YOUNG HARRIS — In the first day of its planning retreat, the Gainesville City Council discussed the priorities and financial challenges the city faces in the next fiscal year.
Two of the council’s top priorities include relocating the public safety building and redeveloping the Midtown district. The two priorities go hand in hand. City staff has identified three areas to locate the new police station and fire administration building in Gainesville’s Midtown district, but the council discussed the locations with Gainesville City Manager Bryan Shuler in a closed session.
Afterward, Shuler said the relocation is "still a ways off," because the purchase necessary to build the new facilities involves multiple landowners.
"We want to work with these landowners in friendly acquisitions, and not use eminent domain," Shuler said.
The city has the power to take property by eminent domain for public uses such as construction of a public safety facility.
Though relocation is in the future, the city needs to be out of the current public safety building by June 2010, as per their agreement with the developers, City View LLC, who purchased the property in order to build a 13-story hotel as part of the Midtown Redevelopment Plan.
The city has already started negotiating with the landowners in question, and once the land is acquired, Shuler said it should take up to 18 months to build the facilities.
"We want to move as expeditiously as possible," Shuler said.
Gainesville, like other organizations in the country, is battling the rising costs of health care and health insurance.
Last year, the city changed its health insurance program to one that requires city employees to pay a $750 deductible — something city employees have complained about, Shuler said.
The city refunds $450 of the deductible to its employees at the end of the year, but Shuler said the refund will not be a financial possibility for too long.
Gainesville City Councilman Robert "Bob" Hamrick commented that he recently had a city employee call him at home who was concerned about the city’s insurance coverage.
Shuler said the city is paying more than it can afford in insurance premiums, and shelled out more than $2 million in premiums from July to December 2007.
"Our insurance situation is not good," said Shuler, who called the current program a "budget buster."
Melody Marlowe, Gainesville’s chief financial officer, said the changes to the insurance program did not benefit city employees; they only made insurance more affordable for the city.
Issues with the current insurance policy are affecting employee morale, Marlowe said. "The employees want more coverage."
Yet, the city will have bigger problems than health insurance if some proposed state legislation is signed into law, Shuler said.
House Bill 938, introduced by Rep. Earl Ehrhart, R-Powder Springs, threatens to cut a portion of the city’s operating budget, Shuler said.
The bill will keep cities from charging franchise taxes — fees that cities charge utilities such as power and cable companies for using the public rights of way — to utility companies without a voter referendum that approves the franchise tax.
Gainesville charges Georgia Power, and other utilities, 4 percent of the gross revenue it makes from customers in the Gainesville city limits. The fee is meant to offset the cost of maintenance on the rights of way that the utility companies use within the city.
County governments are prohibited by state law from charging franchise fees, but residents in unincorporated counties still pay for the fees in their utility bills.
Utility companies currently include the cost of franchise taxes in the rates they charge all their customers, but Ehrhart’s bill would keep residents in unincorporated counties from paying that portion of their bills.
The bill is meant to keep residents in unincorporated areas from paying for a service from which they do not benefit.
"This is an issue that’s going to be hard to overcome in the legislature," Shuler said.
If the bill passes, residents of cities would have to vote on whether to take on the burden of the franchise tax in their utility rates. If city residents voted against paying the franchise tax, Gainesville would still have to allow utilities to use their rights of way, and find another way to make up for the lost revenue.
Currently, Gainesville officials are expecting more than $3.5 million in revenue from franchise fees for fiscal year 2008. Franchise fees make up about 15 percent of the city’s budget.
If Ehrhart’s bill passes, the city would have to make up the loss of revenue with an increase in property tax, the city’s only reliable source of revenue, Shuler said.
In what he called the "nightmare scenario," Shuler presented a mock budget for Gainesville that did not include revenue from franchise fees. In order to meet the city’s operating budget, it would have to increase the millage rate from 1.43 to 2.48 mills.
At least one legislative committee held a hearing on the bill, but the bill was not passed out of the committee, Shuler said.
One other piece of legislation pertaining to franchise fees, introduced by Rep. James Mills, R-Chestnut Mountain, has caught the attention of the city manager.
House Bill 1034, would prohibit cities in Georgia from charging franchise fees to solid waste companies that manage open top "rolloff" dumpsters in the city limits.
Marlowe said the majority of the revenue the city receives for this particular franchise fee comes from "rolloff" customers, and the loss in revenue could be significant.
The bill has yet to have a hearing in the state legislature, Shuler said.
"We’ll see where it goes," he said.
The council is holding its annual planning retreat at Brasstown Valley Resort in Young Harris. Today, the council will meet with Kelly Randall, director of Gainesville’s Public Utilities department, to discuss the drought’s impact on the department’s revenue.