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What’s This? Another Satellite Beach Column In The Newspaper?

Patrick J. Utecht of Satellite Beach wrote a guest column in the Florida Today newspaper of July 12, 2012.

Mr. Utecht writes:

Much has been written and spoken about the excessive debt owed by the city of Satellite Beach, most of which has been simply wrong.

Persons running for election to the present City Council repeatedly told stories about the debt, to the point where people began to believe them.

The city does have debt, but did anyone tell you what that debt is for and when and how it will be paid off?

Before answering that question, ask yourself if you ever carried a mortgage on a home. Did you consider that as a debt or as an investment in your future?

Is there any real functional difference between carrying a mortgage for your home and the city carrying one that it has found to be in the long-term interest of all residents? During past years, Satellite Beach has borrowed money for projects such as the civic center, the police station and others. Were they worthwhile projects?

For general information, this city does have loans for less than $7 million, none of which is debt on the city’s general fund. That money was dedicated for purposes such as:

• Purchase and renovation of the David. R. Schechter Community Center and other capital assets. It will be retired (paid off) during fiscal year 2013-2014.

• State and federally mandated improvements to the city’s storm-water system, including those at DeSoto Parkway and Cassia Boulevard and along the city’s northern border. That fund will be paid off during FY 2018-2019.

• Community Redevelopment Fund:

A. Purchase of property on Sunrise Avenue (now dedicated as a park to Michael Crotty, former city manager) during a recent council meeting.

B. Purchase of Peg Legs property.

C. Improvements to Pelican Beach Park.

D. Partially fund construction of Hightower Beach Park.

The Redevelopment Fund will be retired during FY 2025-2026.

Are those dates reasonable? I think yes. In my opinion, the projects are/were essential for the future of Satellite Beach; that type of thinking is foresight, similar to why many of you incurred debt in buying a home for your family.

As I see it, the above city projects were undertaken for valid reasons. In my opinion, the funding plans and the uses appear to be reasonable and appropriate.

Mr. Utecht makes the analogy that debt within a city is similar to that of debt or a mortgage on a house. However, like all analogies, there are some differences and in this case, major differences.

For example, when a person goes to buy a home and signs the paperwork, they and they alone are responsible for the debt incurred. When a City takes on a debt, it commits the entire population to a debt – even those who disagree with the debt itself. It is easy to say “that is the way a republic form of government works,” and that would true, but that acknowledgement only highlights the differences between a debt incurred by a municipality and one taken on by an individual.

The second major difference is the method of payment of the debt. A city does not create income. It doesn’t exist in the free market. With few exceptions, it does not generate income, but garnishes the income of others through taxes and fees. (Any income generated from services is not self-sustaining.) There is a built in safety net of the people themselves for the government as the government can simply say “we are raising fees and taxes.”

Compare that with a home owner whose income is most likely generated by a salary.

The comparison is striking. A government can get more income by raising taxes and fees that people are forced to pay. As a homeowner, try using the same approach to with your boss if you have debt that is more than you can handle. Try going into the office of your boss and demanding he pay you more or else you will start confiscating the property of the business.

We all know that isn’t going to turn out too well for you.

The bottom line of Mr. Utecht’s letter is that he makes it known that in his opinion, all is well financially within the city of Satellite Beach. At the same time, he disagrees with others who he says “told stories about the debt.”

Who’s right?

The answer probably lies more in the middle than Mr. Utecht or the “story” telling people will admit.

Upon what are we basing that opinion?

On March 21, 2012, Debbie Bradley Goode of Hoyman, Dobson & Company stood before the Council and the citizens of Satellite Beach and gave a summary report of fiscal 2010 / 2011. The good news was the accounting firm found no significant irregularities in the accounting procedures within the city. She did note the reimbursement of the CRA funds was an issue, but it was not within the scope of their audit. At the very end of the presentation, Councilman Billman asked her for a dollar figure on the financial obligations of the city. Her response was depending on how one calculates it, the obligation is between $12 and $16 million for the coming year. She then made a very interesting statement to the effect “there is a danger, but if you (the city) stay on the same path you are taking and address the problems, you should be okay.”

We took that to mean the city’s finances, at that point in time, could go ether way. That would contradict Mr. Utecht’s apparent position of there is nothing wrong and all is well. The moment after Ms. Bradley Goode’s answer, Councilman Billman said, “we have a lot of work to do and it is going to be a long summer” and thereby putting forth the idea the financial sky of the city is falling.

In other words, the financial outlook is not as rosy as some would try to make it and neither is it as dark and desperate as others would paint it as being.

It would be best for all if both sides looked and actually agreed with the accountants. These folks don’t have a “dog in the political fight.”

We don’t have to panic and we don’t have to have celebrations on the state of the city’s finances. What we should do is continue to make sure that in these financial times we remain frugal, stay on the path, and seek to be as efficient as we can be.

We would hope we can all agree on that.



2 Responses to “What’s This? Another Satellite Beach Column In The Newspaper?”

  1. Harold (Bud) Wade says:

    Hi Mr. Afterwit!

    I have to admit that I am wondering what is your point other than nitpicking Mr.
    Utecht’s opinion about Satellite Beach’s debt. He tries to put it into language that most people can understand by comparing the city debt to a mortgage. I admit that no analogy is perfect but this one isn’t that far off.

    Your objection is that a mortgage places a burden only on the person signing
    whereas the city debt places the burden on all residents. That’s true, but that’s what a government does! It only becomes problematic when that government is amassing debt recklessly, with no reasonable program in place for the repayment. Without creating debt, the city would still be flooded when it rained, the ocean would be blocked from view by wall to wall condos, there would be no beach parks, skate park, dog park, recreation facilities, police or fire department. The only contentious debt
    that I have heard of is the purchase of Peg Leg’s property. Even the best investor makes a bad deal once in a while.

