For the Palm Coast City Council this morning, it was like the Cuban millage crisis.
A normally routine, uneventful procedural step fell prey to ideological doctrine. Motion after motion to set a tentative tax rate for 2021-22 failed. Neither side blinked. The decision was deferred.
The city is legally required to pass a budget, and legally required to set a tentative tax rate, the so-called “truth in millage” rate, which then gets mailed to property owners. Today, the city placed itself at risk of missing a deadline and violating the law.
The council has 35 days to set that tentative rate from the time the property appraiser has provided the property tax assessments for the year. The appraiser did so on July 1. That leaves the council only until Aug. 4 to stay within the law and set the temporary rate. It has a meeting scheduled for the evening of Aug. 3, when the new mayor is sworn in. Meanwhile, the administration is effectively prevented from refining the budget until then, leaving departments in limbo.
Today’s requirement was not to lock in the final rate, but only to set a ceiling on the rate that will be adopted in September. In other words, to set a rate within which the council and the administration may then hash out where and how to cut, if possible, or make adjustments to the budget. The process is designed this way to give local governments breathing room to deliberate carefully and factually. Today’s step was administrative and preparatory, no more.
The council couldn’t even do that much. More accurately, two council members prevented the council from doing so.
Council members Ed Danko and Victor Barbosa were insistent on lowering the tax rate regardless, starting with the tentative tax rate, despite being repeatedly told that they could potentially achieve that goal through the coming weeks of deliberations. Both have pledged not to raise taxes regardless, even before seeing the city’s numbers. It was the latest example of a council held hostage to ideological intransigence at the expense of governing realities.
Yet neither Danko nor Barbosa could or would offer so much as a single example of what service or line item they would reduce in the proposed budget to balance it in accordance with their preferred tax rates.
Eddie Branquinho, the interim mayor, was resigned to punting the vote until after the actual mayor is elected in the July 27 special election. He did so after another painful display of obduracy from one side and attempts to reason from the other.
The administration was not proposing to set the tax rate higher than it is, even in proposed form. And from there, the council could have lowered it by the time it sets the actual rate in September. The tax rate is currently $4.6989 per $1,000 in taxable value.
To put things in perspective, take Danko’s home, a 2,400-square-foot property on Wasserman Drive. It was assessed in 2020 at $259,781. Danko has a double exemption–the normal homestead exemption of $50,000, and a senior exemption of $50,000, reducing his taxable value to $159,781 (thus shifting more of the tax burden to less homesteaded properties, or to commercial properties, a detail ostensibly pro-business politicians tend to pass in silence when claiming to be pro-business). His Palm Coast property tax bill would be $750. Even if his property value were to increase 10 percent, the most his bill may increase at the same rate is $22, or less than the cost of inflation, because as a homesteaded property, any increase is capped at 3 percent.
Danko made a motion to set the tentative tax rate at $4.6, what would amount to a 2.11 percent decrease in the tax rate. It would still be a tax increase under Florida law, because at that rate the city will still take in more revenue than it has in the past, so Danko may have to start chilling his antifreeze for a sip. Victor Barbosa seconded his motion.
“I’m a little disappointed that we weren’t able to discuss this before the motion was made on what would constitute the difference between the proposed millage rate and the millage rate that was just motion for, which obviously would mean a reduction in services,” Council member Nick Klufas said. “Councilman Danko, I think it falls on you to do your job and discuss with us what you plan on being removed from this budget to get us to that number so that we can come to a consensus.”
“I think first we set the agenda,” Danko said. “By setting the millage rate, then we go through the budget line by line, which we’re going to have to do. And I think we can all find places to make cuts once we get to that situation.” He compared the approach to budgeting at home.
“If you don’t know where you’re going to cut,” Klufas said, “isn’t it a little presumptuous to be able to say, my budget right now is 1,000 bucks, but next month is gonna be $500 but then force yourself into a position where, after you make that decision you’re saying oh man, everything I had wasn’t necessity, where am I going to squeeze that additional $500 from.”
“Well, I know you’re half my age,” Danko, who’s had a recurring issue with being lectured by Klufas (Danko is 68, Klufas is 34), replied. “But I’ve spent my whole life dealing with a household budget. And I can tell you that’s not the way I do it.”
“That’s just not the best way to approach a problem,” Klufas said.
“You think it’s not the best way, I think it is,” Danko snapped, his voice beginning to rise. Klufas proposed going through the budget line by line at least with enough room to decide what to leave in and what to remove, if anything may be cut.
