The Palm Coast City Council today rejected a request by county government to support raising the local sales tax from 7 to 7.5 percent. The rejection deals a blow to county government, which is looking to increase the tax to pay for law enforcement operations, including the new sheriff’s operations center, and the modernization of its fire department.
But the rejection also reflects the lack of transparency and discussion at the county so far behind a proposal that would amount to a significant sales tax increase, without voter participation, and it echoes tensions between the city and the county that played out a decade ago, when the county was seeking to renew an existing half-penny sales tax. In that context, the rejection was not a surprise, but a consequence of the county’s clumsy approach.
Palm Coast, Flagler Beach, Bunnell and Beverly Beach all benefit from the existing half penny surtax, what’s called the Small County Surtax. Palm Coast’s share is currently $3.26 million, rising by about $140,000 a year. Palm Coast’s share is 50 percent, that of the county is 45 percent, and the other cities split the rest proportionately.
Twice before, it was voters that approved the half penny sales tax. They did so in 2002 by a 74 percent margin and a decade earlier as well. But at the time, the proportion of revenue that went to Palm Coast and the other cities was 72 percent, not 55 percent. But then-Administrator Craig Coffey and the County Commission were desperate for additional money, and wanted to increase the portion that went to the county. Palm Coast was not happy. Because of that, Palm Coast made it clear that it would not support the county in a voter referendum to renew the sales tax–not if the proportion of revenue to the cities was lowered.
The county knew that going to referendum without Palm Coast’s support would end in defeat. But the county didn’t have to go to referendum. It could renew the tax by a super-majority vote of at least four commissioners, and adopt the proportion of the split it was seeking. That’s exactly what it did, snubbing the cities and the voters by adopting the tax renewal unilaterally, raising its own share of revenue and lowering the cities. It was a 4-1 vote. Dissenting was then-County Commissioner Milissa Holland, who thought the scheme disrespected voters and the cities. (See: “Snubbing Voters, Lame-Duck County Enacts 20-Year Sales Tax While Slashing Cities’ Shares.” See articles from the archives on the 2012 tax increase below.)
The county voted to impose the tax for 20 years. In so doing, the county did not rob Palm Coast only of what amounted to $500,000 at the time, but also robbed the city–and robbed itself–of the ability to bond the revenue, because Florida law forbids bonding sales tax revenue not secured through referendum. In other words, the county was taking a financially short-sighted approach, without voter approval, to maximize immediate revenue even though it was lowering its ability to raise larger sums.
The county is now proposing to take the same approach: no referendum, and not even a discussion with the cities about the proportion of tax revenue. That was not even part of the discussion. The county commission, in fact, has had only general discussions about the sales tax and has not yet devoted a focused discussion or workshop on the subject, so it was hurriedly gathering letters of support in a cart-before-the-horse sort of way, with many questions unanswered and unvetted. But as in 2012, the county is desperate for additional revenue. In 2012, it had a jail to build. Today, it has an expensive sheriff’s operations center to build, and it wants to expand its fire services. The county commission’s all-Republican membership has constantly harped about keeping taxes low, but not on this score, leaving the way clear for County Administrator Jerry Cameron–himself reputedly a conservative–to forge ahead with the sales tax proposal.
Even the wording of the letter the county was hoping the city would approve was deceptive: “As you know, Florida’s 6% state sales and use tax rate has held flat since 1988, and many counties in Florida choose to implement the half-cent sales tax to benefit targeted, local programs,” the letter reads. The letter implies that the current sales tax is 6 percent, and that with the addition of the county’s request, it would rise to 6.5 percent.
Neither is accurate. The current sales tax is 7 percent, which is the average in the state. Half the additional percent is levied by the county, half by the school board. The proposed sales tax increase by the county would raise the county’s share to a full percentage point, and the overall sales tax in the county to 7.5 percent, making Flagler County one of the highest-taxed counties in the state, by sales tax. About 15 counties, out of 67, currently have a 7.5 percent sales tax rate, but so do some 100 cities, which can levy a surtax to the exclusion of other cities in their county, or to the exclusion of their county. (The sales tax does not apply to groceries and medications, among many other exemptions.)
Flagler County’s sales tax does not include the tourism sales surtax of 5 percent, which applies to all hotel, motel, and other short-term rental bookings in the county (making the overall sales tax for those who pay th bed tax 12 percent). That is the tax that visitors pay disproportionately, as few Flagler residents would find the need to stay in hotels, though some do. But combining the tourism tax revenue with that of the regular sales tax and then claiming that visitors account for 28 percent of sales tax revenue is deceptive, if not outright false: the 28 percent figure does not accurately reflect the proportion that all Flagler residents pay of the regular 7 percent tax.
It’s not clear where the city got the 28 percent figure, which appears inflated. (A request for that information is pending.) But the Florida Department of Revenue publishes Flagler County’s monthly total sales tax revenue, broken down by category. (The state revenue does not reflect money that goes to the local option sales tax, but the proportions would be identical.) Last March, for example, the county generated $6.3 million in revenue. Hotels, motels, camping grounds and short-term rentals accounted for just 5.5 percent of that. Restaurants accounted for 13 percent, bars for less than 1 percent, and amusement and recreational services, 3 percent. So even if only visitors accounted for every penny spent in all those categories, which is not realistic–even if only visitors were eating in local restaurants, when in fact restaurants cater mostly to local residents–the proportion of sales taxes generated by all those categories combined would still add up to 22.5 percent, making the 28 percent figure look not just suspicious, but wildly off base, and raising questions about the sort of figures government officials are disseminating to back up their claims.
