With taxable property values way down for the second year in a row, the rolled back tax rates look to be heading up — but not without a fight between elected officials, their staffs and property taxpayers.
It's local government budget season, and this year no department's budget may be too small for ax-wielding budget cutters, particularly with taxpayers already hurting and increasingly angry -- think, “tea parties.”
With the economic storm becoming a fiscal hurricane, the budget season is becoming a long hot summer for Gulf Coast county officials looking to trim already downsized budgets.
The big trade-off county officials must wrestle with due to an expected $67 billion drop in taxable property values over the eight-county area, is whether they risk the tea partiers' wrath by jacking up property tax rates or whether they keep cutting and risk the wrath of people seeing their services cut.
The property tax rate, known as the millage rate, is $1 per $1,000 of assessed property value. Property values include real property, personal tangible property, and centrally assessed property such as railroads and private utilities.
Over the past two years, driven by the decline in real property values, the total taxable value for the Gulf Coast is estimated to have declined $112.6 billion. If that weren't bad enough — at least in county officials' eyes — other revenues have been in free fall, too, as sales taxes, gas taxes and fee revenues are all down in tandem with the economy.
Manatee County is illustrative. The $22 million projected general revenue reduction for the 2010 fiscal year includes a loss of approximately $16 million in property tax revenue due to falling values, plus an additional loss of about $6 million in other revenues also declining due to the economy and lower interest rates.
Manatee County Administrator Ed Hunzeker, who holds an accounting degree, summed it up this way in his recent budget message: “In the two previous years, legislative initiatives and Constitutional amendments required local governments to reduce property tax rates and revenues, which when combined with a market driven decline in our property tax base, has produced an unprecedented reduction in local government revenues.”
Adding further insult to the fiscal injury is the Lehman Brothers bankruptcy costing the state and Florida local governments an estimated $1 billion in investment losses. The state's counties, cities and school districts stand to lose $300 million.
Sarasota County is on the hook for $40 million, Pasco $6.6 million, and Hillsborough is at $11.3 million. Absent a hoped for federal bailout, it's been estimated that those investments may only return a maximum of 20 cents on the dollar, maybe only a few cents.
Every June 1, county property appraisers must provide local taxing authorities with their estimates of taxable values so proposed budgets can be prepared with some reasonable accuracy. Final taxable values are due by July 1. In the meantime, local governments are holding budget workshops across the region and getting the bad news from their staffs.
Biggest losers in Lee
As shown in the accompanying table, in order to raise the same general fund revenue as this fiscal year, ending Sept. 30, counties would need to raise tax rates by at least 8.6% in Manatee County to as much as 33% in Lee County.
Lee County Property Appraiser Ken Wilkinson estimates that the county has lost $30.1 billion, 27% of the just market value of property, which he expects will be the largest decline in the state. That translates into a 24.8% loss in taxable value — nearly $21 billion.
Unincorporated Lehigh Acres was the biggest loser, seeing a 47% drop, or $2.98 billion, in the past year. The city of Cape Coral didn't fare much better, losing 33.5% in value, declining $5.3 billion to $10.4 billion.
To make up the losses, the county would have to raise the millage rate by a third from 3.6506 to 4.8565. Or, of course, they could cut the budget or increase fees as an offset or some series of combinations. Lee County raised the general fund tax rate slightly for fiscal year 2007-08. Before that, the previous time the millage rate went up was for the 1995 fiscal year.
Hillsborough County has a similar dilemma. The county has a $4.032 billion budget this year and has a $110 million budget gap to fill. Next year, the deficit grows by another $166 million. Nearly 1,100 county jobs, including about 200 unfilled positions, may be lost over the next two years without a millage rate increase. Of that total, 905 would be cut by fiscal year 2010, beginning this Oct. 1.
To keep operating millage rates unchanged, County Administrator Pat Bean has proposed a $3.468 billion budget for the 2010 fiscal year, but it will be up to county commissioners to make the final decisions on budget cuts or increasing that tax rate. Asked what she thinks commissioners will do about the tax rate, Bean says, “They have been reducing the millage every year. It is their policy to continue that if possible. I don't know if they will find themselves this year to be able to do that.”
