On 3-2 vote, City Commission tentatively agrees to lower millage rate to 3 mills for 2023 fiscal year

Board members debate rising expenses and proposals for new staff members to provide service to city residents

Following close to two hours of discussion on July 26, the Sarasota city commissioners voted 3-2 to tentatively approve a reduction in the city’s operating millage rate from 3.1372 mills this fiscal year to a flat 3 mills in the 2023 fiscal year, which will begin on Oct. 1.

The final vote will come in September.

Formally, the board members this week approved the not-to-exceed millage rate for advertisement on the Truth in Millage (TRIM) notices that the Sarasota County Property Appraiser’s Office traditionally mails out in August.

City Finance Director Kelly Strickland reminded the commissioners ahead of the vote that, once they took action on July 26, they could not approve a higher millage rate after conducting their September public hearings on the proposed city budget for the 2023 fiscal year.

With a slightly lower debt service millage of 0.1782 for the upcoming fiscal year — compared to 0.2100 mills in the current fiscal year — the total proposed millage rate for the City of Sarasota would be 3.1782, in contrast to 3.3472 mills this fiscal year.

One mill represents $1 per $1,000 of property value. Thus, with a rate of 3 mills, the owner of a $200,000 home would pay $600 in property taxes.

Strickland pointed out that an individual with a $200,000 residence would pay $33 less next year with the 3-mill rate than the person would pay if the millage rate remained at the FY 2022 level.

Commissioner Jen Ahearn-Koch made the motion to accept City Manager Marlon Brown’s proposal for the 3 mills for city operations, and Commissioner Hagen Brody seconded it.

The motion included the proposed rates for the St. Armands Business Improvement District (BID), the Golden Gate Point Special District and the Downtown Improvement District (DID), as well. The rates for the BID and the DID were not adjusted from the current level of 2 mills each. However, the overall Golden Gate Point millage, as proposed, would fall from 1.583 mills this year to 1.4474 in the 2023 fiscal year.

During the July 26 discussion, Brody said, “I would prefer to see the full rollback of our millage,” referring to the operating rate that would bring in the same amount of property tax revenue as the 2022 millage rate did. Yet, he acknowledged that he had not heard support from his colleagues for that position.

Strickland had noted that the value of the city’s property rose 17.85% this year, compared to the figure for 2021.

As required by state law, the Property Appraiser’s Office released data in late June that every municipal board in the county — and the County Commission — needed to use in setting the not-to-exceed millage rates.

Therefore, even though the overall, tentative city millage rate approved this week for FY 2023 is lower than the FY 2022 rate, people who saw their property increase in value still will pay more in taxes.

Prior to the July 26 vote, Mayor Erik Arroyo tried to encourage his fellow board members to take a more in-depth look at opportunities to save money in the next fiscal year — including reducing positions that city department directors had requested. He found no “takers” for that exercise.

Therefore, when Arroyo announced that the vote on Ahearn-Koch’s motion was 3-2 in favor of it, Commissioner Liz Alpert expressed surprise that he had supported it.

Facets of the city staff budget proposal

In a recap of the budget workshops that the commissioners held the previous day and earlier that day, Finance Director Strickland noted that the proposed, total FY 2023 budget would be $252,178,292, which represents an 8.1% increase from the 2022 budget of $233,280,364.

The General Fund budget this fiscal year is $78,157,235, a slide showed, while the proposed amount for FY 2023 is $85,671,152, a 9.61% increase.

The General Fund comprises property tax revenue and money the city receives from other sources, such as fines and forfeitures, as well as charges for city services. It covers the expenditures of departments that do not generate their own operating revenue.

During the July 26 Special Meeting, Strickland also pointed out that the proposed 2023 fiscal year budget includes 26 new employee positions, which would bring the city’s total to 802. That figure is slightly higher than the 777 this year, which is the same number as in the 2007 fiscal year, before the Great Recession struck. In response to the loss of revenue during that downturn, employees had to be let go.

Of the proposed new full-time employees for the 2023 fiscal year, Strickland pointed out, 15 would work for departments operating with General Fund revenue. “Seventy-five percent of our General Fund [money goes to] personnel,” Strickland noted.

Five of the General Fund positions would be dedicated to an increased level of maintenance of traffic lights, roads, and street tree lighting, with another three allocated to the Sarasota Police Department. Two of the latter would be crime scene investigators, Strickland said, while the third would assist with public information.

Mayor Arroyo pointed out that the commission earlier this year agreed to the hiring of 10 new police officers, at a cost of about $1.8 million in the first year. During the July 26 Special Meeting, Commissioner Ahearn-Koch reminded her colleagues that they agreed to the request for those 10 new positions after fielding so many complaints about speeding in city neighborhoods.

The fund balance issue

Further, during the Special Meeting, Strickland reminded the commissioners that staff had recommended using $3,168,984 of the city’s unassigned fund balance to fill the gap between revenues and expedited expenditures for the General Fund in the next fiscal year, if the millage were lowered to 3 mills.

The remaining money in the fund balance — $27,812,579 — would represent 32.5% of the city’s operating expenses, she added. That meant that the city could function for two to three months with no other income, she said.

City Manager Marlon Brown pointed out that city policy calls for the fund balance to stay in a range of 17% to 25% of the city’s operating expenses.

