2012 Millage set at 4.7815

Click HERE for Channel 20 Video of the meeting.

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In a relatively short meeting last night, the County Commission approved a 2012 budget by a 4-3 vote. Setting the county-wide millage at $4.7815 per $1000 valuation, the rate is an increase of 0.66%.

TAB has been working over the last few months to avoid any increase, but this outcome is acceptable, given it is a lot closer to our $4.75 target than the rollback rate proposed in June at $4.922. We would have liked to see more restraint in the Sheriff’s budget (it is actually increasing when pension reform savings are taken into consideration), but four of the seven commissioners were hard over on not cutting his budget at all. The Sheriff did pony up $1M in excess fees that helped them bring the millage down ever so slightly.

This was the closest budget vote in recent years – many thanks to commissioners Abrams, Burdick and Marcus, who kept to their position from the beginning of the process back in March to the final vote not to raise the rate. The others did exhibit some flexibility this year, even Burt Aaronson who has rarely argued for lower tax rates. Commissioner Taylor thought that the result was a compromise that had something for everyone and we would agree.

It can’t be proved whether our efforts in TAB have affected the outcome, but given the starting proposal of 4.922 and the significant progress towards the goal, we would like to think so. Almost all of those who spoke at the meetings in opposition to the tax hike were associated in some way with TAB.

Special thanks to those who spoke at the final meeting: Janet Campbell, Mel Grossman and Laura Henning of PBC Tea Party, Mayor Dan Comerford and Commissioner Chip Block of Jupiter Inlet Colony, Matthew Leger, Dionna Hall and Christina Pearce of RAPB, County Commission candidate Albert Key, State Senate candidate and 912 member Mike Lameyer, South Florida 912 members Dennis Lipp, Victoria Thiel and Nancy Hogan, and Barbara Susco, Mark Dougan, as well as Fred and Iris Scheibl of TAB.

Next year will be particularly challenging for the county budget, with an increase in pension costs expected as well as continued pressure on valuations. Be assured that TAB will continue our watchdog role going forward.

Call to Action – September 27 Budget Meeting

TAB Members,

Tomorrow evening, September 27, is the final county budget hearing at 6:00pm in the County Building at 301 North Olive, WPB. You should arrive by 5:30 if you want to be assured of a seat in the main meeting room.

On the table is the 4.79 millage carried over from the last meeting, along with a 4.784 “alternate” proposal that shaves another $700k off the first. If they were able to find only $5M (less than 0.25% of the proposed budget) then the tax rate hike would be unnecessary. Although the commissioners like to talk about “only pennies a day”, it is useful to remember that county spending has grown 10x population growth and 3x inflation since 2003. A line needs to be drawn in the sand. Now. This year.

Currently three of the seven commissioners have voted to avoid the rate increase and consider further cuts to the Sheriff’s budget. We agree, yet the other 4 have been unwilling to challenge the Sheriff, and can block any action in this area. On the bright side, that is the smallest majority we have seen to date, thanks to the courage of commissioners Abrams, Burdick and Marcus. Maybe we are making progress.

Please attend the meeting tomorrow, fill out a comment card, and speak, or send emails to the commissioners. Nothing has changed that makes the TAB proposal any less appropriate, and it remains:

• 4.75 millage – don’t increase the tax rates
• Take the remaining cuts from the Sheriff
• Sell off unused property
• Use reserves where necessary

For some useful background, see

• Tax Rate Proposal Still Too High on the TAB website
• Jennifer Sorentrue’s piece in the Post: Divided Palm Beach County Commission finds compromise increasingly tough on budget cuts
• Andrew Marra’s Editorial in the Post: To serve and protect budgets
• John R. Smith’s Op Ed in the Sun Sentinel: Time for Palm Beach County to go budget diet
• The TAB synopsis of the last meeting: A Surrealistic Budget Hearing

Fred Scheibl
Taxpayer Action Board

Tax Rate Proposal Still Too High

The current proposed millage on the table for the 2012 budget is $4.79 per thousand dollars of valuation, up 0.8% from the $4.75 of last year. With declining valuations, that millage would collect $596M in taxes, $7M or about 1% less than last year. An “alternative” offered by Bob Weisman differs by about $700K – hardly worth mentioning.

