Sebastian Budget Review Advisory Committee Reviewed Second Quarter Financial Report 2022

At the Sebastian Budget Review Advisory Committee Meeting, the Committee had reviewed the Second Quarter Financial Report for the 2022 Fiscal Year.

For those interested, you can click here to read the Agenda from this meeting, as posted on the City of Sebastian’s website.

The City CFO Ken Killgore gave a presentation to the Advisory Board on the Financial Report. Mr. Killgore gave the Committee members copies the 2nd Quarter Financial Report, along with an attached amendment to the budget and related materials the City Council would be voting on.

Mr. Killgore pointed out a mistake on the financial report in the R&R account. A Committee Member, Bruce Hoffman, had pointed out to Mr. Killgore the mistake prior to the meeting. The mistake was corrected prior to the meeting. Mr. Killgore had highlighted and pointed out the mistake to the Committee Members.

Mr. Killgore explained what was originally written versus what should have been written in for the R&R account.

Mr. Killgore thanked Mr. Hoffman for pointing out the mistake and said he likes to have the financial report be in “the best shape we can.”

Mr. Killgore said the revenue the City of Sebastian collected is 61.1%. This is mainly due to the ad valorem taxes being paid to the City earlier in the year.

For expenses, Mr. Killgore said that were 53.9% after the 50%. Mr. Killgore said this was due to the City paying into the fund for the police department’s pensions. A lump-sum payment is made in December, according to Mr. Killgore. He said the 50% goes to the CRA contributions, which are made by the general fund in the first quarter of the year.

Mr. Killgore mentioned revenues are higher than projected is due to not only all the tax revenue being collected by the City, but that the City also got all of its funds from Federal Emergency Management Agency (FEMA) from when Hurricane Matthew hit back in 2016. He also said that a week after the payment came through from FEMA, that the City of Sebastian can now collect another $1,900, permitting the City used administrative time on Hurricane Dorian from 2019. Hurricane Dorian is the Category 5 Hurricane that went right up the east coast of Florida. Mr. Killgore said he and another City employee, Cindy, will be working to get the $1,900 from the Federal Government.

Mr. Killgore added a section to the City Budget for the American Rescue Plan Act. He said we received what he called the “first tranche” of the money, after the amount the City was entitled to at that time. Mr. Killgore said the City received the money last year. He said a notice came to the City of Sebastian to put in to collect the second half of the funds from the American Rescue Plan. The second half of the funds will appear on the next financial report. He said there had been a public hearing on how to allocate the funds; a meeting was also held with City Council regarding this.

Mr. Killgore had put all the items from the American Rescue Plan into a budget.

Mr. Killgore went over the General Fund Forecast. He said, with including the funds City departments won’t use in their budgets, the City will come close to its $5.8 Million projected internal reserve fund. This is permitting Mr. Killgore does not get “surprised.”

Mr. Killgore then went over the Storm Water Fund, Golf Court Fund, Airport Fund and Building Fund. He said the only “matter of interest” on that page is the Storm Water Funds. He said he is waiting on the Master Plan to come through, though the City has a lot of money available for Storm Water. Mr. Killgore thinks that the City will allocate all the funds available for Storm Water to related projects.

Mr. Killgore said the City owned Golf Course is “having an excellent year” financially. He said the Golf Course should meet its projected balances by the end of 2022 “if they continue to perform.”

Mr. Killgore said regarding the Airport that “it’s right on target with” its revenue so far for this year. He said they’re doing good with regards to the Airport’s expenses.

Mr. Killgore said the Building Fund is doing well thanks to the amount of “permit activity” in the City.

Mr. Killgore said he had given the more detailed copy of the budget of the “various funds” to the Budget Advisory Board Members.

Mr. Killgore said the City also gives a Capital Project Status Report, as of March 31st. He said a “large part of the budgeted funds” are for canal improvements. There was $23 Million allocated to Canals. Mr. Killgore said most of this is coming FEMA. However, these funds are still pending from FEMA, with the City not having received a “definite” answer on when they will be receiving the funds. Mr. Killgore said this has “distorted” the amount of progress made on the other projects through this year.

Mr. Killgore said with American Rescue Plan funds, the City had backed out the Contra Dam Replacement. He said this would have been a FEMA Storm Water and Funded Project. Funds will now come from the American Rescue Plan Act instead. Mr. Killgore mentioned the concern from City Council that the City was not double budgeting. What was done to remedy this was to reduce the funding from FEMA and Storm Water and short at $700,000 from the American Rescue Act. He said a few other projects were added. The Gardinia Ditch for $750,000 and the Schumann Drive $750,000 additional Storm Water projects.

Mr. Killgore went to the next page showing where the City of Sebastian has their funds.

He said the Florida Trust has continued to lose money. Mr. Killgore said the loss of money was due to current market conditions in the past quarter. Mr. Killgore pointed out that Florida Trust is invested in two-year Treasury Securities (a type of bond). He said the City is still watching this. Mr. Killgore said the City is still at a positive for the last three years. He said while this is not a bad investment, but that when interest rates go up, the City may see some benefit from that.

