Moments after Mayor Donna Deegan presented her proposed $1.92 billion 2024-25 city budget to the Jacksonville City Council in mid-July, Council member Rory Diamond tweeted that higher taxes were in store for the city if the Council’s Republican supermajority didn’t act.
“And, we will,” the tweet read.
In the Council Finance Committee’s first budget hearing Aug. 8, Diamond and his Republican counterparts on the committee wasted no time in following through on his commitment.
By the first break that morning, the committee squashed one of Deegan’s priority items, a $10 million city loan to launch a public-private affordable housing loan fund.
Deegan had included the loan among one-time expenditures she planned to fund with $47.2 million from the city’s operational reserves.
The fund is a point of pride for Deegan, who held a news conference in April to tout it as an “elegant solution” to create more affordable housing in the city.
The $10 million loan was designed as seed money to attract private investment, which would be provided to developers of affordable housing as gap funding. The city’s loan was to be repaid in 20 years.
Diamond dismissed the fund as a “half-baked contract and half-baked idea,” referring to an analysis by Council auditors that the term sheet for the loan didn’t include basic details such as the minimum number of affordable housing units that would be created through the fund.
Diamond moved to eliminate the loan from the budget, with the possibility that the Council could reconsider it if Deegan’s administration retailored it to address the auditors’ concerns.
The committee passed Diamond’s motion on a voice vote, with only member Ju’Coby Pittman voting against it.
For Deegan and her administration, it was a setback. Afterward, the Democratic mayor accused the committee of playing politics and being obstructionist.
“I really truly do believe that the majority of this Council wants to work with me to move things forward,” Deegan said.
“I think you have individuals who spend a lot of time, frankly, being part of the problem instead of part of the solution.”
It was the start of what immediately shaped up as a bitter budget process, with meetings scheduled through Aug. 23.
The day ended with the committee making additional cuts and with Ron Salem, the chair of the Finance Committee, saying that more would be forthcoming.
Conflict over reserve spending
Coming into the process, some Council Republicans were targeting Deegan’s proposed reserve spending, saying it was against the city’s best interest to dip into the reserves.
The city is carrying operational reserves of $345 million, with another $125 million set aside as emergency reserves.
Deegan’s chief of staff, Darnell Smith, opened the hearing with a defense of the reserve spending, noting that the city had added $300 million to the reserves in the last six years and had more than twice as much cushion as required under city ordinance.
He said adding money to a healthy reserve “means we are not delivering services for our citizens.”
After seeing the affordable housing loan sliced out of the budget, Deegan criticized the committee’s stance on the reserved spending.
“It’s like starving your family so that you can keep more money in the bank than you really need,” she said.
Salem has argued that although the city routinely draws from its reserves, the amount proposed by Deegan is excessive. Over the past 12 years, Council has approved an average of $9 million in reserve spending.
Diamond went further in opposing Deegan. Accusing the administration of “wild, liberal spending,” he announced he was filing legislation that would limit spending in future budgets to no more than 1% above projected city revenue and would prevent the mayor from being able to transfer more than $100,000 without Council approval.
He also said he would seek to eliminate spending on diversity, equity and inclusion.
Carlucci weighs in
Not all Council Republicans have knives out for Deegan’s budget.
At-large member Matt Carlucci, a moderate who endorsed Deegan in the 2023 election, issued a release after the Aug. 8 hearing defending the administration and the affordable housing loan.
Saying homelessness and affordable housing were together the top concerns he hears from constituents, Carlucci said cutting the loan was “akin to swimming halfway across the St. Johns river only to turn around and swim back, like we always seem to do,” he said.
“We must be bold in this budget process and ensure these funds are allocated effectively to make a real impact.”
Carlucci said he would advocate for the loan.
He further urged the committee not to cut Deegan-proposed expenditures for health and wellness, arts and entertainment and other quality-of-life areas.
“These improvements are not mere enhancements; they are vital for the well-being and prosperity of our community,” he said. “I urge the Finance Committee and the Council as a whole to approve these measures and avoid the temptation to water them down, which would only serve to put the brakes on the positive momentum Jacksonville has achieved.”
Budget pressures
Deegan said her budget prioritized “the vital over the important” in a year when the city’s supply of federal pandemic funding ran out and property tax revenue came in $62 million lower than projected.
She called her proposal fiscally responsible and, in defending it, noted that Fitch Ratings had upgraded the city’s credit rating two grades, from AA- to AA+, while two other ratings agencies affirmed AA grades.
“It’s very much a validation of how we’ve handled our fiscal house here,” she said.
With the city on solid ground financially, she said, it was appropriate to spend a portion of the reserves for one-time expenses.
Her list included $11 million in loans and grants through the Office of Economic Development; $10.5 million to purchase public safety vehicles and equipment; $10.5 million for Downtown Investment Authority incentives; $1 million to connect buildings to JEA’s chilled water system; and a $4 million loan to the Jacksonville Port Authority that was part of a Council-approved $27.5 million package of financing to raise high-voltage transmission lines over the St. Johns River to give additional clearance to large ships coming into the Blount Island terminal.
Auditor: Deficits looming
Budget hawks on Council came into the hearings armed with an auditor’s examination of city revenue and expenditures, which showed possible deficits from $44 million to $105 million through fiscal year 2029.
Smith said that to improve the city’s financial performance and ward off the deficits, the administration had adopted a long-range strategy that includes:
Improving operational performance and increasing efficiencies. Smith said the city is analyzing processes and adopting new approaches, such as use of online document signing, to increase capacity and eliminate waste. The goal is to “reduce headcount through attrition and retirements,” he said.
Potentially raising city fees. Smith said the strategy was to evaluate fees to ensure they are set at a level that covers most of the city’s costs for providing service.
Analyzing expenditures to ensure the city achieves “the appropriate ROI based on specific, measurable, achievable, relevant, and time-based metrics that drive expected value.”
Determining why property taxes have slid below projections. “It isn’t enough to know that we have slower revenue growth while doing nothing about it,” Smith said. “We are planning to convene a group of financial and real estate experts to help us understand the drivers of the slower revenue growth and propose solutions for implementation.”