At the September 13 preliminary hearing, commissioners Abrams, Burdick and Marcus voted against the rate increase and were in favor of further reductions in the Sheriff’s budget. At $467M, it is down slightly from last year, but not as much as the estimated $19M he is saving from pension reform which requires contributions from employees for the first time. The other four commissioners (Aaronson, Santamaria, Taylor, Vana) declined to challenge the Sheriff in any way, and thus there were not enough votes to even discuss this prospect.

There are three major components to the county budget – county departments, Fire/Rescue, and the Sheriff’s Office.

In the last 9 years, the county departments grew fat on the rising real estate bubble, but have cut their tax requirements significantly since the peak in 2007 and are now only about 3% over what they were in 2003.

Fire Rescue grew and stayed high (up 70% since 2003) but this year they are not increasing the tax rate and have reduced spending by about $4M. They are also negotiating in good faith with the IAFF to avoid across the board raises in the next contract and reduce starting salaries 22%.

PBSO on the other hand, at almost $400M, is almost twice the county department’s ad-valorem requirement, up from close to parity a decade ago. (See graph below) There is very little the commissioners have been able to do about this balloon in public safety spending. At the first hint of cuts, the Sheriff threatens neighborhood groups with reductions in patrols or the closing of a substation and they bring enormous political pressure on the individual commissioners. As an independently elected constitutional officer, the Sheriff has autonomy in how he spends his budget, but the county commissioners are empowered to set his bottom line. Typically, no commissioners have seriously challenged the Sheriff, but this year we see a change. Newly elected commissioner Paulette Burdick does not seem to be afraid to ask the right questions and suggest that the Sheriff share the cuts with the county. Neither does commissioner Abrams. Commissioner Marcus, not too much of a PBSO critic in the past, has joined the other two in challenging the PBSO budget this year, to her credit. What is the matter with the other four? If there ever was an economy that called for across the board cuts, including in PBSO, this is it.

We call on Commissioners Aaronson, Santamaria, Taylor and Vana to think about the Taxpayer this year and show a little spine.

Only $5M in additional cuts are needed to avoid a rate increase.  Cut the $5M from the Sheriff’s budget (1.25%) and you will be done.   PBSO has become unaffordable at the current level.

We stand by the TAB Proposal for 2012:

• Don’t increase the tax rates
• Take the remaining cuts from the Sheriff
• Sell off unused property
• Use reserves where necessary

Budget Diet?

On today’s opinion page of the Sun-Sentinel, BizPac chairman John R. Smith takes the county to task over its budget process, from what he calls the “Weisman ritual” – proposing a budget that always seems to out of step with conditions, to the arcane and obscure way that the budget is prepared by OFMB. Mr. Smith cites the recent TaxWatch report which concludes the county is holding too much in reserves, owns too much unused property, has too much debt, and does not prepare their budget “in a way that is uniform with Florida’s standard financial reporting“.

He concludes:

For the full article see: Time for Palm Beach County to go budget diet

F-bombs Fly at Fire/Rescue Negotiations

TAB has been attending the meetings between County Fire/Rescue management and IAFF Local 2928 since they began four months ago (See Genesis of a Collective Bargaining Agreement, Fire / Rescue Contract Talks Continue, and Little Progress in the IAFF Contract.)

We had been advised that the meetings tended to be raucous and filled with stunts and theatrics on the part of the union, but in three meetings we saw none of that. While very little progress was made, the tone of discussion was professional and cordial.

Apparently, that has all changed now.

