ST. PETE BEACH — The city needs to find $800,000 to balance next year's budget. And it can do that by either sharply cutting spending or raising property taxes.
That unwelcome news will be the main topic of a special City Commission workshop at 3 p.m. Tuesday.
"We need to get some direction from (the) commission before we put the 2010-11 budget together," City Manager Mike Bonfield said Friday.
Initial spending requests from city departments exceed anticipated revenues by $800,000.
The budget shortfall is a combination of two main factors — an expected $600,000 drop in property tax revenues because of declining values, and seemingly unending legal bills that in the past 2½ years have cost the city more than $659,000.
Bonfield said the county's property appraiser is estimating that St. Pete Beach property values, and therefore tax revenues, will drop at least 10 percent.
Based on last year's property values, one-tenth of a mill in property taxes generates about $230,000 in revenue. The city would need to raise its property tax rate by almost a half mill to make up the $800,000 shortfall.
The alternative to avoid the deficit is to reduce spending by eliminating or cutting back some city services.
Officials won't know what the property tax revenues loss will be until after Bonfield issues his proposed budget in June or July and after the commission sets the tentative maximum property tax rate for next year.
The city manager said he is planning to budget $200,000 for legal fees, but he is not sure whether that will be enough. In February, the city's attorneys billed $33,183 for their time defending just one of five lawsuits filed by residents suing the city over a controversial voter-approved comprehensive plan. This work was in addition to the attorney's regular $5,000 monthly retainer.
The city is also being sued by residents in other disputes ranging from challenges to the city paying a commissioner's legal fees to a recently amended lawsuit over the city's alleged illegal use of a portion of beach south of the Don CeSar Beach Resort and Spa.
With more than half the fiscal year to go, the city already has spent more than $163,000 on legal fees tied to these and other cases filed by residents.
The city's attorney, Michael Davis, told the commission it may be months before trial dates or rulings are issued on several of the cases.
"If we spend at the same rate, we will hit over $400,000 this year and we have budgeted only $200,000. The money will have to come from somewhere," said Vice Mayor Jim Parent at last Tuesday's commission meeting.
At the urging of Mayor Mike Finnerty, the commission plans to discuss whether to revive settlement talks to end the lawsuits. Last year, the city spent about $100,000 for a formal mediation that failed to reach a settlement.
"I am just so afraid when it comes to our budget. It is very difficult to budget that much money for lawyers' fees," Finnerty said.
Other commissioners agreed to discuss the city's last settlement offer, but said they are unwilling to spend any more money on negotiations.
"If they want to come to the table and discuss this, they have to come with something meaningful," said Commissioner Bev Garnett.
Also at Tuesday's workshop, commissioners will discuss some $13 million in unfunded employee pensions over the next 30 years. Bonfield said the issue has been growing since 2000, the last time the city's pensions were fully funded.
No current pensions are endangered, he stressed. To resolve the issue, the city would have to increase its contributions to ensure future pension obligations can be met, or lower pension costs through negotiations with the city's unions.
Despite the escalating financial issues, the city is better off fiscally than it has been in years, said the city's auditor. "The city's books are in very good order," said auditor Peter Schatzel, adding that "it was a very positive year for the general fund."
The city's fund balances more than doubled to $850,000 and general fund loans made to the sewer fund are now being paid back.
Schatzel said the city's general fund has a 2.1-month reserve while all city funds have a 1.4-month reserve.