No Public Service Tax will be imposed on residents, County Commission agrees

Money that tax would have generated to be made up from the Economic Uncertainty Fund until board members can approve specific budget cuts

A graphic prepared by the Office of Financial Management shows the projected budget gaps in coming years that the County Commission will have to address, without Public Service Tax revenue. Image courtesy Sarasota County

It took almost an hour and 15 minutes to achieve what Sarasota County Attorney Stephen DeMarsh told the County Commission it had to do during its first public hearing on the 2018 fiscal year budget.

On a 4-1 vote, the board approved a tentative budget that will incorporate an extra $5.4 million from the county’s Economic Uncertainty Fund because the majority of commissioners made it clear they did not want to implement a 5% Public Service Tax on residents’ use of electricity, water, L.P. gas and natural gas.

The Economic Uncertainty Fund contains money previous boards set aside before the recession, in an effort to prepare for an economic downturn.

On his second try of the evening, Commissioner Alan Maio was successful in arguing on Sept. 18 that the board could balance the budget with extra money from that fund. Then the commission could begin holding workshops in earnest in October, he said, during which the board members could reach agreement on specific cuts. In the meantime, he pointed out, new buildings might be added to the county’s tax rolls, to help on the revenue side.

It was not prudent, he told his colleagues, to sit there at 8:33 p.m. and try to figure out ways to pare county expenses in the coming fiscal year.

Commissioner Nancy Detert had noted at 8:30 p.m. that the board had had more than half-a-dozen budget workshops during the preceding months and had failed to reach clear consensus on how to proceed with plugging anticipated budget gaps in the coming years. She added that she generally would vote “No” on “anything that’s written on your kneecap in a meeting,” especially when it regards money and reducing expenses.

“We have a year … to discuss … cuts,” Maio stressed. “Just because it’s in the budget doesn’t mean that it can’t be cut. … And at a calmer, more rational time, [we could] look at where these cuts could occur.”

“I’ll second that motion,” Detert responded.

Only Commissioner Michael Moran opposed it, having said numerous times during past budget discussions, and again that evening, that every budget has excesses that can be trimmed. “I’ve been consistent in this.”

Commission Chair Paul Caragiulo. File photo

The final vote followed a failed motion by Chair Paul Caragiulo to approve the tentative budget with direction to staff to pare $5.4 million in expenses for the 2018 fiscal year.

In June, the board members voted 3-2 to reject a staff recommendation for a millage increase from 3.3912 to 3.4912, with Detert and Moran casting the “No” votes. During that session, Detert argued for a tax increase, pointing out that the county had gone years without one. Instead, commissioners indicated a willingness to implement the Public Service Tax to generate necessary revenue in the coming years.

Then the board voted unanimously on July 12 to set 3.3912 as the not-to-exceed millage rate for FY18. Even if the majority of the board members on Sept. 18 had indicated a willingness to increase it at that point, by law, they would have been unable to do so.

Because the first reading of the budget was postponed from Sept. 11 as a result of the impacts of Hurricane Irma, the public hearing on the Public Service Tax was delayed until the second budget hearing, set for Sept. 26. State regulations about advertising the excise tax forced the change in hearing dates, county staff told The Sarasota News Leader.

Nonetheless, prior to their first vote on the budget, the commissioners agreed they had no choice but to discuss whether the Public Service Tax would be incorporated in it. Without the $5.4-million that implementing the tax in April would be expected to net for the next fiscal year — which will begin on Oct. 1 — they would have to find another way to plug the gap.

Following discussion, the first motion — made by Detert and seconded by Commissioner Charles Hines — was to approve the tentative budget with the anticipated Public Service Tax revenue; it failed 2-3.

As they had in August, County Administrator Tom Harmer and Deputy County Administrator Steve Botelho — who also serves as the county’s chief financial management officer — explained that if the commission used another $5.4 million from reserves to balance the FY18 budget, the Economic Uncertainty Fund would be wiped out.

The county still would have its 75-day emergency operating fund, which is approximately $50 million, Botelho pointed out.

Yet, without the anticipated $10.8 million per year from the excise tax, the county would be looking at a $7,386,154 gap to in the 2019 fiscal year, along with an $18.7-million hole in the 2020 fiscal year, according to a graphic Botelho showed the board.

