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New Port Richey faces economic 'tsunami' in 2014, official says

NEW PORT RICHEY — The city could find itself in a state of financial emergency within two years if no action is taken to overhaul its finances, City Council members learned Tuesday evening.

Projections show the city's general fund suffering a $12 million deficit over the next five years. Left unchanged, an external auditor said, those conditions could require him to report the financial emergency to state officials.

The impending crisis is the result of deficits in three areas: the Community Redevelopment Agency, which carries heavy debt on properties purchased for redevelopment; police and fire pension plans; and the city's stormwater fund, according to Chad Whetstone, the city-hired auditor from the firm of Carr, Riggs & Ingram.

"This is going to take a lot of creativity, a lot of ingenuity and a lot of hard work to come out of this," Whetstone told the council.

City officials have long known that the CRA is poised to drain New Port Richey's coffers as the debt service on properties the city purchased years ago for redevelopment, such as the Hacienda Hotel and two church properties, will soon bankrupt the CRA fund.

Hampered by the down economy, the city has failed to sell the properties or redevelop them. By 2014, when the CRA fund is depleted, the debt service will become a burden on the general fund. Whetstone's audit shows that in 2014 the CRA will have an $83,201 deficit, which will skyrocket to more than $1.2 million in 2015. That will increase to a deficit of more than $2.3 million in 2016, and more than $3.4 million in 2017.

The audit also shows that the city's police and fire pension plans are upside down and will need increased funding. In 2010, the city's fire pension fund had assets of more than $9.8 million, but liabilities of $11.3 million, leaving more than $1.4 million unfunded.

In 2010, the police pension plan had assets of more than $15.4 million, but liabilities of more than $20 million, leaving the plan unfunded to the tune of more than $4.5 million, according to the audit.

The audit found that the expenditures for police, fire, and general employee Florida Retirement System pension costs to the city will nearly double over the next five years, from 12.7 percent of all expenditures in 2012 to 24.2 percent of all expenditures in 2017.

Whetstone said the factors that are leading to the increases in the police and fire pension costs need to be explored more deeply, a review that could take more than a month. He also said that review could end up showing his projections to be low.

"The trends are working against us," Whetstone told the council.

Whetstone told the Times that the pension costs may be affected by heavy losses on the stock market in recent years and, in the case of the fire pension, retired firefighters drawing more in benefits than active members are paying in.

"Really these numbers are just the tip of the iceberg. Now we need to get underneath and see what the actuaries tell us," he said.

The audit also found that the city's stormwater fund faces a serious cash flow deficit of more than $2.4 million over the next five years. By 2017, the fund is projected to have a negative balance of more than $1.9 million, according to the audit.

After the presentation, council members acknowledged that the projections are dire, but cast them as a worst-case scenario that can be avoided by action.

Newly-elected council member Bill Phillips, who was sworn in Tuesday evening, referred to 2014 as when the "tsunami" of economic trouble hits. He said the council needs to start thinking outside the box now. City officials are planning for a work session in May to begin hashing out possible solutions.

"The last thing we want to do is wait until this thing blows up in our face," Deputy Mayor Rob Marlowe said.

By the numbers

Chad Whetstone, the city-hired auditor, predicts the following deficits just for the Community Redevelopment Agency.

YearPredicted Deficit
2015$1.2 million+
2016$2.3 million+
2017$3.4 million+

New Port Richey faces economic 'tsunami' in 2014, official says 04/18/12 [Last modified: Wednesday, April 18, 2012 8:48pm]
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