The task at hand Monday morning was for Palm Coast and Flagler County to reach some agreement on splitting sales tax revenue in a way that would please both sides. No such agreement was reached in an at-times tense 51-minute meeting of a “task force” the county and Flagler’s cities agreed to assemble the last time they met and failed to agree on the same issue, a month ago.
The tension was a reflection of the hardened positions both sides have taken over the sales tax, with little room to give: if Palm Coast were to give in to the county’s demand, Palm Coast would lose about $500,000 in annual revenue that it would have to make up elsewhere. If the county were to give into the city’s demand, the county would lose 17 percent of its projected sales tax revenue annually, and have to make up that money as well. It comes down to which government will be more willing than the other to bear the brunt of voter anger over higher taxes that both sides agree are inevitable.
There’s a measure of egos in play, too: neither side wants to appear the weaker, and neither side has yet fronted a proposal that combines compromise with face-saving.
Monday morning at the county’s Emergency Operations Center, Palm Coast Mayor and City Manager Jim Landon sat on one side of a horseshoed table arrangement, County Commission Chairman Barbara Revels and County Administrator Craig Coffey sat in the horseshoe’s troth. Aside for minor agreement on the duration of the next sales tax term, which doesn’t substantially address either side’s immediate concerns, the two sides barely budged despite attempts by each to present what each thought was a compromise. Meanwhile, representatives from Beverly Beach, Bunnell and Flagler Beach sat around the table, twittering in from time to time but with little that could alter the dynamics of this battle even as they supported Palm Coast for fear of losing revenue to the county.
On occasions, Landon and Coffey, the respective sides’ artillery, fired at will. When Coffey said that one of the aims of the sales tax renewal was “that this is an existing tax, versus adding another tax,” Landon struck back.
“The premise behind that is just totally false,” Landon said, “because the idea that you’re going to take the money from the cities and not raise taxes, is just false. What you’re doing is, OK, we are going to keep a flat tax for us, take the money from the cities, and let the cities raise the tax. That’s what you’re saying. So if you need more money, the county should raise the tax. But that’s what you’re going to do anyway if you take the money from us. You need that real clear, is that if you don’t extend the time, keep it flat. Keep us whole, any other option you’re raising taxes, period.”
“We’re raising taxes with that option too, Jim. If we take less,” Cofey said, referring to the split formula that Palm Coast favors, which gives it a greater share of the revenue, “we have to raise taxes too, so it’s a matter of who raises taxes and by how much. And there’s some balance there. The question is, should all that burden be placed on the county commission.”
A month ago politicians from every local government in Flagler County sat around a big square medley of tables in the same room to talk about the best way to renew a pair of half-cent sales taxes that expire at the end of the year. Voters must approve the tax renewal in referendums either in August or November.
Flagler County residents pay a 7 percent sales tax. The 7th cent on that tax generates about $8 million. The revenue is split. Half goes to the school district. The other half is itself split between the county and the cities, with Palm Coast getting the largest share (about $2.6 million a year).
There’s no disagreement between the governments on the renewal of the schools’ portion. They’re all enthusiastically behind it. The school district voted in late April to place the renewal on the Aug. 14 primary ballot.
There’s fatal disagreement over how to split the money between the county and the cities. When the city floated the half-cent sales tax 10 years ago, the county agreed to the existing splitting formula, which gives the cities a commanding, 72 percent portion of the revenue because the cities, Palm Coast especially, have the largest share of the population. The county now wants to go with something closer to a 50-50 split (actually, the county would get 45 percent of the revenue), in line with a state-authorized formula, because the county needs to build a new jail and move the sheriff to a better location. As the county sees it, that’s a countywide need that primarily benefits the cities, since the cities generate the overwhelming majority of the crime and the need for law enforcement.
“We agreed to a bad formula 10 years ago because the city was up and running,” Coffey said. “They don’t have that same situation staring at them now. They still have infrastructure need. There’s no doubting that. But the county in the last 10 years has fallen behind. We’ve got to do our share, and it takes money to do that. It’s a question of who’s going to raise—we’re all going to have to generate revenue to meet these needs, and is it fair to put all that burden on the county when we’re already losing CRA dollars.”
CRA stands for Community Redevelopment Agency, a taxing zone that cities set up to revitalize stressed areas. Bunnell, Palm Coast and Flagler Beach all have them. Most of the tax revenue generated in those CRAs stays in those CRAs, denying the county what now adds up to about $1 million a year, according to Coffey. Revels brought up that imbalance during today’s discussion. The cities either ignored or deflected the point.
But just as the county has responsibilities, so do the cities: Palm Coast’s stormwater infrastructure is falling apart, in parts of the city to a dangerous extent, because the city, too, ignored its responsibilities over the past 10 years, to keep taxes low. It borrowed around $10 million to pay for stormwater improvements rather than raise taxes. But it cannot borrow anymore. The city is pledging to spend $7.5 million a year on infrastructure. The sales tax alone won’t generate that kind of money, unless the money is bonded.
The city is looking at new taxes on electricity, though for now the city argues that those new taxes will be in lieu of an $8-a-month stormwater fee imposed on residents: they won’t result in a net tax increase. Residents and at least one commissioner (Bill McGuire) are skeptical, for the same reason that Netts himself, at today’s meeting, characterized the nature of taxes once they’re ion the books: they don’t go away. And Palm, Coast will have the authority to raise the utility taxes by large margins (by up to 10 percent on power charges), unilaterally, without asking voters’ permission.
Revels and Coffey put forth the most substantive proposal of the day—not as a proposal the county commission agreed to, but as a first offer to the cities: The sales tax would be extended for 15 years rather than 10. In the first year, the cities would get the full revenue that they’re getting under the current split formula, which favors the cities. But over the next five years, the proportion going to the cities would decrease until, by year six, the county is receiving 45 percent of the revenue. By then, for example, the county would be getting $1.8 million a year (an increase of $700,000 over the first year), Palm Coast would be getting $2 million (a decrease of $500,000 over the first year).
Netts was not thrilled by the formula, but he said he’d take it to his council, which meets Tuesday morning. The other cities will do the same, though absent a special meeting, Flagler Beach won’t be meeting until May 24.
Netts’s proposal was this: extend the sales tax term either to 15 or 20 years or “forever.”
“As far as I’m concerned I don’t see a rationale of putting any time limit on this,” Netts said. By not putting a limit, the county can float larger bonds and generate more revenue.” That, to Netts, is the compromise the county should accept, because it holds the line on taxes while creating the potential for larger revenue.
Either way, it’s very unlikely that the county will not float a sales tax referendum come August or November, and do so unilaterally if necessary.
“That’s what I had hoped would come out of this body,” Revels said, “that we start to have a little bit of a consensus fall into places, so governments could go back and discuss among themselves, and we don’t want to have the county unilaterally put something on the ballot that isn’t supported by the cities, because we need everyone’s help.” Short of that help, the referendum’s chances of failure rise dramatically.