County Commission asks staff to come back in June with scenarios for balanced future budgets, including a millage rate hike and across-the-board cuts

Implementation of a Public Service Tax also seen as a way to start stabilizing county finances

County staff presented a ‘worst-case’ set of budget scenarios during the May 26 workshop. Image courtesy Sarasota County

They have acknowledged the need not only to pay for critically important building projects but also to begin replenishing the “rainy day” fund they have been using to balance the budget in the wake of the Great Recession.

Now, with the anticipation that an increased homestead exemption will take an even bigger chunk out of the county’s General Fund revenue, the Sarasota County Commission has asked staff to be prepared to offer several options next month for improving the county’s fiscal outlook over the next five years, starting with 2018. Chair Paul Caragiulo was adamant about not being a fan of tax increases, after Deputy County Administrator and Chief Financial Management Officer Steve Botelho suggested on May 26 that an increase of 0.35 mills in the millage rate would put the county on a much more solid fiscal footing. Caragiulo also asked staff to come back during the June budget workshops with suggestions about the implementation of a Public Service Tax (PST) at a level well below the maximum 10% allowed by the state, and he suggested staff take a look at a 10%-decrease in expenditures from the General Fund.

When County Administrator Tom Harmer asked for more specific details about how Caragiulo proposed the 10% cut be applied, Caragiulo replied, “I’m just throwing a number out there.”

Still, as Commissioner Nancy Detert pointed out, counties can impose millage rates up to 10. “Comparatively speaking, we’re very low.” She added, “My [property] taxes are now lower than my homeowner’s insurance,” and even less than her latest car insurance bill, according to the notice she recently received.

A chart shows how Sarasota County municipalities are making use of the Public Service Tax. Image courtesy Sarasota County

Referring to the PST — which Botelho reviewed during February and March budget workshops — Caragiulo said, “For the record … if we need to get ahold of some new revenue, I’m definitely more in favor of the consumptive part of it.” He added that with the PST, county residents would have more control over what they paid the county compared to their dealing with a millage rate hike.

“I do like the idea of the Public Service Tax,” Commissioner Charles Hines told Botelho as well. “I thought we had said to … throw that in the mix here,” he told Botelho.

The PST was not among the options Botelho and County Administrator Tom Harmer had included in a PowerPoint presentation for the board’s May 26 workshop.

Under state law, Botelho explained in February, use of the revenue from the tax is unrestricted; only charter counties and municipalities, such as Sarasota County, can charge it.

If the county levied just a 1% tax on electricity, natural gas, LP gas and water, it could generate about $2.3 million a year in extra revenue, a chart showed. The levy would not apply to the first 500 kilowatt-hours of monthly residential electrical usage, according to a slide provided to the board.

Meeting the demands

A graph shows past and projected revenue and expenditure figures for the county’s General Fund. Image courtesy Sarasota County

As Botelho has explained during past budget workshops, projections show the county’s General Fund revenue will not be sufficient to meet expenses until the 2026 fiscal year. (The General Fund largely comprises property tax revenue.) Botelho further pointed out that the budgets of the county’s constitutional officers — the sheriff, the tax collector and the supervisor of elections, for example — consume 56% of the General Fund each year.

Among the “Items on the Horizon” that the county will have to pay for in coming years, Botelho noted, will be the full operating costs of the new public Shannon Staub Library in North Port, which will be part of the Suncoast Technical College campus; the building on Cattleridge Boulevard into which the Sheriff’s Office will be moving a number of its departments later this year; the north extension of The Legacy Trail, for which the board has committed purchasing the property; ongoing programs to help the homeless; the new Venice Public Library to replace the facility closed last year; and the costs of operating new South County courthouse facilities at the R.L. Anderson Administration Center in Venice.

Commissioners Michael Moran and Hines also noted their expectation that at some point, the group working on a master plan incorporating arts venues and public space on 42 acres of bayfront property owned by the City of Sarasota will be seeking county financial support, as well.

“Somebody’s going to come knocking [on our door] on that,” Moran pointed out of the Bayfront 20:20 initiative.

County Administrator Harmer replied that he had met the previous day with the organizers of that effort, who are still in the planning phase. Still, Harmer acknowledged he, too, anticipates that the group will want to talk with the commissioners at some time in the future. “I don’t think there’s enough information there at this point to know what that [request] might look like.”

