Okaloosa County BOCC — November 16, 2013 — PARISOT TALKING PAPER ON OPTIONAL GAS TAX — reading text

TALKING PAPER ON 5-Cent vs. 3-Cent SECOND LOCAL OPTION GAS TAX 1. Each 1-cent of local option gas tax is projected to bring in $950,048 of new revenue for a 12-month period. Based on a County/Cities split of 64%/36%, each 1-cent would provide $608,030 to the County. For FY2014, the gas taxes would not be increased until Jan. 1, 2015, thus only 9-months of new revenue or $456,023 per cent in FY2014. Projected new revenues to the County would be: 1-cent = $ 608,030/year FY2014 @ ¾ year = $ 456,023 2-cent = $1,216,060/year “ “ = $ 912,046 3-cent = $1,824,090/year “ “ = $1,368,069 4-cent = $2,432,120/year “ “ = $1,824,092 5-cent = $3,040,150/year “ “ = $2,280,115 2. In the recent past, the Board has had some discussion of forming a TIF (Tax Increment Funding) for a yet to be defined area of north Okaloosa County. It would probably take a period of 6 to 10 years for the TIF to accumulate an appreciable level of revenues to apply to road projects or to apply to bonding/borrowing for road projects. One method to move this program forward almost immediately is to use a portion of the proposed increase in optional gas taxes to pledge as support for either bonding or a bank loan. 3. Using figures provided by the County’s Bond Counsel, Mr. Mark Galvin, in May 2013, the chart below shows a few examples of annual debt service and bonding/borrowing (project amounts) that could be done beginning January 2013: Debt Service 15-year Bank Loan 15-yr Payment Total 20-year Bond 20-yr Payment Total A. $1,750,000 $19,945,000 $26,250,000 $21,516,000 $35,000,000 B. $1,250,000 $14,300,000 $18,750,000 $15,500,000 $25,000,000 C. $1,000,000 $11,410,000 $15,000,000 $12,322,000 $20,000,000 Line A would require using 96% of 3-cents of gas tax for debt service. Line B would require using 2-cents of gas tax for debt service. Line C would require using 82% of 2-cents of gas tax for debt service. In all cases shown above, the most economical options are a 15-year bank loan when considering interest and loan/bond costs. 4. Through bonding or borrowing, amounts of $11 Million or more, the Road Dept. would be able to move a number of badly needed projects forward and get them done in the short-term rather than using a “cash- accrual” basis. Any borrowing funds from the gas tax can be used throughout the County for road projects. Funding received via a TIF could only be spent on projects within the TIF boundaries. However, the combination of using gas taxes for debt service combined with a future TIF can be a powerful leveraging factor. 5. If the Board opts to only go for a 3-cent gas tax, most (all?) of the first year proceeds will be used to purchase the critically needed equipment and vehicles that our Road Dept. needs to do the work we expect of them. By doing a 5-cent gas tax, the Road Dept. will be able to replace their worn-out critical equipment and still have a flow of funds to do multiple projects via debt service. 6. Other Considerations: A. Gas taxes are the most appropriate method to pay for road projects. It can be considered a “user fee”: those who buy the most gas usually put more miles on the roads. Whereas property taxes are paid only by property owners. B. Conservative estimates show that 35-40% of gasoline sales are paid by tourists, other visitors, or those just passing through. C. As vehicles generally are getting more efficient gas mileage, they put more road-use miles per gallon. D. The “2nd Optional Gas Taxes” do not apply to diesel fuel, thus not negatively impacting the trucking industry with diesel trucks or heavy equipment using diesel engines (or diesel boats). E. Heaven knows Okaloosa County has millions of dollars of backlogged work that needs to be done to improve and maintain our County roads and road-related stormwater projects. Dave Parisot Commissioner, Dist. 2