Final County Budget Hearing This Evening 9/19

At the first September budget hearing, the Commission unanimously adopted the 4.7815 millage – unchanged for 6 years, and tonight they will make it official.

When this tax rate was first set for the 2012 fiscal year, the countywide ad valorem tax was $595M against a valuation of $124.6B. This year, property valuations have greatly recovered and now total $165.1B. At that level, this millage will generate $790M – up 33% in 6 years, 8.2% in this year alone.

OVer those 6 years, there has only been about 4% inflation and population has grown about 3%. The average household income throughout Palm Beach County grew about 6%.

The government did much better. County employees saw across the board raises of 3% for 4 years in a row (12.6%), and taxes went up 33%.

Remember this growth in taxes – far in excess of inflation and population growth, as you consider whether a 7% sales tax makes sense. If passed, the tax will provide another $70M per year to the county government – larger than the $60M increase in this year’s ad-valorem.

Public Hearing Tuesday on 2017 County Budget

The first public hearing for the 2017 budget will be held on Tuesday, September 6 at 6PM in the BCC chambers, 301 N. Olive Street, 6th floor.
Links:

On Tuesday 9/6 at 6:00 PM, the County Commission will most likely vote to leave the millage unchanged for a sixth year in a row, accepting the tax windfall from rising valuations.

The numbers are slightly higher than the June package as the valuations have been adjusted up slightly to $165.1B – 97% of the all time peak that occurred in 2008. This year’s tax take of $790M is up 8.2% over last year and up 33% in the 5 years since 2012.

Highlights of the budget include:

  • a 3% across-the-board salary increase for all employees (on top of 3% in each of the last 3 years). Note that this 12.5% increase for county employees came during the 4 year period when the county average household income only went up about 4%.
  • 62 new positions. County staffing has grown by 286 in the last 4 years to a total of 11,202.
  • A $28M increase for the Sheriff. The Sheriff now accounts for about 48% of the general fund total appropriation budget.
  • A 4.7% decrease in the budget for Engineering and Public Works.

Note that there is nothing in the budget for revenue and appropriations associated with infrastructure projects that would be funded by the proposed 1 cent sales tax surcharge. If the tax were to pass, the county would receive about $70M per year – about $10M more than the amount of the increase in this year’s property tax. When added together, the total tax increase would be 18% in 2017.

First 2017 Budget Hearing on June 14 at 6pm

In an unrelenting desire for ever more taxpayer money, the county Administrator has proposed a $57M tax increase for the next fiscal year, which will be in addition to about $75M per year that the county will get from the sales tax if approved by the voters.

This is just greedy.

The first budget workshop for the 2017 budget will be held on Tuesday, June 14 at 6PM in the BCC chambers, 301 N. Olive Street, 6th floor.
Links:

At $787M, up 7.9% over last year’s county-wide operating tax haul (which was the highest in county history), this budget will surpass the peak tax during the real estate bubble by almost $100M and is up 32% from the post-bubble low of 5 years ago.

During these last 5 years, inflation (measured by the consumer price index) is up only 4%, and the population has grown by only 3%. So why do they need to increase taxes by 32%?

One reason is employee raises – cost of living raises across the board of 3% each of the last 4 years (did you get a 12.6% raise over the last 4 years?).

Another is the insatiable appetite of the Sheriff. The current budget of $511M is up from $394M in 2012 – an increase of $117M (30%) in 5 years. Maybe PBSO needs it to pay for all those use-of-force lawsuits they have been losing lately.

Not part of the county-wide budget, but paid by those in their service area, county Fire/Rescue is also up 30% in those 5 years.

By keeping millage constant since 2012, they have been able to ride the increase in property valuation that has almost (but not quite) returned to its 2008 peak, at $164.5B.

We think the millage should be reduced this year. If they really expect the sales tax increase to pass in this interesting “anti-establishment” year, then show some confidence by reducing the ad-valorem burden.

