Fort Walton Beach Ordinance — 1740 Adopt Budget FY07-08 — reading text

insurers to buy backup coverage from the state' s Hurricane Catastrophe Fund at below- market rates and in turn requires them to reduce premiums. However, a major storm - or worse, a string of them - could not only wipe out the Fund but also force residents to pay steep yearly assessments on home, auto, and other insurance policies to rebuild the Fund. City of Fort Walton Beach, FL 10- City Manager' s Budget Message Property Tax Reform To lower property tax rates, legislation was passed during Special Session that requires counties, municipalities, and special taxing districts to reduce property tax revenue collections to a designated Taxable Assessed Value percentage below the roll- back rate based on taxing behavior over the Year Citywide ' % Incr past five years. The roll- back rate is the tax rate that would generate 2007 1,485, 863,467, 9. 6% the same amount of property tax revenue as the prior year, exclusive 2006 1, 355,358, 652 23. 3% of new construction. School districts are exempt from this roll- back; 2005 1, 099, 663, 741 19. 8% though the Okaloosa County School Board comprises half of a Fort 2004 917, 979,449 6. 3% Walton Beach resident's tax bill. Property values have experienced 2003 863, 630,650 3. 9% double- digit increases in South Florida since the early 2000' s, but 2002 831, 018,054 3. 7% only here in Northwest Florida in 2005 and 2006. This statutory 2001 801, 494,995 6. 3% change is considered " Immediate Tax Relief and Reform" and a 2000 754,237,271 3. 8% jurisdiction' s level of cuts is determined by a formula that analyzes the jurisdiction' s taxing performance over the past five years, measured against a statewide average. Based on Fort Walton Beach' s compound annual growth rate of 8. 79% from 2001 to 2006, the City' s millage tax) rate may not exceed 95% of the roll- back rate according to the legislation. In addition to the required reduction for FY 2007- 08, a cap on future property tax revenues ( based on the rate of personal income growth and new construction) is imposed by this statutory change. Home Rule authority is the power of local governments to conduct government, perform functions, and render services, except when expressly prohibited by law. In an effort to preserve some Home Rule authority, the legislation allows local governments to override the statutory current year property tax reduction and future years' cap as follows: 2007-08 2007-08 Variance from Millage Ad Valorem Maintaining Current Variance from Method of Adootion MillaQe Descriotion Rate Revenue Millaqe of 4. 6458 2006-07 Revenues Majority vote of Roll- back rate at 4. 1986 $ 5, 926, 619 <$ 631, 254> <$ 92, 565> governing body percentage cap Two- thirds vote of Roll- back rate 4.4196 $ 6, 238, 576 <$ 319, 297> $ 219, 392 governing body Unanimous vote of Prior year millage rate 4. 6458 $ 6, 557, 873 $ 0$ 538, 689 governing body Rate higher than' ~ Voter referendum 4.6459 prior year Staff has prepared a budget based on a millage rate of 4. 1986, a decrease of 9. 7%. Compared to maintaining the current millage rate of 4. 6458, the new millage rate of 4. 1986 results in $ 631, 254 less revenue. However, in comparison to FY 2006- 07 budgeted ad valorem revenues, the overall decrease is 92, 565 or 1. 5%. This overall percentage decrease is less than the legislative 5% reduction ( which is exclusive of new construction) due to 2007-08 Prooertv Owner continuous redevelopment downtown Millaqe Taxes on $ 250K Savinqs from in the Millaqe Descriotion Rate ~ Community Redevelopment Current MillaQe Area. The purpose of designating a Roll- back rate at 4. 1986 1, 049,65 111. 80> CRA is to eliminate slum and blight percentage cap and the property tax reform Roll- back rate 4.4196 1, 104. 90 56, 55> legislation does not penalize Prior year millage rate 4. 6458 1, 161.45 0 jurisdictions for growth in the CRA. In addition to the " Immediate Tax Relief and Reform" enacted via a change to the Florida Statutes, the Legislature has proposed " Further Tax Relief and Reform" in the form of a Florida Constitutional amendment to replace the current " Save our Homes" exemption with a " Super Homestead" exemption. Voters will decide in January 2008 if they prefer the current homestead exemption of $ 25,000 with an annual property value increase equal to the Consumer Price Index or 3% ( whichever is less) or a super homestead exemption with 75% of the first $ 200, 000 of taxable value exempted and 15% of the next 300, 000 in taxable yalue exempted, but with no protection for annual increases in assessed value. If the new super exemption passes, existing homeowners will have the option of keeping their existing Save our Homes protection or converting to the new super exemption. The super homestead exemption will apply to all new properties and transfers of ownership. Although it is unknown whether the super homestead City of Fort Walton Beach, FL 11- City Manager' s Budget Message exemption will pass and how many properties will convert, staff estimates a worst-case scenario loss of 8) 796K in ad valorem revenue at the proposed millage rate of 4. 1986. Communication Services Tax ( CST) Revenues In April 2007 the City received a letter from the Department of Revenue ( DOR) advising that the third- party pre parer for one of the City' s CST vendors had improperly filed the vendor' s CST returns. An audit by OOR revealed that the returns for the period June 2004 through September 2006 incorrectly attributed amounts to the City of Fort Walton Beach from other jurisdictions, thereby resulting in higher monthly distributions to the City. When staff first noticed the increase in monthly payments and contacted OOR in 2004, City staff was told the increase was attributable to incre.ased use of cellular phones after Hurricane Ivan. Communication services tax ( along with half-cent sales tax, local option fuel tax, and municipal revenue sharing) revenues are budgeted based on estimates provided by the legislative Committee on Intergovernmental Relations ( LCIR) and actual revenues have traditionally come in at or above LCIR estimates. The notice from OOR in April indicated an overpayment of $ 1, 666, 858 over a twenty-eight month period, which the City will be permitted to repay over a similar period of time. Additionally, the City's monthly disbursement has decreased approximately $ 50, 000 as a result of the correction. In May the FY 2006- 07 budget was amended to account for the $ 825, 000 current year revenue decrease. Lower monthly distributions will result in $ 881, 645 less revenue from CST in 2007- 08. Additionally, twelve months of overpayment reimbursement is budgeted from fund balance in the amount of $ 714, 368. Cost Allocation Plan The City' s first Cost Allocation Study was completed in September 1998 by KPMG Consulting based on data from FY 1997. KPMG conducted an in- depth review of each General Fund department to determine the types of services provided and who benefited from those services; interviewed each department and completed time analyses to determine the time spent on services; and reviewed all accounting, purchasing, budgeting, and computer transactions to allocate costs to the appropriate division, department, and fund. Building and equipment use were allocated based on square footage and dollar value, respectively. Both actual financial and statistical data for FY 1997 were used and the Cost Allocation Plan was prepared in accordance with full costing concepts, which incorporate all expenditures of the City except capital outlays, election expenses, and grants- in- aid. KPMG determined the General Fund provides the following services to Enterprise Funds: Accounting - payroll, accounts payable and receivable, general accounting Human Resources - recruitment & retention, benefits administration, insurance & risk management Information Technology - hardware & software management, network support Public Works - engineering, service maintenance. fleet maintenance, drainage, general labor Purchasing - competitive bidding, purchase of general goods and supplies In March 2003 DMG- Maximus issued an updated Cost Allocation Plan based on data from FY 2001. Maximus' scope of work was very similar to that of KPMG. As a matter of budgetary policy, interfund transfers to the General Fund