The Letter That Starts the Exposing of the TRUTH !
This letter was the start of the City of Winter Springs stonewalling of the necessary TRUTHFUL documents to proceed with the "Budget Committee's" goal of scrutinizing the upcoming problems of the city's budget problems. This is NOT uncommon when exposing deficiencies in the city's budget approach orchestrated by city manager McLemore. He is exceptionally adapt at covering up where and how the taxpayer's money is spent.
He just couldn't bare his city's financial structure to people who may address it in a common sense way. He even hired a CONSULTANT ( not unusual for this man to hide his lack of knowledge, and communicating the truthful facts) of a city problem to present the city's side before the "Budget Committee". Why McLemore is incapable of performing his duties himself is still a "ten year" puzzle!
When in doubt --- HIRE A CONSULTANT who can be handfed by city management to present a one-sided presentation. The City needs a city manager NOT CONSULTANTS to run the City! Not only was a consultant involved in this committee's presentations, but four EX-commissioners who had a personal hand in enlarging the city's expenses, but also engaged in the OVER-POPULATION of condo/apartment units eliminating the further revenue increases as enjoyed by other County cities with "COMMERCIAL" revenues.
The over-whelming costs of public funds adding developers in the "Towncenter Zoning" can NEVER re-coup that tremendous cost burden. "Tiny Town" just isn't the answer! Along with the "frenzy annexations" by those commissioners as led by city manager McLemore --- depleting water resourses --- increasing traffic burdens -- plus over populating an already burden school system --- does not speak highly of previous government and management. It's time for NEW city management and government!
NOW TO THE MATTER ITSELF AS WRITTEN IN THE BELOW LETTER !
July 3, 2007
Dear City and Committee,
Relative to our recent meeting at City Hall on Thursday June 28, 2007, I’m concerned with the direction were going on what information will be available in the time we have left to make a logical recommendation. I do appreciate all the effort and motivation of city employees and for the most part I do not have any issues with them. It was not my intention to reduce head count, but the basic theme of city presentations was all about doom and gloom by cuts in services.
I think all cities are guilty in quick statements about cuts in services without taking a close look at themselves. No one likes change, but the private sector has made huge changes in the last six years to remain in business. I’m convinced that we do have other options, but I don’t see any effort of the city to pursue them. We just learned that while the committee is trying to make a recommendation on possible cuts, the city pension plan is about to increase the multiplier from 2.5 to 3 which represents a 20% increase in cost to fund the program.
It appears that the city has their own agenda with no compromise and interest of any kind. The reluctance to volunteer critical financial information unless we would ask was clear to me. That part has always been my problem with city hall. Telling people what they want to hear is not my idea of an “honest look”.
Over the years I have devoted a great deal of personal research time learning the ways of the city. I think the city has done many great things, but I also think they have created a hostile environment at times with the information provided. All I ask is that you take the time to read this letter in full with the attachments. Cost per capita of this research is zero, staff equals one and there is no general fund. I fully acknowledge the fact that my comments may be harsh at times, but sometimes this is provoked by the city. I will not buy into any proposal unless I fully understand how it works and what it is. If it’s “complicated” it’s time to make it less complicated.
I first want to address that this is a huge problem for all cities and fully understand that county and state is also to blame and I don’t give anyone a Fastpass. I was just informed that the surplus transfer of money from last year is still in the general fund in the amount of $1,078,594? This was the dollar amount remaining after the minimum fund policy requires $5,048,090. It could be safe reserve fund for something, but I still question where this may go. I would certainly feel better if it was in the hands of the citizens and let them decide on how they want to spend it.
“Unprecedented increases in the cost of goods, services and infrastructure has occurred over the last six years” -- According to Fishkind & Assoc., local government cost has increased 58% since 2002”. With the attached document on growth & value comparison provided by the county, Winter Springs has also received unprecedented taxable revenue with 2006 being the highest in history. Since FY2002, Winter springs revenue compensated with millage is greater than 100%.
