabated even after the shocking epiphany and salvation of Commissioner Lednovich, an Easter weekend miracle nobody saw coming. Too bad there are so many nonbelievers.
Recruit This! At the Tuesday session City Manager Dale Martin claimed recruitment efforts have been disrupted by the pandemic and he could have taken this opportunity to shut it down for good. Instead he explained with a straight face that with the anticipated retirement of Utilities Department Director John Mandrick this fall, the city will need an engineer to replace him. Really? The city needs to replace John “You have to pay to play” Mandrick? That’s like Chicago placing an ad following Al Capone’s arrest saying: “City needs new extortionist to replace city’s well-known jailed mob leader.” The city runs a criminal enterprise and Mandrick is the enforcer. As entrepreneur and local critic Pat Keogh says: “If you think ‘criminal enterprise’ is too harsh a term how else do you explain the unchecked theft of citizens’ property by City Public Works Director Mandrick and the rest of the city government shaking down private enterprise through illegal impact fees?”
Following three years of litigation and two trials it was found in 2014 that the city engaged in unlawful financial practices and the city was forced to pay about one million dollars in private legal fees. It also had to refund $3.5 million in illegally collected fees. The city quickly turned around and reinstated the fees under another name — “capacity fees.” Mandrick led that reinstatement with the help of a $24,500 taxpayer-paid consultant thus continuing the city’s “legalized” extortion racket. Why $24,500? Could it be because state law requires a competitive procurement for work over $25,000?
In the 2014 court case Judge Brian Davis ruled that the City of Fernandina’s “impact fees” did not comply with Florida Law, that the “Impact Fees” used to purchase the city’s water facility (part of the city’s infrastructure) were in violation of law, and that “Persons paying the impact fees have received no benefit from their fees.” Despite the verdict and taxpayer money being flushed down the drain nothing changed.
So, Martin and the bobbleheads want Mandrick’s job and the job of City Engineer to be taken over by the Deputy City Manager, ANOTHER NEW POSITION. With that explanation, the bobbleheads — who obviously had been drinking at home — unanimously approved.
Folks this city is in a heap of trouble and nobody is doing anything about it, except the last person I thought would help — Mike Lednovich.
Want More Bad News? Then Read This: Pundit, former CEO, entrepreneur, financial advisor, and author, Joel Ross, predicts bleak things ahead for local government pension funds, particularly those in Florida, a topic considered toxic by our city commissioners and the city manager. They won’t talk about it except to say: “The auditors say everything is fine.”
It ain’t. And Florida is more at risk than any other state says Mr. Ross.
According to Mr. Ross pension funds are now having to do major rebalancing. They’re a real issue he explains. “The states and cities now are in very deep financial trouble due to lost sales and room tax revenue; they have limits on how much property tax they can charge. So, there will be more situations where there is no money to make pension contributions, and they get skipped. Between not being able to make much return on their bonds, and limited, or no, contributions from their state or city trustees, there will be a major pension crisis coming your way. You will hear Pelosi bellowing more and more that states and cites need help. This is why. She needs to try to bail out her Dem govs and mayors who made outrageous concessions to the unions over pensions and healthcare. Some states even made paying pensions a constitutional duty, so it is a monster crisis waiting to explode. The Fed is buying muni bonds, so for now things in that market are OK, but watch out what might be coming.
“Florida is very heavily dependent on sales taxes and room taxes from Disney and Universal. That is dead for now, and no way to know when that returns to normal. The city of Orlando is already highly levered and so is now screwed without those taxes. It is unclear what Orlando is going to do to meet its debt service and pension contributions. Miami is no different. With no income tax, FL will have to raise sales and property taxes. You see where all this is headed. No place good for anyone. These are the things that will play out after the virus is gone. Count on taxes going up.”
Fernandina Beach’s pension funds are some of the most underfunded in the state and it looks even bleaker for the future but nobody in the city will discuss it. What’s up with that? Does anybody from the city care to tell us here where we are with the pension programs?
Ask Nancy & Chuck: The following headline explains why your favorite place to shop, eat or drink may not be around after this virus crisis ends or even before it’s over: “Senate adjourns until Monday after Democrats block McConnell’s bid to add $250 billion in small business aid.”