Adding to the dilemma is Hillsborough's need to slightly increase the debt millage rates to pay off voter approved bonds for environmental lands and park improvements. The rates must change annually based on the changes in the property tax base to comply with bond covenants.
The county was able to get around a debt millage increase this year by using other revenues. Now, however, with the tax base expected to decline in 2010 and 2011, Bean is proposing an increase to the debt millage totaling two and a half cents for each $1,000 of taxable value over the two years. That makes it that much tougher for commissioners to raise the general fund tax rates.
The property appraiser's latest property value estimates show Hillsborough County's three general operating funds losing $27.2 billion combined in taxable property value. Without an increase in the tax rate, Hillsborough could lose about $96 million in property tax revenue — $61.5 million to the countywide general fund, $28.7 million to the unincorporated area general fund and over $5.7 million to the library tax district fund. The library district covers the city of Tampa and the unincorporated area.
Budget cuts in Charlotte
Nearly five years after Hurricane Charley, Charlotte County still has its own special set of problems, starting with a $48 million revenue shortfall. But the county struggles with getting an accurate estimate of its taxable value, a problem tied directly to Charley and 2005's Hurricane Wilma.
According to Property Appraiser Frank Desguin, the estimate provided to Charlotte County and Punta Gorda tax authorities June 1 cannot be relied upon. It only shows a 7.4% decline because only a third of the tax roll has been updated.
But Desguin expects a 20% decline when the work is completed and that's what commissioners have been assuming throughout 22 budget workshop meetings.
Commissioner Tricia Duffy cautions, however, that when the final numbers come, in the county could see a 30% property value drop-off.
A 20% decline amounts to $3.8 billion in reduced taxable value. Potentially, that translates into a 25% increase in the tax rate if commissioners chose to go that route.
The bottom line is that without a millage rate increase or major budget cuts, Charlotte County stands to lose $21.5 million in general revenue. Duffy, however, maintains that there is no plan to increase the tax rate, saying, “We're hoping to be able to do it all with budget cuts.”
Desguin says his staff is still catching up from the workload brought on by Charley and Wilma. Desguin cites increased construction, adjustments for property that had damage, repairs, changes in the real estate market and the number of sales increasing 30% to 40% a year.
He says his staff is spending time doing things they normally wouldn't have to do, adding, “We're much better this year as far as where we'd like to be. Hopefully, next year's roll is where we'd like to be.”
From 2007 to 2008 taxable value declined by $45 billion over the eight county region, but only one county, Charlotte, increased their general operating millage rate. That increase was significant — 25%, going from 4.5426 to 5.7096 mills.
Two counties reduced the tax rate — Hillsborough and Sarasota — though slightly.
Now, with a larger decline of $67.4 billion expected this year, and lower taxable values anticipated for the next fiscal year, it has become much more difficult to lower the millage rate without mass layoffs or other major service cuts. Only double digit increases in the tax rate can prevent that, and that doesn't seem likely.
Manatee, though smaller than most of the local counties, is looking to cut $22 million from the operating budget, but appears to still be in a somewhat better position than most area counties.
Over the last two years, Manatee has been making cuts and using reserves to offset revenues losses. It may not hurt these days to have a former accountant as your administrator, such as Manatee's Ed Hunzeker is.
Kevin Rolland, in the Collier County property appraiser's office, raises another issue for which taxpayers should be aware. If a county uses the rollback rate, which was used during the good times to roll back millage rates so the same amount of revenue was brought in, the opposite happens now. The rate goes up to bring in the same amount.
So while it is a misnomer, a rollback rate is going to generate more taxes, because even a little new construction will add to the tax rolls, Rolland says.
This could be a double-edged sword for county officials, however. Anything that looks like a tax increase will get serious scrutiny by a tax-weary public looking to cut costs, and especially property taxes.
More tea parties are already being planned for the region and no public officials want to be the focal point of that anger.