Strickland explained that staff also takes into account the best practices recommended by the national Government Finance Officers Association (GFOA) in determining how much fund balance to maintain.

She did survey the other municipalities in Sarasota County about their fund balances, Strickland noted. Most of them keep a higher amount than the GFOA calls for, she indicated. “We’re coastal cities in Sarasota County,” she explained. “We want to make sure we have a little bit more than 25%.”

Both Strickland and Brown alluded to the fact that a hurricane strike that caused major damage could result in the necessity of the city’s using that money to continue functioning until the community recovered from the storm.

On July 25, during the first day of the board’s budget workshops, Brown noted that some government finance organizations, such as the GFOA, and “even the auditors … frown on how much fund balance you have.”

Nonetheless, Strickland did acknowledge that when city staff prepares to issue bonds, the rating agencies consider the amount of fund balance and millage rates, especially whether the commission is willing to raise the millage if necessary. The rating agencies also will ask why a local government is using fund balance to plug budget gaps, Strickland continued.

In response to a question from Mayor Arroyo, she added that in the city’s proposed budget for FY 2023, only about half of the fund balanced that would be used to cover the gap between expected revenue and expenses would be going toward recurring expenses.

If the City Commission chose not to lower the millage rate, Strickland said, the gap between anticipated revenues and expenses in FY 2023 would be $1.3 million.

During the July 26 Special Meeting, Commissioner Brody asked whether the city’s fund balance includes the money set aside for the city’s Revenue Stabilization Fund.

“No,” Strickland replied. That stabilization account, she added, has $2,640,554.

A slide she showed the board members noted that the Revenue Stabilization Fund was established in the 2009 fiscal year. According to a policy resolution that the 2016 City Commission approved, the money can be used only for emergency funding situations.

“Just a little uncomfortable with the deficit spending,” Brody said, noting that “leading economists” have predicted a high probability that the United States will slip into a recession next year.

Responding to Brody’s concerns, Strickland told him, “It is a risk” in terms of using a higher amount of fund balance to fill the budget gap.

When the city has less revenue, she continued, “We freeze positions,” for example. “We stop travel; we stop capital spending,” she said, referring to construction of city projects.

Strickland also alluded to the fact that the city had to take such measures during the 2021 fiscal year, after the COVID-19 pandemic affected revenue.

“I feel like we did fine this year,” Brody said. “We provided a fine level of service to the community. … Why can’t we maintain staff levels [for the next fiscal year]?”

City Manager Brown reminded him and the other board members that they all come to him from time to time during the year to ask whether the city can handle new expenses for issues that have arisen. Brown cautioned the commissioners about “having staff stretched thinly.”

“My budgetary philosophy,” Brody responded, “is we should be putting money away … when times are good. … There’s nothing wrong with having a strong fund balance. … You can have a fund balance that can supplement your revenues in the event of a couple of years of a downtown,” Brody added.

Future city commissions would appreciate having that extra money, he said.

Points and counterpoints

Commissioner Alpert told her colleagues and staff, “I’m uncomfortable with the budget gap.” If Brown and the directors of the city departments “are asking for these new people, they aren’t asking just because they thought it would be great. They’re asking because they think they need these people.”

Alpert suggested leaving the millage rate as it is this year. If a recession does happen, she added, “We’re faced with drastic cuts or raising the millage. … I think our millage rate is very reasonable for the entire area.”

In regard to the recommendations for new personnel, Commissioner Ahearn-Koch said, “I think these proposals reflect the requests of our citizens. … And … our job is to serve the citizens, to give them the services that they elected us … to prioritize.”
Although the 2020 Census showed the city with 55,386 residents, she continued, the city is appealing that, because the expectation was that the count would be almost 58,000. With almost 4,000 more people having moved to the city, Ahearn-Koch added, she sees the need for more staff to provide the necessary services.

Lowering the millage “is sensitive to what we’ve been through, and it doesn’t impact us that much,” she pointed out.

Vice Mayor Kyle Battie said, “I literally, like, agree and concur with everyone’s thoughts, to be honest with you.” However, he continued, “I’m not as comfortable lowering the millage, you know …”

The commissioners did lower the rate for the current fiscal year, Battie pointed out, to help property owners who had to deal with ramifications of the COVID-19 pandemic.

Then he read a quote that he said reflected his primary view: “Good stewardship requires us not to squander our resources in times of abundance but rather gather them to prepare for the unknown that lies ahead.”

He is worried about a recession, he added, but “We do have to account for the amount of growth that’s coming, you know, to the city, and having the staff, you know, to take care of ’em.”

Therefore, Battie said, he preferred to keep the millage rate the same for the 2023 fiscal year.

Arroyo voiced concerns about the fact that many of the expenditures in the 2023 fiscal year budget will be long-term ones, such as the debt service on the renovations of the Bobby Jones Golf Club.

“We don’t know, necessarily,” he said, “if we will be generating money to cover those expenses moving forward.”

Finally, Arroyo told his colleagues, “I am in favor of keeping the millage the same. I was a big proponent of lowering it [last year].”

However, Arroyo added, “It doesn’t appear that we are in a position to do that [this time].”

Nonetheless, Arroyo joined Ahearn-Koch and Brody in approving the staff proposal for the lower millage rate in the 2023 fiscal year.