Public hearing set for Sept. 11 on new 5% Sarasota County Public Service Tax on utility usage

Residents in cities with the tax would not pay the county fees

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

With Commissioner Michael Moran in the minority, the Sarasota County Commission voted 4-1 this week to advertise a Sept. 11 public hearing on implementing a 5% Public Service Tax on electricity, natural gas, L.P. gas and water usage by residents in the unincorporated areas of the county.

As Deputy County Administrator and Chief Financial Management Officer Steve Botelho explained, the tax would not be assessed on people who live in the county’s municipalities. Still, staff’s projection is that it would add $10.8 million a year in ongoing revenue for the county.

Already, the Cities of Sarasota, Venice and North Port charge some variation of the Public Service Tax (PST), Botelho pointed out, while the Town of Longboat Key does not.

Commissioner Charles Hines made the motion to authorize the public hearing, and Commissioner Nancy Detert seconded it.

As board members acknowledged, the consensus when they concluded their June 21 budget workshop was to maintain the county’s millage rate at 3.3912 for the 2018 fiscal year. They voted on July 12 to set that as the not-to-exceed rate, so they are unable — under state law — to raise it prior to adopting their FY18 budget in late September.

“We are constantly asked to do more with less,” Hines said, and “the state mandates state restrictions on us.”

Furthermore, he continued, local government leaders across the state expect two new homestead tax exemptions to win voter approval on the November 2018 ballot, which will take more money from the county’s General Fund.

A chart shows which charter counties levy the tax and what their millage rates are. Image courtesy Sarasota County

Botelho pointed out that, if the PST is implemented, the board is not expected to have to deal with a budget gap until the 2020 fiscal year. However, Botelho noted, no money is being set aside to start rebuilding the county’s Economic Stabilization Fund, which has been helping the commission fill budget gaps in the wake of the Great Recession.

If the board and staff become so financially constrained that they cannot plan for years ahead, Hines said, “we’re going to put ourselves in an emergency situation, when you’re cutting massive [numbers of] employees, cutting levels of services. That’s not the right way to plan. Even with this, we are not meeting our goal of rebuilding that economic uncertainty fund,” in spite of making that a priority, he noted. “We need something,” he stressed.

These are the latest state projections for increases in county property value over the next several years. Image courtesy Sarasota County

Moreover, Hines told his colleagues, “It’s a likelihood that the state will continue — at least with this speaker [of the Florida House] — the path of continuing to restrict local governments’ power in regards to … ability to raise revenue.” At some point, he added, the Legislature may do away with the right of charter counties — such as Sarasota — to impose the Public Service Tax.

(Richard Corcoran, a Land O’Lakes Republican, is the speaker of the Florida House.)

If it turns out that the county does not need the PST revenue, Hines said, “I will be the first one to make the motion either to reduce it or get rid of it.”

Detert voiced concern about maintaining the 75-day emergency operating fund in future fiscal years. In FY22, she pointed out, the staff projection shows that fund coming up short by $900,000. “One hurricane and we’re done for. … We do have to have the courage to have a budget that’s sustainable. Otherwise, you’re just kicking the can down the road.”

“I’m OK advertising the public hearing, just for the record,” Chair Paul Caragiulo said of the PST. “I think that we’re probably going to run into some issues about who is absorbing the expense,” for which he and all his colleagues should be prepared, he added. “This is a big deal.”

Getting to the vote

After Hines made the motion for the public hearing, no one immediately seconded it.

Detert then reminded the other commissioners that when they all discussed their budget options in late June, she preferred a millage rate increase to put the county on sounder financial footing, “And there were three of you who disagreed with [that]. So if you disagreed with the millage increase, I don’t know why you wouldn’t [support] the motion on this agreement and just second it. But that didn’t seem to happen, either.”

A chart shows projected county budgets through the 2022 fiscal year. Image courtesy Sarasota County

Commissioner Alan Maio said he would support the motion, adding, “It’s the first time I’ve ever been chastised because I didn’t make a motion or second one. I had the luxury early in my career as an elected official of making a motion that didn’t get a second,” he continued. “I completely mistook the temperature of my fellow commissioners.”

Then Maio added, “I think there’s a lot of people criticizing this 5% PST because they don’t have all the facts.” Still, he said, “I take comfort in the fact that if we pass this today, and subsequently on Sept.11, that it will take us through FY20, which ends [on Sept. 30, 2020], without projected shortfalls.”

