County Commission facing how best to balance constituent needs with fiscal realities

Staff cautions that numbers will change, but early figures indicate a $7.7-million gap to fill in the 2019 fiscal year budget and an even deeper hole for FY19

As of Dec. 8, 2017, these are the estimates for the Sarasota County General Fund budgets in coming years. Image courtesy Sarasota County

The Sarasota County Commission has entered 2018 in the uncommon position of needing to fill significant holes in its budgets for the next two fiscal years — a potential $7.7-million gap for FY19 and a hole as deep as $19 million-plus for the 2020 fiscal year.

Over the past 10 years, a Sarasota News Leader review confirmed, the board’s budget workshops typically began no earlier than February. However, because the majority of the current commission was unwilling to raise the millage rate — which is reportedly the second lowest in the state — or implement a 5% Public Service Tax on certain utilities starting in April, the discussions commenced in October 2017. At the end of this month, the board members have said they will dig into the budgets for the departments they control. Yet, they already have heard pleas from the public about maintaining current service levels — especially in regard to library operations.

“The problem is the cost of doing business has gone up,” Commissioner Charles Hines pointed out.

And once again, during the commission’s Dec. 8, 2017 retreat, county staff explained a financial fact that the average person has found hard to believe, based on board comments: Although plenty of new construction has been underway in the county — especially in the city of Sarasota — $100 million in new value on the tax roll translates into only $339,000 in new property tax revenue, thanks to the current county millage rate of 3.3912.

A chart shows how various types of county revenue can be used legally. Image courtesy Sarasota County

Deputy County Administrator Steve Botelho made that point as he and interim County Administrator Jonathan Lewis reviewed numbers they know and numbers staff has estimated, in preparation for the 2019 fiscal year. Botelho cautioned that even the budget gaps projected for the next two fiscal years are sure to change.

State economic staff has estimated that development completed in the county with a value of $1,298,000,000 will be added to the property tax roll in FY19, Botelho noted. That would generate about $3.6 million in ad valorem tax revenue for the county’s General Fund. That new construction has been included in the state’s estimate that property tax values will grow altogether by 6.3% this year, he said. “In the past, we have not gotten that kind of detail from the state.”

In the city of Sarasota, he added, The Vue, Cityside and DeSota condominium and apartment complexes were anticipated to be completed before the end of the 2017, along with the Art Ovation Hotel next to the Palm Avenue parking garage and the Embassy Suites & Spa on U.S. 41 in downtown Sarasota. Those had a total construction value of $280,000,000, Botelho said. If their taxable value proves to be the same figure, he pointed out, that would translate into $820,000 in new ad valorem tax revenue for the county in FY19.

However, a slide Botelho and Lewis showed the commissioners emphasized, “Construction value doesn’t necessarily equal taxable value. Also, we do not know what projects will or will not make the FY19 tax roll.”

A chart shows county statistics for the 2017 fiscal year, which concluded on Sept. 30, 2017. Image courtesy Sarasota County

Commissioner Nancy Detert — the new chair of the board, as of Jan. 1 — asked how accurate Botelho felt the state projections were.

“Historically, they’ve been pretty far off,” he responded. However, in the recent past, he added, they have proven closer to the mark. “Based on history, that 6.3 [percent] might range [from] 5.5% to 7%.”

Building permit activity also is on the rise in the unincorporated part of the county, Lewis pointed out; in fact, it broke a record in the 2017 fiscal year — which ended on Sept. 30, 2017: The county issued 35,614 permits, according to another slide Lewis showed the board. That represented a 9% increase over the figure for the previous fiscal year. Lewis stressed that that record beat pre-recession figures.

For single-family home construction, the number of permits issued in FY17 — 1,620 — reflected a 10% hike over the FY16 number, the slide noted. “They’re huge,” Lewis added of those figures.

Achieving budget accord

A second chart shows more county statistics for the 2017 fiscal year. Image courtesy Sarasota County

As the board looks ahead to financial discussions in the coming months, Detert told her colleagues and staff, “I would say that probably our biggest hiccup this year … was when budget time came, we weren’t all on the same page.”

Detert proposed during the board’s last budget workshop in June that the millage rate be increased, because property values still were about 20% lower on a countywide basis than they had been before the Great Recession struck. Her own property taxes had continued to be lower, she pointed out.

“Frankly, nobody wants a headline that says, ‘County Commission raises taxes,’” Detert pointed out during the board’s June 21 deliberations on how to balance the FY18 budget. Nonetheless, she continued, “I would be willing to have a tax increase.”

Botelho had explained, she noted, that owner of a home valued at $200,000 would pay only $20 more per year, if the millage were raised by 0.1 mill. “I’m concerned that we don’t have enough in our [rainy day] reserve fund.”

Botelho and then-County Administrator Tom Harmer had proposed a millage increase of 0.1 — from 3.3912 to 3.4912 — along with the 5% Public Service Tax on use of electricity, natural gas, liquid petroleum and water as a means of balancing the budget and enabling the county to start setting aside funds once again in that Economic Uncertainty Reserve, or “rainy day” fund.

During the Dec. 8 retreat, Detert said she accused Harmer “of being too nice: ‘Maybe you didn’t sound urgent enough for us’” about the state of the county’s finances.

The more time the commission spends on adjustments in the coming months in preparation for the FY19 budget, Detert told Lewis and Botelho, “the better the result’s going to be at the end when we have to take a final vote.”

A chart shows changes in General Fund budgets for various departments over the past several years. Image courtesy Sarasota County

“That’s an interesting observation,” Commissioner Hines said of Detert’s comment about Harmer. In the past, Hines added, he had told Harmer “he needed to be more emphatic” about budget concerns.
However, Hines continued, Harmer did warn the commissioners over the past two to three years that they would be facing the financial situation that is before them if they did not act appropriately to ensure revenue sources would cover expenditures. “And we pushed back for a couple of years.”

Hines also pointed out that prior to the commission’s last discussion about raising more revenue — held on Nov. 28, 2017 — several people appeared during the Open to the Public portion of the session to plead that certain county services be maintained at current levels or improved. Among the speakers were long-time Sarasota attorney Dan Bailey of the Williams Parker firm and Jono Miller, retired director of the Environmental Studies Program at New College, who also has served for many years as a county advisory board member. Noting that Bailey and Miller are “potentially on different ends of the [political] spectrum,” Hines reminded his colleagues that both men nonetheless said the county’s millage rate is too low to provide the level of services residents want. “We need to take that information into account.”

Referring to the discussion about Harmer, Hines told Lewis, “Jonathan, your personality’s different.” Hines added that Lewis already had made it clear to the board that “it’s going to be a bumpy year.”

Hines then noted earlier remarks Lewis had made about studies showing how to achieve the best types of relationships between elected officials and staff. “As you said there, it needs to be [a relationship with] trust,” Hines continued. The commissioners should not hesitate to ask staff for information if they feel they do not have all the details they should have to make the best decisions, Hines said.

Then-Chair Paul Caragiulo also pointed out, “The material has to be up-to-date,” especially when it relates to county finances. “Absolutely, completely up-to-date and correct. … That’s a challenge.”