- August 21, 2013
In a week or so, all of our local governments will be releasing their proposed budgets for the 2013-2014 fiscal year, which will begin in October.
You can expect most local jurisdictions to have good news — that the value of taxable property is beginning to rise again, for the first time since 2008.
This is good news for consumers and local governments. The good for residential consumers is the value of what is likely their most important asset — their homes — is increasing. Their net worths are rising again.
The good for local governments is those rising asset values will generate greater tax revenues — more money to spend than in 2012. Indeed, just look at what the (allegedly) conservative Legislature did in its most recent session:
Because of a recovering economy and stronger tax collections than a year ago, the Legislature adopted a budget that rose to $74 billion from $69.9 billion, a 5.8% increase — far above the rate of inflation. This increase proved the adage once again that government will spend as much as you give it … and then some. (It will be telling to see what “turkeys” Gov. Scott vetoes from the budget; stay tuned.)
For Longboat Key taxpayers, rising real estate values in most instances would portend an uneventful budget process. Town commissioners likely will debate whether to keep the town’s tax rate at 1.8872 mills or lower it slightly to keep town spending at $15.4 million.
(Our prediction: It’ll be a brief debate. They will quickly opt to keep the millage rate at 1.8872 to be able to give town employees a raise and fund a few other projects that may have been postponed during the lean years.)
The big debate will be this: How to pay off the town’s $27 million in unfunded town-employee pension liabilities. The questions will be these:
How much will commissioners tax residents and for how many years to pay down the liabilities?
Ever since his appointment, Town Manager David Bullock has devoted much of his efforts to resolve the town’s most pressing fiscal problem. He made great progress negotiating the town’s firefighter union to close out and freeze their pension plan and move to the Florida Retirement System. Police and general employees are on the verge of agreeing to shift to other plans and freeze their pensions as well.
That was step one — when in a hole, quit digging. At least town taxpayers’ pension obligations won’t continue increasing.
Step two is wiping out the obligation.
The options can be multitudinous. But this much you can expect: The town will take advantage of the low interest-rate climate and ask for voter approval to issue bonds to pay down the liabilities. This, of course, would mean Longboat taxpayers will be paying more in property taxes in future years than they are now to service the new debt.
Some of the debate over this strategy will center on whether to borrow the maximum amount and wipe out the debt or rely on the pension funds’ investments to grow in value and cover some of the obligation.
Taking on more debt should not be too concerning to taxpayers. If the Town Commission opts to finance the entire liability over, say, 10 to 20 years, it would be similar to taking on the debt of the town’s past beach-renourishment projects, which taxpayers handled readily.
At present, the town’s debt is quite manageable. According to the tyown’s 2011 Comprehensive Annual Report, the most recent one available, the town reported a long-term debt-to-net assets ratio of 15%, not counting the outstanding pension liabilities. That’s $15.2 million in long-term debt to $100.4 million in net assets. With the pension liabilities, the long-term debt-to-net assets ratio rises to 42% ($42.2 million to $100.4 million).
Contrast that with the city of Sarasota. Its long-term debt to net assets is 26%, 50% when you include pension liabilities. To be sure, Longboat Key’s financial condition and borrowing capacity is far stronger than the city of Sarasota’s.
But here’s the kicker that will also become part of this important discussion: How much money will the town need for its next beach renourishment project? If that comes in at, say, $30 million, the town’s borrowing capacity and risk will rise dramatically.
As always, there are twists that make the town’s budget process a challenge for commissioners. This year’s sessions will be no different. Unfortunately for them and taxpayers, it appears they will find themselves in the unenviable and unavoidable, position of having to raise taxes.
+ Goals for the commission
When the Longboat Key Town Commission convenes May 20 at Town Hall for its annual talk-fest on “goals and objectives,” here are two suggestions:
1) Let’s have the Town Commission sanction a contest. Call it “The Longboat Key 2050 Contest.”
And here’s the idea: Put up an attractive cash prize — say, $20,000, $25,000 — or maybe a two-week, all-expenses-paid vacation at the Longboat Key Club and Resort for college architectural students from all over the nation. Ask the contestants to submit detailed ideas, including renderings and narratives, of what they would do with the following Longboat Key properties:
• Bayfront Park and Recreation Center and the two town- and county-owned parcels next to it
• The Longboat Key Center for the Arts
• The Wolfer-Rooks properties adjacent to the Publix Super Market and Longboat Key Public Tennis Center
• The Longboat Key Library and adjacent tennis courts
• Whitney Beach Plaza
• The Saba-Conrad, gas station and empty bank building property that sits between Cedar Street and Broadway
Truth be told, each of these parcels is underutilized, mal-developed or could be converted to far more attractive or useful developments.
Nothing may come of the contest. But at least it might spark some ideas and help create a vision for what the future of Longboat Key could and should be.
2) This next suggestion may be the equivalent of smacking a wasp’s nest with a broom, but the discussion should begin:
What’s the future for the private, not-for-profit Longboat Library? Answer: tenuous.
Then what? Reinvention? Dissolution?
Though we have long applauded that Longboat Key has had a privately operated library and not another taxpayer-supported bureaucracy, given the direction of book publishing to e-readers, it’s difficult to envision a prosperous future for the library. Library membership continues to shrink, and as time goes by the market for buying used books is likely to dwindle as well. That has been one of the library’s sources of revenue.
Is it time the town takes possession of the building and its costs? The town then could lean on Manatee and Sarasota counties to return some of the property taxes Longboaters contribute annually and apply them to providing up-to-date library services our library can’t afford. It’s worth discussing.