Palm Coast Council Approves Budget and Tax Rate and Rejects Latest Attempt to Nullify Debt Referendum

The Palm Coast City Council on Wednesday gave final approval to a $358 million budget and a slight reduction in the property tax rate starting Oct. 1. The adopted tax rate is officially an 8.29 percent tax increase under Florida law, but the figure is misleading: most homesteaded taxpayers will not see a change in their city tax bill but for a few dollars up or down, and when all local tax bills are aggregated, the typical homesteaded homeowner is likely to see a slight decrease.

The 50-minute hearing, which had been rescheduled from last week, when two of the council members were ill, turned indecorous again in its last 10 minutes. Council member Ed Danko challenged the city attorney over a lawsuit just filed against the city to stop a referendum on November’s ballot, and urged two of his colleagues to rescind their vote supporting the referendum, so the legal action is made moot. They declined.




The first 40 minutes were more workmanlike. Mayor David Alfin and Council members Nick Klufas and Theresa Pontieri voted for the budget. Ed Danko voted against, reiterating the opposition to the budget he’s voiced previously. He wanted the tax rate at “rollback,” which would have limited city revenue to the same amount next year as it received this year (excluding tax revenue from new construction). The city adopted the rolled back rate last year.

But that rate is blind to inflation. By adopting rollback, especially in inflationary times–the inflation rate has fallen below 3 percent this year–the city is in effect reducing its purchasing power. Over the past 10 years, the typical Palm Coast homeowner has seen his or her city tax bill remain flat. In fact, that has penalized city revenue as inflation has resulted in a substantial tax cut for homeowners, and a tax shift for the non-homesteaded, like renters and businesses.

The non-homesteaded do not enjoy a 3 percent cap on their maximum taxable value year over year. So they who shoulder a disproportionate share of the tax burden, subsidizing the homesteaded. Reductions in the tax rate, let alone the rolled back rate, further subsidize the homesteaded even as it may marginally provide relief to the non-homesteaded. Danko said the higher taxes the non-homesteaded will pay will be passed down to consumers, affecting everyone.




The city’s overall budget is $358 million. But most of that has nothing to do with the property tax. Rather, it includes the internal budgets of huge funds such as the utility, stormwater and garbage collection, all of which operate as their own, fee-driven funds, separate from the general fund. They are self-sustaining. The overall budget figure also includes the city’s debt service. The part of the budget that matters directly to property taxpayers is the general fund, which is a relatively paltry $61 million, or 17 percent of the city’s overall budget. The general fund pays for police, fire, park and other quality of life services.

In the budget starting Oct. 1, the fire department will account for the largest share of the general fund, at $14.4 million, followed by street maintenance, at $9.9 million, then policing, at $9 million. The city contracts with the Flagler County Sheriff’s Office for policing services. The coming year’s budget includes money for nine additional deputies, for a total of 57. The city’s Palm Harbor Golf Club, again in the red, is costing the city $1.9 million, though a substantial portion of that is made up by fees. The city’s health insurance costs alone rose 18.4 percent, or $880,000.

The city is carrying a general fund reserve of $20 million. Danko wanted the city to take $2 million out of that reserve to cover the full rollback tax rate.

“There are places we could cut and we’re not,” he said, without giving examples. He repeatedly invoked the tax burden on seniors and their fixed incomes. Three individuals who addressed the council spoke likewise. “This is real money to real people, and I’m sorry I can’t vote for this budget. And I would urge you all to reconsider this.”




“I take a little offense at the inclination that I don’t think it’s a lot of money, and that we’re not considering seniors,” Pontieri said. “I think we did last year when we did a full-rate rollback, and I think we did again when we actually reduced the tax rate from what it was last year. We asked city manager twice to go back to the budget and find hundreds of thousands of dollars, and to her credit and to staff’s credit, they did that, and that does help our seniors. I have to say, I’m really proud of this budget. I’m proud of our staff, I’m proud of this council. And the reason I’m proud of this budget, and what we’ve been able to accomplish in this budget.” She said the city is not immune from the same inflationary pressures affecting households, yet reduced the tax rate and provided for the city’s priorities, including swale maintenance, repaving, policing and code enforcement.

The reserves were not immune either, she said: the city had to dip into them for $2.5 million to complete funding for fire stations. She said she “vehemently” opposes dipping into reserves to lower tax rates, comparing it to dipping into the country’s petroleum reserve to lower gas prices.

Klufas joined Pontieri, also pointing the open-book nature of the finance department, which has often weathered harsh–and inaccurate and unfair–criticism through uninformed public comments. “You’re such a transparent group of individuals,” Klufas told Helena Alves, the finance director, and Gwen Ragsdale, the budget and procurement manager. “If anything ever has a reason, you’ve always been the first people to have an answer, specifically with numbers. And that’s a hard thing to pin down sometimes.”

Budget matters done, Danko brought up the email City Attorney Marcus Duffy sent council members earlier this week, urging them not to openly discuss the lawsuit challenging the referendum until he called for a closed-door meeting. State law requires any such discussions of setting up closed meetings to take place in open session–not by email, out of public view. Duffy’s email skirted that line, since he was not explicitly calling for that closed meeting, but was nevertheless discussing it in an email to all five council members. “That is not my interpretation and I do not agree with that assessment,” Duffy said.




“From looking at the state law, it looks to me like your proposal to put that into the shade should have been done here in the sunshine, and that’s very concerning,” Danko told Duffy. (Putting a meeting “in the shade” is usually how governments describe closed-door meetings: in the shade from sunshine.) “Quite honestly, I don’t know why you’d want to put this in the shade. It’s not like we’re suing contractors or developers or builders about dollars. It’s not like we’re negotiating a contract with our firemen’s union. This is something that has been in the sunshine, that this council has been split on the language of that charter amendment, and the reaction from the public has not been very good. And yet, here we are taking something and you wanting to move it to the shade.”

State law allows local governments to hold closed-door meetings to discuss pending litigation as long as the discussion is limited to settlement strategy and financial costs, though no decision may be made in the shade. Those decisions must be held in an open meeting. The shade meeting must stick to the given subject, it must be recorded, and the transcript must be made available soon after the matter is resolved.

Danko, who again used unseemly language characterizing the council or its counsel, said if the referendum moves ahead, it will fail and taint the next council’s efforts to craft more appropriate referendum language. When he asked Klufas or Alfin to rescind their vote on the referendum–only they could do so, since they were in the majority that approved placing it on the ballot–Klufas shot back: “You could also ask your best friend to remove the lawsuit that he gave to the city, if you wanted to,” a reference to Jay Livingston, the attorney who filed the lawsuit on behalf of Alan Lowe. (The lawsuit bears Lowe’s name but Danko’s fingerprints.) “I don’t want to respond beyond any of that, but that’s just crazy talk.”

As Danko challenged him, Duffy–signaling that he won;t be cowed–advised to end the discussion, prompting another retort from Danko against the attorney.

If the referendum passes, Pontieri said she intends to seek a resolution “to put limits on what we can borrow in for how long,” and that may only surpassed by a supermajority vote of the council (of at least four votes out of the five). “So I understand your concerns, but I am making a commitment to protect our fiscal health with that resolution in the future,” Pontieri said.