The Palm Coast City Council and the Flagler County Commission are heading toward a showdown next week, with every county taxpayer in the middle. The two governments are at odds over the half-cent sales tax local residents have been paying, and that expires at the end of this year. The question is whether the two governments can agree on a fair split of the money, as they have in the past.
So far, there’s no agreement. Without an agreement, Palm Coast won’t support the renewal opting instead for other ways of generating money, such as a new, steep tax on residents’ utility bills euphemistically called a “franchise fee.” (Bunnell and Flagler Beach impose just such a tax already, as do innumerable cities across the state.) And without Palm Coast’s support, the renewal, which must get voter approval, is in doubt, and with it $40 million in government revenue.
The county has several other options (up to seven such options by the county administrator’s count): it can, for example, adopt a sales surtax by a supermajority vote of the commission (at least four of the five commissioners must approve). It can also go directly to voters whether Palm Coast is on board or not, though without the county’s largest city supporting such a move, the outcome at the ballot box is in doubt.
The two governments, along with the school board and three cities, will meet in a scheduled joint session the evening of April 10 (at 5:30 p.m. at the county’s Emergency Operations Center) to attempt to work out their differences. They have not talked face to face on the sales tax issue to date.
“My disappointment is that there’s not a spirit of cooperation, and that people tend to want to take people hostage over certain situations,” Brabara Revels, who chairs the county commission, said on Tuesday. “But we’ve all got the exact same duties, every one of us, and I’m hoping that the intergovernmental meeting, that we can set that tone, that we’re all there to get the best for citizens at the least cost, spread the widest, and to accomplish all these health, life, safety issues.”
Palm Coast wants to concentrate on its crumbling infrastructure, particularly its stormwater system, which it has neglected for years, from a combination of low taxes and focus on other improvements. The county wants to build a new jail, or expand its existing jail, and rebuild the old courthouse annex so the sheriff can move there, away from his current, rather decrepit digs on Justice Lane. Neither government can accomplish its aims based on the current formula splitting the sales tax revenue between them. There’s simply not enough money to do it all. And each side wants more than the other is willing to yield. And so far, the two sides have done more posturing than talking.
“We have basically discussed this issue through the media,” County Commissioner Milissa Holland said. “We’ve heard their side through the media, we’ve heard Mr. Coffey’s original plan through the media.” Craig Coffey is the county administrator. “We have not sat down, we have not given a presentation on why we feel it’s essential that these facilities are expanded upon, and are necessary. Take away the other three items that you proposed up there, in the absence of coming together as collective bodies in one community, I think we’re doing a disservice to the public by just assuming that we can go to another tax and they can go to another franchise fee. It’s just been frustrating to watch that we haven’t all sat down as adults.”
But what county commissioners and city council members have said so far, each in their chambers, and what their respective administrations have impressed on them so far, suggests that the differences between the two sides are greater than anything they may have in common on the matter.
It’s a matter of numbers.
For the past 10 years, residents of Flagler County—including Palm Coast—have been paying a 7 percent sales tax, rather than the standard 6 percent Florida sales tax. That extra penny generates $80 million a year for local governments. Flagler County voters approved the extra percent in two separate referendums 10 years ago: half a cent goes to the school board, the other half is split between county government and the cities.
Most of the money financed infrastructure improvements. It’s how Belle Terre Elementary was built. It’s how 500 miles of Palm Coast’s roads were resurfaced. It’s how an earlier version of the tax paid for the county jail.
Palm Coast wants that revenue. But the city doesn’t like the formula that splits the money between it and the county. The city believes it’s being short-changed. So Palm Coast wants to do one of two things: if it is to support the sales tax renewal, it wants the formula reworked, and its share of the money increased. Palm Coast wants to take in $26 million of the $40 million generated by the half-cent sales tax over 10 years, or $2.6 million a year. (In the past 10 years, the city collected $23.4 million from the tax.)
The county, for its part, is proposing to decrease Palm Coast’s share over the next 10 years by $5.6 million, to $20.3 million.
The county is arguing that it needs the greater share of the money because it must provide public safety for all county residents, including Palm Coast. Most of the people at the jail, commissioners are quick to say, are from Palm Coast, and the jail expansion is driven mostly by Palm Coast suspects. The county could raise property taxes, which affect all county residents universally, including Palm Coast’s. But Coffey, the county administrator, was discouraging that approach: it’s politically costly, because voters will take out their anger on the county, not the city. And to Coffey’s way of thinking, recent changes in law, and coming changes in law (if an amendment to the constitution is approved in November) will limit much of the potential revenue that could have otherwise been raised through the property tax.
If voters approve Amendment 4 in November, it would prohibit any increase in the assessed value of a homesteaded property if the fair market value decreases while capping the increases of non-homesteaded properties’ assessments, including commercial and industrial properties, at 3 percent a year. “That could further lower your ability to fund anything out of property taxes,” Coffey said. “As the economy recovers, assessed values increase, you will not be able to recover the ground that you lost.”
Coffey was also critical of Palm Coast’s slouch toward the so-called “utility franchise fee” or another form of utility tax, which can be imposed unilaterally by the council, without voter approval, on electric bills, levying a tax of up to 10 percent a month on bills. The revenue potential is much greater than the sales tax, and all the money remains in Palm Coast for the Palm Coast City Council to use as it chooses.
Coffey did not hesitate to sound alarmist about Palm Coast’s plans: “On the alternatives if you’re only taking $4 million now out of the economy, whether that’s sales tax or whatever method,” he said, “and you go take $8 million now, because you can generate it with electric, then you take $4 million more out of the economy.”
Alarmist, but not quite accurate: Palm Coast would not be “taking” an additional $4 million out of the economy anymore than current taxes take money out of the economy. In a local economy, taxes are the most efficient way to redistribute money, and, unlike other private sector dollars, to ensure that the money remains in the community, and is spent locally. (Think of it this way: A dollar spent at Walmart will, for the most part, end up in Walmart’s coffers in Arkansas, then in the coffers of Walmart’s suppliers, from China to Indonesia, and in the pockets of Walmart’s stockholders, few of whom live in Flagler County. A dollar taken out by government in the form of taxation of the kind the county and the city are talking about is then spent on a local contractor and local labor to build a jail, repair swales, repave a road: the results for the local economy are more beneficial than a dollar spent at a box store or a chain restaurant.)
Just as Coffey was citing various reasons why the city should not opt out of the sales tax, city officials last week were citing reasons why it should. Either way, it won’t eliminate either government’s needs.
“But our duties are different than theirs,” Commissioner Allan Peterson, who was once a city council members, said. “Ours are more expansive. We’re making decisions for every resident in the county. The cities are making recommendations and decisions for the residents in their respective cities.”
County Administrator Craig Coffey’s Presentation on Flagler County’s Sales Tax
(To be presented at the April 10 joint meeting of local governments)
Download County’s Sales Tax Presentation