He said the interfund loans are on schedule to being repaid.

Regarding debt due to the outside parties, Mr. Killgore said “we have made the May 1st payment on the Storm Water Utility Bank Notes” and was the City’s final payment of that debt. He said the City will have the final payment on the paving improvement notes on December 31st of this year.

Mr. Killgore pointed out how the City soon will be debt free regarding long term debt. He mentioned there are a few lease purchase items the City of Sebastian is currently funding, within the annual budget appropriates.

The last part of his presentation was on the comments from the City Departments on their activities and accomplishments in the last quarter. Mr. Killgore was willing to take questions from the Budget Review Advisory committee, if they had any.

After Mr. Killgore gave his presentation, Chairman Larry Napier then asked the members if they wanted to give any comment. He first asked Alternate Committee Member Jim Sullivan if he wanted to give any comment. Mr. Sullivan replied saying he didn’t have any comment.

Committee Member Harry Hall had asked Mr. Killgore “can you walk me through the benefits of hiring an airport manager versus the facilities director portion pay?”

Mr. Killgore said he wasn’t sure if he could address that properly. However, from Mr. Killgore’s knowledge, he said “it was a decision to take” some of the duties of the public facilities director and move it over to the airport manager. This was done when a previous City Employee held the title of public facilities director.

Through further conversation, Mr. Killgore said the retiring Public Facilities Director had accumulated time off that had to be paid out when that person retired. This pay out as a result affects the City’s budget, reflecting that payout.

Mr. Killgore had said the Public Facilities Director job had been eliminated from the City. For managing the City Airport, that part of the job went to a new position called Airport Manager. The Public Facilities part of the Public Facilities Director job has been split up among various City Employees. Two other department managers will have oversight for Public Facilities in the City of Sebastian. Parks and Recreation Director will be taking over supervising the maintenance portion of the job. What Mr. Killgore said was in response to a question Mr. Hall asked him about the status of the Public Facilities Director job.

Alternate Committee Member Grace Reed was asked if she had any questions or comment. She referenced how Mr. Hoffmann asked at the previous meeting that the details of the non-departmental budget items being sent to board members. This was in response to how at that time, the non-departmental budget items were under budget.

She raised concern about the non-departmental budget having already gone through a lot of its money for the year at a little over 69% in Quarter 2. She said compared to last year at Quarter 4, only 75% had been used. She asked about what goes under non-departmental line items, as she did not know what those are.

Mr. Killgore then gave some explanation about what goes under non-departmental in the City Budget. One example he gave was property and liability insurance. Mr. Killgore said he would do better in the future on including more information for non-departmental budget items.

Committee Member Bruce Hoffman was next. He went straight to asked Mr. Killgore regarding non-departmental budget items “is that where the expense for the compensation study is, non-departmental? The compensation study; is it done? Is it finalized?”

Mr. Killgore said the compensation study has been presented, but the City has not taken action on it. This is due it being to a negotiation item.

Mr. Hoffman asked again about whether or not the compensation study is a non-departmental item, Mr. Killgore said that he believes it was taken to non-departmental and did not affect the H.R. Budget. Mr. Hoffman found with the compensation study being in the non-departmental budget, that it helps to explain why the expenses are increased for the non-departmental budget.

Mr. Hoffman then asked if the City of Sebastian is “still sitting on the $80,000” from Hurricane funding. Mr. Killgore replied saying Yes; he said the money is in a liability account. It will be sitting in that account until it is requested. Mr. Killgore said he would be happy to turn over those funds.

Mr. Hoffman asked if the Golf Course will be doing “the ditch drainage work” and asked if that has been cancelled or not. Mr. Killgore said he hasn’t heard any direction to cancel the project.

Mr. Hoffman then asked regarding the payment for the ditch drainage work, if the City was going to make a general fund payment or not within the next three to four months. Mr. Killgore said he purposely delays that payment to ensure the City Golf Course is

Mr. Hoffman asked regarding capital projects, “how come we can’t just finish off some of these projects from…. Park signage from 2019, it’s three years ago. We have no one that just addresses this stuff, particularly?” Mr. Killgore said for the last “several years,” the City has been allocating money for the signage and he said the $30,000 remaining in that account. Mr. Hoffman then said “so it just keeps coming out of that one line item, we leave that there rather than somehow rolling that money forward into” Mr. Killgore said $31,000 is the funding for this year for the signs that weren’t in the budget.

Mr. Napier asked Mr. Killgore if the Capital Budget has a five-year life. Mr. Killgore said “yes, a rolling life.”

Mr. Hoffman asked Mr. Killgore if the Stormwater Utility Final Payment was paid out of the Stormwater Utility fund? Mr. Killgore said it was DST, as that is what it would qualify for that.

Committee Member Father Dave Newhart did not have any thing to comment or ask about.

