Don’t Mind a Gap This Year: Flagler County’s Budget Prospects Brighten With Talk of Tax Cut

The Flagler County Commission Wednesday morning got its first look at the coming year’s budget, and for the first time in half a dozen years, the numbers were not frightening. There was no talk of a “gap,” or a budget shortfall. There was no talk of budget cuts, lay-offs or higher taxes. To the contrary.

Property valuations are expected to increase around 5 percent county-wide, the most significant increase since 2007. At today’s property tax rates, that would bring in an additional $2.3 million in revenue to the general fund. Last year property valuations went up a fraction, but not enough to make a difference. This year’s increase is significant enough to have Coffey talking about recommending a tax cut.

“I want to propose reducing slightly the tax millage rate,” he said, referring to the property tax. The commission increased the tax rate last year in what proved to be the steepest increase of any local government. “We are still playing catch-up, we’re not able to do much of a decrease, but we can start a trend as we grow more,” Coffey said. Over time, as the county catches up on its services, it can look for greater tax cuts. But for now, property valuations are still around 48 percent lower than they were seven years ago, at the height of the housing bubble.

Last year’s tax increase was calculated to increase needed revenue as much as to provide the sort of cushion this year that would allow for a small tax cut—and play into the politics of the year: county commissioners running for election despise tax increases the year of their campaign. If commissioners are able to cut taxes this year, the move could be a boon to Commissioners Nate McLaughlin and Frank Meeker, who are running for re-election.

And this year’s tax cut, if it materializes, may not amount to a tax cut by Florida law’s definition. The cut in tax rates does not automatically translates into lower tax bills for property owners, unless the tax rate cut is applied to the same taxable value of a property. But if a property’s value increases by, say, 10 percent, and the tax rate is cut by 2 or 3 percent, the property owner will still end up paying more at tax time. By Florida law’s definition, that’s a tax increase. It can only be an actual tax cut if the reduction in the tax rate is lower than the rolled-back rate. It has happened in the past and it may happen again this year: politicians hide what is, in fact–by the law’s definition–a tax increase behind a token cut in rates.

Despite the more encouraging numbers, the county continues to face “challenges” that increase its costs regardless of economic conditions. The county provides some 30 services unique to county government, and that cities don’t have to provide, like libraries, 911, ambulance and fire services, housing assistance, the county jail, courts, veteran services and quite a bit more. The revenue sources for those services are not always stable.

Take the 911 system. It’s run partly on a 911 fee assessed on residents’ phone bills. The Legislature this year reduced that fee from 50 cents to 40 cents a month. It was part of Gov. Rick Scott’s pledge to reduce taxes and fees by $500 million across the state. The 10 cent reduction, or $1.20 over the year, appears small. But the state essentially reduced county revenue—in Flagler’s case, by $100,000. It’s not as if Flagler’s 911 system could accommodate the cut. The money will have to be made up somehow. Property tax revenue is the only way. Scott’s politically expedient cut will, in other words, result in a cost shift away from all users of the 911 system to property tax payers, who will end up subsidizing non-property owners. “Whatever short tern gains there is, long term it’s going to cost property taxpayers more money,” Coffey said.

The state is shifting costs bin many other ways, tooo: the county must bear the cost of juvenile justice to the tune of $180,000 after legislative attempts to reduce that cost shifting failed. The state is also asking counties to increase their Medicaid match (the health insurance program for the poor). This year’s increase is $29,000, a lot lower than a previous increase of $100,000, but still an increase. The state is also asking counties to increase their contributions to the Florida Retirement System, even though the system is the single-best funded public retirement system in the nation. The mandated increase this year: $330,000.

Scott made much of his reduction on motor vehicle fees, which the Legislature approved. But that cut will result in less revenue for local tax collectors. How much less has not yet been determined. That money may, like the 911 shortfall, have to be made up locally.

Coffey went over the county’s various departments one by one. No significant changes are expected—no eliminations or additions of staff, with one exception: Coffey wants to add three firefighters to the county’s 75. Firefighters’ starting pay is over $38,000 a year, but when benefits and equipment are included, the cost of each new firefighter is around $75,000.

Flagler County Sheriff Jim Manfre is also expected to ask for a budget increase, after his predecessor, Don Fleming, cut the budget.

Coffey made his presentation at a rapid clip and said this year the number of budget workshops will be limited, in comparison with previous years (when they could add up to a dozen or more). Individual constitutional officers will not made budget presentations to the commission, as in previous years, unless there are significant differences between one side and the other. Coffey did not specify whether that would apply to the sheriff as well, whose budget is the largest, and most consequential, of all the constitutional officers. Other officers’ budgets tend to be static and not quite as compelling.

“I feel sometimes I lose you guys after I pass a certain amount, and I’m trying to talk a little slower,” Coffey told commissioners not long into today’s workshop, which did not include a public participation segment. Commissioners adjourned close to the three-hour mark, after listening to a 25-minute presentation on the county’s employee health insurance system. The next budget meeting is scheduled for June 16.