All department chiefs and the constitutional officers who sought budget hikes will be asked to inform the commission about affected projects if they were to halve their increases
It took about 70 minutes of discussion, two split votes and one failed motion, but the majority of the Sarasota County Commission this week opted to support Chair Paul Caragiulo in refusing to raise the county’s millage rate for the 2018 fiscal year.
After passing the gavel to Vice Chair Nancy Detert shortly after 5:30 p.m. on June 21, Caragiulo made a motion directing County Administrator Tom Harmer to have staff prepare budget forecasts for the next five fiscal years incorporating a 5% Public Service Tax (PST) on residents’ bills for electricity, gas and water consumption in the unincorporated parts of the county. Under state law, the maximum a PST can be in a charter county is 10%.
The PST has to be implemented at the end of a calendar quarter, Steve Botelho, the county’s deputy administrator and chief financial management officer, explained to the board. Therefore, he added, it most likely could not be put into effect until April 2018; the budget models will include that assumption.
The five-year budget forecast staff showed the board, plugging in the 5% PST, had no shortfall until the 2020 fiscal year, when the county would face a $7,259,725 gap. Harmer pointed out that that model included $8 million set aside since 2013, when the commissioners voted to reduce the emergency operations reserve from a 90-day level to 75 days. Last year, the board called for Harmer to continue to keep that $8 million apart from other funds, in the event it was needed to help cover additional expenses for the World Rowing Championships this fall or initiatives to help the homeless.
In his June 21 motion, Caragiulo also asked Harmer to work with the directors of all county departments seeking increases in their budgets for the 2018 fiscal year to cut those upticks in half. Furthermore, Caragiulo called for Harmer to work with the county’s constitutional officers — including Sheriff Tom Knight and William Furst, the property appraiser — to cut by half their budget increase requests for FY18. Caragiulo said he was not necessarily looking for a reduction in any department’s personnel. Instead, he talked of wanting to know the “operational repercussions” of those cuts. “Tell us what that would mean,” is how he put it when Detert sought clarification.
Finally, the motion included direction for staff to continue its “sweep” of all potential revenue sources, a practice staff has been pursuing as the commissioners this fiscal year have been trying to figure out how to pay for such high priority projects as the north extension of The Legacy Trail, a building on Cattleridge Boulevard in Sarasota that it acquired earlier this for a number of Sheriff’s Office divisions, and the new Venice Public Library.
Commissioner Charles Hines seconded Caragiulo’s motion, and it passed 3-2, with Detert and Commissioner Michael Moran dissenting.
The board will hold its next regular meeting on July 12. On that date, it will have to set a not-to-exceed millage rate for FY18. Although Harmer and Botelho both had proposed a millage increase of 0.1 — from 3.3912 to 3.4912 — Caragiulo was adamant about not raising taxes — “something that hasn’t been done in the last 14 years.”
“Maybe it’s because I’m new,” Commissioner Michael Moran said, but adopting a millage rate increase “is a little unsettling to me.” (Moran was elected in November 2016.)
Caragiulo preferred the PST, he noted, because “one can alter behavior if they wan to pay less for things.”
“I can live with the Public Service Tax,” Hines agreed. If the board did not go ahead and implement it during FY18, he added, he was fearful the Legislature would put an end to the ability of charter counties and cities — such as Sarasota County and the City of Sarasota — to utilize the tax.
“Frankly, nobody wants a headline that says, ‘County Commission raises taxes,’” Detert pointed out. 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.”
Detert did add that she would prefer, if the board raised the millage rate, that it also promise no further millage increases for the next decade. Caragiulo told her the commission could not bind future boards to such a promise.
When talk began at one point about going as high as 8% on the PST, Commissioner Alan Maio said, “That goes against people who pay rent,” and owners of commercial buildings will “then pass that on to their tenants …”
He stressed that a number of apartment dwellers pay their electric and water bills.
The proposed FY18 budget is $1,081,676,093, down 0.2% from the FY17 budget, but with operating costs up 2.7% year-over-year. Although 20 new full-time employees have been requested, only 12 of those would be paid for out of General Fund revenue, according to material provided to the board. The General Fund largely comprises property tax revenue. Therefore, staff has explained, it is the most constrained source of county money.
Importance of the ‘rainy day’ fund
In setting the stage for the final budget discussion after two days of workshops, Harmer told the board, “In our view, we’ve been artificially low in our millage rate and our revenues on purpose,” in response to the effects of the Great Recession. Given the improvement in the economy, deferred county maintenance, the number of high-priority projects the board has identified and — a point Botelho also stressed — the need to start building back up a “rainy day” reserve fund, Harmer said, the commission should consider the small millage rate increase.
