In Flagler Beach, A Pitched Battle Over Taxes Is Dividing Commissioners as Administration Draws Fire

By Florida law, even if the tax rate stays the same, if a property owner sees a higher tax bill because his or her property values have improved, that’s considered a tax increase. Only going back to the rolled-back rate ensures against such an increase. (See a complete explanation of the rolled-back rate here.) 

There was no question that a majority of commissioners agreed to go to rollback. 

Yet on Friday, commissioners got two surprises. The first was notice that two commissioners, Jane Mealy, who chairs the commission, and Deborah Phillips, had signed a call for an unusual third budget workshop. That’s set for Sept. 3. The second surprise was the revised budget book Kathleen Doyle, the finance director, submitted. 

Doyle in a memo  submitted the updated budget. But the tax rate was set at $5.4552, not the $5.285 the city commission had explicitly agreed upon. 

Doyle explained that the rate of 5.4552 “is the roll back rate of 5.2850 plus the Florida Per Capita Personal Income Increase of 3.22%. This Increase is per Florida Statute 200.001.”

Doyle made it sound as if Florida law required the additional increase. It does not. The only thing Florida law does is require the Office of Economic and Demographic Research to report per capita income increases as calculated by the federal government. The requirement has no other effect. It is certainly not a requirement of local governments to include the increase as part of their tax rate: state law does not force any such increases on local governments no matter how much per capita income, or inflation, fluctuate in a community. 

The measure is advisory only–it’s one way to measure increased demand for government services, though by no means the only or most accurate way–with one caveat: once calculated into the proposed property tax rate, that rate is also the maximum rate that a simple majority of commissioners (three out of five in Flagler Beach) may approve in order to enact the budget. 

The Mealy-Phillips request for another meeting, in other words, suggests that such a majority may be in the making, countering the effort to go back to rollback. 

Commissioner Eric Cooley on Saturday wrote Doughney: “At the conclusion of last meeting, concensus was reached and direction was given to staff to budget at rollback. No where was direction given to do rollback plus (random items). This book and update does not follow the last public direction given. There has been no public changes to direction given to staff so I am confused why this is even being presented to us in this manner? I request the budget book be prepared following the direction from the last meeting. Please advise.”

Cooley worries there’s been back-channel activity.

“That was not the direction that came from our meeting. Our meeting was, you were going to set a budget book based on rollback,” Cooley said In an interview on Sunday. “Someone has gone to staff and given them different direction than the direction that was given to them at our meeting by the commissioners.” Cooley said the commission’s direction was “being undermined by somebody,” and that come Thursday, “it’s going to be one of the first questions I ask when we call our meeting to order.” 

He added: “This type of tactic, our city is supposed to be better than that, this is the kind of tactic you come across with the county, not our city. This is the first time I’ve seen it.” 

Commissioner Rick Belhumeur put it more bluntly: “It’s a conspiracy. I don’t know of a better word to explain it,” he said, referring to the city administration, which he says drives the budget process more than it should, given the commission’s role.  

Cooley and Belhumeur may also be overstating the case: while the Doyle memo may have poorly conveyed its meaning, sounding more prescriptive than advisory, it does not lock the commission into voting for the higher property tax rate, but only provides for what the numbers would be at those various tax rates, as budget documents usually do. The decision is still in commissioners’ hands, with two hearings, on Sept. 16 and Sept. 30 at 5 p.m., when any line item, any number, may still change.

Belhumeur and Cooley have been pushing through the two budget hearings to lower the tax rate well below that Larry Newsom, the late city manager, had initially proposed. They disputed a range of new spending, from license plate readers for the police department to drones for various departments to capital improvements to the sanitation office to increases in the amounts the fire department is asking to add to its fire truck reserve fund, and so on. They say the commission has raised taxes year after year. This year, with the coronavirus emergency, it should hold back and give taxpayers a breather. 

“I’m not looking at changing the millage rate this year at all. I think this city has been through enough, and I do appreciate what the commission has done over the last three and a half years,” Newsom had said in his very last interview earlier this month, when he spoke to FlaglerLive on the budget. “I think we can take a break on the millage rate. I can’t promise anything on utilities.” He added: “I don’t want to do rollback because then you’re doing catch-up.” 

That’s Mealy’s approach. 

Newsom agreed that, after proposing to buy a new fire truck earlier this year, that plan should be shelved until a future year. “That was my mistake,” he said of the fire truck. “That was my suggestion, it wasn’t the fire chief, so I accept the responsibility for that, however, we can make it last for a few more years, but that truck’s been in the budget for quite a long time, I was just trying to move it up.” 

In July, Newsom had proposed a maximum tentative tax rate of $5.8 per $1,000 in taxable value, “but I think tentative should be put in quotation marks,” he said–meaning that it was just a working number, not a guide. 

But when he submitted the proposal at the July 23 meeting, he advised the commission against going back to rollback ($5.285), though he said he’d be comfortable with keeping the rate equal to what it is currently: $5.710 per $1,000 in taxable value. Setting the proposed rate only means that the commission may not exceed it once it votes on the actual rate at two successive public hearings in September, but it may lower it by then. 

Cooley and Belhumeur wanted the tentative rate set at $5.710, the current rate. Their motion at the July 23 meeting failed. Mealy, Ken Bryan and Phillips wanted it set at $5.8, and won that vote, 3-2. 

It’s easier to understand the numbers with an actual example. Take Commissioner Phillips’s house on Palm Avenue. It’s valued at $350,000, assessed at $296,467–a $6,665 improvement from the previous year–with a $50,000 exemption, making its taxable value $246,467. In 2019, Phillips’s Flagler Beach tax bill was $1,336, up from $1,263 the year before, when the tax rate was $5.39. 