In the above chart, the dotted orange line shows what has happened to property valuations – peaking in 2008, dropping to a low in 2012, and then climbing almost back to the peak. The dotted green line is a combination of population growth and inflation – a measure of “reasonable” tax growth. Comparing this to the blue adopted tax line, you can see how much more our taxes have risen over what is reasonable. And of course the green “Sheriff” line is a tale unto itself.

Sales Tax Proposal Sent Back for More Info

During a long meeting that stretched from before lunch until 5pm, the Board of County Commissioners yesterday deferred action on staff’s sales tax proposal, sending it back for more information.

Commissioners Valeche, Burdick and Abrams all wanted to see things slow down while the proposal is fleshed out. They did not want to see ballot language as of yet, rather the next session should discuss the unknowns of the proposal, including:

– What is the project list from the cities and School District?
– How would funds be distributed among cities, Cultural Council, county, schools?
– What it looks like without the Cultural Council projects included?
– What does the Hospitality Industry think of it?

While no one wanted to shut it down, they are clearly not ready to move on it. Some concerns expressed were that the proposal had expanded way beyond the original infrastructure funding, encompassing new construction projects, equipment for the Sheriff, and other items. Commissioner Abrams worried that the “Christmas tree” could tip over from all the ornaments.

Regarding the proposals from the Cultural Council – illustrated by a procession of over 10 museum directors, zookeepers, theater managers and the like, some of the projects go way beyond what you would expect from public funding, including architectural enhancements to the exterior of existing buildings to make them more trendy.

We will wait and see. We have listed objections to the plan as it is currently known. We expect that the devil is in the details though, specifically:

– Will the cities give up some of their share to fund CC projects?
– What will each of the 39 municipalities do with their share? Will any reduce their ad-valorem?
– What effect will this have on the county Ad-valorem budget process this year?

Regarding the Fire/Rescue sales tax proposal, there were too many questions about the enabling statute to move forward at this time. In particular:

– It is unclear what happens if sales tax revenue exceeds needs – can the surplus be spent on non fire/rescue projects by the county or cities? – It needs a statute change or AG opinion.
– What would be the process for collecting and distributing the cash, and how could ad-valorem be adjusted after trim notices are sent – Tax Collector Anne Gannon came and listed some of her process issues with it.
– What does Fire/Rescue administration (ie. Fire Chief Collins) think of the proposal. (The proposal is being brought forward by the IAFF union, not Fire/Rescue management).

We will keep you posted.

Some of the organizations with whom we have spoken, are also in a “wait and see” mode. Many believe there are real infrastructure needs, but many of the add-on projects give them pause.

For the Post story on the meeting, see: Action on Sales Tax Issue Delayed.

Final Hearing on FY2016 Budget, 9/21

Next Monday, the Commission will take their final vote to set the county-wide millage rate at 4.7815, unchanged since 2012.

Out of the $63M tax increase, the $775K that they did not commit to new spending will be rolled into reserves, ready for use to increase the BDB subsidy and other priorities that didn’t make the budget proposal.

This is how the budget compares to last year:

2015 2016 Change
County-wide $667.3M 729.9M + 9.4%
Library $41.5M 45.0M + 8.4%
County Fire Rescue $196.6M 214.8M + 9.3%
Jupiter Fire Rescue $17.6M 17.7M + 0.6%

Keep these large increases in mind as you contemplate the coming push for raising the sales tax to pay for “infrastucture” projects that should have been addressed in the normal budget process.

Public Hearing on the Budget – What to expect

On Tuesday, September 8 at 6 PM, the county commission will meet to consider the 2016 budget in the first of two meetings to set the millage rate. See: 1st Public Hearing Package

In the June workshop, before the county valuations were adjusted upward slightly, flat millage projections yielded $724.8M in property taxes – an 8.6% increase over last years budget. With the new valuations, the yield became $729.9M or a 9.4% increase.

All of this $62.6M windfall has been allocated to new spending, including large increases for the Sheriff, another 3% across the board pay increase for all county employees, new hiring, some capital projects and increases to reserves.