The latest meeting was Wednesday, 9/14, starting at 10:00am. After about an hour in which the county proposed that a group of sections that were not particularly controversial be approved as a package, the union began a private caucus that lasted about an hour. Since the caucus is private, members of the public are excluded so we went into the conference room next door. This wasn’t far enough evidently, as one of the negotiators suspected we could hear them through the wall and asked us to go farther away.

We returned at the conclusion of the Caucus for 10 minutes only as they spoke briefly to the county and went back into caucus for the next two hours. We were not able to return at that time, but a member of one of our coalition partners attended the afternoon session and sent us the following report. Evidently, the negotiations are taking a different turn. We are speculating that the union attorney has been restrained in his language up to now because there was always a woman present.

A Surrealistic Budget Hearing

Click HERE for Channel 20 Video of the meeting.

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At about 11:00pm Tuesday evening, the County Commission voted to set the county-wide tax rate at $4.79 per $1K valuation. This is up 0.84% over last year – a small increase, but an increase nonetheless.

After the last meeting, the rollback rate of 4.8751 was on the table, intended to collect $607M in countywide taxes, $4M more than last year. The new rate will collect $596M, an $11M difference and $7M less than 2011. That is some progress, but going another $5M to flat millage would have sent a signal that the commission “feels your pain”. Any increase, no matter how small, sends the opposite message and all good will is lost. Thank you to Commissioners Abrams, Marcus and Burdick for trying to do the right thing.

The real story is how the dynamics of the meeting played out and the bizarre behavior of some of the commissioners.  What played out was a perfect example of why people are losing confidence in government at all levels. It was sad to watch.

The five and a half hour meeting started with a brief overview presentation by Administrator Weisman that contained a strangely petulant rant against the recent TaxWatch study on county reserves. It was if his integrity was being questioned by a Tallahassee interloper that had no business telling lies about his stewardship of the county purse. TaxWatch claims that Palm Beach County has excessive reserves when compared to objective measures or peer counties. Nyet, says  Bob. Move along, nothing to see here.

Next we had “public comment”. By TAB’s count there were about 80 speakers. 75% were very much opposed to any cuts in “their” programs, including all the usual suspects – Palm Tran Connection riders, directors of Financially Assisted Agencies with their hands out, the minions of COBWRA and others from the West Boynton area reacting to the Sheriff’s threat to close their substation, advocates for Victim’s Services, the blind, lifeguards and swimmers, Animal Control, and the eloquent (even poetic!) supporters of the Green Cay Nature Center.

Speaking for the taxpayer and greatly outnumbered were about 20 citizens opposed to the millage increase – almost all associated in some way with TAB. The other 1.3 million residents of the county stayed home last night and get the government they deserve.

When the public portion of the circus was over, the meeting “returned to the board” where the real show began.

In a motion that had jaws dropping throughout the chamber, Commissioner Aaronson proposed funding EVERYTHING on page 8 of the package (the list of programs they would like to restore above a flat millage benchmark). This would be done by adopting a 4.80 tax rate, then funding the additional $7M or so in additional  items (Sheriff adders, BDB, Cultural Council, Film Commission) by “taking the money from the roads programs”. If the $7M required would be too difficult for that department (it had been previously discussed with staff), then take the money from “reserves”.

Wow – an admission that we can spend reserves. (TaxWatch?, TAB?) Most striking was the hanging question, finally asked by Commissioner Marcus – how come we are just learning that this $7M is available? Couldn’t we have dispensed with stirring up all the constituent groups by just using this from the get go?

Steve Abrams said this was going in the wrong direction. Instead of funding everything on the page, why not use this “found money” to fund some of the programs while keeping the millage at 4.75?

