Because of pandemic, City of Sarasota looking at estimated $247,112 shortfall in preliminary 2022 fiscal year budget

Mayor calls for no property tax increase

Sarasota City Manager Marlon Brown. Image courtesy City of Sarasota

A projected shortfall of $2,212,487 in the City of Sarasota’s budget for the 2022 fiscal year — which will begin on Oct. 1 — has shrunk to $247,112, City Manager Marlon Brown pointed out to the city commissioners during their regular meeting on March 15.

Nonetheless, Brown added, revenue and expense estimates “at this early stage [are] very tentative.”

He also noted that city policy calls for the General Fund’s reserve fund to represent between 17% and 25% of the city’s operating expenses. “It stands at 30.2 [percent]” Brown said, giving the commissioners a “cushion of just over $8 million” that could be used if they directed staff to allocate it for specific purposes.

More refined information should be available on May 27, Brown noted, when staff has scheduled a budget review with the board members.

Mayor Hagen Brody did make it clear that he opposes any property tax increase for the next fiscal year.

The commissioners also kept the millage rate the same from the 2020 fiscal year to the current fiscal year.

“I would like to see us get to a place where we can lower taxes,” Brody said. Even if the board in a given year does not raise the millage rate, he pointed out, property owners end up paying higher taxes because property values go up. (Each year, local governments advertise what their “rolled-back” millage rates would be if they were to keep their property tax revenue from rising because of higher values.)

Kelly Strickland, the city’s finance director, pointed out on March 15 that in December 2020, state officials estimated the city’s property value would rise 3.8% this year. If that projection proves to be on the mark, she noted, that would provide the city an extra $1.2 million, based on the Fiscal Year 2021 millage rate of 3.2632 mills.

Last year, she noted, the value of city property increased by 4.64%.

On the negative side of the equation, Strickland continued, FY 2022 will be the first year when the city will have to pick up all the expenses of operating parks that Sarasota County returned to city management. During each of the past three fiscal years, she added, the county gave the city $882,000 to subsidize the city’s costs for those parks.

“Also,” she said, “we will have the TIF for The Bay,” referring to the tax-increment financing mechanism the City and County commissions approved last year to help fund planned new amenities on the city’s 53 acres of bayfront land.

These are the estimated TIF payments for the city and county over the 30-year life of the proposed agreement for The Bay Park, as of early September 2020. Image courtesy Sarasota County

As agreed to by both boards, Jan. 1, 2019 is the base tax year for the TIF. That means that each year the value of property in the TIF district increases, the city and the county will calculate the amount of additional tax revenue they would collect, based on the increase and each local government’s millage rate. Then the city and county will allocate the money to a trust fund for The Bay Park.

Given the timing of the TIF agreement’s approval, Strickland indicated, the city will contribute money for the current fiscal year as well as for FY 2022, into the trust fund. The total, she said, has been estimated at $315,000.

Among other factors that will affect the city’s revenue and spending in the next fiscal year, Strickland noted that a 3% salary increase for the members of the International Union of Police Associations (IUPA) will cost the city $518,000, with potentially another $225,000 going to the city’s Teamsters members, based on a 1.5% salary increase. However, Strickland added that the final figure for the Teamsters will be determined on the basis of various factors. She explained that the most recent deal city leaders concluded with the Teamsters stipulates that all of those union members’ city employment anniversaries will be shifted to October.

On the positive side, Strickland continued, staff anticipates savings of $75,513 in payments to the General Employee Pension Plan in the 2022 fiscal year.

“The best news,” she noted, is that the amount the city will have to pay into the Fire Pension Plan will drop $1,551,375. That was a result of changes in the “mortality table” for the Florida Retirement System, she said.

Additionally, the city’s payment into the Police Pension Plan will drop $240,000, Strickland pointed out.

These are the March 15 revised factors affecting the City of Sarasota’s budget for the 2022 fiscal year. Image courtesy City of Sarasota

Among other budget factors, Strickland noted that city leaders last year eliminated the Equipment Replacement Program as one response to the downfall in revenue linked to the COVID-19 pandemic. To restore that program, she said, the commissioners would need to set aside $1.1 million.

Strickland explained that that program works by requiring one-fifth of the expense of any new piece of equipment to be allocated to that fund each year for five years, to reflect the expected lifespan of that equipment. Therefore, she continued, funds would be available at the end of the five years to replace the piece of equipment, instead of city staff’s having to find enough revenue in one year to buy the replacement item.