At a $5.8 tax rate, Phillips would pay $1,430. If the city commission maintains next year’s tax rate the same as it is this year, Phillips would pay $1,407. If the city goes back to the rollback rate of $5.2850, her tax bill would drop to $1,302. If the rate goes below the rollback rate, then the tax bill would go lower still, depending on where the rate is set. 

In order to go back to rollback, Doyle told commissioners that the various city departments would have to cut a combined $190,000 out of a general fund budget of roughly $7 million. 

The question at the very end of the day-long workshop last week was how to get there. Mealy was not interested in delegating the task entirely to the administration. Cooley, Belhumeur and Bryan did not want to micromanager, but rather give the administration the bottom line number (the rollback rate) and have it work back to it. 

“There’s a fundamental problem with how we’re going about this that I have an issue with,” Cooley said. “So for instance, if I think we need to be at rollback, OK, then I should not be charged with being tasked with taking out little pieces of the budget here and there that have been added in by staff. I should be able to go to our heads of staff and our city manager and say, this is where we need to be. You all are smart people, you know what your needs are, and you guys figure it out.”  He said the administration should make the numbers work. “If you added stuff that inflate it, you take it out, and then you’ll still have plenty of money, because this year that we’re in is really well funded.”

“That sounds really nice except that gasoline goes up, utilities go up, and bla bla bla,” Mealy said. (Actually, fuel costs have fallen significantly because of the covid crisis, and utility costs were set to fall). “So we tell Matt he’s got to cut his department to whatever the rollback rate would be to his department.” 

“But it’s not a cutback,” Cooley said. 

“Yes it is, because when you look at his operations’ costs, gas goes up, so do we not let the police drive as far? Electricity goes up, so do we tell them to turn the lights off at night?”

“That is a very exaggerated argument,” Cooley said, citing the “small amounts” Mealy was referring to.  

Bryan sought to clarify Cooley’s point: if it takes cutting 2 percent out of the projected budget in order to return to rollback, then each department would have to cut back next year’s budget by 2 percent. 

“We would be potentially saying you spend what you spent the year that we’re in,” Cooley said, “and to Jane’s point, there are some things that are more expensive. If you give raises to your staff, that will mean that something else needs to come out. The changes are not drastic. These are not big changes. We’re sounding like we’re going to starve people, and that’s not the case. Now, I reviewed all of this, and I have found a litany of things in here that are not necessities. But I don’t want to be the one to tell the department heads which ones that they can choose from. I would want them to do it and just hit the number.”

“See, we did that,”  Mealy said. “Under a previous administration, we had the administrator tell each department hey, cut your department by 10 percent, and that’s where we ended up with vehicles that weren’t working, with jobs that weren’t getting done. They cut by 10 percent. They did.” 

Doyle is heard correcting Mealy–to 3 percent. 

“I don’t care what the percent is,” Mealy said. “I never agreed to giving a blank percent to departments. I think it’s a terrible way to run things.”

Bryan said it’s not unusual in government to give standards to meet, and that the administration “be the ones that decide where it’s going to be, if we’re going to go that route, to a rollback rate.” (Bryan did have concerns about going to rollback if it meant defraying a too-high increase the following year, though he did misinterpret the facts: “It may lead to a reduced millage rate for some folks,” he said, “but in actuality it’s probably going to stay about the same.” That’s not correct: the rollback rate would, in fact, reduce the property tax rate for all, without exception: )

“Then what’s our role?” Mealy asked. 

Bryan deflected with a joke about giving up 3 percent of his salary. “See, I don’t agree with this,” Mealy continued. “I think that staff and the city manager pout a budget together, supposedly with needs and not many wants. I think it’s our roles as representatives of the people of Flagler Beach to go through the budget and see how much we think each department should have. I guess I see things differently. No, I don’t want to look at how many pairs of boots the fire department has. Don’t want to do that. But perhaps one department can cut a bigger percent than another department can.” 

Commissioner Rick Belhumeur agreed with that, but also agreed with Cooley that “something had to give” when it came to find the budget work. He said he supported a baseline budget, “not that you start with a number and you work until you get to it. That’s what I’ve hated about this process since I got here. In this case, this year, I’m going to stand with Eric, and I think we need to hit rollback.” 

“Why did we spend from 9 to 5 for two days going through all this?” Mealy asked. “I don’t get it.” 

“Well, I think you’ve got to decide: does the commission as a whole want to go to rollback?” Mayor Linda Provencher asked, trying to break the logjam. “If you guys don’t agree on that, it’s a moot point.” She added, “if three of you don’t want to go to rollback, there’s no point to this conversation.” 

Cooley pressed on. “Every single solitary layer of government in this country right now is making efforts to help out the taxpayers because of the drastic impact of the pandemic,” he said. “This year is not a normal year. This is a completely different year than anything we’ve had. Next year is going to be different. Fingers crossed.” He crossed his fingers. “But we can’t be the only ones who are not doing that. We have to chip in also. So that is where I used my rationale, because I have voted for tax increases as a commissioner, and there have been specific, pointed things that I unwanted to ask our citizens to step up and help out with. We were very far behind from previous administration.” 

Initially, Cooley wanted to go below rollback just a little. “Where I’m at is rollback or a touch below that,” he said. 

Bryan agreed, leaving it up to the department directors on how to get there. 

When the mayor asked for a show of hand from those who wanted to go back to the rolledback rate, all commissioners raised their hand with the exception of Mealy. “It’s a majority,” Mealy said. 

“We have to as a city cut $190,000” Doyle said, “not each department per se, however the city manager decides to cut $190,000 out of the budget.” 

“I think we’re abdicating our role,” Mealy said. 

But the other commissioners agreed to leave it up to the city manager.