It has been a long standing tradition that when cuts are made, the county departments and the Sheriff share them dollar for dollar. On the table was an additional restore for the Sheriff of $5M, not matched by the county. Steve Abrams wanted to see the tradition continue and Chairman Marcus polled the board to see if it could be maintained. No. Aaronson, Santamaria, Taylor and Vana will vote to give the Sheriff everything he wants. Case closed. The other three did not like this but there was nothing to be done. Chalk one up for the impressive Ric Bradshaw political operation. This was clearly a done deal before the meeting as there was no discussion on the topic.

The meeting then became a horse trading session – Shelley Vana would delete the mediation program that Priscilla Taylor wanted as well as letting Animal Control close one day a week until it was pointed out that there could be more euthanized cats and dogs (oh my!), prompting Vana to look horrified and say “oh no, we can’t do that!” and Taylor to say “if you restore that then give me back my mediators!” Finally, Vana threw up her hands and said “OK, Just fund EVERTHING!”. Now there is leadership!   Karen Marcus around this point made the observation “..we’re not looking too good up here right now..”.

Someone then threw out an arbitrary number – “Why don’t we set the millage at 4.79?” It was after all, getting late. One number is as good as another I guess. Chairman Marcus regained control of the meeting at this point and called a 20 minute “time out” to let staff calculate what 4.79 and “funding everything” would mean.

At the end of the break, staff reported that this would require an additional $7.9M, which would come from the roads program and/or reserves. Since there were not 4 votes to revisit the Sheriff’s share, Mr. Weisman was directed to identify this amount before the final meeting on 9/27, “taken from programs that have no constituency, like engineering or buildings and land”, and the meeting wrapped up with the formal votes on the millage rates.

So what are the take-aways from this meeting?

• The millage was set at 4.79 or below, at most a 0.8% increase over last year.
• The Sheriff got everything he wanted and was not required to match cuts with the county departments, breaking a long-standing tradition.
• About $7M in surplus or deferrable program funds were mysteriously “found” after threatening all the programs with vocal constituencies that could have been satisfied with less.
• After claiming TaxWatch was wrong and our reserves are too low to use, Mr. Weisman reversed course and offered $7M to fund the programs.

In summary, this was not too bad an outcome given where we started, but the cynical way the process was conducted by staff and some commissioners was not government’s finest hour.

Call to Action – 9/13 Budget Meeting

This is a call to action for next week’s county budget hearing, Tuesday evening, 9/13/11 at 6:00pm. The meeting is in the county government center, 301 North Olive in West Palm Beach. Come early as the meeting is expected to be crowded.

As you prepare for the meeting, here are some resources that may be useful:

• September Talking Points
• Sample email and 3 minute remarks
• The 2012 TAB Proposal – September Update
• September Budget Hearings – Some Background

Also check the “News Articles” tab on the TAB website for the latest budget stories from the Palm Beach Post, Sun Sentinel, and others.

Those on the “receiving” side of the budget will be out in force. Those of us on the “paying” side must also have their voices heard. If you can’t attend, send an email. Addresses for the commissioners and administrator can be found on right side of the TAB website, or you can email all at once at: BCC-AllCommissioners@pbcgov.org.

For some specific details about this meeting, see the 9/9 TAB email.

Bob Weisman’s Response to TaxWatch Study

NOTE: The TaxWatch study was made available to commissioners and staff prior to their press release. This is the initial response from County Adminstrator Weisman.

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From: Robert Weisman
Sent: Wednesday, September 07, 2011 9:01 AM
To: BCC-All Commissioners
Cc: Lisa DeLaRionda; John Wilson; Audrey Wolf; Ross Hering; Robert Weisman; Brad Merriman; Denise Nieman; George Webb; Joe Bergeron F.; Jon Van Arnam; Liz Bloeser; Shannon LaRocque; Steve Bordelon; Steve Jerauld; Verdenia Baker; Vince Bonvento
Subject: TaxWatch Report on Reserves and Property

You have been provided with a “draft” copy of a TaxWatch report on Palm Beach County that concentrates on our financial reserves and property. We have been able to give this only a cursory review since we were given access to it last night. The following are some brief comments in case you are asked about the report.