The expansive Van Wezel parking lot is an element of the planning process for new amenities under the Bayfront 20:20 proposal. File photo

Hines noted the list Botelho had provided, with ongoing funding concerns. Before the board jumps at the opportunity to undertake new projects in the future, Hines said, it needs to make certain it can afford to maintain existing structures at the level the community demands. The Bayfront 20:20 initiative, he continued, “is a big project. It makes sense, but … do we start abandoning some things … or start ignoring them” to pay for new ones?

Moran concurred with Hines. “Our quality of life here’s absolutely incredible, but it’s also extremely expensive to make sure we maintain it.”

Digging into the numbers

One bit of good news Botelho did provide the board on May 26 was that the estimated increase in the county’s property value this year is 8.14%, slightly more than the 8% staff had used in its projections for the workshop that day. (See the related story in this issue.)

The final property tax figure is required, by law, by July 1.

A chart shows projected property tax value increases for the county. The preliminary figure for FY18 is up to 8.14%. Image courtesy Sarasota County

In reviewing budget scenarios for the next five years, Botelho reminded the board on May 26 that in February, staff was projecting no shortfall before the 2019 fiscal year, and the amount estimated was $3,542,392. Harmer and commissioners have pointed out in the past that whenever the shortfall is $5 million or less, staff generally finds a way to eliminate it.

However, one big change since February, Botelho noted, has been the Legislature’s approval of a bill that would increase the homestead exemption from $50,000 to $75,000. The measure will be on the November 2018 ballot; 60% of the voters who cast ballots will have to support it for the change to become law as part of the Florida Constitution.

Botelho also reminded the commissioners on May 26 of a new national accounting standard that has to be used by the Office of the Clerk of the Circuit Court and County Comptroller when it audits the county’s financial documents. When that procedure — known as GASB 54 — is taken into account with the expected loss of the extra property tax revenue from the homestead adjustment, he continued, the board is looking at a deficit of $7,298,949 in the 2018 fiscal year. That scenario encompasses debt service for the county’s borrowing of funds to pay for the several projects, including the new Sheriff’s Office facility on Cattleridge Boulevard.

The shortfall would more than double to $15,969,729 in the 2019 fiscal year, the chart shows, and it would climb as high as $20,176,234 in the 2020 fiscal year.

A millage rate increase of 0.35 mills for the 2018 fiscal year would raise the total county rate from 3.3912 — the second-lowest in the state — to 3.7412, Botelho pointed out. It would generate about $18.1 million more in revenue, not including any increases from rising property values.

A chart lists costs over which the county has no control. ‘FRS’ is the acronym for the Florida Retirement System, referencing county pensions. Image courtesy Sarasota County

For a person with a home valued at $250,000, the impact of the rate hike would be about $70 more per year, Botelho said.

Under that scenario, the county would not be looking at any shortfalls through the 2022 fiscal year. Furthermore, Botelho noted, the county could begin to build back up its “rainy day fund.” Since the 2012 fiscal year, he told the board, a total of $53.8 million has been spent out of that economic stabilization account to supplement county revenue. (See the related story in this issue.)

Board members and staff have explained that the county lost about 40% of its property value as a result of the recession. In 2008, a chart shows, the total value was $62.7 billion; in 2016, it had climbed back to $46.6 billion. The estimated value this year is $54,513,787,514. At the lowest ebb — in FY13 — it was $39.1 billion.

If the county had not decreased its operating millage rate in the 2008 fiscal year and kept it lower, a chart notes, the county would have brought in about $148 million more in property tax revenue.

Several other counties already are looking at millage rate increases for FY18, Botelho noted. Based on current information, however, he added, Sarasota County’s rate would be the sixth-lowest in the state if the board implemented the 0.35-mill increase.

Coming events

A graphic shows the breakdown of expenditures from the county’s General Fund for this year. Image courtesy Sarasota County

In late June, County Administrator Tom Harmer reminded the board members, they will hear presentations of the proposed budgets for the county’s constitutional officers. Already, Botelho and Harmer noted, Sheriff Tom Knight has reported that his FY18 budget will be lower than county financial staff had expected.

In June, Harmer continued, the board members will look at finalizing their plans for the next fiscal year.

“It’s going to take the details that I think Chairman Caragiulo’s asking for,” Commissioner Alan Maio pointed out, for the public to understand the financial constraints the board is facing.

The new homestead exemption is one factor the public will need to realize has a big impact on the county’s fiscal future, Caragiulo added. “That’s a lot of money.”

Still, he continued, “we have a sophisticated community that understands a lot of these issues, once information is provided.” The board members, he said, need to be able to counter misinformation and hyperbole.