    Your next objection is that when a city increases debt, it raises taxes which forces the residents to pay regardless of whether they agree or not. That is just not true on the very face of it. If I disagree with how the city handles my tax money, I have the absolute right to move elsewhere. During my lifetime, I have lived in seven states and two foreign countries. I have never lived anywhere where people didn’t complain
    about taxes. Politicians make their living touting how they will “lower your taxes”. A reasonable person looks at taxes as the cost of the amenities and services one receives. Yes, we are higher than most small cities around us, but look at what we get in return.

    Finally, I disagree with your conclusion about Debbie Bradley’s statement ““there is a danger, but if you (the city) stay on the same path you are taking and address the problems, you should be okay.” You apparently looked at that statement as the “glass half empty”. What advisor is going to make a categorical statement of this nature that isn’t hedged? Anytime anyone takes on debt, there “could be problems”.
    That’s a fact of lfe. I assume that the rest of her report found no evidence of reckless spending. Couldn’t that make the “glass half full”? It certainly doesn’t counter Mr. Utecht’s opinion that the debt is reasonable.

    I have stated before that I know very little about municipal finances. However, I have Lorraine Gott’s breakdown of the city’s indebtedness as of 7/4/12 and it appears to me that, yes there is debt but yes, there is a reasonable repayment schedule set. (Just like a mortgage! :-)) Her figures all come from city sources and if you can get a copy, it’s probably worth your looking at it.

    Bud Wade

    • AAfterwit says:

      Greetings Mr. Wade,

      The idea that “that’s what cities do” does not excuse it. We are in a city that has a debt that is 50% of its yearly operating budget. Many people think that is high. From the research I have done, it is at a tipping point. That research shows to be inline with Bradley Goode’s statement. It can go either way and we need to be careful.

      As for the debt itself, the statement “creating debt, the city would still be flooded when it rained, the ocean would be blocked from view by wall to wall condos, there would be no beach parks, skate park, dog park, recreation facilities, police or fire department,” upon what are you basing that? That is one of the statements from people who think the debt is “fine” I have never understood. Are you saying the city couldn’t have saved when times were better to have money for those projects when the time came? The fact of the matter is that when you create debt, you end up paying more for the same item or service than if you had paid for it outright.

      So when people say “debt is what cities do,” the response is “cities need to live within their means.”

      The only contentious debt that I have heard of is the purchase of Peg Leg’s property. Even the best investor makes a bad deal once in a while.

      Frankly, I am not sure the city should be “an investor.” Even so, it is hard to argue that the Peg Legs purchase was an “investment” when there doesn’t seem to have been a development plan or planned use for the property. The only purpose seems to have been “so someone else can’t buy it.” That is not an investment in any stretch of the word.

      Your next objection is that when a city increases debt, it raises taxes which forces the residents to pay regardless of whether they agree or not. That is just not true on the very face of it. If I disagree with how the city handles my tax money, I have the absolute right to move elsewhere.

      I’m sorry, but I am having problems understanding how the idea of moving away and not be a resident is contrary to the notion that a government forces residents to pay for something. The residents within the city are still paying whether you are there or not, right? Whether an individual moves or not has no impact on the idea that city debts are paid by residents.

      This is where the the “home mortgage” and “governmental debt” is truly illustrated. If you have a home mortgage, you and you alone are responsible for the payments. You can assign more money to that mortgage payment by one of two ways – increasing income or decreasing expenditures. On the income part, you can seek a raise, seek a second job, etc. Still, the impetus on increasing income is on you. With government, the increase in revenue is through taking from other people. The government doesn’t go out and “get a second job.” It doesn’t “ask for a raise.” At the “point of the government sword,” it says “we need more money,” and it takes it.

      A home owner can also look at decreasing expenditures. For example, we know that in today’s economy as incomes shrank and money became tighter, people looked at “tightening their belts.” When the new city council looked at “tightening the city’s financial belts,” all Hades broke out. I believe there were a couple of reasons for that. First, the election was so contentious that some people did not want to see any new idea succeed. Secondly, the group that wanted to look at tightening the belts tied it to a charge that the city had, under previous Councils, been “wasteful.” (There were charges of corruption and malfeasance as well.) Another fight broke out over that issue and it didn’t have to be that way.

      You apparently looked at that statement as the “glass half empty”. …… Couldn’t that make the “glass half full”?

      I think you missed the point. I look at the glass and see it as “at the halfway point.” That is contrary to the statements of those who say “nothing wrong here… nothing to see… move along,” as there are issues with the debt. When your plans to repay that debt are based upon certain levels of revenue and you aren’t making that revenue, there is a real danger there. Saying “we have a plan!” doesn’t mean the plan can be or will be met. That would be the idea that the glass is full. At the same time, I disagree with those who are crying gloom and doom for the city’s debt. The glass isn’t empty either.

      And just so you know, the accountants did not look for “reckless spending.” That is not their job. They look to see whether the spending and the accounting measures were within the law. There is a difference.

      I do have Lorraine Gott’s breakdown and have looked at it. It is a summary of the plan to pay the city’s debt based upon certain levels of revenue. In other words, if the revenue is there, the plans work. If not, there is a problem. In the city we are close to the revenue not being there. That’s the point. It is great to have plans but having a plan does not mean the plan will be successful. (You yourself admit the plan for Peg Legs hasn’t worked out.)

      The point of addressing Mr. Utecht’s letter was to highlight the differences in his comparison of a home mortgage and debt a city takes on. In addition, as we said, we aren’t saying the glass is half full. We aren’t saying the glass is half empty.

      The glass is at the halfway point.

      Thanks for writing.

      A. Afterwit

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