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Palm Coast to Raise Tax Rate 14% and Eliminate Stormwater Cost Exemption for Many

| August 9, 2011

Palm Coast's drainage infrastructure is in need of a little repair. (Palm Coast administration)

The Palm Coast City Council settled on a proposed budget for next year that leaves most city services intact, raises the tax rate 14 percent, joins the county in the burial of Enterprise Flagler (the economic development partnership), and stops the majority of the street-repaving program for now while shifting public works’ focus to drainage infrastructure. The council’s hope of scaling back the tax rate it first discussed on July 26 proved overly optimistic.

The Palm Coast Fire Department survives unscathed after all, including its Station 22 on Palm Coast Parkway, whose firefighters briefly caught the gleam of an ax the city council wielded against them for a while. Law enforcement and code enforcement will also not be touched. The Frieda Zamba pool will likely close between November and April, for a saving of $57,000. And of course no mention of a new city hall.

“There’s actually with all this work a good story to tell,” Palm Coast City Manager Jim Landon said, stressing a few times that there are no new taxes in the proposal. A segment of the city’s property owners won’t agree.

Under the plan the council approved Tuesday morning—a plan that may still change, but not by much—the tax rate would rise from $3.5 per $1,000 in taxable value to $3.99, a symbolic penny short of the $4 mark. That means a house valued at $150,000, with a $50,000 homestead exemption, would see its city taxes increase from the current $350 to $399. Most homeowners won’t see that increase, because most homeowners have also seen their house value decrease by an average of 14 percent. In reality, most will pay the same as they did last year, at least in city taxes. Overall, tax bills will decline for most, because the largest portion of property owners’ tax bills—school taxes—will fall by more than 10 percent.

Still, the city’s budget, which will generate almost as much revenue next year as it did this year—thus preventing lay-offs or reductions in services—relies on a few shell games, particularly regarding stormwater fees, which today also became, officially, stormwater taxes. The desire of some property owners to avoid stormwater costs has just been eliminated by the city’s proposal. Grand Haven residents in particular, who fought a long and bitter battle to get out of paying stormwater fees (they take care of their own drainage), have just seen their gains nullified. (“I think there will be ramifications at the polls in November,” Tom Lawrence, a Grand Haven resident and the county’s tea party chairman, had warned the council in March if it did not relent on stormwater fees levied on Grand Haven.)

The city is raising its tax rate by almost half a mill, or 50 cents on $1,000 in taxable value, to supplement the stormwater fund. Those not paying into the fund before now will regardless.

“Currently, because we’re rebating and because we’ve given these exemptions,” Mayor Jon Netts said of the stormwater fees, “it is the single family residents with the swales in front of their house that’s covering pretty much the whole burden. Frank [Meeker] correctly stated several months ago that some of these people who now have an exemption from any stormwater still drive on our roads. They still drive on Florida Park, they still drive on Palm Coast Parkway, which has its own stormwater. We’ve now done what we have to do is spread some of that stormmwater cost more evenly over everybody.”

“The problem of course, if it’s a millage rate when you’re talking stormwater, we’ve defined it as a utility,” council member Frank Meeker said, “and a utility is the user pays. Now, I don’t know if that means it’s appropriate or not appropriate to do millage, but certainly it’s a dedicated funding source right there to fix a pressing need of the city that we just can’t ignore.”

“If you subsidize your stormwater fund in the millage rate, then everybody gets to participate,” Netts said, using the word participate expansively. “If you lower the millage rate and increase your stormwater fee, then only the single-family residences get to participate.”

“I think what you all are telling me is that by keeping it as ad valorem,” Meeker said, referring to property taxes, “I can spread it out over commercial slash industrial areas that aren’t kicking in the dollar per year now, and all those people benefit from the stormwater utility as well. I can go for that.” And he did, after earlier being willing to raise the fee for those who pay it. (Residents pay $8 a month. A $1 per month increase for homeowners would have generated $600,000 a year). But Mary DiStefano is opposed to raising fees. And $1 a month would fall short of paying bills. “We don’t think that you can generate enough by just collecting fees,” Landon said.

Between 2006 and 2009, the city borrowed  or opened lines of credit of up to $13 million through the State Revolving Fund loan program and RBC Bank for drainage improvements and swale repair, with more, serious upgrades lined up ahead.

That’s the first half of the shell game. The other half applies to sales tax revenue. Almost 10 years ago Palm Coast voters agreed to a half-penny sales tax to pay for street improvements, such as the 50 miles per year that have been repaved. That money will not pay for street improvements next year. Some $1.7 million of the money will be shifted to the general fund. Essentially, the half-penny sales tax will subsidize the general fund, keeping the property tax rate from rising further. An additional $885,000 from the sales tax will go to the city’s stormwater fund.

“It gets your funds all balanced so they’re all in the black,” Landon said, alluding, without citing figures, to an $817,000 deficit in the stormwater fund at the end of 2010.

The council will hold another budget workshop on Aug. 23, to discuss the final proposed budget. The first public hearing is on Sept. 14, the second on Sept. 27.

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