Two city commissioners back tax increase

Photo by Norman Schimmel

City Commissioners Paul Caragiulo and Shannon Snyder have told the Greater Sarasota Chamber of Commerce’s Government Issues Group they are inclined to raise the property tax rate to address the city’s pension fund shortfalls.

They spoke on May 11 in the chamber’s boardroom during an advertised meeting, to comply with the requirements of Florida’s Sunshine laws. The Sarasota News Leader was the only news organization represented.

Caragiulo dominated the discussion, opening with a PowerPoint presentation that outlined the parameters of the pension issue. “Pardon me,” he said at the outset. “This is my very first PowerPoint presentation.”

The opening slide was an attention-grabber: a clock and fuse attached to sticks of dynamite. The slide said, “The question is not ‘When will the bomb go off?’ The question is ‘How big will the explosion be?’”

The presentation raised questions not only about the City of Sarasota’s pension problems, but it indicated other cities around the state are even worse off.

“This is a revenue problem, because property values are down,” said Caragiulo. “Especially when the actuaries are telling us we need to put more into the [retirement] plan.”

Part of the current problem is the simple equation that creates the city’s property tax revenue. Multiply the assessed value times the millage rate, and the result is the ad valorem tax revenue of the city. Caragiulo looked at the equation today and 20 years ago.

In Fiscal Year 1980, the city’s millage rate was 6.03. In FY 2011, it was 3.35, or about 45% lower. However, property values jumped 7.3 times over the same two decades, producing revenues that increased by a factor of five.

Yet, while property values rose, prices also went up during that 20-year period, as did city workers’ salaries. And the investments of the pension plan money underperformed, earning only an average of 5% over the past 10 years, or slightly above the statewide average of 4.3%.

With the pension funds performing below estimates, and increasing numbers of city employees and police officers retiring, the shortfall is coming to dominate the city’s current budgetary cycle.

Both Caragiulo and Snyder said the current system of taxation by cities – set by state law – “is broken.” Caragiulo said 28% of the property in the city is exempt from taxation because it belongs to a church, government or nonprofit organization. “We need to figure out another way to collect revenues for cities. We have to do something or cities will be extinct,” he said.

“The necessary reforms are getting put in place, but they are not going to bring immediate relief,” said Caragiulo. “It’s going to be more painful in the short term.”

Do those “necessary reforms” include tax increases?

Snyder said, “If we start raising taxes, which we’re going to eventually do, there will be a taxpayer revolt. And most of our voters live in the high-rent district.”

Caragiulo estimated “about one-third” of the tax base is non-residential property, which is to say commercial and rental properties.

Cities cannot raise property taxes higher than a level of 10 mills.

One of Caragiulo’s slides indicates Sarasota’s tax rate is 48th on a list of rates for the 50 most populous cities he checked. If you add Sarasota County’s millage, the combined rate is the lowest of those 50, he said.

There has been some talk of consolidating city and county governments, as was done in Dade and Duval counties (Miami and Jacksonville, respectively). But that doesn’t seem to work, Caragiulo indicated. Both counties are at the 10-mill maximum, and still facing similar pension problems.

Both commissioners all but explicitly called for a millage increase. “Right now I think we can justify that,” said Snyder. “I don’t see a good end scenario in the next 24 months.”

Caragiulo concluded the presentation by saying, “You’ve got to be willing to fall on your sword over this.”

Editor’s note: This article was updated May 12 regarding two points in Caragiulo’s comparison of millage rates for the most populous cities.

Download the full presentation by Commissioner Caragiulo by clicking here: Pensions Presentation-Paul Caragiulo