But by planning ahead for the economic slump and taking action to minimize its impact, officials say they have constructed a fiscal plan on solid ground, with no further cuts in personnel or services expected.
Moreover, Sanford employees may stand to regain some of the sacrifices imposed on them through the city’s belt-tightening measures.
“We’re in pretty good shape. We are stable,” said Tom George, interim city manager, during budget discussions this week with commissioners.
In drawing up what George terms a “place-keeping budget,” the city is projecting a 9 percent decline in property-tax collections. However, this will be somewhat offset by a .5 increase in the millage, adding $1 million to city coffers. The city’s tax rate was raised to 6.825 last fall, the first time the millage was increased in 14 years.
At the time, city commissioners explained that the tax-rate increase was needed not to balance the current budget but to shore up the 2012 spending plan, where a $2.5 million shortfall was forecast.
The city also is in line for additional revenue with the expiration of the Seminole Towne Center Community Redevelopment Agency, retiring the debt payment and allowing for an estimated $410,000 in tax money to be funneled to the general fund instead of the special tax-increment financing district.
And the city still has a $2 million surplus left over from construction of the $20 million Public Safety Complex.
But the overriding pall of a stagnant economy persists.
Due to falling real estate values, the city lost $4.7 million in property-tax revenues in 2010, repeating a similar drop from the year before. This year, city property taxes are expected to fall another $2.4 million.
However, all of this was expected as the city took steps to avoid a financial squeeze. These actions included: freezing department budgets at 2006 levels (except for police and fire) and, in the past three years, reducing the general fund by $13 million and eliminating 50 positions.
“There’s no fat left to cut,” George said.
In fact, the interim city manager would like to soften some of the financial sanctions placed on city employees, if the budget allows.
To make up for years of potential pay raises denied city workers during a wage freeze, George wants to restore 10 days of work that had been taken away from employees.
In a cost-cutting move, the city had imposed three weeks of unpaid furloughs on employees, resulting in a 6 percent reduction in their salaries. George would like to trim that to just one week of no work, no pay.
“It’s not a pay raise,” George emphasized.
Additionally, city workers are facing the possibility of another financial burden. If the state Legislature mandates government workers contribute 3 percent to their Florida Retirement System, as is being debated, that would mean another 9 percent cut in salaries.
Despite the hardship already placed on city workers, they have become more efficient and effective workforce, George said, and one that he wants to hold onto.
“We run the risk of losing our good employees,” he said.
Mayor Jeff Triplett, however, was not convinced this is the time to start rewarding city employees. Explaining that he, as a banker, and many others in the private sector consider themselves fortunate to even have a job in the current business climate, Triplett made it clear that this issue would require more discussion.
What’s the plan for pensions?
As it was pointed out, the city still is grappling to control personnel costs in other ways. For example, Sanford police, who received a 3 percent salary increase this year, are due for another 3 percent bump next year.
And then there are the pensions for public-safety employees. Retirement plans for government workers are taking hits from all sides these days, with police and fire pensions coming under particular scrutiny in Sanford.
The city now pays more than $4 million annually for public-safety pensions. Projections for fiscal year 2012 estimate an additional $415,234 would be needed to cover rising pension costs.
“We know the city is overexposed,” said Commissioner Patty Mahany. “The actuary told us we have to address it.”
Currently, city funding for pension plans accounts for 9 percent of the 2011 general fund budget. The breakdown is as follows: police ($1.55 million budgeted, or 4 percent), fire ($1.11 million, 2.9 percent) and general employees ($785,504, 2 percent).
Since 2006, these expenditures have spiraled out of control with pension costs to the city increasing by 46 percent for police, 60 percent for fire and 34 percent for general employees.
But in reviewing the various options available to the city—reducing benefits, terminating or freezing plans—there wasn’t much relief to be found.
If the city were to change benefits, it stands to automatically lose state funding that supports the pensions ($176,349 for police and $169,201 for fire).
To terminate the plans, the pensions would have to be fully funded, costing the city an estimated $6.3 million. Freezing the plans would likely boost the city’s cost 10 percent per year, since the payroll growth rate goes to zero unless the city stops accruals to current participants.
“There’s not enough savings in any of these options to make it worthwhile,” George said.
Still another option is the so-called “Stop-Start” method, which would allow the city to collect more state money for the pensions, adding up to $200,000 each year to city coffers. This method is relatively harmless but, again, doesn’t generate much savings.
Perhaps the best alternative at this time, he said, is a wait-and-see approach on what Tallahassee does.
Currently, the city contributes 12.51 percent to the Florida Retirement System, which covers city workers except for police and fire personnel. According to proposed legislation, the city’s liability for these plans could drop to 7.97 percent for 2012, saving the city about $355,000.
In contrast, the police and fire pensions are the complete responsibility of the city and employee, as determined by the actuary. Currently, these plans have a liability of $2.7 million and $3.6 million, respectively, and city contribution rates of 27.5 percent and 28.4 percent.
The collective-bargaining agreement covering 180 Sanford police officers ends this year while the contract for 121 fire personnel expired last year, with about 30 retirees included in each group. About 300 general employees are covered under the state-administered plan.
And there will be more upcoming costs associated with the police and fire departments. Recently, officials learned that, due to new federal guidelines, the just-opened Public Safety Complex requires a major information-technology upgrade, primarily of its radio equipment. With two years to complete the job, the city must spend $870,000 on the police headquarters and $180,000 on the fire department.
These unplanned expenses, officials said, could come out of the $2 million left over from the building’s construction, which was completed in October.
Auditors for the city’s Comprehensive Annual Financial Report for 2010 also focused in on the need to bolster information-technology operations, especially security controls.
“During this assessment, we noted several areas which could improve the city’s IT processes,” according to the report. “IT controls should be implemented, maintained and updated, as necessary, to keep pace with the constantly changing technology environment.”