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

September 6, 2011

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

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

Recommendations from 2006 study that were not implemented:

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

New Recommendations regarding property and buildings

Property

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

Buildings

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

Conclusion

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.