Deegan budget: Skirmish over reserve fund spending could be forthcoming (Courtesy of the Jacksonville Daily Record) — As the Jacksonville City Council begins dissecting Mayor Donna Deegan’s $1.9 billion general fund budget, don’t be surprised if the figure of $47.2 million comes up several times in budget talks.
That is the amount Deegan is proposing to spend from operating reserves during the city’s 2024-25 fiscal year, which begins in October. The city has about $350 million in operating reserves, or about 18.5% of the total proposed budget. Reducing the operating reserves to $303 million would make it about 16%.
The chair of the influential Council Finance Committee immediately raised a flag on it after seeing Deegan’s budget for the first time July 15,
“I just believe reserves are there for emergencies and should not be used in general for budgetary reasons,” said Ron Salem, the Finance chair and immediate past president of the Council. “In general, without looking at the specifics, using reserves to help balance the budget is problematic for me.”
Deegan responded to Salem’s concerns by noting that the city routinely draws from its operating reserves and that spending $47.2 million of it still leaves the city with more than twice the cushion recommended by city ordinance.
The proposed expenditure makes up 2.4% of the total budget.
With Council preparing for weeks of budget hearings in advance of a final vote on the budget, here is a look at Deegan’s request and why it could become a friction point between her administration and Council.
Recent history
According to information provided to the Daily Record by the city, Deegan is accurate in saying the city regularly spends a portion of its reserve funding annually.
The information, which covers fiscal years dating to 2012-13, shows that the city has spent reserves every year except 2022-2023.
The mayor’s office proposed using reserves in all but four years – 2012-13, 2013-14, 2020-21 and 22-23.
In all of those years except 2022-23, Council approved expenditures of reserves even if they weren’t part of the mayor’s proposed budget.
The amount of Deegan’s request is the highest since 2012-13 and is more than $9.5 million more than the second-highest amount during that time. In 2014, Mayor Alvin Brown proposed spending $37.7 million, which Council slashed to $7.1 million in the final budget.
The highest amount proposed by Mayor Lenny Curry was $22.3 million in 2017-18, which Council approved.
Looking at the Council-approved budgets, the biggest spend-down was $22.3 million in 2017-18, followed by $15.6 million in 2023-2024. The 2023-24 amount was $3.4 million more than Deegan requested.
In the past 12 Council-approved budgets, the average amount of reserve spending was $9.28 million.
Deegan’s proposal is not a record amount, nor was Brown’s $37.7 million. Her office provided information showing that $72.1 million in operating reserves was appropriated as part of Mayor John Peyton’s 2004-05 budget.
Deegan’s office stressed that her budget does not touch emergency reserves, which are maintained for situations such as major storms, and that last year’s budget added $76 million into operating reserves. The mayor’s office also moved $20 million in operating reserves to emergency reserves last year.
Deegan’s budget proposed budget includes a $128.78 million emergency reserve fund.
According to a source familiar with the budget process, the city generally sets its reserve spending with the expectation that tax revenues will come in at higher-than-projected levels. That is often what happens, as the revenue projections are conservative, which allows the city to keep its reserves steady while paying off one-time needs.
Deegan’s plan
Deegan, who is not proposing a tax increase in her budget, wants to use the reserves to cover one-time expenses. They are:
• $4 million loan to the Jacksonville Port Authority.
• $10.5 million for public safety vehicles and equipment.
• $10.5 million for Downtown Investment Authority one-time development grants.
• $11 million for economic development grants/loans (Office of Economic Development).
• $10 million for a housing loan fund for affordable housing.
• $1 million loan to public buildings to connect to JEA chilled water to reduce future utilities expenditures.
In crafting her proposed budget, Deegan faced budgetary pressures that included an increase for city services brought on by an influx of 17,000 new residents in the past year.
On the other side of the ledger, property tax revenues fell $62 million short of projections, partly driven down by high vacancy rates in commercial office properties amid lingering remote-working policies adopted by companies during the pandemic. The vacancies have reduced demand for offices, reducing sale and lease prices and undercut the appraised value of commercial office properties.
Salem’s concerns
During a July 16 Finance Committee discussion about two projects involving funding that could feasibly be carried over into the next budget as reserves, Salem said he preferred to defer action on the projects in light of Deegan’s proposed use of reserve funding.
“There have been reserves used in budgets in the past. They’re in the $7-8 million range where reserves were used, nowhere near $47 million. So it would be my feeling to accumulate dollars such as this that we could utilize to reduce that or obviously find other places in the budget to cut, which is another option as we get into the budget process.”
In recent months, Salem has raised concerns about how impending increases in city spending, coupled with the shortfall in projected revenue, will affect the 2024-25 budget. He has signaled that he will be scrutinizing all expenditures carefully, including those involving reserve funds.
The city’s impending increases include paying for its $775 million portion of its stadium deal with the Jacksonville Jaguars, plus $56 million in funding for city parks and the stadium adjacent flex-field that was also included in the deal.
Elsewhere, the city faces increases in pay for firefighters and police officers, part of new agreements forged between Deegan and the police and fire unions, and potentially an additional $94 million in community benefits that were originally part of the stadium deal but were carved out for consideration on their own.
That funding would go toward workforce development, homelessness services and affordable housing in the Eastside neighborhood and countywide, with $30 million exclusively for the Eastside.