What is not being addressed in this budget is infrastructure – roads, bridges, parks, etc., which both staff and commissioners have been saying is an urgent need. Why? Because they plan to hit you with a sales tax increase and/or higher debt loads for that.

A sales tax increase would have to be passed by referendum and is not guaranteed, but staff and commissioners appear eager to make the attempt, even Hal Valeche, who laughably calls himself a “tax cutter”. To my knowledge, there have been no county tax cuts since he has been on the dais.

Funding critical infrastructure “off budget” is devious. One of the most important functions of local government is to build and maintain public roads and spaces. When these projects are funded as they should be, through a public budget process that allows for public input and discussion, commissioners are forced to make tradeoffs and set priorities. Because of the “Save our Homes” statute that limits homestead tax increases to the inflation rate (0.8% this year), there is a limit to the amount they can gouge the non-homestead propery owners. If they can get an “infrastructure sales tax” passed, it would generate an enormous amount of new revenue – just .5% would exceed $100M / year, and none of it would have to be justified through the budget process.

So what to expect?

The additional $5M that would be generated from the higher valuations (determined since June), could be used to reduce the millage and “give a little back to the taxpayer”. Do not expect that from this Commission. In the July workshop it was mostly allocated to other spending, including a mid-year pay increase for the tax collector’s office. With a little less than $1M unallocated going into the September hearing, likely recipients will be the Business Development Board (which has requested another $500K), and additional hiring in other areas.

The maximum millage rate set in July at 4.7815, unchanged since 2012, will very likely become the adopted rate after the two September hearings, and you can expect a push in the 4th quarter for the sales tax referendum to go on the November 2016 ballot, and/or a very sizable bond issue for “infrastructure”.

Since for homestead property owners, the 0.8% limit makes their tax increase minimal, there is not likely to be much public opposition in these meetings, and TAB does not plan to oppose the increase. The sales tax though is another matter, and now is not too early to consider what can be done to defeat such a move.

Maximum Millage to be set Tuesday, 7/21

The county commission will act to set the maximum millage for fiscal year 2016 on Tuesday, 7/21, as part of a regular agenda. Staff recommends holding the county-wide millage flat at 4.7815.

Since the June budget workshop, where the flat millage would have generated $724.8M in taxes on $151.6B in valuation, the property values have been adjusted upward to $152.7B. With flat millage, that will provide another $5.1M in taxes, or $729.9M.

Compared to last year’s adopted tax of $667M, this represents a 9% tax increase, and the largest proposed tax in county history.

The $5.1M windfall since June could have been used to reduce the tax rate, but only Commissioners Steven Abrams and Paulette Burdick have even suggested that as a course of action. Other Commissioners scoffed as they have plans for that money.

Most disappointing was Commissioner Hal Valeche. A founding member of TAB (see: BCC 7/20/10), his interest in restraining the growth in the budget seems to have vanished, showing that once elected to office, one’s priorities change. Commissioner Valeche favors taking all the windfall and (since all is never enough) later floating a bond issue for “infrastructure” spending. Quoted in the Palm Beach Post as the countywide spending soars above $1B, he remarked: “Government has to eventually spend some money on some basic things. This isn’t fluff.

It should be noted that the area of “infrastructure” – roads and bridges, where it has been repeatedly claimed that more money is needed, saw no significant increase in the budget. The Engineering and Public Works department actually saw a decrease of $1.2M. Remember this when later in the year there is a discussion of the bonds and/or raising the sales tax to pay for basic maintenance of roads, bridges and parks.

As previously noted, the taxable value increase on homestead property is limited this year by the Save Our Homes statute to about 0.8%, so this increase will be mostly borne by non-homesteaders – businesses and second home properties. As a result, homestead owners may feel they have no dog in this fight, but they are wrong. As we saw throughout the downturn, Save Our Homes just delays the tax hikes. Eventually, taxable valuations will catch up – even if market values decline.

