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Friday August 1st 2014

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Enterprise Operations

Mayor Hayward runs three main enterprises:  Port of Pensacola, Pensacola International Airport and Pensacola Energy (Sanitation Services is discussed under Neighborhoods). The port and airport have financial issues, while the gas utility continues to thrive.

The Port of Pensacola is a $14 million asset that generated in 2011 a positive cash flow of $252,329. However, once deprecation was included the enterprise lost $872,288. Adding to the problem is delinquent tenants who owe the city hundreds of thousands of dollars and are frequently more than 90 days past due.

At the recommendation of his port advisory, Hayward said last January that his administration would re-examine leases with Cemex and other firms storing aggregate material at the port and will push for the expansion of high-tech offshore service industry.

In April, the mayor announced the city had secured $3.6 million in state funds for the port. Of the $2 million appropriated from the Florida State Transportation Trust Fund, $1.2 million funded the retrofitting of Warehouse 9 to accommodate the fabrication and repair of high-tech subsea equipment. The remaining $800,000 funded the installation of sanitary sewer receiving stations for berthed vessels.

In addition, the port also received a $1.64 million Florida Seaport Transportation and Economic Development grant to repair, rehabilitate and expand the capacity of Berth 6.

In November, Hayward canceled a press conference that was reportedly to announce an agreement to bring more business to the city and with it more than 100 jobs over three years. There has been no word on if the deal will be consummated in 2013.

The Pensacola International Airport has a new name, new logo and is looking for a new director. Like the port, the airport had operating income before depreciation of $3.8 million in 2011. However after depreciation, debt service and non-operating expenditures and contributions, the enterprise lost almost $2.2 million.

Fitch Ratings downgraded the airport’s bonds to ‘BBB’ from ‘BBB+.’ For the third consecutive year, Fitch gave the facility a negative outlook because of its weak balance sheet liquidity and slightly above-average leverage. According to Fitch, the airport’s unrestricted cash balance position has historically been poor relative to its operating expenses, and for fiscal 2011 the airport only had 63 days cash on hand.

Hayward did convince UPS to move in October 2011 its regional sorting facility to the airport. He, the Greater Pensacola Chamber and the county have been recruiting another big employer to the airport that could bring 500 jobs to the city, but they have yet to make it happen.

Pensacola Energy, formerly known as Energy Services of Pensacola, has been a “cash cow” for the city for decades, contributing $8 million annually to city operations.

At the mayor’s recommendation, the city council approved an average rate increase of 6.9 percent for FY 2012.

Mayor Hayward has championed natural gas as an alternative fuel source. On Dec. 16, 2011, the utility issued a $5 million Gas System Revenue Note with Hancock Bank to fund capital infrastructure for ESP and purchase five compressed natural gas refuse trucks.

The utility entered into an agreement with Zeit Energy to build a compressed natural gas fueling facility in conjunction with ECUA. The $1.8-million facility opened in October 2012.

The mayor also completed negotiations with the Navy on a new Basic Ordering Agreement project for energy upgrades for NAS Pensacola. The estimated annual profit for the utility is $250,000.

The city also agreed in December to sell Gulf Breeze the rights to supply natural gas to Pensacola Beach for a lump sum of $470,000.

Budget

Mayor Hayward inherited a financial nightmare—skyrocketing pension costs, the first of nearly $4 million debt payments coming due, declining property taxes and shrinking population. Reining in the budget may have been his most difficult, and least glamorous, task.

Fortunately, he has had veteran Finance Director Dick Barker and Chief of Staff John Asmar take lead on developing his first two budgets.

The property taxes have declined steadily since the 2006-07 fiscal year. In his tenure, Hayward has seen them drop $1.1 million to $12,015,300, the lowest level in nine years. Meanwhile the city budget has increased to $220,680,000, which is up $3.6 million from when he took office. And the population has dropped, losing nearly 4,000 residents since 2000.

When the mayor gave his State of the City address in June, the city’s unfunded pension liability topped $116 million, and annual pension costs had jumped $1 million in 10 years to $13.7 million for FY 2013. On Dec. 21, the mayor announced a collective bargain agreement with the police union, which he said will reduce unfunded pension liability by as much as $10 million. However, the agreement also gave one-time bonuses and pay raises to the officers, which will offset initially some of the savings.

This fiscal year is when the city and its Community Redevelopment Agency begin making payments to the Emerald Coast Utility Authority for relocating and demolishing its Main Street sewage plant—$1.3 million annually until the $19.5 million commitment is paid. Also $2.6 million is due on the bonds for the Maritime Park.

Former Escambia County administrator Randy Oliver has been hired as a consultant to help the mayor figure out how to make the payments.

While the overall city budget is up, the General Fund budget is slightly down, dropping from $49.6 million in FY 2011 to $49.3 for FY 2013. Last year, Mayor Hayward rolled back the millage rate from 4.5395 to 4.2895. He did not drop the rate for FY 2013.

Hayward has increased the budgets of Public Safety (2.71 percent), General Government (11.5 percent), and Culture and Recreation (7.29 percent). However, the biggest increase has been in Economic Development, which is up $1.73 million in two years—over 48 percent.

The hike is largely due to the creation of a million dollar economic development incentive fund, which Hayward has said is to “market surplus properties, provide incentives to growing businesses or new ventures, and to provide seed money to assist with site development.”

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