Whatever the accurate proportion is, the references to the visitor portion of sales tax revenue is irrelevant and reflects a fallacy in the argument: that because visitors pay a share of the sales tax, the burden on local residents is somehow lessened, or not as steep. That is also not accurate. Whether Flagler County sees 100,000 visitors or 5 million in any given year, local residents will still pay the same amount of higher sales tax when they shop for clothes, cars, computers, shoes, home-improvement wares, light bulbs, and so on. A resident on fixed income will not see his or her tax burden decrease even if every hotel and motel is booked solid all year round. The bottom line, in sum, is that the only beneficiaries of the visitors’ portion of the sales tax are the local governments and their coffers–not residents’ tax burdens. So even introducing the notion of a visitor portion in the tax discussion is disingenuous and, ultimately, not applicable.
The school board portion of the sales tax was approved by referendum, and it was devoted to technology–the technology the district used to allow students to be taught remotely during the pandemic. That half-penny sales tax is going up for renewal in 2022. The county commission never contacted the school board to discuss strategy, or the wisdom of the county passing a sales tax increase ahead of the school board needing to renew its own half-penny sales tax. The county commission could then end up unilaterally voting for a sales tax increase, and by the time the school board seeks voter approval for the renewal of an existing sales tax, voters could decide that they’ve been taxed enough, and reject the school board’s request.
Put simply, the county’s unilateral approach may have far more unintended consequences than the letter of support lets on. But the county’s approach also reflects the tunnel vision of an administrator and a commission that have tended to be light on homework and big on improvisation. Inevitably, there’s been push-back.
“The Flagler County Commission spends money, and spends our money in ways that are not exactly wise,” Mike Cocchiola, a Democratic Party operative, told the Palm Coast City Council this morning. “We know this. We know they buy buildings at a high prices, they sell low. They’re evidently not real estate agents. But anyway, the half-cent sales tax is burdensome to people on fixed incomes, it is really burdensome to people on fixed incomes,” particularly the elderly, he said. “To give the Flagler County Commission more opportunities to spend tax dollars is not a wise thing to do since they have proven they cannot be responsible and they’re not responsible already with the tax dollars we already give them.” He said the county’s use of law enforcement to justify the tax increase is “like waving an American flag. Sure, you know, everybody supports the American flag and everybody supports public safety. Well we are already safe. And I don’t know how much more the Commission needs to make us more safe. Build bigger buildings perhaps? Surely they can find something to cut out of their budget so as to avoid burdening us, the citizens of Flagler County and of Palm Coast, particularly those of us on fixed incomes, from more taxes.”
At today’s meeting, both the Palm Coast fire chief, Jerry Forte, who is also the city’s interim deputy manager, and Chief Mark Strobridge, the sheriff’s right-hand man, spoke supportively of the need for additional revenue to account for coming expansions of their services such as capital improvements and the addition of sheriff’s deputies. The additional half-cent sales tax revenue for Palm Coast would be apportioned by nearly 70 percent for the fire department and the rest for law enforcement.
Mark Strobridge, the sheriff’s chief of staff, also addressed the council, citing a recent University of North Florida study the agency commissioned that pointed to a requirement of some 47 additional deputies tied to growth by 2025. “All of your county, the municipalities and unincorporated areas have police and emergency fire rescue needs that would benefit from the additional funding generated by the sales tax,” he said.
“You guys are bad boys,” Acting mayor Eddie Branquinho said to fire and law enforcement officials. “You’re putting us in a position that we don’t like. But guess what, those out there voted for us. We’re going to have to have the fortitude to make a decision,” he said. He spoke supportively of the proposal, describing it as “swallow a bullet to go for it.” Yet he did not second the motion to approve the letter of support.
To Council member Victor Barbosa, the increase would invite local residents to hop the county line and shop elsewhere. He wanted other options. Council member Ed Danko took the hardest line against it. “The county has asked us to simply support their tax increase. This is a county tax increase,” he said. “This is not the city of Palm Coast. Why the county is even asking us to get on board and support them, do they not have the courage to pass this tax increase on their own? They need us to get behind them first, because I’ve heard from county commissioners who have said they’re not going to vote for this unless we all get behind them, and that kind of seems like this is their responsibility. They shouldn’t be hanging their tax increase on us.”
Council member Nick Klufas said it wasn’t unrealistic for the county to ask for support for a measure that would also funnel revenue to the cities. “No, I think this is their job, not our job,” Danko replied. “We don’t go to the county and ask for their support if we pass a tax increase.” Danko seemed to overlook the fact that a city tax increase does not implicate the county, whereas a county tax increase implicates 85 percent of the county’s population, which is the city of Palm Coast.
When Klufas moved to approve the letter, his motion gained no second and the motion died. Klufas then told Danko that by not providing a second at least for the sake of discussion, “you’re foregoing the ability for you to be able to display your aspects and your thoughts or talking points to the residents, but more importantly the council,” he said, “so that we can all be on the same page to try to unify our support or not support for something. But hiding behind the fact that there’s not a motion on the table before you were willing to speak and then not seconding the motion, which you can still vote against you, just seconding the motion will just allow you to say what you had said you were going to say, and you did not do that. I just want to make sure that you understand what you’re doing.”
“Number one, I don’t need a lecture from you, Nick, Okay?” Danko, not missing an opportunity to be crude, snapped back. He then spoke of agreeing for the first time with Cocchiola of the Democratic Party before repeating his “I’d rather drink antifreeze than vote for any tax increase” campaign slogan. “Let the county figure out what they’re going to do, let them vote or not vote for it. Let them learn how to tighten their belts and stop buying moldy buildings, but I don’t want them coming to us for cover,” Danko said.