Committee Member Terry McGinn had two things to comment about. The first was an observation about the increasing golf course revenues. He said he learned from some people the increase in golf course use was that Grand Harbor closed some of their Golf Course. According to Mr. McGinn, this closure “overloaded” another Golf Course in the County, Sandridge. This in turn caused more people to use the Golf Course in Sebastian. This has contributed to the good year the Sebastian Golf Course has, according to Mr. McGinn.

Mr. McGinn asked if the new road paving near Main Street in Sebastian would be considered a Capital Budget item? Ms. Reed clarified that the paving would be for new sidewalks on that road near Harrison Street; this would be to replace old sidewalks on that road. Ms. Reed said it would cost $300,000 the City currently does not have at this time and hopes the City would leave that alone.

Questions were raised about how the City could pay for something on a State Road, which the State of Florida has responsibility for. Ms. Reed said the City paid for the decorative sidewalks “to start with” and had “worked it in” to the original plan to “keep the pretty in the City and now if they want to keep it, they have to work it back in” and it would be “another $300,000.” Mr. Killgore said it is a “risky take” when working with the State of Florida. Ms. Reed asked if the sidewalk would be in the 2023 budget. Mr. Killgore said yes that is correct, the sidewalks would be in the 2023 budget.

Mr. McGinn went back to his initial question of would the Sidewalks be added to the Capital Budget in 2023. Mr. Killgore said from the minutes he read, it indicated that it was a “Council Direction” to provide it in 2022-2023. He said the Sidewalks would be in the Capital Budget for 2022. It would show as a Capital Project for 2023.

Mr. Napier asked for the sidewalks, if the Capital Budget has to be amended. Mr. Killgore replied saying “yes” to Mr. Napier’s question.

Mr. Napier then asked when the City paid for the $300,000 of improvements. Mr. McGinn said “10 years ago.” Mr. McGinn said it was a “long discussion among the Council people” and he thinks the current City Council will approve the sidewalk project. That’s why Mr. McGinn asked his initial question. Mr. Napier thinks that is a “negiotiation” City Manager Paul Carlisle would have to do.

Mr. Napier said he sees the improvement in the City owned Golf Course. That’s $140,000 more revenue than a year ago. He noticed a lot of Discretionary Sales Tax Fund being used in the Airport Fund. He asked if the Airport pays back the DST money. Mr. Killgore says there has been direction by the City Manager Paul Carlisle, but no ordinance or resolution that puts this in “cement” regarding the DST funds. Mr. Killgore went on to say if the airport does something with those funds, like create a new hangar at the airport, once that project, like the hangar in this example, starts to make money, they should move to start paying back the City. Mr. Napier said with regard to the Golf Course, that they should be finding the capital improvements “with recreation impact fee money to the tune that’s available and using the golf course money, I only that’s fair.” Mr. Napier added that the Golf Course is the best “recreation amentity” in the City along with the Barber Street Sports Complex, saying they’re the two main amenities in the City. Mr. Napier said that we should use that impact fee money, working it into the airport, if there is no other prohibition that he may be aware of. Mr. Killgore said DST funds are able to be used towards the Golf Course if it’s related to infrastructure, but not for maintenance.

Mr. Napier says the past financial quarter was very good and very positive for the City.

Mr. Hoffman had asked Mr. Killgore during General Member Matters, “under the American Rescue Plan, Contingency. How the hell did we get away with doing that? I mean, don’t you have to have a specific purpose for every one of those dollars?” Mr. Killgore said “in the regular regulations say you have to budget every dollar, it does say you have to spend it within you know before 2024. Mr. Hoffman then asked “so we haven’t found a specific use for it yet, we just have it sitting there waiting, but we gotta spend it or they’re going to want it back.” Mr. Killgore said “just understand that a lot of our projects end up being higher” than expected. Mr. Hoffman then concluded the Contingency is the Contra Dam not coming at $750,000, instead with it being $800,000. Mr. Killgore said if the money doesn’t come in, in time for the Contra Dam, that hopefully the money can be reallocated to other projects in the City.

Mr. Sullivan had asked how long the City of Sebastian has to spend the American Rescue Plan Funds. Mr. Killgore said the funds have to be obligated by December of 2024, from what he knows. There has to be a contract in place. It has to be something concrete, not just a budget item. The City has until 2026 to disburse, to spend the money. Mr. Sullivan also asked what guidance the City was provided on what the City can and cannot spend the Cares Act money on. Mr. Killgore said “you wouldn’t believe the amount of guidelines.” He went on to say that the City had public hearings on the Cares Act funds> Mr. Killgore said there’s four categories the funds can be used for. He said they are enhancing staff (the City avoids commitments). The City used this for retention funding to prevent people from leaving. The next one is COVID-19 improvements, encouraged the funds to be on infrastructure that will make citizens more comfortable or safe. The guidelines mention utility improvements. The last point is the funds can be used for Stormwater. Mr. Killgore said Stormwater was not included in the preliminary instructions. The City of Sebastian is looking to use those funds for Stormwater improvements.

The next Budget Review Advisory Committee meeting will be on Monday, July 11, 2022.

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