The financial reserve discussion appears very similar in opinion to the report that was issued 5 years ago. There does not appear to be anything in the reserve discussion that would affect our proposed budget. The funds they speak about are from multiple sources (impact fees, special revenues, bonds, general fund, etc) which are allocated to multiple projects. The only way funds could be made available to help balance the budget would be to eliminate and de-fund general fund projects that we have deemed necessary. We routinely examine project status and one of the ways we have balanced our budgets over the past few years is by taking money from completed or other projects whenever justifiable.

There would not appear to be anything new in the property portion of the report. Mecca is by far the largest asset we have, which it appears makes up 1/3 of the property they are talking about. The practicality and wisdom of selling our limited marketable property at this time is questionable. The numbers sound big, the reality is different.

We will evaluate and respond more fully after the final report is issued and we can review it in detail. If it discloses anything that can be useful in our budget balancing efforts, I can assure you that we will so inform you.

The 2012 TAB Proposal – September Update

The county has published their First Public Hearing package for the September 13 budget meeting. It presents a budget at the “rollback rate”, a 2.6% increase for the county-wide portion, generating $607M in ad-valorem revenue, and retains the current 2011 tax rate for Fire/Rescue and the Library System.

“Rollback rate” is a misleading term. While it is supposed to mean a rate that generates the same amount of tax revenue as the previous year, this one actually adds $4M to the county-wide tax burden. The 2.6% increase will likely understate the change to a homestead property held for some time, since the valuation may still not have caught up to the market value under the “Save our Homes” statute. Check the “TRIM Notice” that you should have received by now and look at the county tax line to see what it means to you.

Since Fire/Rescue and the Library system are not changing rates (and therefore collecting less revenue), the increase in county-wide taxes is offset by enough to hold the combined taxes to within $1M of the current budget. If adopted as proposed, this budget would collect a total of $835,144,556 in the 2012 fiscal year.

In July, the commission voted to set the “maximum millage” to the “rollback rate” of 4.8751. This means that in September they can adopt a lower rate but cannot exceed this maximum. Three of the four commissioners have indicated a desire to avoid raising the rates, and they could prevail. Therefore, to facilitate discussion, the budget proposal “bridges” the two rates by listing the programs that would have to be cut if the millage rate were kept at this year’s 4.75, but would be “restored” if the commissioners go with the higher “rollback rate”. Six separate proposals are provided, representing “steps” that add up to the $16.8M difference between the two rates (4.7500 vs. 4.8751). Controversial programs that are “restored” under the 4.8751 proposal include Palm Tran fares, lifeguard funding, nature centers, some financialy assisted agencies and about $12M in PBSO appropriations (less $5M in “excess fees”).

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The first three points of our TAB proposal for this budget year are unchanged from July, but we have added a fourth point which reflects a conclusion drawn by Florida TaxWatch in their recently published study – namely that county fund balances are excessive compared to either our peer counties or objective measures of “prudent reserves”.

The TAB Proposal

1. Maintain the county-wide millage at 4.75
2. Take the majority of cuts from PBSO, not the county departments
3. Take action to reduce the inventory of county property and reduce the debt
4. Cover any remaining shortfall from current fund balances (reserves) which are excessive compared to peer counties.

We also want to see a charter amendment for a county version of “Smart Cap” placed on the 2012 ballot. Detailed arguments for each of these can be found later in this article.

Background

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Last year, TAB was formed in July, after the county budget process was well underway.

After researching the growth in county spending for the period 2003-2011, we concluded that it had grown 11 times the population growth and 3 times the rate of inflation. For FY2011, the proposed budget raised the millage by more than 9% on top of an increase of more than 15% in the previous year. Although the ad-valorem equivalent (and the total amount of collected taxes) declined in the 2011 fiscal year with the steep decline in property valuations, those with homestead properties saw their taxes go up.