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

When Detert asked Botelho how use of all the Economic Uncertainty Fund in FY18 would affect the county’s bond rating, he replied, “We’re good” in terms of current debt service levels. However, he added, if the county were to issue new debt, it might have to do so with a lower bond rating, which would increase its costs.

If the commission adopted an FY18 budget without the Public Service Tax, Botelho continued, staff would come back to the board in the first quarter of the 2018 fiscal year to talk about level-of-service options to cut expenses.

Detert pointed out that even as the board members were aware of staff concerns about balancing the next budget, they had continued to agree to major expenses.

“It was like Christmas for the past couple of months,” Detert said, “when we talked about extending bike trails,” for example. (She was referring to plans to purchase property for the North Extension of The Legacy Trail.) “It’s real easy to be Santa Claus in December,” Detert added, “but then all the bills come due in January.

“Nobody likes taxes,” she continued. “Nobody likes fees. Half the people don’t even like government until they need it, and we saw that need recently,” she added, referring to county services related to Hurricane Irma.

Commissioner Nancy Detert looks at a budget slide on June 20. File photo

Detert reminded her colleagues that she supported the staff recommendation this spring for “a small increase in property taxes,” which, she said, would have added so little to the average property owner’s bill that someone owning multi-family housing probably would not even pass it along to renters.

Botelho told the board in June that the owner of a home valued at $200,000 would pay only $20 more per year if the millage were raised by 0.1 mill.

Referring to the Public Service Tax, Detert said, “I hate to do these kind of taxes. This sort of stuff is a constant, monthly irritant for people.” She added that, to her, they are “way more irritating than just your property tax.”

“I’m having a real issue with the Public Service Tax,” Caragiulo said. “Perhaps it is in light of what has just occurred [with the hurricane].”

Levels of service and fund balance

“The awkward, difficult conversation” is to cut expenses, Moran pointed out, reprising assertions he has made over recent months that the board should pare county healthcare costs and eliminate Sarasota County Area Transit (SCAT) routes that serve few passengers, for examples.

Both Detert and Commissioner Hines responded that it would take more than one discussion to arrive at a decision about how to address rising healthcare expenses. “We probably need a couple of workshops on that as a single subject,” Detert said.

Moran objected to any talk of cutting services. In the private sector, “in the real world,” he told his colleagues, an employer would tell a department chief to cut his or her budget without reducing services. “I wouldn’t expect anything different here. … We’re not going to cut services. The level of service is to be expected.” Although the process can be “very, very painful,” he acknowledged, “that’s where the leadership steps up.”

“I agree with your philosophy overall,” Hines replied. However, he asked Moran how the board could tell the county’s librarians, for example, to cut their budgets without cutting services. “How does that work?” How could the board tell the Parks, Recreation and Natural Resources Department to lower its expenses without reducing the frequency of mowing of athletic fields, for another example, Hines asked, pointing out additionally, “The cost of gas is the cost of gas.”

“It’s a very fair question,” Moran responded. “You’re assuming there is no fat. … You don’t cut to the bone; you get rid of fat.”

Commissioner Charles Hines. Rachel Hackney photo

Earlier, Hines referenced level-of-service cuts staff had suggested prior to the June budget workshops. Among them were reductions in funding for operations and maintenance of park facilities and related amenities, for a total of $553,000; closing the libraries on Mondays and reducing the number of full-time employees in the county’s Libraries and Historical Resources Department by 17, for savings of $535,000; eliminating a number of SCAT system routes — including one that circulates between downtown Sarasota and Longboat Key — for a total reduction of $979,000; and reduce funding support to the University of Florida/Institute of Food and Agricultural Sciences (UF/IFAS) Extension & Sustainability office by $452,000.

Those proposed service level cuts totaled $4.4 million. That figure reflected the fact that 44% of the General Fund budget covers operations under the aegis of the County Commission, County Administrator Harmer explained. The General Fund primarily comprises property tax revenue.

Then, after the board’s June 21 budget workshop, Harmer worked with staff — at Chair Caragiulo’s request — to identify another $1,133,000 in potential department cuts. Botelho and Harmer discussed that during the board’s final budget workshop this year, held on Aug. 21.