Probably Not True But So What: An old friend sent me the following the other day and despite the fact I don’t believe it, it’s just too good not to print. He wrote: “I woke up yesterday to find my dog laying on the back patio covered in dirt with a rabbit in his mouth. The rabbit’s not bloody, just dirty. Since my neighbor’s kids raise blue ribbon rabbits I instantly knew it was one of theirs. I took the rabbit away from the dog, rushed inside, and washed all the dirt off it before my neighbors could come home. It was a bit stiff but maybe it wasn’t dead. I took it and placed it back in one of the cages in their back yard and ran back home. About 30 minutes later I heard my neighbor in the backyard screaming so I go out and ask, “What’s wrong?” She said their rabbit died three days ago and they buried it, but now it’s back in the cage.”
TV BS: CNN invited Nancy Pelosi on its network to discuss how fight a global epidemic despite the fact this woman can’t stop people in her district from pooping on the sidewalks. Nancy Pelosi is vile and disgusting, again proving she is really dumb. She and Adam Schiff are separately launching committees and commissions to investigate what the administration is doing wrong. Do they really think the voters are going to want to listen to this garbage again?
Something To Do While Self-Isolating:
Russell, I hate to break it to you but when the facility was sold to the City, those in the unincorporated county as well as those in the City were paying rates which were controlled by the PUC. Messers Mandrick and Gerrity cooked up the idea for a 25% surcharge on County residents in part to pay for the utility. In customary mob boss fashion, the City chose to ignore a county commission vote to not apply a surcharge on county residents. So, I don’t agree with your opinion we knew about higher rates, they were just foisted upon us. Interestingly, since the City purchased the utility, new developments in the county have had to agree to annex into the City. An image of an old TV western with the homesteaders having the water supply diverted by the ranch land baron, come to mind!
BTW, my negative comments only concern the rate structure. The service has always been very good and the personnel have always been receptive to any problems I might have had.
Is there a city map showing commisioner districts and when they are coming up for reelection? It’s time to start planning ahead.
Pat, your idea has a lot of merit and the timing couldn’t be better. Two questions: 1) How would the local governments get this going?, and 2) What other “commodity “ services could be combined?
Dave, I rarely agree with you but you are dead on target with this one. Spending should be kept at a bare minimum. Who knows how long this is going to last and even towards the end, people over 65, with health problems, etc. are not going to be chomping at the bit to jump right in. Regardless what the political pundits would have us believe, the recovery will be longer than most people think. For this time, good job Dave! ps:( to Pat’s statement; I knew when I moved downtown Fernandina, I would have to pay city taxes. I also knew that there were two plants that occasionally stink. I also knew that at 7:am on Saturdays the train engineer was going to blow my ears out with his horn. Those who live in the county also knew they were going to have to pay a higher water bill. Get over it, annex, or move. No one forces anyone to live anywhere!
44% and rising. City ad-valorem tax receipts have grown by 44% since 2016. City population has grown by 2.7%. Why the giant jump in taxes one can ask? Inflation can account for 8.7%, which leaves a WHOPPING 35.3% unaccounted for. Interestingly, this burgeoning city budget has occurred since Mr. Martin became City Manager. No doubt an explanation can be given, certainly all expenditures can be justified. BUT still the question remains: what controls are in place to make sure tax-payers interests are protected? The City Commission is supposed to be that control, but perhaps additional mechanisms are needed? Especially now that we all enter “unchartered waters”. As a taxpayer, I am happy to pay a fair rate for efficient, effective city services, but to see ad-valorem receipts (your taxes) go up at such an alarming rate does raise questions.
If Pay to Play Mandrick is really retiring it is a wonderful time for the COFB to render a valuable service to its citizens and their neighbors in the County. They do that simply by returning the water and sewer utility to investor ownership. That way water and sewer rates will once again be subject to oversight by the Florida Public Service Commission. Citizens then know their rates for services provided by an essential utility monopoly will be based on a recovery of reasonable operating costs and an appropriate return on the capital invested. An investor owned utility will also prevent the COFB from using access to a public water and sewer system to coerce their County neighbors into being annexed into the COFB.
Dave, hate to paraphrase a popular phrase but in FB the spending will continue till the economy improves I guess. Dr Doom in the virus update conference today indicated the reopening of the economy may not take place to much further in the future than the President had hoped. That is not welcome news. On the other hand, even a haphazard reopening of the economy in spurts may not be sufficient to provide enough taxes and fees to keep this budget on track IMO either. So, I agree with all of those who support curtailing less then necessary spending now. Oh, the projection is for more hurricanes than average this season with the Atlantic being especially above average.