The agenda item on 7/21 is not expected to generate much discussion – they will set the maximum millage and go on. In the September public hearings (9/8 and 9/21) though, the Commission will have the opportunity to adopt a lower number – but don’t hold your breath.

$725M County Budget Proposal Largest in History

The county budget proposal, to be discussed in the first budget workshop on Tuesday, June 9 at 6pm, proposes flat millage at 4.7815 producing $57.5M in new taxes on rising valuations.

With property values having returned to 89% of the peak seen in 2007, this budget is actually $36M higher than the record set that year, making it the highest dollar value budget in the history of the county.

Coming on top of a $44M tax increase last year, during a time of negligible inflation and little population growth, the county is intent on taking a larger and larger share of taxpayer wealth. Many of the municipalities have already started talking about decreasing their millage – why not the county?

As usual, the Sheriff is claiming a big slice of this largesse, but the county-wide departments are also upping their spending. There is an across the board 3% “cost of living” increase on top of a similar 3% last year. Hiring is being turned on again with 66 new positions to fill. And $19M is targeted for capital projects.

Since the proposed millage is the same as last year, and there is a slight decline in the debt service, this budget will be presented as if it contains a slight tax rate decrease in aggregate. Don’t be fooled – at $725M, the proposed countywide taxes collected is both the largest total amount in history, as well as the largest dollar increase since 2007 at the peak of the bubble.

So what does this mean to the property owner?

Thanks to “Save our Homes”, the most that the taxable value of a homestead property can increase in a single year is 3% or the inflation rate, whichever is lower. This year the state has set the rate to 0.8%. With flat millage then, the homesteader’s tax bill increase is limited to less than 1% and much will be made of the fact that this is only a few dollars at most.

Calculation of non-homestead share


2015 Tax x 39% = homestead share
$667M x .39 = $260M
Allowable increase = 0.8% x $260M = $2.08M

Remainder ($57.5M – $2.08M = $55.4M)
to be paid by non-homesteader
who paid
$667M x 61% = $407M for 2015
and will pay
$407M + $55M = $462M for 2016
or + 13.6%

But what of the non-homesteader?

There are approximately 630K taxable properties in the county, of which 298K are homesteaded (47%), and last year these paid about 39% of the taxes. Using these figures we can calculate that the homesteader’s share of the $57.5M tax increase is about $2M or about $7 per parcel on average (see box). The remaining $55M will be paid by the non-homestead properties (both residential and commercial) and they will see an increase of about 13% over last year, or about $167 per parcel. Since some non-homestead properties are capped at 10%, those not so fortunate will pay even more.

From a historical perspective, the millage has been unchanged since 2012, when the county property valuation was about $125B. As it now sits at $152B, the county has been able to increase its “take” from the $595M in 2012 to this proposal’s $725M, up $130M, without having to increase the tax rate. How much different it was in the years leading up to the bubble bursting after 2007. For the years 2006, 2007 and 2008, as valuations climbed, a different set of Commissioners actually DECREASED the millage rate. Even though tax amounts continued to climb, their action resulted in lower taxes than flat millage would have produced.

It is clearly time to start decreasing the millage rate, even a small amount. Maybe this Commission should study the actions of their predecessors.

Final Budget Hearing on 9/22

On Monday, September 22, the final county budget hearing will take place at 6pm at the Government Center at 301 N. Olive.

We still believe the Sheriff’s increase is much too large, but the show of support he mustered at the September 8 meeting has precluded any substantive discussion of the issue before the Commission.

And although Commissioner Abrams suggested they discuss a modest reduction in millage (and the size of the $44M tax increase) at the upcoming meeting, we do not sense the rest of them want to go there.

We therefore expect the proposed budget (4.7815 millage, $667M proposed tax) will be adopted.

For some thoughts on the growth in the Sheriff’s budget and the Commission’s inability to deal with it, see: On Oversight, Checks and Balances, and the County Budget

On Oversight, Checks and Balances, and the County Budget

Our system of government imposes an arrangement of checks and balances, so no person or group can acquire unchecked power.