Commercial versus residential revenue is a great topic of discussion. Commercial revenue is supposed to give some tax relief for the residential side. There is a clear distinction between the two and they should never be combined. If they are combined, how will you ever know if our town center is an economic generator? Investments might be much greater than output in a reasonable time frame thus running on auxiliary power. The city likes to combine the town center with the new residential construction. I never received any input on actual commercial town center revenue.
However, county records show that commercial taxable revenue for 2006 was $229,194,377 for the entire city. Please see attached Residential Vs. Commercial Taxable Values document provided by the county tax roll. That being said, multiply FY2006 millage of 4.75 to get a total income of $1,088,673. Residential taxable revenue is at $1,718,313,229 thus a total income of $5,933,757.
Also note current 2007 records of the county shows a reduction in commercial ratios from 11.77% to 11.46%. Yup! “Houston, I think we have a problem”. Were going the wrong way. We all talk about how great commercial revenue is for our city, but we appear to build more town homes than anything else. We now have inherited another problem if commercial revenue is going to give residential tax relief.
I will use the “per capita” formula that our city knows all to well. Commercial revenue now has to be spread to a larger residential base thus tax relief per capita shrinks. That also means we now have develop even more commercial property for any tax relief. We need to put a stop in turning commercial into residential properties.
If you recall, our city manager indicated that last years millage reduction was due to the commercial revenue increase. Looking back at the Residential Vs. Commercial Taxable Values attachment, Commercial revenue increase from 2005 to 2006 was $78,423,208. Using the FY2006 millage rate of 4.75 we have an income increase of $372,510. The millage reduction to 4.4019 would generate an income of $345,211. That is a net difference of $27,299.
So, who wants to explain that $27,299 of a 60M total budget reduced the millage rate? The real reason is that total taxable revenue was at an all time high of 20.84%. CAFR 2006 document also reveals that during the year of millage reduction, the city also increased electric franchise fees. My research on hidden taxes is not complete, but at the moment they are very high in comparison and possibly at maximum permitted by law.
I know general fund dollars are also used to fund certain town center projects, but all we heard at city hall this is a “tiny” amount. Not exactly sure what tiny means, but it would be nice to know how tiny. Looking at the 2006 CAFR for 2007 major initiatives I read “begin Phase II of the Town Center Project with the James Doran and company to include a $930,000 partnership agreement for public parking and $250,000 for streetscaping”. If this was actually done, your entire commercial revenue for the year was wiped clean. Yes, there is more than mentioned above in budget documents.
For years I have fought the city on defined benefit pension plans, as they are too expensive to maintain and carry too many variables. Defined benefit pension plans are still common in the government sector, but it was also because many government entities in the past did not have FICA.
Since the last stock market crash and 911, the private corporate sector has made substantial changes in expenditures to remain competitive in a global market. Most Corporations of America have terminated defined benefit pension plans and have adopted the 401k retirement plan. The average employer contribution in a 401k is 3%. They are of course easy to manage by outside financial institutions such as Fidelity.
Employers such as IBM, Intel, Micron, Lucent, and local corporations such as Lockheed and Westinghouse/Siemens have all converted to 401k plans. Most cities continue to have them as they compete to keep employees on the payroll. This is of course all done at the expense of the taxpayer. The argument by all cities is an incentive to keep employees.
So am I to believe that the private sector is not trying to keep employees on the payroll? Competition keeps you honest! Cities tend to clone each other and it’s simply too easy to pass the burden to the taxpayer. At some point you will exhaust the patience of the taxpayer and your seeing some of that today.
Based on provided records, the current Winter Springs defined benefit pension plan had employer contributions of 8% till FY2004. FY2005 went to 9.5% because of phased in benefit over four years to increase multiplier to 3 for past service. FY2006 employer contributions increased to 11%. FY2007 employer contributions increased to 12.5% with a .5% increase later that year for an added disability enhancement (13% total). FY 2008 employer contribution will increase to 13.5%.
