HISID looks at 2014 budget
HOLIDAY ISLAND -- "I would challenge anybody here in the room, or around the table, formally or informally, I would challenge you -- what contingency, what emergency would occur that would warrant having to operate the district four months at a time without anything else coming in?" asked Holiday Island District Manager Dennis Kelly at the Board of Commissioners meeting Monday. "Even the ice storms you've had have lasted just days."
He was referring, during the 2014 budget discussion (See the district's PowerPoint presentation here), to the amount the district is required, by its own Code of Regulations, to keep in reserves: 35 percent of budgeted expenses each year.
He said the 35 percent is "predicated on a four-month count," or a third of the year.
Kelly said he had tried to find out the background of how the 35 percent reserve was established, "and there was no real answer ... it was just kind of pulled out of the air."
He suggested reducing the reserves to 25 percent, or three months, which would free up $318,000 per year to be used for operating expenses, he said.
The discussion was tied to unexpected expenses this year in legal fees associated with two lawsuits against the district (roughly $225,000 to $250,000), expenses for repairs to Well #7, which could run up to $80,000, and returning to spending $200,000 on road paving each year as the district had in the past.
He said the legal fees can be paid out of the reserve account "because it fits the category of what you would use that account for -- it's not an operating expense."
Even without reducing the reserve percentage, Kelly said the district is "in good shape, with a reserve account that continues to grow."
Figures supplied as part of the discussion show $895,000 in undesignated reserves, which cannot be used for operating expenses but can be used on such things as capital assets, the district's portion of any split-cost improvement grants or other one-time costs and unanticipated expenses.
In addition to undesignated reserves, there is $210,000 in unrestricted funds tied up in certificates-of-deposit.
This is all separate from the funds set aside for debt service on the wastewater treatment plant, the rolling stock equipment reserve, road funds from the county, fire department reserves and the district's operating money market account, which has $1.2 million in it.
Kelly said it costs the district $300,000 to operate each month, but in a later interview reduced that figure to $263,000.
Projected total income in the 2014 budget from all sources is $3.165 million, with $1.985 million being billed for assessments. Office Manager Marilyn Clave said at the meeting she had accounted for expected unpaid assessments on 827 lots. As of Oct. 16, $1.528 million in assessments had been paid. The largest bulk of unpaid billed lots was 769, owned by Holiday Island Development Corporation, representing $312,199 in lost income.
In this draft of the budget, operating expenses are projected at $2.881 million, leaving a surplus of $284,000.
Figures show an actual total surplus from the 2013 budget, as of the meeting, at $701,918.
Kelly is also proposing salary increases for employees and offered two scenarios for achieving those: a one-time bonus or a percentage of anywhere from 2 to 4 percent.
The problem with a straight cost-of-living increase, he said, is that higher-paid employees get a lot of money and lower-paid get a little money, which results in an "accordion effect."
"The district is not going bankrupt," Kelly said later. "In fact, we're doing quite well. We have a $283,000 surplus going into the new year, $3.4 million in reserves and $1.1 million in cash."