However, efforts to gain assistance from the county’s constitutional officers — including Sheriff Tom Knight and Clerk of the Circuit Court and County Comptroller Karen Rushing — to come up with another $1,983,068 in reductions failed, Botelho noted on Aug. 21. Only Public Defender Larry Eger ($88,000) and State Attorney Ed Brodsky ($33,500) offered cuts, Botelho reported.

Knight was among constitutional officers who responded in writing that they had worked hard to keep their expenses down, proposing FY18 budgets at the levels they absolutely needed for their departments to operate. Rushing pointed out that her FY18 budget was flat compared to the current one.

County Administrator Tom Harmer asks the constitutional officers in June to consider cuts to their budgets, at the County Commission’s request. Image courtesy Sarasota County
Sheriff Tom Knight responds to the county administrator’s request for a budget cut. Image courtesy Sarasota County

Pleas from the public

At various times during the Sept. 18 hearing, members of the public did address the board, with three asking that the commission refrain from cutting the proposed FY18 budget for the UF/IFAS Extension & Sustainability office.

Larry Protts of Sarasota, who told the board he serves on a couple of its advisory committees, praised the Extension Service as “one of the programs that … is an unsung hero in all of this.” He added that he believes county residents receive a high rate of return on the investment the board makes in that office each year.

UF/IFAS programs have not been “marketed very well in the last four years,” Protts said, but “that has been remedied.”

Speaking on behalf of the nonprofit organization Control Growth Now and himself, Sarasota attorney Dan Lobeck told the board that the implementation of the Public Service Tax “would be huge for a lot of people, some of whom can afford it the least.”

He added, “Growth should be made to pay its own way.” If the board raised its road impact fees to require developers to pay their actual share of the cost of routes to new communities, and if the fiscal neutrality methodology for developments east of Interstate 75 — under the aegis of the Sarasota 2050 Plan —were modified to make it truly fiscally neutral, Lobeck said, the county would have the funds to cover a lot more of the expenses it incurs.

The excise tax, he continued, “is something your people don’t want and you don’t need.”

The clock is ticking …

As the discussion continued on Sept. 18, no resolution appeared to be in sight.

In response to a board question, Deputy County Attorney Kathleen F. Schneider reported that Tax Collector Barbara Ford-Coates had been notified that, because of Hurricane Irma, the deadline for all local government bodies to deliver their tax rolls to the Tax Collector’s Office has been delayed until mid-October.

County Attorney Stephen DeMarsh. File photo

Still, County Attorney DeMarsh pointed out, “There’s not a lot of time” for the board to decide how to proceed with the budget.

When Commissioner Maio first suggested keeping the budget as proposed — without the Public Service Tax but with no cuts in departments — his motion died for lack of a second.

Following about a 10-minute break, Caragiulo made a motion directing staff to utilize the Economic Uncertainty Fund to cover 75% of the amount the Public Service Tax would have brought in for FY18, with the remaining 25% of the $5.4 million to be found through cutting expenses. Maio seconded that motion.

Harmer sought clarification that Caragiulo was proposing another $4,050,000 from the Economic Uncertainty Fund with the remainder coming in budget reductions for the General Fund.

“It’s all General Fund,” Caragiulo replied. “I don’t care how we get there. … I would hope that everybody would work together to get there.”

Harmer also told the commissioners he felt they should know that the county’s expenses in the aftermath of the hurricane already were more than $4 million and were expected to climb. None of that was reflected in the budget model Botelho had shown them that evening, Harmer pointed out.

The county would be eligible for federal government reimbursements of 75% of some of its post-Irma costs, he added — such as storm debris removal — but it could take 18 months to get those funds.

The vote was 2-3 on Caragiulo’s motion, with Moran, Detert and Hines in opposition.

After another break and further discussion, with no new motions brought forth, Caragiulo said, “I’m out of ideas.”

Following a brief silence, Commissioner Maio reiterated his call for approving the tentative budget with the $5.4 million coming out of the Economic Uncertainty Fund to replace the FY18 revenue that had been expected from the Public Service Tax.

After that passed 4-1, the meeting finally concluded — three hours and eight minutes after it began.

The final budget hearing is scheduled to begin at 5:30 p.m. on Sept. 26 at the County Administration Center located at 1660 Ringling Blvd. in downtown Sarasota.