In its first comprehensive recommendation to the Palm Coast City Council for the coming year’s budget, the city administration is proposing a 7 percent budget increase that includes money for five new sheriff’s deputies, two new firefighters and a fire inspector, and nine additional administrative positions.
The budget proposal rests on a request to keep the city’s property tax rate flat, which would result in an increase in revenue of over $5 million from property taxes alone, but would also equate to a tax increase of around 14 percent, though homesteaded property owners would not see an increase anywhere near that.
The budget also includes over $150,000 more for city council members’ salaries, the cost of one and a half deputies, as a result of the council’s self-voted 151 percent salary increase last spring, the largest in the city’s history and one of the largest on record in any city in the state. Finally, the budget would also result in a deep cuts in the city’s reserves despite the vast increase in revenue.
“You’ve heard a lot of increase in cost resource issues that this budget also is looking at mitigating the risk of that future recession period,” City Manager Denise Bevan said, noting the city’s premium on retaining talent and ensuring a steady succession within the ranks. But neither Bevan nor Helena Alves, the city’s finance director, mentioned the tax increase explicitly as they presented the budget in a workshop Tuesday.
Bevan confirmed that in Mayor David Alfin’s words, “staff has been directed to review their budget asks and to trim them to the lowest level that they feel they can operate their department.” Still, some council members are uncomfortable wit the budget as presented, and are looking to find a few cuts, either in services or in the tax rate. Their salaries, of course, are not on the table.
The fiscal year begins Oct. 1. It’ll be the first year when the new council salaries, reflecting a 151 percent raise plus benefits the council voted itself, will be impacting the budget. The new salaries don’t kick in until after the November 8 election. When they do, the cost will add $157,000 to the budget, for a total of $291,000, up from $133,000 this year. That cost increase, of course, has nothing to do with inflation.
Palm Coast is benefiting from a 19.7 percent increase in taxable values, a huge increase over the previous year and the largest such increase in 16 years. Some 5 percent of that is attributable to new construction. Once the new construction is deducted from existing values, it results in a 14 to 15 percent net increase in existing taxable values which, if not offset by an equal reduction in the property tax, would equate to a 14 percent tax increase. But since homesteaded properties’ year-over-year taxable values are capped at 3 percent, homesteaded property owners would not see that increase.
Businesses and renters will.
The city is still seeing 150 to 160 single-family home building permits filed every month, according to Ray Tyner, the deputy development director, powering yet more revenue from new construction and continuing to push property values up of next year’s calculations.
Palm Coast government runs on a $229 million budget. But there really are two governments within the government: the part that’s directly financed by your taxes, and the part that’s financed by your fees. It comes down to the same thing in the end: you’re still paying for it. But the method of payment is not the same.
The $229 million figure includes $91 million for the water and sewer utility, which operates separately, as do other large semi-autonomous funds that generate their own fees: the stormwater management fund ($24.4 million), the garbage fund ($9.4 million), building permits, and information technology (combined $4.1 million). You pay for most of those those services monthly, and steeply, through your utility bill (building permits and IT excluded).
The city’s general fund (“can’t spell general fund without fun,” in the words of City Council member Nick Klufas), where property tax and other revenue flows, is $46.7 million this year.
The general revenue is made up of property taxes, sales taxes, some permitting fees, some charges for services, and the city’s reserves. Property taxes alone generated $28 million this year. That revenue is expected to ramp up to $33.4 million next year, a $5.3 million increase, assuming the council adopts the same tax rate in effect today. That’s what the administration is requesting.
The general fund accounts for many of the most visible city services: fire, police, parks and recreation services, the city administration, code enforcement, street maintenance, and communications. All those operations employ the equivalent of 244 full time employees.
The city is proposing a $52.7 million general fund budget for next year, and requesting an increase of 12 employees, to 256. That would include two new firefighter-EMTs and a fire inspector, but not the five additional sheriff’s deputies, who would be in addition to the 12. They are counted separately since they would be on the sheriff’s payroll, paid by contract by the city.
Flagler County Sheriff Rick Staly is requesting the additional deputies for the policing contract for Palm Coast, swelling that budget to $6.5 million and 48 positions, up from $3.7 million and 28 positions in 2020. the city administration’s submission of that request was accompanied by a graphic illustrating the steep budget increases of the last five years, in comparison with relatively flat budgets the right years prior, along with a chart outlining the year by year increases. The increase includes an annual, built-in 5 percent increase, Helena Alves, the city’s budget director, said, though “overall, the law enforcement budget is increasing by 13.5 percent.”
The subtext to those illustrations is the divide between city staff and the city council: if city staffers are eager to show the sharp increases, which eat at other city priorities, most city council members have been quick to support the sheriff.
The fire department’s increases have been more in line with those early years of policing budgets, increasing mosestly from year to year.
“The personnel services increase reflects a burden of the new firefighters for the ladder truck which you did partially last year,” incoming Fire Chief Kyle Berryhill said, “two new firefighter positions to control overtime associated with minimum staffing and a new inspector position designed to provide additional capacity and succession in the Prevention Division.” There are also additional operating expenses, including a one-time increase of $640,000 to the city’s fleet-replacement fund, in preparation for replacing two engines and an attack truck.
For the past decade, Palm Coast has relied on solid reserves. Reserves stand at $3 million today, down from $3.7 million when the budget was adopted–and falling sharply: the city is taking out another $2.5 million from those reserves to pay for upgrades to its public works facility, leaving a paltry $900,000 as reserves for the year starting on Oct. 1–not the safest position to be in ahead of a possible recession.
Some of the figures listing the number of employees in each department don’t corelate with budget figures. For example, on paper, the city attorney line item reflects only a part-time position of 0.5 employees. In Fact, the city attorney’s budget is $574,000 this year, rising to $624,000 next year. The city employs an outside firm for its legal services.
The current property tax rate is $4.61 per $1,000 in assessed value. A $200,000 house with a $50,000 homestead exemption would pay $691 in city taxes. (County, school and other agencies’ taxes are on top of that.) Let’s assume your house value increased by 20 percent, gaining $40,000 in value. Its total value would be $240,000. But that would not be its assessed value, which would be limited to a 3 percent increase–so $6,000, or a total of $206,000 in taxable value. If the council kept its rate flat, your city tax bill next year would come out to $719, or a $28 increase for the year–about six gallons’ worth of gas at today’s prices, or a few uselessly calorific coffees at Starbucks. That’s why tax increases of the sort never jam council chambers, which are notoriously cavernous during those public hearings.
Council member Ed Danko, citing “an uncertain future,” wants to see a decline in the property tax rate, because no one can tell how long the sharp increases in property values will last. “I think we may have to go cut a little bit deeper. That’s my initial reaction to this,” he said.
“We’re in a tough spot here because of our growing population,” Klufas said. “With this rate of growth, it’s hard to scale that level of service in a linear fashion with some of the different services that we provide.”
Alfin suggested that each council member could speak with the city manager individually to propose budget decreases or increases. “That millage rate is the end of obviously a very long and involved process,” he said. “So we really need to go backwards and identify those items that maybe perhaps can be pushed forward, phased or whatever it might be.”
The maximum property tax rate will be set at a council meeting on July 19. Beyond that, council members can set a lower tax rate, but not a higher one than that set on the 19th. The first public hearing to adopt the budget and final tax rate is scheduled for Sept. 8, and the second on Sept. 21.