A.G. Gancarski
The Jacksonville City Council Auditor quarterly report, released last week, merits closer inspection than it generally gets. With one quarter left in the Fiscal Year, the report from the office of Council Auditor Kirk Sherman gives a snapshot of how the city is actually performing.
There are, to be sure, positives.
“The City is projected to incur an overall favorable budget variance of approximately $6.3 million within the General Fund/General Services District (GF/GSD). Revenues are projected to be $1.2 million less than budgeted and expenditures are projected to be $7.5 million less than budgeted.”
One specific positive: the perpetually beleaguered Mayport Ferry. Lower fuel costs have the fund “no longer in a negative cash position,” according to the report.
But there are concerns also. One worth mentioning relates to the Police and Fire Pension Fund.
“The Finance Department is projecting that the City will contribute the total amount budgeted for Police and Fire Pension Fund contributions. However, it appears that the budgeted contribution will be approximately $4 million less than the total required contribution from the City. The City will have the option to utilize all or a portion of the $5 million capacity within the City Budget Stabilization Account, or it could pull budget capacity from other line items within the GF/GSD to avoid depleting the stabilization account,” reads the report.
As well, there are concerns related to subfunds. Several are described as “financially challenged.”
The review consisted of the GF/GSD and 30 other subfunds. Of these subfunds, “three had a negative cash balance, four report projected unfavorable variances, and two show a negative cash balance combined with a projected unfavorable variance. We are concerned regarding the cumulative negative effect of these subfunds on the overall financial condition of the City.”
Another loss leader: the Equestrian Center.
“The contract with the non-profit states that revenues collected at the equestrian center are to be deposited into the City’s accounts, however this is not happening. It is my understanding that the non-profit is working to get legislation filed to amend the contract however, to my knowledge, nothing has been filed. As of the third quarter, this fund has a negative cash balance of $502,599.20.”
The perpetual questions and concerns related to this facility will not be abated by this report.
As well, self-insurance is another driver that bears monitoring.
“The fund overall has a projected unfavorable variance of $4,639,935. The main driver of which is an unfavorable variance in paid loss of $5.0 million in workers compensation. Of that variance the City portion makes up $1.9 million and Fire heart / hypertension makes up $3.6 million,” reads the report.
Another issue to be watched: macroeconomic pressures on Jacksonville’s budget process. As the froth of the financial bubble flattens out, the city’s investments are destined to perform less robustly.
“The Operating Portfolio’s performance, for the quarter ending June 30, 2015, came in at a negative 0.37% after fees. While the portfolio was running ahead of pace through last quarter, recent global market developments have moved in the other direction,” reads the report.
“The markets are often unpredictable and do not move in a straight line so a precise figure of where we will end up for the year is not known. While the markets may very well recover prior to fiscal year end, we are lowering the forecast to reflect the current level of unrealized losses,” the report adds.
To counter the expected contraction in the global economy, the city’s investment portfolio is “now, and has been for several quarters, positioned in a moderate to slightly conservative posture after having reduced risk in recent years.”
Performance, in general, seems to have started leveling off a year ago. The last quarter put the portfolio into a posture of negative performance, and the last month in the report (June) augured especially poorly.
Independent agencies, such as Jaxport, as well as the Jacksonville Aviation, Electric and Transportation Authorities, all report being in good financial shape.
The same can be said, broadly, for the city’s credit ratings, which by and large range from upper medium grade to high grade. No prime ratings, but no red flags either.
