Holmes Beach Mayor Bob Johnson informed city commissioners July 14 that the city has a $651,457 shortfall in the general fund.
The general fund is used by the city to pay its operating costs.
“This is horrifying,” Commissioner Jean Peelen said during the meeting.
“I was absolutely dumbfounded about this,” Johnson said.
Chair Judy Titsworth expressed a different opinion. “I wasn’t at all surprised,” she said. “You can’t keep everything at status quo. It was only a matter of time. I’m surprised by how it happened.”
Johnson said the shortfall has existed since at least 2010 and the city has been filling the gap from its reserves fund, something that cannot continue into the next fiscal year without causing financial stress.
To fix the issue long-term, Johnson suggested raising the city’s millage rate for the 2015-16 fiscal year. The fiscal year is Oct. 1-Sept. 30, 2016.
Holmes Beach kept the rate at 1.75 mills since the island’s economy began recovering. With costs rising, this caused a rift between the general fund revenue spent and that which was collected.
Commissioners voted July 14 to allow an option to raise the ad valorem rate to the maximum allowable, 2.3191 mills.
Johnson said he didn’t believe it will be necessary to raise the rate to the maximum. However, city leaders are strongly considering going above the 2 mills mark.
“The solution is to get the rates to where they should have been realistically rather than doing it in one lump sum,” the mayor said. He went on to say that before any binding decisions were made, he plans to investigate fully the impact to residents.
Previously, by combining the city’s expenses and revenues from each department or source into one lump sum, it appeared on the surface that the budget balanced, something commissioners questioned at the July 14 meeting. It was when Johnson and city treasurer Lori Hill broke the budget apart they realized there was an issue.
“When I didn’t see the correlation of business to expense, I knew we had a problem,” Johnson said. Johnson broke the budget into five income and expense areas, placing earmarked funds, such as those from the 5-cent gas tax, in separate categories.
Though the new budget process exposed a problem, Johnson is thinking positively.
“It exposed a problem, but we have time to deal with it,” Johnson said. “We found it in time to fix it without waking up in the hole.”
According to the mayor’s calculations, if the problem had continued unchecked, the city would have run out of reserve funds in just over a year. Already, the city’s $957,000 operating reserves are below the $1.2 million-$1.3 million mark sought by Johnson.
In addition to considering an increase in the millage rate, the city is reviewing building permit fees.
Another discovery from the budget process, which is still ongoing, is the building department was not bringing in enough revenue to pay for itself.
Commissioners decided to discuss raising the rates.
Johnson and the city’s department heads were tasked by commissioners with finding ways to cut costs without severely affecting services to residents.
Budget talks will continue in Holmes Beach with a final millage rate set and a budget expected for adoption by the commission in late August.
The commission will meet at 7 p.m. Tuesday, July 28, at city hall, 5801 Marina Drive, Holmes Beach.