The Palm Coast City Council is prepared to set its tentative, maximum tax rate for next year 3.4 percent higher than the current rate. The rate would nevertheless not be enough to pay for about $3.3 million in additional needs or requests in a $72.2 million general fund budget, among them a $1 million request for nine new sheriff’s deputies, over half a million dollars in a cost-of-living pay increase and $740,000 in staffing increases.
The tentative rate the council will adopt next week allows it either to set it as the final rate for next year or to go below it in coming weeks. It may not exceed it. That leaves the council with no option but to either eliminate the $3.3 million in additional spending, or to find the equivalent in budget cuts.
The budget includes a $2 million fund balance, carried over from unspent funds in this year’s budget, that Finance Director Helena Alves said may be used for “one-time expenditures or capital projects.” Alves strongly counseled against using the money for recurring needs, as Council member Theresa Pontieri said at one point when she suggested using the balance to lower the tax rate. (The fund balance should not be confused with the city’s reserve, which is much higher.)
The council could not reach a unified approach at its workshop Tuesday, though budget season typically implies weeks of deliberations to reach consensus. This is an especially difficult budget season for three reasons, any one of which would have upended the process.
First, the economy is slowing, sharply lowering tax valuations and revenue compared with previous years. Second, a proposed constitutional amendment could raise the homestead tax exemption and cut general fund revenue by up to 30 percent by 2028. Third, it’s an election year, which may influence candidates’ decisions.
Pontieri is running for a County Commission seat. She was opposed to eliminating the request for nine new deputies, which seemed like a possibility during Tuesday’s discussion. Sheriff’s Chief of Staff Mark Strobridge urged the council not to step back from a three-year program of adding nine deputies each year. The city is entering the third year.
Mayor Mike Norris was empathetic, but also cautious. “The sheriff is trying to do exactly what he needs to do to keep the city and the county safe, and we’re eternally grateful for it,” Norris said. “It’s just we are very constrained, and I know you guys understand.”
“I completely agree in terms of the sheriff’s contract that we entered into an agreement,” Council member Ty Miller said. “We said we were going to do these things. Obviously, things have changed from the state level as well as the drivers in terms of property valuations going down this year in comparison to the previous years.”
There were discussions about a proposed 3 percent merit pay increase (“what I’m trying to prevent is an automatic 3 percent merit increase when some may deserve it and some may not,” Pontieri said), whether to use the fund balance to pay for the city’s contract with the Flagler Humane Society, whether to cut the Humane Society’s budget request by $200,000, or even–as Pontieri suggested–whether to end code enforcement patrols and transform the division into a complaint-based system only.
“I’m not sure the juice is worth the squeeze,” Council member Charles Gambaro said. He has generally opposed loosening of code enforcement rules, including the relaxing of rules on work truck parking in residential zones and looser outside paint colors for residential homes.
Running the Southern Recreation Center will cost $831,000 next year, while generating half of that in user fees. “The Southern Rec Center is gorgeous, it’s a beautiful facility,” Pontieri said. “I know it’s highly utilized by our public, and all of that’s great. But it’s costing us almost a half a million dollars, and we talked about the aquatic center and how that’s such a bleed to us every year. This is trending to be not very different.” She wants a plan for revenue-generating tournaments that will stop the bleed.
The increase in the tax rate is deceptive. Excluding new construction, the city would have to modestly increase its tax rate just to keep next year’s revenue equal to this year. Under Florida law, that would not be considered a tax increase. It would be going to a rollback, or in this case rollup, rate. The proposed budget barely raises the tax rate above rollback.
“The rollback rate is basically to have the same number of dollars coming in from last year and this year,” Council member Dave Sullivan said. “Normally, the rollback rate reduces the millage rate. In this case, even to just duplicate what we took in last year, we still would have to increase the millage rate.”
The current tax rate is $4.0893 per $1,000 in taxable value. The rollback rate would be 4.1389. If the city were to fund its $3.3 million in additional needs, the rate would have to be 4.5350. If the city were to keep the existing tax rate–which would be a tax cut, under Florida law–it would have to cut $1.5 million from the budget on top of the $3.3 million in unfunded needs and requests.
“I’m not saying that we need to adopt that as the max today,” Pontieri said of the current rate. “But that is what I will be advocating for as we move forward.”
Palm Coast’s projected general fund budget is $72 million. If voters approve the amendment raising the homestead exemption, the city, by its own calculation, will lose $9.2 million of that. It will lose $15.9 million the following year, or more than a fifth of its revenue.
Florida’s Revenue Estimating Conference, a consensus of analysts from each branch of government, projects a $12.4 million loss for Palm Coast next year and $21.7 million the following year (30 percent).
Revenue Estimating Conference numbers are usually “pretty close,” Flagler County Property Appraiser Jay Gardner said, suggesting they are likely more accurate than his, which are based on projections of some increased values locally. He cautioned that assessments are “in the decrease mode,” which will add further downward pressure on the city’s revenue, and that the numbers will change–and the amendment will be challenged in court.
The projected loss framed some but not all of the discussions of the council’s long workshop Tuesday, especially with the proposed amendment’s premise that public safety is to be immunized from cuts.
In the current budget, Miller said, public safety consumes $30 million. By year two of the amendment, the city would face an $8 million deficit if it were to keep funding public safety at current levels, and face the same other services it is providing.
“We do have some big decisions to make and try to figure out how we’re going to fund everything that the residents deem to be essential versus non-essential,” Miller said.
“I think we have to hold the line this year and see what happens with the election and the referendum,” Norris said. He agreed with Gardner that the amendment will be a tax shift rather than a tax cut.
“In general terms, I think we should be very careful this year in making significant changes, and we don’t know what’s going to happen on the amendment yet,” Sullivan, the most experienced of the elected officials by far, said. “We will not know till November. We can always cut back on things if we have to. So, as far as the millage rate goes, we’ve got to look at everything. I know personally, I would never go below the rollback rate. As a point of fact, I think to fund things properly, we probably should do what the staff is recommending to 4.2296.”
Sullivan’s recommendation carried, keeping in mind that it will be the tentative rate, above which the council cannot go, but it may still set it lower by the time it votes on next year’s rate and budget in a pair of hearings in September.
Robjr says
Tell the Sheriff NO. There is one million dollars saved.
And if there has to be reductions in force do not begin at the bottom of the hierarchy. How many
of the city staff are in the low to mid six figure salary bracket?
Shark says
It’s about time the Palm Coast gravy train ends !!!
MITCH says
If I delay making needed repairs to my house, then when I do make the repairs, I can expect costs to be higher. Same with running any business or organization (city). The residential roads East of US 1 have been ignored for 26+ years and are in need of repairs, now the city has to juggle where to find the funds. It’s not just the residential roads, but infrastructure as a whole has been ignored to push growth. Expansion of West of US 1 threatens to take repair funds from East of US 1 which will leave the residents of East of US 1 with deteriorated unsafe residential neighborhoods. Then there are problems with sewer systems in some residential arears, where will those funds come from? We are all concerned about our water quality. Where will the focus of city resources go in this time of dwindling funds. Sadly, from looking at the past 26+ year, we have somewhat of an idea how our leaders have been following previous city council leaders.