Overall spending, propped up by state and federal stimulus funds, continued to increase in 2011 and only now is declining a bit. (See % changes from a 2003 baseline in the chart below). Adopted tax followed the valuation curve upwards until 2007 where after a slight decline as excessive reserves were burned off, it has been relatively flat, even as the economy has been in decline and valuations have plummeted. Ad-valorem equivalent (which is spending minus non ad-valorem revenue) has declined since 2010, while spending has been supported by intergovernmental grants.

With the weak economy and double digit unemployment in the county, we thought another tax rate increase was wrong, and argued for keeping the millage flat at 4.344. As part of the proposal, we went through the staff’s “green” and “blue” pages, and made specific spending cut proposals totalling over $50M, argued for deferring raises in Fire/Rescue and PBSO, and listed $100M in capital projects that could have been deferred.

In meetings with the individual commissioners, we made our case and had a productive dialogue, but were not persuasive enough to carry the day against the hordes of special interests (including PBA members supporting the Sheriff’s budget) that flooded the meetings and lobbied the commissioners to keep the taxpayer money flowing. The final budget passed with a 9.3% rate hike on a 4-2 vote, with commissioners Abrams and Santamaria voting against, and the district 2 seat vacant after the resignation of Jeff Koons.

This year we started earlier and have focused on educating community groups about the budget history, preparing them to join the discussion armed with the proper facts.

• The Sheriff submitted a budget request with spending that is 4% higher than last year, mostly to cover raises under the collective bargaining agreements in place until 9/2012. In the flat millage budget, he is being asked to cut 5% more than he saves with FRS, but so far has been unwilling cut any deeper.
• The property appraiser, who had been projecting a 6% decline in valuations this year, has softened his outlook to a 2.3% decline.
• FRS reform, passed by the legislature and signed by the Governor, will result in savings to the county departments, PBSO and Fire/Rescue of $15.4M, $20.6M, and $11.6M respectively (by our calculations). Note: The county shows the PBSO savings to be $18M.
• Although the difference between last year’s adopted tax ($603M) and the tax generated by flat millage this year ($591M) is only $12M, cuts are necessary because the “hole” is really $45M. This is explained (although not to our satisfaction) by “decrease in one time funding sources”, “increases in general fund transfers”, and other matters. See: County Budget Update – July 8

The following is an outline of the “TAB Proposal” for 2012:

The 2012 TAB Proposal

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1. Maintain the county-wide millage at 4.75
   • County-wide property tax rates have risen 25.6% in the last two years alone
   • Although the total taxes collected have declined over the same period, those with homestead properties saw double digit increase in their county taxes
   • This year, the reduction in valuations has slowed from an expectation of -6% to a more modest -2.8%, reducing the pressure on the budget and millage rate
   • TAB estimates that reforms to the Florida Retirement System (FRS), passed by the Legislature, will result in a $48M savings to the county this year ($20.6M in PBSO, $15.4 in county departments, and $11.6M in Fire/Rescue). This should be used to hold or reduce the millage, not for new spending on programs or salary increases.
   • The county is still experiencing double digit unemployment and slow economic growth. This is not the time to be raising taxes.
   • Thankfully, the Fire / Rescue and Library MSTUs are not projecting an increase in tax rate.
2. Take the majority of cuts from PBSO, not the county departments
   • County-wide ad-valorem taxes pay for the county departments and the constitutional officers, including the Sheriff. In the last 8 years, PBSO has grown from 46% of the budget to 58%.
   • Most of the growth in the PBSO budget has been in personal services costs (salary and benefits), and PBSO deputies are now compensated more than 30% above the national average for similar positions.
   • Measured against a hypothetical population+inflation cap since 2003, county departments are now comfortably under the cap (although they exceeded it in the boom years by a cumulative amount of $50M). PBSO has greatly exceeded the cap in each year, with a cumulative overspending (versus the cap) of $500M in the 8 years. (See charts below)
   • The Sheriff provides only the statutory minimum of budget data to the county (and the public) so it is difficult to see where the money is being spent. Through Chapter 119 (open records law) requests, TAB has determined that almost all the spending growth has been in salaries and benefits for employees covered by collective bargaining agreements, not in operating costs.
   • The reduction to PBSO from $470M to $448M in the submitted budget would meet our criteria if allowed to stand.
3. Take action to reduce the inventory of county property and reduce the debt
   • Florida TaxWatch has conducted a Palm Beach County Study funded by the PBCA and others, that created an inventory of underutilized land and other property owned by the county, and compares our debt and capital programs to our peer counties. This study can be used as a blueprint for action to reduce the debt (currently $1600 per county resident with interest costs estimated at 14% of taxes collected) and make plans to sell off assets like Mecca Farms.
   • The Clerk and Comptroller has identified the county-wide debt (including the Solid Waste Authority) as being significant already, and it is about to be increased even further with the building of the waste to energy facility and the convention center hotel.
   • During the boom, windfall tax receipts were used to start projects that committed the county to long term debt that is difficult to justify now that the boom has ended. We need a plan to correct the problems caused by earlier bad decisions.
   • TaxWatch obtained a list of vacant properties owned by the county and has assembled a table of current value. As long as these properties remain on the books it is a double liablility – there is a carrying cost associated with them and they are held off the tax rolls. Many of the over 2400 properties listed in the PAPA database as belonging to the county should be sold, even at a loss.
4. Cover any remaining shortfall from current fund balances (reserves) which are excessive compared to peer counties
   • The TaxWatch Study analyzed unreserved fund balances against peer counties as well as against an objective measure of “prudent reserves” for a government entity, even one within a hurricane zone.
   • They concluded that the Palm Beach County fund balances are way in excess of what is needed and should be utilized to fund current spending until the balances fall at least below 40%.
   • Sufficent fund balances exist in excess of a 40% cap to fund any shortfall this year and can be used in lieu of raising the tax rate.

It should be noted that items 3 and 4 can be used together. Property can be sold over the next 1-2 years and the proceeds can be used to replace fund balances used to fund current expenses. Asset sales can also be used to retire debt.

This year’s TAB Proposal is really not asking that much. With the smaller decline in valuations and the large savings from FRS reform, there should be very little difficulty in making the modest cuts that will be necessary to avoid an increase in the tax rates.

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Smart Cap

Separate from the TAB Proposal for the FY2012 budget cycle, but important for long term budget restraint is a charter amendment to bring the state level “Smart Cap” proposal (SJR958) to the county. This will be a separate track, aligned with the charter review process, but if you agree with it, please mention it in the context of the budget discussion.

Adopt a “Smart Cap” charter amendment for county government

• The state-wide “Smart Cap” (SJR958) will be on the ballot in 2012. What is good for the state is good for the county.
• “Smart Cap” limits the revenue that can be collected to last year’s cap plus an adjustment factor that reflects inflation (change in Consumer Price Index) and population growth – an objective measure of “appropriate spending”.
• Although the decline in valuations has currently dampened the large increases in county spending that occurred during the boom, spending has continued to rise, even last year. When “normal” returns to the real estate market, a cap could prevent the out of control spending that occurred during the bubble.
• Unlike Colorado’s Taxpayer Bill of Rights (TABOR), a smart cap is based on last year’s cap, not on last year’s revenue. That prevents the “ratcheting down” of the cap that caused problems in that state during a recession.
• A well designed Smart Cap can provide emergency override (Supermajority BCC vote) and exemptions for unfunded mandates and other areas identified by the League of Cities as as problematic.

Growth in ad-valorem equivalents compared to hypothetical “Smart Cap”

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Florida TaxWatch Report on County Reserves, Debt, and Property Utilization

At the request of the Palm Beach Civic Association, the Palm Beach County Taxpayer Action Board, and the Town of Palm Beach County Budget Task Force, Florida TaxWatch conducted a study of several aspects of Palm Beach County Finances.

