𝐀 𝐋𝐞𝐭𝐭𝐞𝐫 𝐭𝐨 𝐭𝐡𝐞 𝐌𝐚𝐧𝐝𝐞𝐯𝐢𝐥𝐥𝐞 𝐆𝐨𝐯𝐞𝐫𝐧𝐦𝐞𝐧𝐭 - 𝐆𝐥𝐞𝐧 𝐆𝐫𝐮𝐧𝐲𝐨𝐧 - City Financial Issues
After attending the City Council budget workshop meeting on August 11, I am responding to the invitation by Councilman Vogeltanz to provide the Council with my thoughts on the proposed FY26 Operating Budget. This message is intended to provide both a common understanding and clarification of the industry accepted operating budget terms and feedback on the various vaguely described solution to the General Fund sustainability problem over the next 5 years. There have been several interactions with a few Council members on the financial analysis that is included below, but this message will expand the awareness level to ALL Council members as well as the Mayor and Finance Director and the public at large. I urge the Council members to question the Finance Director on these results of the financial analysis to confirm the accuracy since the basis of the data used in the analysis is the *Microsoft Word - Five Year Forecast Narrative.
The industry accepted definition of an organization operating budget only includes recurring annual revenue and recurring annual expenditures. One-time revenue and capital expenditures are not included in the operating budget because they are not considered to be recurring in nature. The operating budget is intended to capture the ongoing day-to-day expenses and revenues associated with running the business, such as salaries, rent, and utility bills. Therefore the financial analysis below is including only annual recurring revenue and annual recurring expenditures. This means that one-time potential FEMA reimbursements ARE NOT included in the financial analysis. The inclusion of the FEMA reimbursement would only increase the General Fund balance but WOULD NOT change to trajectory of the trend of the imbalance between the recurring revenue and recurring expenditures. In fact the General Fund expenditures for the next five years are projected to grow at 240% more than the projected revenue. The compounding effect of the drastic difference in the growth rates makes resolving this imbalance even more difficult the longer the Council waits to address this situation.
Another objective of this message is to clearly expose and accurately identify the impact of the majority of the Council member’s seemingly proposed solution to the dwindling General Fund balance. The Council seems committed to bringing a ballot election to the citizens to rededicate some ill defined portion of the existing Mandeville sales taxes from the current restricted allowable use to any lawful governmental use (i.e. General Fund). The language that has been used in the public budget workshop meetings has been to reallocate some of the sales tax revenue that is being “stuffed in the [proverbial] mattress” and cannot be used for operating the City’s services. Here is the quote from the Finance Director:
“You’re right to note the distinction between reallocation and rededication. It’s fair to say that some of the recent discussions may have used those terms a bit interchangeably, though the intent under consideration now is more accurately described as a potential rededication of a portion of future sales tax revenue—similar to what was done in 2014. That kind of change would require voter approval and wouldn’t impact the existing fund balance.”
It is astonishing to me that the Council has now been through 5 budget workshop meetings and no one has asked one simple question to specifically define which sales tax fund would be the target of the election to rededicate! And even more importantly how much sales tax revenue would be redirected to the General Fund if the voters approved. You would think since it was stated at the budget workshop on August 11 that the Council has the responsibility to evaluate the proposed budget and make changes if necessary before approval. Well if the sustainability of the General Fund over the next 5 years is doubtful without significant adjustments, I would think the details of the target fund of the rededicated sales tax and the annual amount of revenue that would be redirected to the General Fund would be important information to know BEFORE the decision is made to approve the proposed FY26 Operating Budget.
DISCLAIMER: ALL OF THE FOLLOWING FINANCIAL ANALYSIS ASSUMES THAT THE CURRENT LEVEL OF OPERATING BUDGET EXPENDITURES ARE NOT REDUCED!
The following financial analysis is being provided to remove the veil of uncertainty from the debate on the approval of the proposed FY26 Operating Budget and more importantly to remove the plausible deniability by the Council before the vote to approve the budget at the Council Meeting on August 14. The first order of business is to come to a conclusion as to which of the City’s sales tax funds would be the target of a rededication election. Here are the available sales taxes to consider.
For purposes of this analysis, the logical choice of the target sales tax for rededication is the 2001 Sales Tax (e.g. Street Construction). The 1986 Sales Tax (e.g. Special Sales Tax) has a broader definition of allowable uses than the 2001 Sales Tax so therefore even if the voters approved to rededicate the Street Construction 0.5 percent to the General Fund there would still be restricted funds available in the Special Sales Tax for streets and drainage. So the estimated FY26 revenue to be collected in the 0.5 percent Street Construction fund is $3.6 million. But wait the prior Council discussion in the budget workshops claimed that the City is collecting too much revenue in the restricted sales tax funds (sticking money in the proverbial mattress). With that understanding it is reasonable to consider reducing the Street Construction sales tax rate from 0,5 percent to 0,25 percent. That would mean that the FY27 potential revenue to the General Fund (if the voters approved in early 2026) would be approximately $1.8 million a year. Let’s be generous and say that the redirected revenue in FY27 would be $1.9 million.
Here are the financial results of the successful rededication of the Street Construction sale tax to the General Fund.
Here are the forecast net Expenditures numbers to support the obvious conclusion that rededicated of the Street Construction at 0.25 percent sales tax WILL NOT completely eliminate the dwindling General Fund balance.
So the question to the City Council is what do you believe the voters will think if they approve the rededication of the Street Construction sales tax and then they learn that the General Fund will still be unsustainable and then the Council next comes for a property tax increase to bring in more revenue? I would believe that I am being misled and that the Council and the Administration are not being fully transparent with the voters UNLESS the Council fully discloses these financial results and also takes immediate action to begin reducing the Operating Budget expenditures in the current proposed budget. BTW I have also already performed the analysis of both rededication of the $1.9 million sales tax AND increasing the property tax to the maximum millage bringing in an additional estimated $1.5 million both starting in FY27. Although the recurring revenue with the additional $3.4 million annual will initially produce a small percentage surplus but when the annual capital project expenses are included the General Fund annual spending deficits still exist.
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