When it comes to the county budget, Florida statutes clearly designate the legislative body – the county commission, to have the authority and responsibility to set priorities for spending and taxation. The administrator and his staff prepare a detailed budget, following whatever guidelines they have been given, and the commission meets in the sunshine for two workshops and two public hearings to discuss and adopt a budget before the fiscal year begins on October 1.

WIth $4B at stake, a bureaucracy exceeding 11,000 people, and limited time available, the commissioners themselves cannot physically evaluate every line item in this very complex budget, so they focus on insuring adequate funding for their own public policy priorities while much of the budget travels on automatic. Lower level line items like specific road projects, nature centers, or other items with a constituency, only get discusssed if the staff recommends a substantial change to the item.

What does get discussed every year is the Sheriff’s budget, since it is the major consumer of tax dollars, and outside the control of county staff.

Most everyone will agree that the function of PBSO – law enforcement, the county jails and courtroom protection, is necessary and should be adequately funded. The agency should have modern equipment suitable to the mission, and deputies and staff should be adequately compensated in line with peer agencies around the state and in the rest of the country, and it is the Sheriff’s responsibility to request a budget that delivers what he needs.

But what if his request is excessive?

In the county departments, managers submit budget requests that are a mixture of needs and wish list items. It is the nature of organizations to want to grow. The Administrator and his staff must adjust the requests of his departments in creating the overall budget, so that spending growth (if any) fits within the revenue expectations of the organization as a whole. If the priorities are not in line with the Commission’s expectations, they are free to make adjustments as a part of the process. Not all wish list items are funded. Although the other Constitutional Officers have a similar autonomy to the Sheriff, they usually “play nice” with staff and their budgets are rarely controversial. They are also relatively small.

The Sheriff’s budget is different. It is very large and complex, and very little detail is available to staff or Commissioners, and certainly not the public without a chapter 119 (open Records) request. The attitude is one of arrogance – “this is what I need and I am not willing to discuss it further.” Since the PBSO request must fit within the overall county budget, big increases there crowd out other county spending and severely limit the ability of staff or Commission to be fiscally responsible. Since they are charged with approving the budget, the public typically blames them for the excessive tax increases that result.

This year, many of the Commissioners told us privately that they agreed the Sheriff’s budget is out of control. They know they are responsible for approving his spending, but see no effective way to challenge him. This has been true for many years, as Commissioners have come and gone. While it is true that they have the statutory authority to reduce his spending (subject to appeal to the Florida Cabinet), they do not feel they have the political basis to do so.

This year, only Vice Mayor Paulette Burdick and Mayor Priscilla Taylor have publically questioned the Sheriff’s spending. This takes courage and we appreciate what they have said and done.

As for the others, they are hostage to an impressive political machine that can bring enormous pressure on wavering commissioners from the districts where the Sheriff provides most of the law enforcement. Just witness the array of speakers at the September 8 hearing – HOA Presidents, concerned citizens, even PBSO employees – all came out to speak the Sheriff’s praises and remind the Commissioners what the price of resistance would be. One particular Commissioner went so far as to admit that without the support of the Sheriff, their re-election would be in doubt.

There are about 1.3 million citizens of Palm Beach County. Almost 900,000 are voters. Yet only a small number of people follow what happens at the county, and fewer still participate in the process. We believe that most of the county residents would be surprised at the size and growth rate of the Sheriff’s budget, but they are not organized, and lack the time and assistance to provide sufficient cover to those commissioners who would act if they could. By carefully limiting the size of his increases, the Sheriff assures that we never reach that tipping point that would so outrage the citizens that they would spontaneously rise in opposition.

Some Commissioners have suggested that next year can be different, but we doubt it. As long as the status quo goes unchallenged, or the funding mechanism for the Sheriff’s office is modified through statute or charter, the Sheriff will continue to claim whatever portion of the county budget he desires.

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