In addition to an analysis of the county debt and reserves compared to our “peer” counties – Miami/Dade, Broward, Hillsborough and Orange, updated from their similar 2006 report, they also investigated the quantity and status of unneeded or underutilized property owned by the county.

The complete report is available HERE. What follows is a summary of the major findings.

Major Findings

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1. County Fund Balance (“money in the bank”) is excessive

• The commonly accepted fund balance levels (unreserved) as a percent of expenditures for a government entity is 15%. Locally, 25% is considered prudent for hurricane preparedness. Palm Beach County has maintained a balance exceeding 50% over the last six years. Bringing this level down to even 40% would free up $188M of “excess reserves” that could be used for current spending, thus avoiding a tax rate increase through several cycles to come.
• Peer counties retain AAA bond rating with considerably less reserves

NOTE: This finding supports point 4 of the TAB Proposal – Cover any remaining shortfall from current fund balances (reserves) which are excessive compared to peer counties.

2. The County owns vast amounts of “Vacant” Property

• Of 2500 parcels owned, 353 parcels totaling 6200 acres are “vacant” – either unused or used for something other than their intended purpose
• Selling 25% of this vacant property would generate $54M in revenue and return $270K/year (unimproved) to the tax rolls
• Property record-keeping is unreliable and formal definitions and classification procedures are needed

NOTE: This finding supports point 3 of the TAB proposal – Take action to reduce the inventory of county property and reduce the debt.

3. County Office Space Allocation is overly generous

• Office size for executives and supervisors greatly exceeds state standards
• Reducing to standard could save $400K / year

In addition to these (and other findings), the TaxWatch team also made specific recommendations. Six were carried over from the 2006 study and are still relevant in 2011. The others are new and relate to the land and buildings aspects of the study.

Florida TaxWatch Recommendations

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Recommendations from 2006 study that were not implemented:

1. Establish a fixed cap on reserve funds as done elsewhere
2. Implement a priority based budget process with performance metrics
3. Adopt a budget reporting system that follows accepted standards and can be understood by the public
4. Implement a Sunset Review process with automatic repealers
5. Periodically rank all unstarted capital projects (partially implemented)
6. Centralize services for constitutional officers

New Recommendations regarding property and buildings

Property

1. Work with commercial realtor to plan and execute marketing plan to sell surplus properting over the next 18 months
2. Institute formal definitions and procedures to identify “vacant”, “improved”, and “surplus” property
3. Dispose of “strips” of land to adjacent property owners or bundle for sale
4. Fully implement County Owned Real Estate (CORE) database and make available to the public
5. Implement online marketplace to dispose of surplus property
6. Apply full sunshine to property acquisition, exchange and sale process and separate from consent agenda
7. Engage consultant to suggest utilization of surplus “right of way” property
8. Incorporate vacant land disposition as part of County Comprehensive Plan

Buildings

1. Require occupancy and vacancy rates of county assets be tracked
2. Revise office space guidelines to align with Florida space allocation standards
3. Make list of county owned buildings easily accessible to the public

Conclusion

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TAB has argued that in this time of economic distress, tax hikes of any kind are counter productive. As the real estate bubble has deflated, the county has been increasing the tax rates in an attempt to prevent a decline in tax revenue. An alternative (in addition to the obvious – cut spending) is to buffer the shortfall with reserves accumulated during the “good” times. Not all government entities have that option as their reserves have been depleted.

The TaxWatch study points out that Palm Beach County is flush with reserves. Additionally, the county is carrying a significant quantity of unused or underutilized property that could be sold off over the next year or two, and the proceeds used to replace reserves spent to cover current spending.

It is our hope that the commissioners will agree and use this information to reject a tax rate increase for 2012.

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