Peachtree City Economics the focus of June 6 Council Retreat
On Tuesday, June 6, the Peachtree City Mayor and Council held their second and final Retreat workshop in preparation for the 2018 budget process beginning later in the month. During the workshop, City Manager Jon Rorie and Financial Services Director Paul Salvatore gave an overview on what it costs to maintain and operate Peachtree City.
In answer to that question, Rorie said, “It depends.” In FY 2017, which continues through September 30 of this year, the answer to that question was $33.5 million (or about $985 per resident). Each year, the City must balance the scarcity of means (revenues) against the ends those revenues could achieve (the services requested by and provided to residents).
Salvatore reviewed the City’s revenue sources, which include licenses and permits, fines and forfeitures, franchise taxes, other taxes, and other revenues. However, the two primary sources of revenue are Ad Valorem, or property taxes (39%) and Local Option Sales Tax (20.5%), which cumulatively make up 60% of the total revenues. Salvatore noted that Peachtree City’s 2016 gross digest (real and personal property) was 8.2% over the pre-recession values in 2009. Sales tax revenues had dropped even earlier, declining after 2007, and reaching pre-recession levels for the first time in FY 2016. This demonstrated the volatile nature of the two largest revenue streams.
Rorie then reviewed many of the service levels Peachtree City maintained that were not comparable with other communities. These included 100 miles of paths with 35 bridges, 29 tunnels, and 177 at-grade crossings (valued at $20 million), which all required maintenance in addition to the 179 miles of streets (valued at $83 million).
Peachtree City also had about 3,700 acres of greenbelts and parks, including 416 active park acres. Finally, the City had 40 buildings that ranged in size from City Hall, the Library, and the Police Station to picnic shelters and restroom facilities in some of the parks. These buildings were valued at $45 million, and the City maintained another $1.4 million in miscellaneous items such as bleachers, field lighting, playground equipment, etc.
One of the key components of Rorie’s presentation was the fact that the City had not budgeted funds for actual building repairs and maintenance, and this issue had compounded during the recession. The 2017 budget included approximately $325,000 under the “Building Repair and Maintenance” category, but these funds were dedicated to expenses such as HVAC maintenance, fire and security systems, generator maintenance, dumpster service, filters, doors, etc.
To address the deterioration of buildings and facilities, the City issued a $3 million Facilities Bond in 2011 to make repairs and upgrades. Another $3 million Facilities Bond was issued in 2014 to continue these repairs.
Salvatore then reviewed the City’s current debt level, explaining that the City had a total of $9.24 million in outstanding principal and paid $2.1 million per year in debt service. The City also carried approximately $2.3 million in revolving debt in the form of 5-year equipment loans. Salvatore noted that Peachtree City's legal limit for debt was based on the digest, which meant the current debt limit for the City was about $200 million.
Salvatore then outlined when the current debt components would expire. While the equipment loans would continue to revolve, several bonds would end over the next few years. The Series 2003 General Obligation Bonds would expire in January 2018, reducing debt service payments by an amount equivalent to 0.103 mils of the City’s property tax rate. The 2011 G.O. Bonds would expire in January 2019, dropping the debt service payments by another 0.206 mil equivalent. Additional bonds would be retired in 2022, 2023, and 2024, leaving only the revolving equipment loans. The reduction in debt service payments over that time would be equivalent to 1.35 mils.
Rorie said debt service would be one of the options discussed in the coming budget development when Council needed to make decisions on a new fire station. The City was collecting impact fees for a station on the west side (MacDuff Parkway) as those homes were being constructed. A fire station with the associated fire engine and ambulance would cost roughly $2.9 million (equivalent of approximately $350,000 per year in debt service if funded in that manner). The development in that area would generate about $775,000 once all of the homes were built, but a station would probably need to be constructed before all homes were completed. The homes in the area would also generate an estimated $1.4 to $1.7 million in property taxes each year to help fund the estimated $948,000 in annual operating costs for the station.
Rorie added that the West Village station was currently a lower priority than one at the southern end of town. However, what that southern station ultimately housed would be a consideration – a satellite location primarily dedicated to Emergency Medical Services would be a different issue than a full Fire Station. This was one of the issues that would be brought forward during the FY 2018 Budget discussions.
Rorie noted that the funding that became available as the city retired long-term debt could be used to dedicated to regular maintenance needs, such as painting, fountain or pool resurfacing, bathroom fixtures, flooring, etc., so that repairs would not require Facility Bonds in the future.
The Retreat concluded with Rorie reminding those in attendance of the Budget meeting schedule: