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.

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.

Let’s Be Honest about the “Biotech Cluster”

Yesterday, the Board of County Commissioners voted unanimously to void their interest in the deed restriction that would have prevented “Project Diamond”, the UTC techonology showcase proposed within the “biotech campus” on the Briger tract. The other government players – Palm Beach Gardens and the state (represented strangely enough by FDEP), concur. Scripps, while disagreeing that this is an appropriate use, is not strongly objecting. Kolter (of course), the NPBC Chamber and the Economic Council are all strong supporters.

As part of the complex and expensive (to the taxpayer) deal that brought Scripps to Jupiter, 100 acres adjacent to I-95 was set aside for use only by biotech related enterprises, all part of the vision for a “biotech cluster” in Northern Palm Beach County.

It would seem the deed restriction standing in the way of the UTC project has been cleverly sidestepped by the BCC and the other government players. They are not “ending the Biotech era” and blowing up the restriction you see, just making a one-time exception in a way in which Scripps cannot object. In Commissioner Hal Valeche’s words: “You get a bird in the hand like this, it doesn’t come along that often.”

UTC, being an excessively green “smart building”, that “fits the vision of high tech enterprise” may end up being similar to a biotech campus in meeting the 2003 goals, but avoiding the restriction is tacit agreement that the whole vision of the Scripps Project was flawed. “We’re not giving up on bioscience or biotechnology,” said Commissioner Melissa McKinlay. Surely not.

The Scripps Project, by most measures, has been a failure. Although Scripps itself has met their committment in terms of jobs created, the 40,000 related jobs promised when the deal was done have not materialized. The amount of public money that was spent to bring Scripps to Jupiter exceeded $1M for each job actually created.

The UTC HQ project will be a fine addition the county and the city, although the amount of cash and tax avoidance they are being given is distasteful to one who believes in free markets and fiscal responsibility. Clearing the way for them with a deed “exception” though is not being honest. Let’s just acknowledge that the Biotech vision was a failure and move on.

Maybe when Kolter brings their next non-biotech project forward they will finally admit it.

See: County OKs UTC HQ near Scripps

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.

First Public Hearing on 2015 County Budget

The first Public Hearing on the 2015 County Budget is Monday evening, September 8th, at 6:00PM at 301 N Olive, WPB, 6th floor.

Unchanged from June, the county proposes to keep the county-wide tax rate at last year’s 4.7815 despite a 7% increase in valuations, which will result in a tax increase of about $44M over the 2014 adopted tax. This follows a $23M increase last year.

These additional funds will mostly go to the Sheriff (67%), and BCC operations (driven by salary increases).

When the real estate bubble was expanding prior to 2007, the county budget grew by leaps and bounds, because a flat or mildly decreasing millage was easier to execute than raising it during the downturn. We are about to experience something similar. Back to back increases of $23M and now $44M is our warning. If not opposed now, the county spending will climb unrestrained. Some Commissioners (Burdick, Abrams, Valeche) see this. Others (Taylor, Vana) have embraced it. Returning even a small portion of the 2015 windfall to the taxpayer would set a precedent for the future.

The county is not alone in claiming all the valuation increase for more spending – most of the municipalities are following suit.

If you have a homestead exemption, it may appear that the tax increase on your TRIM notice is smaller than the 7% that the budget would project. This is because valuation increases in a single year are capped at the inflation rate (1.5% this year). Rest assured that your taxes will climb every year hence until you are “caught up”, even if valuations fall. This year, the difference is made up with higher taxes on commercial property and residences without the homestead exemption, for which the cap is 10%.

If you find all this troubling, let the Commissioners know you care about the growth in the county tax burden and spending. Attend the meeting on Monday if you can, or send them an email to BCC-AllCommissioners@pbcgov.org.

Let them know that we don’t want to return to the spending excesses of the last real estate bubble. A decrease of millage this year, sharing the windfall with the taxpayers, would be a tangible signal of responsible governance.

For some details of the 2015 budget, see: “2015 Budget – Flat Millage, what’s not to like? PLENTY!“

Maximum Millage Adopted

Yesterday, the County Commission set the county-wide maximum millage at 4.7815, unchanged in four years. Reduced payments on county debt have very slightly reduced another line item called the “voted debt” millage, and they are trying to claim a slight reduction by combining the two rates, but I am sure you are not fooled. (See: Rate to ensure tax hikes for many in the Palm Beach Post, and Palm Beach County holds the line again on property tax rates in the Sun Sentinel.)

At this millage, rising valuations will generate an additional $44M windfall for the county over last years take, a hefty increase. It is not enough for some commissioners though – Shelley Vana and Mayor Priscilla Taylor argued strongly that there are so many additional things they would like to spend money on, that we should actually increase the tax rate. Commissioner Berger joined them in supporting Vana’s motion, but it failed 3-3 with commissioner Burdick absent. Hal Valeche and Steven Abrams argued against any increase, and Jess Santamaria joined them to defeat it.

We were surprised by this attempt to raise the rate, given the hefty tax increase already planned, and expected a pro-forma vote, coming as it did at the end of a long and involved commission agenda. As such, we did not participate in the meeting, nor call for others to do so. Only two members of the public spoke against the tax rate, Anne Kuhl and Alex Larson.

The $44M tax increase (more than $63M in aggregate, when Fire/Rescue’s $14M hike is included), is too much, coming as it did after last year’s $22M hike. The September public hearings on the budget (September 8 and 22) are the time to make our voice heard on that subject. Although the maximum millage has been set (required to generate initial TRIM notices), the rate can be reduced in those meetings. Reductions in the rate of growth of some programs, particularly the Sheriff, are warranted.

Maximum Millage to be Set on July 22

Tomorrow, July 22, the County Commission will set the maximum millage rate for FY2015. Staff is proposing the countwide rate stay at 4.7815 – which would be the fourth consecutive year at that rate. Judging by its position in an otherwise crowded agenda (Item 5-I-1), they do not expect much public comment on the action.

The maximum rate is the do-not-exceed rate, and the final millage can be set lower than that in September (as it has been on occasion). As adoption of the maximum rate is all but assured, we do not think opposing it at this time is an efficient use of resources. The September public hearings are a more appropriate time to bring arguments for sharing the valuation windfall with the taxpayers.

Since the property appraiser’s office is projecting that the taxable value will increase for 86% of owners, at this millage, most of these will see an increase in their property tax bill at the end of the year, whether homesteaded or otherwise. (See: Taxable value up for 86% of Palm Beach County properties )

Most of the increase is going into employee compensation increases – 3% for most, better than 6% for the Sheriff’s office, on average. We will soon have an article which compares the compenstation trends in county government – PBSO and otherwise, to the growth in private sector county median income. You will see that it has been a good time indeed to work for the government.

We believe that a $44M increase in taxes this year, returning none of the windfall in valuations to the taxpayer, needs more justification than has been forthcoming, particularly from the Sheriff. Sheriff Bradshaw has refused the Mayor’s request for a workshop on the subject however. The commissioners, who are required to hold public meetings on the budget, must defend the Sheriff’s request as if it was their own, even when many have questioned his numbers.

It is an act of political courage for a commissioner to oppose the Sheriff’s budget, as he can organize large numbers of supporters to flood the chamber and demand that his request be filled. Nevertheless, some commissioners have raised the question. But it would take the votes of 4 commissioners to challenge the Sheriff, and under our system of constitutional officers, all they may do is reduce his overall number, not specify from where the cuts would come. If refused, the Sheriff could appeal the decision to the state level, something he has threatened in the past, and the commission could be overturned by the Governor after the budget period ends, leaving them with a hole to be filled from reserves – a daunting prospect.

Unless the Sheriff is challenged though, we are on a trajectory where all the other county functions will be starved for funds, or much larger increases in taxes are in our future.

The commissioners are there to serve their constituents, and for the most part they do that well. If enough constituents ask for a challenge to the Sheriff’s budget, most commissioners will at least ask the question. Between now and the September public hearings on the budget (9/8 and 9/22), we would like to hear from interested parties. Send us an email at info@pbctab.org and let us know if you would be willing to help organize support for those commissioners who would be willing to challenge the Sheriff’s budget.

