Fort Walton Beach Council agenda — 05-15-2007 special agenda - budget policy — reading text

and the CRA Fund increased has averaged 38.4%. Based on slowing home and condo sales, it is not anticipated that double- digit assessment increases will continue and revenues are anticipated to stabilize. The Florida Legislature is considering several proposals to reduce Property Tax Allocation local government revenues from property taxes. Proposals from the W8I.er House and Senate are varied, but include provisions such as: 1) rolling Mgnt 0. 3% back the millage rate to 2000- 01 level adjusted for inflation - a $ 1. 7M loss to the City, 2) rolling back the millage to 2003- 04 level adjusted for inflation - a $ 1. 5M loss to the City, 3) rolling back the millage to 2005- 06 level adjusted with a two- year cap - a $ 0. 6M loss to the City, 4) eliminating homestead properties from property taxes and increasing the state sales tax to 8. 5% - a $ 2M net loss to the City, and 5) doubling the homestead exemption to $ 50, 000 - a potential $ 0. 5M loss to the City. Current year Ad Valorem revenues total $ 6. 8M and it is unknown at this time how much this revenue will decrease. The Legislature will convene in Special Session June 12- 22 to finalize property tax reform City property taxes are 28. 8% legislation. of a taxpayer' s total tax bill. 3 of 36 FY 2007. 08 Budget Policy Workshop Current Exemptions Florida' s homestead exemption limits the annual increase in taxable value of a citizen' s primary residence to 3% or the Consumer Price Index, whichever is lower. Consequently, the City' s revenues do not increase in proportion to assessed value increases for homesteaded properties. Sixty- six percent of residential parcels are homesteaded, claiming $ 125. 7 million in exemptions. Furthermore, three percent claim an additional $ 25, 000 senior citizen exemption adopted by the City in 1999, resulting in an additional $ 6. 6 million in exemptions. Combined, these exemptions translate to about $ 615, 000 less revenue annually for the City. Benchmarking is useful in ascertaining how the services offered and the taxes and fees levied by the City of Fort Walton Beach compare to municipalities of similar size and service levels. Municipalities are permitted to levy up to 10 mills for Ad Valorem taxes. Compared to benchmarks evaluated in preparation of the FY 2006- 07 budget, Fort Walton Beach' s millage rate is relatively low. FY 2006-07 Millage Rate Comparison 10 8 6 4 2 o Venice New Jacksonville Panama Fort Walton Tarpon Pensacola Casselberry Winter Park Oakland Edgewater Winter Smyrna Beach City Beach Springs Park Haven Beach The per capita Ad Valorem tax measures the extent to which property taxes are relied upon to fund programs and services. After maintaining a 4. 9700 millage rate for thirteen years ( since FY 1993- 94), the City lowered the rate 6. 6% to 4. 6458 in FY 2006- 07. When compared to municipalities of similar size and service levels, the City' s per capita property tax is the fourth lowest. FY 2006-07 Per Capita Tax Comparison 800 700 600 500 400 300 200 100 0 Panama City Pensacola Fort Walton Tarpon Winter Haven Oakland Park Jacksonville New Smyrna Venice Winter Park Casselberry Edgewater Beach Springs Beach Beach Water & Sewer Fees - The City provides potable water and sanitary sewer services to residents and these activities are accounted for in the Utilities Enterprise Water & Sewer Revenue 5 Fund. Water and sewer rates are structured to support $ operations as well as finance the 2005 bond issue for 4 improvements. Fees are set by City Council based on the cost of providing these services and are published in the 3 c Comprehensive Fee Schedule. City Council adopted a five- 1$2 year plan for water and sewer rates in April 2005 with a 5% increase in FY 2006- 07 and a 4% scheduled for FY 2007- 08, 1 effective October 1. Water service fees are anticipated to generate $ 2. 5M and sewer service fees $ 4. 5M in FY 2007- 0 08. 2003 2004 2005 2006 2007 Budget Water . Sewer 4 of 36 FY 2007- 08 Budget Policy Workshop Other Taxes - This category includes franchise fees, utility taxes, communications services tax, and local option fuel tax. The City' s franchise fee agreements provide a 6% rate on gross electric and gas sales and a $ 1. 50 per ton sanitation host fee is also collected per contract. These revenue sources have averaged a 4. 6% annual increase over the past three years. Franchise fees are anticipated to generate 1 . 7M in FY 2007- 08. Utility taxes are levied against electric, gas, and water revenues at the rate of 10%. These revenue sources have averaged a 1. 8% annual increase over the past three years. Utility taxes are anticipated to generate $ 1. 6M in FY 2007- 08. Since the collection rates for franchise fees and utility taxes are fixed for 10 to 15 years, revenue growth in these categories is limited to energy price increases. Effective in FY 2001- 02, the State of Florida created a flat tax rate for all communication services so that no type of service had a competitive price advantage over the other. The City budgets communications services tax ( CST) revenue based on information provided annually by the Florida Legislative Committee on Intergovernmental Relations ( LCIR). For FY 2006- 07, LCIR Communications Services Tax 3. 0 estimated the City' s revenue at $ 2, 334,994; consequently, 2, 335, 000 was budgeted. The City was advised by the 2. 5 Florida Department of Revenue ( DOR) in March 2007 that 2. 0 ongoing audits reveal that Fort Walton Beach was overpaid c: approximately $ 1. 7M in during the 28- month period June 2004 1. 5 September 2006 and will receive reduced CST revenues this 1. 0 year. Current year revenues are likely to be closer to $ 1. 5M rather than $ 2. 3M - a decrease of $ 825K. Current year 0. 5 expenses have been cut and the General Fund budget amended to reflect the reduction in CST revenue. Until OaR' s 0. 0 audits are complete, the full impact of the situation will not be 2003 2004 2005 2006 2007 Budget known, but staff estimates a $ 900K reduction in FY 2007- 08 revenue ( compared to original FY 2006-07 budget of $ 2. 3M) and a $ 715K repayment for prior months' overpayments ( the City will pursue repayment over the same number of months as the error occurred). The communication services tax is anticipated to generate 1.4M in FY 2007- 08. Local Option Fuel Tax 800 In FY 2002- 03 the ten- year local option fuel tax interlocal 700 agreement between Okaloosa County and its municipalities was re- written and Fort Walton Beach' s local option gas tax 600 proceeds were reduced approximately $ 50,000 annually g$ 500 0 even though the tax was raised to $ 0. 02 per gallon. While c: 400 the City' s revenue decreased as the result of this agreement, o F $300 all other municipalities in the county enjoyed revenue growth. Annual growth has been 1. 7% for this revenue source, and it 200 is hoped revenues will return to their 2003 level in FY 2008- 100 09. Local option gas tax is anticipated to generate $ 715K in 0 FY 2007- 08. 2003 2004 2005 2006 2007