Dunnellon grapples with growing debt
Published: Tuesday, May 14, 2013 at 7:18 p.m.
Last Modified: Tuesday, May 14, 2013 at 7:18 p.m.
OCALA - Dunnellon Mayor Nathan Whitt is trying to apply a simple political theory in mulling over the city's finances: when deep in a hole, stop digging.
Whether Whitt's message sinks in before the city's budget sinks, however, remains to be seen.
Two major initiatives — the introduction of a telecommunications utility and the expansion of its water system — has significantly increased what Dunnellon owes its creditors.
Dunnellon had accumulated $22.8 million in debt as of last Sept. 30. That meant each resident owes $13,098 to the city's lenders.
To put that number in context, Marion County as a whole had about $224 million in debt for its water utility system and other big projects as of the end of last fiscal year on Sept. 30. That amounted to $671 per county resident.
One of the culprits for all that debt is Greenlight Communications, a telecommunications utility that the city launched in 2011 to offer Web-based and cellular telephone service, a connection to high-speed Internet and cable TV as well as security monitoring.
Dunnellon launched it from scratch, including having to lay a 200-mile fiber-optic network.
Doing so meant borrowing $7.4 million.
Then in December 2011, as Greenlight Communications was trying to get of the ground, the City Council voted to buy the water utility system in the Rainbow Springs Country Club, which sits outside the city limits north of town but is within Dunnellon's defined service area.
The deal doubled the size of the city water system. But completing the acquisition meant going another $6 million in debt.
And that came on top of other ambitious projects to improve the water and sewer system around town, all of which were financed with borrowed money.
On Monday night, Richard Powell, a Lake City accountant who compiles the city's annual financial statement, briefed the council on its last audit.
Powell suggested the city was sitting atop a healthy reserve and noted that the "new position" of its income had risen by a little more than $1 million between 2011 and 2012.
But despite that, the city's utilities were big money pits.
According to his report, Dunnellon's water and sewer system and Greenlight Communications, combined, lost nearly $2.6 million in 2012.
The water and sewer system was elevated into the black only through grants the city received last year.
Greenlight Communications, which city officials had once hoped would net $2 million a year, was in the hole for $2.5 million.
Powell attributed this to the network being in "start-up status."
"There isn't full revenue here," he told the council Monday night.
Councilman Erik Collop responded by suggesting the utility itself was problematic.
"That particular system is not in very good shape," Collop said. "It's crippling this city, and it will cripple this city if we let it."
The fiscal picture has only added to some recent turbulence in the city operations.
Harold Horne, the city's long-time community development director, retired in mid-March, announcing his departure in a terse two-sentence memo.
City Manager Lisa Algiere also recently resigned.
Algiere had been the main proponent of Greenlight Communications, having managed a similar system in Valapariso, a small Panhandle town where she worked before joining Dunnellon.
Critics often blamed Algiere for foisting a flop on the city and loading up its debt in the process.
In her May 8 resignation letter, Algiere said her husband had accepted a new job in Tampa and the family decided to relocate there.
On Monday night, the future of the city's lawyer, Marsha Segal-George, also seemed in doubt.
Whitt cited her contract as an example of the city's desperate financial situation and suggested it would be one place to start fixing things.
Segal-George, who has been with the city since 2007, works for an influential Orlando firm whose partners include Tom Feeney, a former Republican congressman from Central Florida.
Whitt pointed out that Dunnellon had paid the firm $316,825 for her services just since Oct. 1.
In comparison, this year's budget for the County Commission's three-member, in-house legal staff is $663,108. As of mid-April, the County Commission had also paid an additional $31,320 for outside legal advice.
Whitt said the lawyer's contract should be amended so she would only be responsible for a contentious lawsuit the city is battling over Rainbow River Ranch, a proposed 349-home development along the east bank of the Rainbow River.
Whitt added that the city should seek new legal help because the current system was financially unsustainable.
He found an ally in Collop, who announced that he had lost "complete and utter confidence" in Segal-George and her firm.
A big factor in that, Collop said, was because Segal-George had helped draw up the business plan for Greenlight Communications, which he believed was outside her expertise.
"It's time to look at what's going on and stop all the BS," Collop said.
But the pair could not convince the rest of the council to go along, losing by a 3-2 margin on a motion to have the staff investigate whether the agreement could be amended.
Segal-George countered that she had spent considerable time — and racked up considerable billable hours — fighting the city's prolonged legal battles over the Rainbow River Ranch project and the Rainbow Springs acquisition.
Councilman Dennis Evans defended Segal-George.
"The attorney works for the council," he said. "We are to blame."
"There has been a lot of turmoil," said Councilwoman Penny Fleeger, "and I would like a week or two of calming down."
On Tuesday, Whitt sounded hopeful in an interview, saying it was too early to begin the death knell for Greenlight Communications.
"It's going to be a rough couple of months, but we can see the horizon now," he said.
The mayor said he is awaiting a workshop next week, at which a consultant who has been reviewing the utility will present a strategy for running it.
And Whitt reiterated comments he made at Monday's meeting that the Rainbow Springs water system was a good deal that was badly handled.
The city bungled it, he said, by not explaining the benefits of it to the residents and by rushing in to raise their water rates.
Next week, Whitt said, he will unveil a new program called "Mending Fences: Friends and Neighbors Again" to try to end the acrimony generated by the deal and the subsequent lawsuit.
Still, it will be a struggle to get the financial picture cleared up, the mayor said.
"Our biggest issue is our budget. It's like you're making minimum wage and you're shopping for a Porsche," Whitt said.
"Mr. Collop and I seem to be on an island."
Contact Bill Thompson at 867-4117 or email@example.com.