“It is a planning tool,” she said of the program.

Then Brown told the commissioners that he already had advised all city department chiefs that they would not be able to add any new positions in the 2022 fiscal year or seek extra funds for any other purpose.

By May 27, he added, “We should have some more dependable numbers …”
The commission is scheduled to conduct its FY 2022 budget workshops in July, Brown noted.

When Mayor Brody asked whether Brown had any information yet about how much money the city will receive from the new COVID-19 stimulus bill that Congress approved last week, and President Biden signed into law, Brown replied that he did not. However, Brown cautioned the board members not to consider using any money from that program for more than one-time-only expenses. They will not be recurring funds, he pointed out.

Some suggestions

Brown put the financial update on the March 15 agenda, he told the commissioners, to give them an opportunity early in the budgeting process to offer any recommendations to staff.

Vice Mayor Erik Arroyo offers comments during the March 1 City Commission meeting. News Leader image

Both Vice Mayor Erik Arroyo and Brady had comments.

Arroyo pointed out that he has been discussing budget issues with Brown, Deputy City Manager Pat Robinson and Finance Director Franklin “for a long time.”

Among his proposals, Arroyo continued, are to try to avoid using the General Fund to cover expenses when other city sources are available. (The General Fund is made up largely of the annual property tax revenue the city receives, and other sources of revenue, such as gas tax funds.)

Second, he said, the city should have a policy calling for staff to seek bids on as many services as possible.

Third, Arroyo talked of his desire to find out how much the city typically spends in a year on vehicle accident claims, with an eye toward trying to get its insurance policy to cover them. “I believe that number is great,” he added of the annual total.

Further, Arroyo called for increases in city charges for certain permits, such as those for underground installations, including 5G upgrades for internet service. Workers handling such projects “often hit water mains,” he pointed out. “It’s a Florida problem.”

Moreover, he said, contractors “have told me our fee is quite low, comparatively.”

Another idea, he continued, is to eliminate the city’s Parking Division and then pay an outside firm to handle the work of that division’s employees.

Yet another recommendation, Arroyo said, is to require city employees who continue working past the point when they are vested in their retirement plans to keep contributing to those plans.

He also advocated for eliminating the hiring of consultants, and he called for finding a way to reduce the approximately $10 million a year the city pays for outreach to the homeless, including medical treatment claims

Finally, Arroyo said he wants to see the city reduce redundancies in departments. For examples, he said, “The city has an IT [information technology] department; the Police Department has an IT department. The city has a payroll department; the Police Department has a payroll department.”

“We can consolidate them, and the results will be tremendous,” he added, though he noted that employees would not have to be terminated.

Mayor Hagen Brody makes remarks during the Oct. 2, 2017 City Commission meeting. File photo

Taking his turn, Mayor Brady said, “A lot of [the FY 2022] budget issues are predictable,” with the city having taken “a hit” during the pandemic.

“I’d like to see us get to a point where we’re stable,” he continued, meaning staff would not have to pull money from some departments to plug “budget holes” in others.

As for the loss of the county funding for the parks: Brody pointed out that he had suggested in the past that staff plan for that. “But here we are.”

In regard to property taxes, he asked Finance Director Strickland whether she was certain the increase in value this year would be 3.8%.

“We won’t know until June 1,” she replied, reminding him that, by that date, the state requires the release of preliminary property values. July 1, she added, is the date for the final figures to be released for budget-planning purposes.

Brody said he also opposes any fee increases for the 2022 fiscal year. In fact, he continued, he would like to see the city lower not just its fees but also its tax rate.

Further, Brody indicated his support for eliminating the city’s business tax. No reason exists, he said, for the city not to allow business owners “to keep more money in their pocket.”

During election season, Brody pointed out, candidates often discuss repealing the business tax. “But it never comes up at the commission. I’d like to have a conversation about it.”

On one of its webpages, the city says, “Businesses and licensed professionals operating within the City limits of Sarasota must pay a business tax. This includes anyone doing business out of their home, if the home is located within the City limits. A Business Tax paid for an office does not cover professionals working in that office. Each person engaged in an occupation requiring a state license must pay a Professional Business Tax.

“The Business Tax is required to be paid when the business begins operations,” the webpage adds.

These are samples of business tax fees in the city of Sarasota. Image courtesy City of Sarasota