ECWCD faces budget crisis; tax hike, layoffs are possible

By Staff | Mar 3, 2009

David Lindsay

The possibility of layoffs and a tax increase for landowners of Lehigh Acres may be needed to balance the new budget of the East County Water Control District (ECWCD). There is a half million dollar shortfall in the budget of the water drainage district, according to figures released last week.

Auditor Joseph Welch presented the 2008 audit to the Board of Supervisors of the ECWCD at their meeting on Feb. 23.

Last year there was a projected deficit of $536,327, but the auditor verified an actual deficit of $763,965, 19 percent of personal and operating expenses.

The current budget for 2008-09 has a projected deficit of $456,126, according to the report.

The District received 95.5 percent of its revenue from a non-ad valorem assessment tax per acre in 2008. Small additional amounts came from permits, interest, and local grants.

In an interview last week with District Manager David Lindsay, he confirmed “there will be no intergovernmental grants this year.”

Additionally he said, “there will be no income from the sale of spoil as there is no market.” He also said “that interest income projected at $75,000 is only $20,000 to date.” Permit income has declined due to the decrease in construction building.

There will be less income then projected for the current budget year, according to projections. This is the third consecutive year of deficit spending for the ECWCD and the District is facing serious budget problems.

Currently there is a $500,000 shortfall. Lindsay said “this is a reasonable estimate.”

As of September 30, 2009 the District will be at or below the required fund balance for reserves.

Budget policy requires that “the District will maintain an adequate fund balance for unanticipated expenditures, expenditures of a non-recurring nature, unanticipated revenue declines, planned purposes or emergencies. The District will strive to maintain a minimum General Fund reserve balance of 25 percent of total expenditures.”

To maintain required reserves “revenue will have to equal expenditures,” it states.

It continues: “The District will pay for all current expenditures with current revenues and fund balance, i.e. balanced budget: current revenues plus appropriated fund balance equals expenditures/ expenses.”

In the coming budget year there will be no surplus fund balance to cover a fourth year of deficit spending, records show.

Since the District depends almost entirely on a per acre assessment for revenue, it has experienced significant collection problems in the past with an allowance of 12.5 percent for non collection. The current budget has a 3.5 percent non collection allowance.

According to the 2008 Budget Summary:

“The value of the lots they had purchased had declined in value and their taxes were more than the value of their property. Subsequently many lot owners refused to pay their property taxes and the District was forced to raise assessment rates to cover its debt service and thereby increasing the burden on the tax payers who did pay their taxes.

“By 2004, Lee County was becoming built out and the last place left to develop was Lehigh Acres. Soon all the lots were being bought up by investors and the District received millions of dollars in prior year taxes which allowed it to pay off all of its outstanding bonds. Unfortunately the possibility of this scenario happening again is all too possible as home and land values within the District have declined sharply and foreclosure rates are the highest in the nation. Unemployment rates and job growth in the area are greater than the national average.

“It is feared that many homeowners will not be able to pay their taxes and the District may be forced to raise its assessment rate drastically over the next few years to make up for lost revenues.

“East County Water Control District is a special purpose government agency that does not receive funds in the form of shared revenues from the state. The District’s non-ad valorem assessment tax payers account for 96 percent of operating revenues.”

The above quotes were taken from the 2008 budget summary, page v.

The number of employees has increased from 25 to 32 and two part-time employees for a total 33.5 full- time equivalents. In three budget years the District has increased personnel costs 52.6 percent.

The union is again entitled under its contract to an automatic pay raise.

Some $71,000 has been added to debt service this year, according to the manager. Debt service has first priority of payment.

In the coming process to establish the FY 2009-10 budget the Board of Supervisors will have to increase tax rates or decrease expenditures sufficiently to avoid an increase in taxes.

The third alternative is a combination of raising taxes and decreasing expenditures.

If the district chooses to reduce service levels then fewer employees may be required.

In the last three years the district has raised taxes a combined 25 percent.The District currently has $5,812,567 in outstanding debt.

Several water control structures have failed which will require millions of dollars in construction costs and debt service. A request for “stimulus” funds by the District includes projects costing more than $22 million. These would add over $1.5 million in yearly debt service requiring a 36.5 percent increase in tax rates.

The non ad valorem tax rate for 2008 is $89.80 per acre.

Chairman Desmond Barrett said he has been briefed on the serious budget problems and “believes in a top down not a bottoms up approach to cuts.”

He said he would be willing to look at renegotiating the manager and assistant manager contracts, supervisor health care, front office staffing, and expenses.

“The board will face difficult choices; the bill has come due,”Barrett told The Citizen.

The next meeting will be on March 23 at 6:30 p.m. at District Headquarters on Construction Lane. All meetings are open to the public.