2015 Budget – Flat Millage, what’s not to like? PLENTY!

The Palm Beach County budget proposal, published this week, is quite remarkable. Not since the bubble years, when inflated valuations drove out of control spending, has there been a budget proposal of this size. Rising valuations should allow a modest return to the taxpayer through lowering the millage. This proposal, while holding millage flat, clearly notes that there are areas whose levels of funding they think are “unacceptably low”.

By almost any measure – the tax amount, ad-valorem equivalent spending, population and inflation (TABOR), the county apparently believes we have returned to the good old days.

While valuations have improved by over 6% this year, at $138.6B we are only at 82% of the peak year of 2008. Yet this year’s budget proposes to spend more than the all time record (on an ad-valorem equivalent basis) that occured in 2009, and collect within 2% of the record tax dollars levied in 2007.

When taking population and inflation into account, this year’s tax increase is more than DOUBLE the 3% that would be expected under TABOR.

What is driving this inflated budget? It is not hiring, as the overall staffing levels have declined slightly. It is not really the FRS contribution rate (less than 7% of the increase), or Palm Tran Connection changes (about 10%). A lot of it is pay increases for employees (3% across the board, on top of step and longevity raises in PBSO) which account for about $21M or half of the increase.

The big gorilla in the room of course is the Sheriff’s budget (as it usually is).

Sheriff Bradshaw seeks to spend $531M next year, supported by $467M from ad-valorem taxes. (The county budget proposal contains $5M less than this but the Sheriff has not agreed to the reduction). This is up from $499M (+6.4%) and $434M (+7.6%) last year. Since 82% of the Sheriff’s budget is personal service costs (salary and benefits), and staff growth is minimal (30 out of almost 4000), we can conclude that most of this increase is headed into the pockets of employees, as they will receive the same 3% that all county employees are scheduled to receive, plus contracted step and longevity raises.

Since 2003, PBSO spending has almost doubled (97%) while other county departments have only increased by a third – well within inflation and population measures. As measured by spending per capita, the Sheriff’s budget has increased by 73% from $195 per county resident in 2003, to $336 today. In 2003, the Sheriff spent 36% of county tax dollars and today that figure has grown to 48%.

Every year, adminstrator Weisman warns the commissioners that this growth of the Sheriff’s budget is unsustainable and at some point will crowd out all other county spending, yet as a group they never do anything about it. Some commissioners have pushed back – particularly Paulette Burdick and sometimes Mayor Taylor and Commissioner Abrams, but there have never been 4 votes to roll back his spending to a sustainable level.

There are a number of reasons for this. A cut to the budget for a constitutional officer (such as the Sheriff) can be appealed to the Governor. If an appeal is brought and the county loses, the budget goes into the next fiscal year with a large hole that needs to come from reserves. While the commission can cut the Sheriff’s appropriation, they are not allowed to say what specific items he should cut. He can therefore use his discretionary power to target areas of maximum political leverage. We have seen for example, how the threat to close the West Boynton substation will turn out COBWRA and others in force to pressure the BCC to restore the funds. We have also seen the PBA fill the commission chambers with red-shirted union members in solidarity with the Sheriff.

Unless there is a concerted effort by the public to raise their voices in opposition to the spending of this leviathan that is PBSO, we can expect no action again this year.

What can you do:

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Attend the budget workshop on Tuesday June 10 and / or email, write or call your commissioner. Ask them:

1. Why has county spending returned to levels not seen since the real estate bubble.
2. To reject the Sheriff’s budget as submitted and return a portion of the valuation increase to the taxpayer in the from of a reduction in millage.
3. To consider providing raises to employees based on merit, rather than across-the-board or COLA increases

The bottom line is this – rising property valuations are not correlated with rising incomes among county residents. The growth of government spending should be “reasonable” – perhaps in line with population growth and inflation. There is no justification for a $40M tax increase in a single year.

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