LARGO – When discussing the city’s rainy-day fund, Largo commissioners say they are concerned because, while it’s not pouring yet, the clouds on the horizon sure do look dark.
Those ominous clouds represent several financial challenges that will lead to $3.8 million in budget reductions in fiscal year 2019 and 2020 if the city maintains its current course.
That’s why a consensus of commissioners agreed Aug. 11 during a budget work session that a property tax increase was likely necessary to avoid future reductions of services.
Meridy Semones, Office of Management and Budget manager, said the millage rate she was preparing on the ordinance is 5.5705 mills, or $5.57 for every $1,000 of assessed taxable value. The increase would cost the average homeowner, who has a home valued at $139,227 about an extra $18 a year, but it will net the city an extra $843,000 compared with keeping the present rate.
Commissioner Jamie Robinson said it’s worth it if it means the city doesn’t have to eliminate services.
“If you were to shut down Southwest Recreation Center or the pool, you are only saving $300,000,” he said, emphasizing that there were no plans in place to do so. “So, you are still nowhere near the $4 million you need to get to. How do you get to that point of shutting stuff down? Where does that come from? Because that would significantly change the level of service that we provide here in the city of Largo – significantly.”
On July 25, commissioners agreed to advertise a rate of 5.7413 mills on the Pinellas County Property Appraiser’s Truth in Millage notices, which will be sent out Aug. 21 to residents.
At the work session, however, commissioners found a middle ground, as long as it was above the current rate of 5.3705 mills, which would keep the city just above a 10 percent fund balance,
the minimum established in the city’s policy.
Semones said 10 percent of the general fund is about three months’ worth of operating dollars, so if there was a catastrophe or revenue stopped coming in, the city would be able to pay salaries and continues services for about 90 days.
Commissioner John Carroll said the goal has been 20 percent so 10 percent is nowhere near good enough.
“I think it’s wise for us to prepare for the future,” Carroll said. “I think it’s wise for us to build our fund balance. Some would argue that a 10 percent fund balance is acceptable. I completely disagree with that. I’ve spoken to other elected officials in northeast Florida up around St. Augustine that suffered from the effects of hurricanes and waited for FEMA reimbursement and were quite thankful they had a healthy fund balance when they needed it.”
Robinson agreed and added that the city wouldn’t want to take the chance and rely on FEMA funding.
“The fund balance I think is probably the most important thing,” he said. “If there were some sort of natural disaster to happen in this area, with a 10 percent of 9 percent fund balance we can’t operate. We can’t do it.”
Semones said the extra $843,000 created by the property tax hike would add about 1.4 percent to the fund balance, but she won’t know for sure until the final changes are entered into the budget.
‘Taking a little bit of medicine’
In the fiscal year 2018 budget, City Manager Henry Schubert detailed several concerns that would precipitate the $3.8 million in reductions, including:
• Low revenue growth and outdated streams of revenue
• A constitutional amendment on the November 2018 ballot that would increase the homestead exemption by $25,000. If approved, Semones said it will cost the city $650,000 in revenue beginning in FY 2020.
• A decision by the Police Officers and Firefighters Pension Board to decrease the rate of return assumption for the pension plan, which means the city will have to pay an additional $888,000 in FY 2018.
Considering the challenges, Commissioner Curtis Holmes was among those who said it was wise to incrementally raise property taxes starting now rather than do it dramatically later on.
“It’s almost like you’re better off taking a little bit of the medicine as you go along,” he said. “As far as 5.7 (mills), I don’t know about that. But it’s a matter of trying to stay ahead of the curve as best you can, so you don’t get this big hit down the road.”
Holmes expressed concern, however, that a property tax hike might make residents less inclined to approve an extension of the Penny for Pinellas sales tax, which is on the ballot in November.
“We may be harming our own cause,” he said.
With limited options, Holmes said another likely discussion that is inevitable will be the return of a fire fee, which the commission rejected in 2015.
“This is a great inequity that somewhere down the road is going to have to be addressed,” he said. “Someone’s going to have to bite the bullet on it and say this is what we are going to have to be looking at.”
The first public hearing for the millage rate will be Sept. 5 and the second is slated for Sept. 19.
Chris George is editor of the Largo Leader. He can be reached at 727-397-5563, ext. 316, or by email at cgeorge@TBNweekly.com.