City Financials

Fairhope is an enviable community, frontage on Mobile Bay, its historic character, many parks and engaged residents......except for its financial position. Despite having over 16,000 citizens within its limits, the City of Fairhope cannot generate enough revenue to fund what we want and what we need. For the past 3 years the city has resorted to deficit financing, drawing large sums of money from its utilities. In the year ended 9/30/07 the city charged the utilities $2,419,999 for collection and administrative services and then transferred a further $4,020,046 of utility profits to the city general fund. In spite of this six and one half million dollar infusion from the utilities, the city still needed added debt to operate. The utility support has come at the cost of 10% annual increases each year since 2003 in utility prices to its customers.

As the city government presently operates the mayor, with help from utility and other supervisors, prepares the budget. The council has no participation in the concept or development of the budget. The budget for the year beginning Oct. 1, is usually presented to the council at its last September meeting, no time to review or discuss, just vote it up or down.

The budget for 2008 showed only $115,000 more revenue than expense. Five months into this budget, Feb. 29, 2008, our revenue was down over $500,000 from the prior year. Actually the difference would have been much worse but transfers from the utilities to the city were up 80% over 2007. The Fairhope Comprehensive Annual Report (audit) that was just approved by the city council for 2007 shows long term debt at over $39 million. To this can be added $8.8 million of airport debt for a total of about $48 million. The same report shows that our 2008 payments for debt principal, interest and capitalized leases for the city, the utilities and the airport will exceed $5 million.

The United States economic outlook appears to be bleak, and a full recovery may not be until 2010. Locally, the current property taxes are still up in the air. The city is not expected to receive our final tax collections until this summer and possibly in amounts less than the budget. Next year it would seem that property tax receipts for all elements of local revenue will be down because of the lower than expected property values. Also it seems reasonable to expect a lower rate of construction so other fees will be reduced. To add to the problem, natural gas and electric power will continue to increase.

What’s the upside? We do live in an enviable place and I feel that the continued economic downturn won’t hit us as hard as some parts of the U.S. But, the city must reel in its spending and make annual energy, capital spending and debt service budgets a part of the annual budget. Finally, and most important, the city must start an active, long range financial planning process. (appeared in the Mobile Press Register as a letter to the Editor)