Employee contributions remained at 3% all those years.
As mentioned earlier, the multiplier increase from 2.5 to 3 will have a huge cost increase impact of 20%. To calculate pension salary take years of service and multiply times multiplier to get X percentage. Then take salary and multiply times X percentage to get annual pension payment. Below are a few examples:
$50,000 salary, 30 years of service, multiplier at 2.5 = $37,500
$50,000 salary, 30 years of service, multiplier at 3.0 = $45,000
$60,000 salary, 20 years of service, multiplier at 3.0 = $36,000
At some point we all retire, but not of course at the same time. The following calculation is crude with errors, but designed to generate a general idea of cost. Total current payroll was given at $14,160,494 of which 26% are considered benefits. That being said, I have an adjusted annual payroll of $10,478,765 if that assumption is correct. At the moment I will divide 288 employees to an average salary of $36,384. 20 years of service with multiplier at 3 equals a total annual cost of $6,287,155.
This would of course be based on current salaries and not future salaries. CAFR records also indicate that the city paid pension plan administration cost of $84,341 in 2006. Defined benefit pension plans will continue to escalate in costly long term liabilities once financial commitments are made. They must be paid or simply default on them like some Airlines. We all know the city would not default, but the long term consequences are huge as seen in states such as NJ, NY and CA. The cost of high finance and pay later is simply out of control.
Lake Mary has adopted a 401(a) for city “general employees” with generous maximum employer contributions of 12.5%. City Manager John Litton of Lake Mary wrote -- “We looked at other alternatives including defined benefit plan and it simply was not economically feasible”
Still amazed on how the city continues to use the “per capita” analysis as it does not compensate for commercial business and we have the highest residential rate in the county. Once more, per capita analysis was calculated by taking the general fund and dividing it by the residential population.
According to the Florida legislature, Winter Springs had the highest percentage increase in per capita tax collection from 2001 to 2006. So we have the highest per capita tax collection and the lowest per capita spending? Guess that entire surplus is in the other 41M of the budget? Thought someone at city hall could at least acknowledge that one after hearing all those educational backgrounds?
Please see attached file on “per capita” that was presented at city hall and I did make several changes for better clarity. Obviously, the “per capita” analysis is of great value in Winter Springs if you can sell the concept. I do know that Ron McLemore used this analysis in his self appraisal as an accomplishment.
( Yes he did and he was WRONG in doing it --- Just LOOK at the ACTUAL FIGURES [ Here ]
The more town homes you build, the lower the per capita becomes. Commercial business requires fire and police like our town center. The town center was one of the justifications in hiring six new police officers the other year.
Coming to a close and no more time as I do have a full time job beyond this, I like to leave you with some additional issues to think about. Vacation transfer time etc. is also a costly expense we need to look at. I’m of course frustrated that we as a committee can only address the general fund and not the total fund of about 61M. I most certainly see many more possible cuts in the other 40M. I would also like the commission to consider having a cut outside the general fund of 1.3M if the general fund is to remain as is.
Again, I would not favor a head count reduction unless forced with no compromise. I have always been against high finance and frustrated that we still carry a 43M outstanding debt to add to the problem. We are of course spending millions per year to reduce this debt. As mentioned at the committee, city hall needs to run more like a business. Only then will you run at peak efficiency.
In my view government spending is certainly not in sync with the private sector at all levels of government. The idea of spending more to increase quality of life has no merit. By the year 2030, the middle class population in China will be greater than the total population of the U.S. Where do you think our quality of life will be in the private sector? Things have and will change.
Happy Fourth of July ….
Regards,
Ron Ligthart
1036 Winding Waters Circle
Winter Springs, FL 32708
Tel: 407-327-1072
(The text in the above is exactly as written, and a copy is available from the City Clerk's Office -- City of Winter Springs. The highlighting, and emphasis is strictly that of the publisher.)
