By Mary Hladky
Boca Raton City Manager Leif Ahnell has warned council members that the city faces a potential $20 million budget deficit in two years.
Of most concern is that revenue the city gets annually from the Community Redevelopment Agency is about to dry up.
The city will receive $13 million from the CRA this year. By the 2023-24 fiscal year, the CRA will no longer make payments to the city. The CRA is scheduled to cease to exist in 2025.
The relationship between the city and its CRA, which was created in 1980 to eradicate downtown blight, is complicated. But for budget purposes, the CRA is required by state law to reimburse the city for the cost of police, fire and other city services in the downtown.
Another issue is police and fire pension costs. Ahnell told council members on April 26 and again at a council goal-setting session on May 12 that the pension plan’s investment returns are underperforming the market significantly.
The pension plan was expected to earn an 8.6% return last year, but realized 4.1%. The previous year, a 4% return was expected, but it earned 3%. The underperformance is expected to continue, he said.
“The firefighters and police are very concerned about it,” Ahnell said.
It also appears that the police and fire pension fund’s management and consulting fees are “significantly greater” than those of other pension funds, he said.
The city soon will spend $2.4 million to shore up the fund.
The pension plans for the city’s general employees and executive staff do not pose a similarly high drain on the city’s budget.
“We cannot continue to absorb these kinds of shortfalls,” Ahnell said. “It will become a challenge to balance next year’s budget.”
The pension board has eight members, with four appointed by the City Council. Police officers and firefighters each appoint two members. The Coastal Star was unable to reach a pension board official.
While the city makes appointments, it has no other control over how the board operates or invests its money.
The potential deficit doesn’t mean the city is going broke. It can cut spending or raise taxes to balance the budget. But the city is very proud of its low tax rate, so a tax hike seems very unlikely.
Ahnell cautioned council members to be mindful of the potential deficit as they make spending decisions.
The city is growing and so needs to increase services such as police and fire protection. As it adds new parks, it must hire new employees. The city also will bear the expense of pending projects, including the construction of the new Wildflower/Silver Palm Park, building a parking garage for the Brightline station and taking over the operations of the Boca Raton Golf and Tennis Country Club that was donated to the city.
Planning for a new government campus has been placed on hold because of the pandemic, but at some point the city will replace the aging and outdated police department and City Hall buildings. Ú