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Budget talks: Q&A with Roger Hernstadt

July 19, 2017
Jessica Salmond - News Editor ( , Fort Myers Beach Bulletin, Fort Myers Beach Observer

Town Manager Roger Hernstadt now has a couple months with the Town of Fort Myers Beach under his belt. While the Town Council has been on recess he's been digging into the town's finances to prepare for budget discussions once the council reconvenes in August. Hernstadt convinced the council to let him set the preliminary millage rate at .9 mills in June in a 4-to-1 vote. The millage can be lowered from .9, but not raised.

We sat down with Hernstadt to get a state of the town's finances and a peek at upcoming budget discussions.

What are some of the important things you'd like to accomplish in the 2017-2018 budget?

One of the first things in the new budget is to understand what the financial implications are to outsource some of the services, to make a decision and put that to rest one way or the other. We presented some information about outsourcing certain departments in June for the council to put some thought to. Hopefully as we have workshops with them in August, we can build a budget around that decision.

Another thing is to continue the process of getting the reserves up to the appropriate levels, something that was started by the previous interim manager. The rule of thumb is, 90 days of operating money on hand for your government, 19 percent roughly. When you live in a coastal community that could be highly impacted by natural disasters and hurricanes, the rule is to accumulate another 6 percent. State and federal resources don't happen quickly, you have to get by three to four months before you see money flowing in if you have a storm, if you're eligible at all. If you dig into reserves, then you have to build them back up. Also, litigation reserves. Towns with strong financial standing also have reserves for litigation. You don't expect to win or lose them all. so you are in a position to pay out if they lose.

Right now we don't have a specific reserve for litigation.

You are having Bay Oaks set up a long-range Capital Improvement Project (CIP) plan. Is that in the works for the town as a whole?

The third priority is a comprehensive CIP that's pay as you go - accumulate money for large-ticket items or pay out of that year. The other option for paying for capital project is borrowing money, but I don't recommend that unless the interest rates are really good. We need to start understanding what we own and what the renewal and replacement costs are, and not deal with the annual emergency. We need to get a comprehensive list of assets, price out elements you have and understanding you need to have money accumulated for projects. Such as, painting town hall every couple years, it will need a roof replacement in so many years. It does inflate you against new things you want to do but for the things that are known, we should be setting aside funds.

Most cities and towns have a 5-year CIP and most of them don't look beyond that. But (planning beyond) is the better way to operate. You might be collecting a little more money to accumulate money for things that are seven, 12, 18 years out. But most places focus on pressing needs and then you get hit with the big-ticket items. We have a lot of condominiums on the island. They all set aside money for repairs and things they need to do, so some people should be familiar with the concept.

Interim manager Jim Steele strongly advised a higher millage, but the council froze it at .8. What are your thoughts about .9?

The town can operate from hand to mouth, but what happens is that when you do that, when you have a bad decision and bad luck happen in one year you have a financial crisis. When you really look at what people are paying for their town government, it is really a relatively small amount. People get caught up on their tax bill, but a change in .8 to .9 generates $319,177 more. When you accumulate that over years, you have wiggle room.

We need to continue to look for opportunities to make sure we're maximizing our ability to achieve revenues at our proprietary operations, such as the Mound House and Bay Oaks. I think we're trying to understand where we are and then set realistic objectives and decide what kind of taxpayer support we want to give to those functions. With inflation those costs will only go up every year. We need to say hey, we will stop contributing at this percentage point. We need to see if we can do better with alternative funding sources, grants and state federal money, like stormwater.

What's the town's current financial position?

I can assess that over the last year it's gotten much better due to the town's leadership. It's not done by a long shot but it's trending in the right direction.

I think with the town's help we can position the town to be strong and a great place to live and work and a financially stable municipality. I believe that we should have a budget that is financially responsible and transparent. When we make the budget presentation, we'll make sure all the changes are clearly delineated and priced so council can decide if they want to spend tax money there.

we'll have a list to talk about, debate and let public weigh in, and make a decision about whether they want to make the town more financially stable going forward.

There's a cost for everything we do. One proposal will be to set aside a pot of money for fee waivers, that way we can see how much is given away. If we are in a pattern where we cut the fee or whatever all the time, maybe just lower the fee. I think the fees are reasonable and there is a cost to things. I understand people don't want to pay them, if the applicant isn't paying the cost, then the tax payers are.



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