Fernandina Beach is Still Subsidizing its Airport

FERNANDINA BEACH, Fla. - For the city's enterprise funds, the past few years have been rough going.

While all the funds cover their operating expenses through revenue coming in, the city still subsidizes them because they don't generate enough money to pay for big-ticket costs, such as capital improvements, and unforeseen expenses, such as legal fees.

Fernandina Beach has five operations budgeted as enterprise funds - the Municipal Airport, the Harbor Marina, the Golf Club and the city's water and sewer utilities.

The original intent of the funds, begun during the mid-1990s, was for those operations to be self-supporting, requiring no general-revenue funds, which largely come from property taxes.

However, the funds have not worked out as planned.

"We're at the 'What-do-we-want-to-be-when-we-grow-up' stage," City Manager Michael Czymbor said. "We have to decide if we want to pay to play."

He said there are definite intangible benefits to the city having the amenities like a marina and airport and golf course.

"But, if we have to be able to budget for capital improvements at the golf course, for example, green fees may have to go up from $50 to $55," he said. "But we have to realize that these amenities is also what makes Fernandina Beach and Amelia Island tourist destinations for people who will spend money in our community. And we have to find a way to measure that."

City commissioners held a work session Tuesday to examine the enterprise funds and asked city staff to come back to them next month with recommendations on how to restructure the funds to account for costs that benefit city residents and those that benefit visitors.

"We have to delineate what we want the enterprise funds to do for us. The original idea of enterprise funds was to make enough money for the city of Fernandina Beach to reduce property taxes," Sapp said. "If it provides recreation for all residents, you're going to expect something different."

Sapp was perhaps most concerned with the airport and asked why the city had to own it because it is used mainly by county residents living at the south end of Amelia Island.

The airport was built on city land by the Navy during World War II. Because it technically belongs to the federal government, the Federal Aviation Administration requires revenue produced by the airport go into a fund used exclusively to pay airport maintenance and expenses.

"Somebody give me the rationale of why this is an asset to me when 75 percent of the people who use the airport are not city residents," Sapp said. "If all the money generated out there has to stay out there, what's the asset?"

If it were not for ongoing arbitration with the McGill Aviation, the airport's fixed-base operator, Airport Director Richard Johnson said the airport would have made a profit. The city has spent about $500,000 in legal fees on the dispute, including $322,113 last year. Without that expenditure, the airport would have made a $192,089 profit instead of a $130,024 loss.

Critics argued that because the previous city commission and attorney made decisions that led to the dispute, general revenues should pay all the legal fees. General-fund money had to supplement the cost of legal fees by 2006.

Johnson said the airport will be more profitable when grant-funded improvements are completed and the litigation resolved.

Sapp asked whether the county might like to own the airport. City Attorney Debra Braga said she could look into setting up an airport authority, similar to Jacksonville's. The authority would be an independent special district created by Legislature that would have limited taxing authorization. The city land on which the airport sits, however, would have to be ceded to the authority.

Commissioner Joe Gerrity didn't like that.

"Our asset is 600 acres on Amelia Island," he said. "And I would not feel comfortable signing over that asset."

He said the airport's benefits to the community include tourism, economic development and job creation.

"Every one of those would be positive even if we didn't own it," Sapp said.

The marina enterprise fund is more difficult to analyze because visitors and residents use its amenities, Sapp said.

City residents use the marina for walks and watching sunsets, but that doesn't bring in revenue. Yet, expenses to maintain the decks and other facilities come out of the marina's enterprise fund.

Commissioner Ron Sapp suggested the marina fund be "hybridized," putting the cost of maintaining public areas, like the boardwalk, in the Parks and Recreation Department budget.

That would more accurately account for the public use from the private use by boaters who dock at the facility. That way, revenues and expenses for marina services would more fairly reflect the business side of operations.

Gerrity asked whether it would be better to wait to see what increases in revenue ongoing improvements at the marina will produce.

"I'd like to see where we were at when that marina's finished," Gerrity said. "I think we're really putting the cart before the horse here."

No one mentioned the golf course, which operated with a $1,400 loss, despite having to borrow city funds to finance a new irrigation system in 2006.

However, water and wastewater funds may need more study, officials said.

The city purchased the water and wastewater utility from Florida Public Utilities in 2003, but it is not performing up to projections, largely because the city froze rates until 2008. A final payment of $5 million is due to FPU in 2010.

Czymbor said that when the utility was purchased, water and wastewater divisions had been counted for jointly. The city has separated the functions, with the water department showing more than $500,000 in profit. Because $5.4 million in capital improvements were made in the wastewater division, cash balances were also transferred to pay for them.

Commissioners urged a study be done to determine what water and wastewater rates should be charged when they can be changed next year.

"I'm sure a study will say they'll need to be raised by 50 to 75 percent," Gerrity said. "And when I had suggested three years ago they raise rates 3 percent a year, people looked at me like I had two heads."

FERNANDINA BEACH 2006 ENTERPRISE FUNDS

AIRPORT GOLF COURSE MARINA WATER WASTEWATER

REVENUES $509,686 $2,690,112 $5,265,398 $3,731,191 $3,403,530

EXPENDITURES $639,710 $2,691,507 $3,987,623 $3,211,233 $5,560,294

Capital improvements $1,195,658 $1,992,000 $5,400,000

Legal fees $322,113

PROFIT (LOSS)* ($130,024) ($1,395) $1,277,775 $519,958 ($2,156,764)

* ALL FUNDS MUST BE BALANCED IN GOVERNMENT ACCOUNTING, SO RESERVES WERE USED TO MAKE UP ANY LOSSES.

SOURCE: FERNANDINA BEACH



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