“In conceptual world it is a beautiful thing to be able to say, we’re going to squeeze the line items and cut the slush fund,” Klufas said. “But the reality is that we have all the budgets in front of us and the line items, and all we have to do is identify what we want to cut to be able to give the city of Palm Coast residents a tax cut if we can do that. But it’s operating in bad faith for us to be able to say we’re going to get to 4.6 with all the information in front of us to not be able to say–and this is how. As a responsible representative we should be able to say: this is what we’re going to do, but more importantly, this is how we’re going to get there.”
“Do you see any place we can make a cut, one single cut?” Danko asked him.
“With all due respect, you’re the one asking to reduce the proposed millage rate that was just presented to us. Are you saying–no, you?”
“With all due respect, going your route will guarantee a tax increase,” Danko said, apparently not grasping that the rate he was setting also meant a tax increase. He then said the rate “may go a lot lower.” He said the idea was to send a message to taxpayers that the council feels their pain, “that we care, that we know what you’ve been through and we know how to tighten our belt here too.”
Klufas didn’t disagree, but again pressed that the council had to go through actual line items to get to that point–and again suggested Danko should offer up an example. He did not. They went back and forth until Barbosa withdrew his second. For a moment it appeared as if Barbosa was looking to break the logjam. In fact, he was doubling down. With Danko’s motion lacking a second, it failed.
Branquinho motioned to leave the tax rate flat “for the fifth year in a row.” (Actually, the fourth.) Klufas seconded. “I just think he’s the responsible thing to do, to play it safe,” Branquinho said. “If we find the places to cut, we can always bring it down.”
“That’s what I feel like our role appears to be is to keep the trains on the tracks,” Klufas said.
The motion got a 2-2 vote. Tie votes mean that the motion fails.
Barbosa then motioned for a tentative tax rate going back to roll-back. Danko seconded. (See an explanation of the roll-back rate here.) That rollback rate of $4.4594 per $1,000 would be the rate at which the city would realize the same revenue in 2022 as it did in 2021–other than the additional revenue it will get from new construction–thus equation to no tax increase (and no tax decrease). Barbosa said some $800,000 of the money going to the tennis center expansion, out of the general fund, could be a starting point, but Branquinho said that money has already been appropriated. (It has, but it isn’t clear if contracts have been executed yet.)
“You know the sheriff wouldn’t get his guys if you cut it back there,” Branquinho told Barbosa. “You know very well they wouldn’t get it. They would they wouldn’t get one guy.”
“Why would that be? We could get more cuts,” Barbosa said.
Branquinho threw up his hands and called for a vote. The motion failed. “I cans ee we’re going to go nowhere today,” the mayor said, deferring the decision to when the new mayor is seated.
Branquinho’s statement about sheriff’s deputies went back to the sheriff’s request last week for 10 additional deputies in Palm Coast. Danko and Barbosa both had spoken in favor of that addition. The city administration in the budget it presented today was able to accommodate the addition of six deputies, not 10. The two council members’ stance today made that addition–let alone their original pledge–almost impossible to match up with their tax stance. They also jeopardized the addition of three firefighters, as planned in the budget, and several other service expansions.
“The city departments have additional staff requests that were not included in the budget numbers that were presented to you today,” Helena Alves, the city’s finance director, told the council. “That totals approximately $615,000, those requests include four FTEs [full-time-equivalent positions] and equipment for the Streets Department, three FTEs and equipment for the Parks and Recreation Department, and one FTE for financial services. The city’s street pavement program also has a shortfall of approximately $1 million, and that is beyond the transfer of 550,000 that we’re proposing from the general fund.”
Under the proposed budget the administration presented–and with the tax rate remaining flat, not at rollback and without a decrease–the Palm Coast Fire Department would see its budget increase by 10 percent due to the addition of three firefighters. The addition of six deputies, for a total of 39 deputies assigned to the city, raises the city’s budget for policing from $4.7 million to $5.1 million. There are also projected increases in parks maintenance (25 percent, due to the addition of three positions and new equipment), and most city departments are seeing some cost increases.
Alves said the cost of adding just four deputies would, absent other cuts, increase the property tax rate approximately [$0.0737 per $1,000 in taxable value], or $9.2 for a property valued at $175,000, with a $50,000 homestead exemption.
Alves in her calculations lowballed the estimate by going with a property with a taxable value of $100,000, which is significantly out of step with current median values. As of the 2019 U.S. Census estimates, the median value of an owner-occupied house in Palm Coast was $209,000, which may itself be outdated. In June, the Flagler County Association of Realtors reported that the median sale price for a home in Flagler as a whole was $262,000. (Sale prices are almost always higher than assessed values.)