Audit of City of Sarasota finances for 2020 fiscal year points to reserve problems in Solid Waste and Parking Management divisions

Mayor Brody adamant about not raising Solid Waste rates

This is the cover of the City of Sarasota’s 2020 fiscal year Annual Comprehensive Financial Report. Image courtesy City of Sarasota

As a result of its formal audit of the City of Sarasota’s finances for the 2020 fiscal year, the Purvis Gray CPA firm of Sarasota has urged the City Commission to take action to shore up the city’s Parking Management and Solid Waste funds.

Both funds used reserves in the 2020 fiscal year, Mark White, partner in charge of Purvis Gray, told the commissioners during their regular meeting on April 5; that has left the funds with less money than recommended.

Of the two, the Parking Management fund requires the most attention, White said in response to a question from Commissioner Jen Ahearn-Koch. “The city has issued debt for some of [its] parking garages,” he continued. Therefore, the city is obligated to pay both annual principle and interest on those bonds, White added.

On the positive side, White told the commissioners, “Believe it or not, during this pandemic, you were able to add to the fund balance of the General Fund — not by a lot — but the fact that you did not deduct a significant amount from [that fund balance] is significant.”

The General Fund comprises various types of revenue the city annually receives, including property tax payments. It is used to pay for the operations of departments that do not bring in any funds on their own.

In the 2020 fiscal year, the city’s property tax revenue totaled $38,226,955, a 5.97% increase from 2019, the city’s Annual Comprehensive Financial Report (ACFR) noted. That was up from $36,074,226 in the 2019 fiscal year, the report said. The city’s property value rose 4.67% in 2020, the report added.

A pie chart in the ACFR pointed out that the property taxes made up 34.6% of the General Fund in FY 2020. The second largest source of revenue was sales tax — 12.2%. However, the ACFR said the sales tax revenue decreased by $530,568, compared to the FY 2019 figure, as a result of the pandemic. “Prior to this,” the report added, “sales tax revenue had been gradually increasing for the past nine years.”

At the end of the 2020 fiscal year, the ACFR said, the unassigned fund balance for the General Fund was $23,155,761, which represented 30.2% of General Fund expenditures, or 3.6 months of operations.

Replying to a question from Vice Mayor Erik Arroyo, City Manager Marlon Brown pointed out that Solid Waste is an “enterprise fund.” In other words, the department is supposed to generate enough income from rates and fees to sustain its operations. However, Brown added, it is getting close to a deficit.

“We will be coming back to you during the budget process,” Brown said, with the potential of a rate increase.

The ACFR found that the Solid Waste Division had expenses totaling $13,362,371 and revenue that added up to $12,298,105 in the 2020 fiscal year. Therefore, the net loss for was $1,064,266.

In the 2019 fiscal year, the net loss was shown as $643,745.

“Solid waste operations include the collection and disposal activities of refuse and recycling,” the ACFR explained.

In 2019, the document noted, residential customers saw an 8.34% rate increase, while commercial customers experienced a 5% uptick.

As for the Parking Management funding issue, Brown noted that he plans a May agenda item to address that situation.

The ACFR showed that the FY 2020 expenses for the Parking Management fund were $4,808,990, with revenue totaling $2,857,059. That resulted in a deficit of $1,951,931.

In the 2019 fiscal year, the ACFR noted, Parking Management had a net loss of $1,660,422.

This chart is contained in the city’s Annual Comprehensive Financial Report for FY 2020. Image courtesy City of Sarasota

“I am not supporting a rate increase,” Mayor Hagen Brody said in regard to the Solid Waste finances. “I’m telling you that right now. It’d be nice to see some rate decreases,” Brody added. “This is death by a thousand paper cuts in this community, with tax increases, rate increases. It’s just a rotating wheel of rate increases here,” Brody continued. “I haven’t seen a rate decrease since I’ve been here.”
Brody was elected in May 2017.

White of Purvis Gray pointed out that the commission could call for cost reductions in Solid Waste in lieu of raising the rates.

Then Brody said he could not understand why the Parking Management fund has insufficient revenue. “Their job is to go out and write tickets. That [reserve problem is] just beyond my understanding.”

For years, the Parking Management fund has required subsidies from the city’s General Fund to make up for its shortfalls. Although the commissioners voted in 2019 to implement a new paid parking program in downtown Sarasota, the initiative was put on hold for months last year as the novel coronavirus pandemic unfolded.

Accounting personnel need to be replaced

Yet another issue White of Purvis Gray addressed during his April 5 remarks was the loss of accounting personnel on the city’s staff.

A slide he showed the board indicated that that situation largely was a result of retirements.

Over the past three or four years, he said, “a whole bunch” of those employees left. “These are people that have been with you for years and years and years that have tremendous expertise.”

Mark White of Purvis Gray and city Finance Director Kelly Strickland address the commissioners on April 5. News Leader image

During the 2020 fiscal year, he added, “Some of the new hires that were on board” also departed.

Yet, the city is looking to implement a new accounting system, White pointed out. It also is striving to “maintain a desirable level of stewardship and accountability,” a Purvis Gray PowerPoint slide noted.

“To accomplish these goals,” White told the commissioners, “we believe that you’ll need one to two to three accounting professionals and essentially rebuild your Accounting Department.”

In response to a question from Commissioner Ahearn-Koch, White said, “We’re talking about filling existing positions … Right now, your department is kind of bare bones, and you have a lot of things going on.”

“The turnover [in Accounting] is concerning,” Mayor Brody said.

Because of the pandemic, City Manager Brown pointed out, positions had been frozen. However, he added, at the commission’s direction, those slots can be filled.