Kudos to Commissioner Lednovich for addressing a real issue for the city. Expanding city expenditures were already the elephant in the room even before the current crisis. I hope he can get the commission to take this seriously., and that he won’t give up. We need to support our essential workers at grocery and other outlets and especially our healthcare workers. Hopefully the virus impact in Nassau County will remain at the low percentage we’ve seen so far. Regardless, the impact on individual and business finances is already severe. Trimming city spending won’t be pleasant, but inaction can lead to bigger problems in the future.
Why in the wide wide world of sports would any rational person want to live in the nutty City of Fernandian Beach? Not me!!
Wow! Can I say I agree 100%?! Kudos to Lednovich! Sounds like the other City Commissioners and Martin need to ‘gather round the ole kitchen table’ and figure out areas to CUT unnecessary spending….just like the ‘workers’ have to do! (Here’s a first & easy cut…..that unnecessarily large park planned for Simmons Rd. You know…the one where all the trees will be cut down for a retaining pond?! And by the way….your blog post made me smile and laugh out loud! (I admit…it was the paragraph on Pelosi!) We all know that people are doing lots of great things on the island…during this weird time,
Dave, an independent audit/assessment is done of the City’s two pension fund (General Employee and Police/Fire) each year as part of the budget preparation process. I’m not sure when the most recent report was done but it would be available from the City Clerk, Caroline Best upon request. On a positive note, the City has never missed making the required annual contribution, even during the Great Recession period, although such contributions did not fully fund the pension. As a general rule, funding to reach an 80% of liabilities level is considered a “healthy” plan. Another positive is that pension funds generally performed above target return levels in 2018 and 2019 improving their financial health.
Now for the bad news. The Leroy Collins Institute of Government has been grading municipal pension funds since 2011 – the low point for most of them due to the recession. Their latest report was published in May 2019 that only goes through 2017. The FB Employees General Fund is graded as a “C” and the Police/Fire Fund as a “D”. The full report and basis for their grades can be found here: http://collinsinstitute.fsu.edu/sites/default/files/tough-choices-good-news-bad-news.pdf
With the major decline in the financial markets expected in 2020 due to COVID-19 and other global economic factors, return performance of pension program is going to fall way short of return assumptions. I don’t know if the City has adjusted its ROR assumptions in the last 10 years, but a close examination should be made. As a marker, as of 2017 the typical general employee plan had adopted an assumption of 7.25 percent, while the typical firefighter and police officer plan assumed a 7.50 percent return.
While the employees contribute to these plans, there is a substantial contribution from the City as part of the overall employee benefits program. When the market fails to meet or exceed the target ROR assumption, the City’s contribution increases or the funding level percentage decreases.
Pat Keogh served on one of the pension boards for a number of years and, I am sure, can provide some additional historical perspective. The underfunded level of these funds clearly are a major issue that must be addressed. They didn’t get that way overnight and it is going to take a number of corrective actions over many years to get them where they need to be.
Let me preface this by saying I don’t play golf. I can’t with a rotator cuff problem and an arthritic shoulder. Maybe one day but I’ve put off surgery over 5 years now. I don’t want to go ‘under the knife’. With that said it baffles me as to why the vast majority of golf courses (public, semi-private and private) are open all along the First Coast and our Municipal Golf Course is closed? All open have a one person per cart limit or choosing to walk alone. Cups are turned upside down (no reaching in the hole) and other rules applying to social distancing. Hell, when I once played golf I was never close to my playing partner as I spent most of my time looking for my ball in the rough. I did learn early on it was one of the only sports when playing that one could drink beer. And cuss. Anyway, what a perfect time for our budget draining golf course open to all at $30 per round could supply exercise for all playing and more importantly not sit idle for a month now adding even more to the city budget woes.
Always enjoy your blog, Dave! Thanks for “nailing it” on so many areas. We have an interesting 18-24 months ahead.
Dave, I have a challenge for you – in this time of sadness and worry how about writing a column with uplifting news. It’s not just the Dems, the Reps are being a pain in the neck as well. So what’s going on here on AI that is good? Who’s donating what? Who’s thanking who and how? What fun things are people doing to pass the time? Try being positive for a change and give everyone a reason to start the weekend with a smile…..
rabbit died three days ago and they buried it, but now it’s back in the cage.”
LOL that’s an old old joke…. good morning Dave