Botelho explained that the earliest the county could implement the PST would be April 1, because — under state law — it must take effect on the first day of a calendar quarter at least 120 days after the county gives notice to the Florida Department of Revenue that that the tax has been approved.

“Is there any circumstance by which they could turn us down?” Detert asked, referring to whether state officials could block implementation of the tax.

“I don’t think a denial would be in play unless we didn’t do a step properly,” Botelho replied.

With two readings of the ordinance necessary before the tax could be approved, Botelho’s timeline indicated the second public hearing would be in mid-October. Therefore, the PST will be in effect for just six months in the 2018 fiscal year; nonetheless, it is expected to generate $5.4 million.

A chart shows the breakdown of the proposed 2018 fiscal year budget for the county. Image courtesy Sarasota County

Botelho did show the board a slide noting that if the PST were approved, the county would exempt the first 500 kilowatt-hours of electricity per month for residential use. Assuming that, the slide added, a Florida Power & Light Co. customer using an average of 1,529 kilowatt-hours per month would pay about $3.15 more per month, or a total of $37.80 extra a year.

The PST would not apply to wastewater use, the slide continued. Its impact on the average county Utilities Department customer who uses 4,000 gallons of water a month would be about $1.30 per month or $15.60 per year.

About 64% of county residents live in the unincorporated areas, Botelho told the board.

Only charter counties, such as Sarasota, are allowed to impose the PST, Botelho explained.

From June to August

In a review of county financial changes since the board last considered the proposed budget in late June, Botelho pointed out on Aug. 21 that the final taxable value of county property climbed 0.1% from the preliminary value in June, to 8.25%. That will add about $160,000 to the General Fund, which primarily is made up of property tax revenue.

Elimination of poorly performing bus routes operated by Sarasota County Area Transit (SCAT) will add another $189,300 to the budget’s revenue side, Botelho added.

Following the completion of the annual audits of county funds, he continued, staff found $5.4 million in unspent money that will go back into the General Fund; the estimate was $3 million.

A chart shows responses to the ‘level of service’ exercise this summer, in which all departments seeking increases for FY18 were asked to cut those by 50%. Only two of the constitutional officers responded that they could make such cuts, given their needs for the next fiscal year. None of those will be implemented, County Administrator Tom Harmer said on Aug. 21. Image courtesy Sarasota County

One other positive change, Botelho said, is a $222,227 decrease in the proposed budget for the Clerk of Court and County Comptroller. “That was really good news,” he told the board.

On the other side of the balance sheet, Botelho said, the Public Defender’s Office notified staff that it needed to increase its FY18 budget by $56,228 for contractual services.

Furthermore, Botelho noted, state staff recently lowered its projected property value increase for the 2019 fiscal year from 7.4% to 6.3%. He characterized that as “a fairly significant change.” That figure likely will be modified a few more times before that fiscal year begins, he added.

After staff plugged in all the latest figures, Botelho explained, the budget software the Office of Financial Management staff uses produced models for FY18 and FY19 that showed no shortfalls. However, for FY20, the gap would be $5,012,697.

The FY18 and FY19 budgets also include a fully funded 75 days of emergency operating revenue, Botelho noted.

As the commissioners directed staff on June 21, he continued, all the constitutional officers and all county departments that sought increases in their budgets for FY18 were asked to engage in an exercise involving a 50% rollback in the hike. The goal, Botelho said, was to pull together $1,983,068 in revenue from the constitutional officers and $1,131,862 from the departments. However, the constitutional officers — such as the sheriff and the state attorney — came up with a total of only $121,500. The only two who offered cuts were Public Defender Larry Eger ($88,000) and State Attorney Ed Brodsky ($33,500).

Conversely, departments operating under the aegis of the County Commission ended up with a total of $1,133,000 in their exercise, Botelho noted. (County Administrator Tom Harmer later pointed out that, given the board’s agreement to proceed with advertising the Public Service Tax, staff would not implement those cuts as it finalized the proposed FY18 budget for the two scheduled public hearings in September.)

The total proposed county budget for FY18 is $1,130,628,123.

The Sept. 11 public hearing on the budget — and the proposed Public Service Tax — will be held at the R.L. Anderson Administration Center in Venice. The final public hearing on the budget is set for Sept. 26 at the county Administration Center on Ringling Boulevard in downtown Sarasota.