Botelho reminded the board members early on during the June 20 workshop that both the county’s financial adviser — Jay Glover, managing director of Public Financial Management Inc. in Orlando — and Sean Snaith, director of the University of Central Florida’s Institute for Economic Competitiveness, strongly recommended to them on May 26 that they start putting money back into their Budget Stabilization Reserve. Snaith warned that it would be just a matter of time before another recession occurs, while Glover talked of concern that the county could lose its high credit ratings if the commissioners continued to use the Budget Stabilization Reserve to balance the budget.
Rushing, the clerk of court, also advised the commissioners in early May to “evaluate options to restore the General Fund Budget Stabilization Reserve.” She made the comment during a review of the board’s Comprehensive Annual Financial Report for the 2016 fiscal year.
In fact, Botelho and Harmer included quotes from Glover, Rushing and an S&P review of the county’s finances in July 2016 on a page in the master PowerPoint presentation for the budget workshops this week.
Looking for direction
After the final scheduled presentations during the June 21 budget workshop, Harmer explained that he and his staff had tried to develop “what we think is a fiscally appropriate and fiscally sound and sustainable plan for the next year,” especially in light of the need to start building back up the “rainy day” fund that previous commissioners compiled before the recession began.
For the first time since he was elected in 2012, Commissioner Hines pointed out, the board was faced with difficult choices. It could accept the staff recommendations for raising the millage rate and implementing the PST and then, before finalizing the budget on Aug. 21, see whether staff members are able “to pull some more rabbits out of the hat, like [they have] done in the past.”
(The board will hold public hearings on Sept. 11 and Sept. 26 before voting on the latter date to adopt the FY18 budget.)
Commissioner Maio responded that he feels staff will be able to find other funding resources — whether by eliminating poor-performing Sarasota County Area Transit (SCAT) routes or just with the final property values, which are due by July 1. (The preliminary estimate was an increase of 8.14% over the 2016 values.)
Moreover, Maio pointed to the “overwhelming amount” of new construction underway, which will be going on the tax rolls in the next couple of years.
The previous day, Botelho showed the board a slide illustrating the lag time before new dwelling units and commercial structures become the source of additional property tax revenue for the county. Although board members later chided Botelho for what they called an unrealistic expectation that a building just getting underway in September 2017 would be finished in March 2018, the scenario Botelho and his staff provided pointed out that taxes on that building completed in early 2018 would be collected for the first time in the 2020 fiscal year.
Additionally — based on the 3.4912 millage rate staff had proposed — Botelho noted that new construction valued at $100 million would mean only an extra $349,000 in property tax revenue in a year.
The ‘level of service’ scenarios
Among other potential sources of money to balance the budget, staff provided the commissioners examples of cuts from various departments that would add up to $4.4 million. Staff came up with that figure, Harmer told the board, because county government operations use 44% of the General Fund revenue. (The constitutional officers’ budgets utilize the remainder of the General Fund money.)
For example, if the current nine county libraries were closed on Mondays, the savings would be about $535,000 per year. If SCAT eliminated Route 23 — the Venice Island Loop — the annual savings would be about $135,000.
If the Parks, Recreation and Natural Resources Department reduced its contractual maintenance services by 12% overall and eliminated four contractual maintenance positions — people who clean the restrooms at beach parks and pick up garbage, for example — that would result in about $553,000 a year for the budget.
“These are some pretty extreme things on this page,” Caragiulo said of the suggestions.
“You start cutting the bus to the library and the bus to the doctor’s office [and people are] just going to think we’re ridiculous,” Detert pointed out. After all, she continued, the board managed earlier this year to agree to about $8.6 million to help pay for the North extension of The Legacy Trail, and it is working on a deal to create a Spring Training complex for the Atlanta Braves near North Port. The members of the public do not understand how county finances work — that Tourist Development Tax revenue, for example, can be used for some projects but not others, she said.
Detert and Hines also talked of their views that specific department budgets should be cut, but they concurred that it was not appropriate to discuss those ideas in public, for fear of embarrassing department directors. They suggested that Harmer talk individually with all the board members, as he may find a majority with the same views about certain departments.
When it came to votes, Hines first made a motion calling for an 8% PST, approving the budgets as presented by staff and the constitutional officers and not reducing the levels of service proposed for discussion during the workshops.
That motion failed 2-3, with only Detert supporting it.
Hines then amended the motion to call for decreasing the PST to 5%, but no one seconded it.
Finally, Caragiulo made the motion that passed.