Budget discussions between Mayor Donna Deegan's office and the City Council will likely become contentious over the next month as officials debate spending practices after an auditor's report showed the potential for deficits in the next four city budgets -- leading one City Council member to propose changes to future budget processes.
The report projected a $78 million deficit in the 2025-26 budget when considering the expected revenue and already allocated expenditures. However, the report did not include the unallocated $96 million in the negotiated community benefits agreement as part of the EverBank Stadium deal or the proposal to register police and fire in the Florida Retirement System.
To counter the loss, City Council members have proposed cutting up to $47 million that Deegan proposed in operating reserve spending, and council member Rory Diamond plans to introduce legislation to cap mayoral spending power in the future.
Deegan's office maintains the spending invests in the city's future and cited a boost in the city's credit ratings announced Tuesday.
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The result could be a compromise between the City Council and mayor's administration that plans to fight for its current priorities, including the benefits agreement, or a political battle, according to Michael Binder, with the University of North Florida Public Opinion Research Lab.
"You wonder if this is going to be a [sic] arguing over stuff and then ultimately just stepping in the middle and calling it a day," Binder said. "...That's how politics is supposed to work. You argue about things you can argue about, and when you can reach a compromise, you reach a compromise."
Deegan proposed a $1.92 billion budget and accompanying $489 capital improvement plan on July 1. Her office has said it would be a "lean" year because the city is no longer receiving federal American Rescue Plan funding and received less in property taxes than officials expected.
Deegan has argued the spending, including $47 million from operating reserves for one-time expenses, will serve as an investment in Jacksonville's continued growth and will create revenue over time. She will never produce an unbalanced budget, she said.
Ron Salem, the chair of the finance committee dissecting the budget, countered that the reserves should primarily be used for emergencies and that the city needs to keep them intact, especially in light of potential deficits.
The review from the City Council auditors show possible deficits ranging from $44 million to $105 million over the next four years. The average amount pulled from operating reserves in the past 12 years is just over $9 million per year.
As of July 1, the city had $345 million in operating and $125 million in emergency reserves, up from $316 million and $66 million, respectively, in 2022.
"Someone asked me about the reserves, and I said, 'I like looking at them,'" Salem said. "Knowing that they're there, knowing if we have an emergency, we're adequately prepared, and if we have a recession, and we're looking at laying off people, we could dip into the reserves to assist in that."
The proposed funding from the reserves would go toward a number of projects, including $10.5 million for public safety vehicles, $10 million for an affordable housing loan fund and $10.5 million for Downtown Investment Authority grants.
City Council could still keep those projects while finding a way to pull it from the general fund, Salem said. He had ideas on areas of the budget he wanted to cut but said he wanted to wait until budget hearings for fellow council members to voice their ideas as well.
Council member Diamond said Tuesday that he wanted to go farther and will introduce two bills to limit the mayor's spending power: the mayor would not be able to transfer over $99,999 without prior City Council approval and future budgets could not spend more than 1% more than projected city revenue.
Diamond said in a news release he will also file an amendment to prohibit any spending related to "diversity, equity and inclusion."
"The Mayor's budget is almost $47,000,000 over-budget and does not present the conservative values of the people of Jacksonville," Diamond said. "These new laws will ensure a balanced budget and tight fiscal control over our City's finances. This is the only way to protect our taxpayers from this wild, liberal spending."
The Deegan administration maintained that its budget is sound, especially given the city's credit rating returns.
S&P Global Ratings and KBRA held the city's standing at AA, while Fitch upgraded it to AA+. All three decisions were made knowing the proposed general fund budget, usage of operating reserves, proposed capital improvement plan, movement of infrastructure projects back into the Better Jacksonville Plan, inclusion of stadium renovation funding and five-year projections for revenue and expenditures, the city said in a news release.
Deegan said her team plans to fight for each of her priorities in hearings over the coming months, especially as the city currently has double the amount in emergency reserves as auditors recommend.
"From my view, there is a big difference between being fiscally conservative and fiscally responsible," Deegan said in an interview with the Times-Union. "And to me, if we are too conservative in terms of making sure that we are investing in those things that will return money to our city, I think that's going to send us down a bad path economically."
Both perspectives have merit, Binder said. People typically consider reserves for emergencies, but they can also be treated as a savings account to replenish, he said.
As for whether pulling from the reserves is a smart move, Binder pointed to recent, more costly, spending.
"All this boils down to: you're spending nearly a billion dollars on a football stadium, and what do you think about that?" Binder said. "Because if you're not spending a billion dollars on a football stadium, suddenly you have a lot more resources to do a lot of other things."
The City Council approved a stadium deal in June, only passing a portion of the community benefits agreement that UNF's poll found to be the most popular aspect of the deal. Council leadership formed a special committee to discuss the remaining priorities -- the Eastside neighborhood, workforce development, affordable housing and homelessness -- but budget discussions will carry impact as well.
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The auditor's report puts the agreement in a "whole different light," Salem said. He believed the city could still receive matching funds from the Jaguars because of other areas of the budget that invest in the shared priorities.
Binder did not know how the Jaguars could react to that proposal, but he anticipated it may be a "tough sell" for residents.
"Honestly, unless you're seeing a ticket holder, or unless you go to games with any kind of regularity, that doesn't really do a whole lot for you," Binder said. "Those other things in that [community benefits agreement] that's, you know, there's large sections of the city that could get direct benefit from that."
As the city faces major financial projects in the coming years -- from the stadium renovations and salary increases to development project incentives -- Binder said officials will have to decide how to allocate funds but will likely shy away from considering revenue increases that could impact future campaigns.
Officials could elect to raise the property tax rate, make cuts to the biggest part of the budget or start to increase the trash fee that is currently being subsidized by the general fund. However, whoever broaches the idea could be penalized for increasing resident costs in the next election, he said.
"Honestly, most decisions made in City Hall are political, as opposed to necessarily fiscally responsible," Binder said. "Sometimes those things correlate, many times they don't."
The City Council finance committee begins budget hearings Thursday, and the full council will vote on the budget in September.