New city manager shifts first week focus to tax reform impacts

During the three months between being selected as Sarasota city manager and her first day on the job, Karie Friling’s focus was to study up on the city’s long-term projects and initiatives that will influence how the city evolves for generations to come. 

She wanted to “hit the ground running” with full knowledge of the current state of The Bay park, the city’s affordable housing plans for its First Street property, the downtown master plan update, a reimagined Main Street and the Sarasota Performing Arts Center, among others.

Then came June 2 when, just four days into her tenure, the Florida Legislature upended those plans with its approval of placing a referendum on statewide property tax reform on the November ballot. She was aware of the effort to significantly increase the homestead exemption was a possibility, but it still came as something of a shock.

“When I got here, it seemed like the state was most focused on getting the budget approved. I think what happened caught us all a little bit by surprise because it moved so quickly,” Friling said as she met with media members to recap her first seven days on the job. “They called the special session, and then it was literally done within 48 hours. I came in here with the goal of getting to know everyone, and getting my feet firmly planted and to begin working on some of these very large, generational impact projects.”

Now all of that may be put on hold as her priority shifted to how to address at least a $5.5 million annual reduction in personal property tax revenue by fiscal year 2029, money the city uses for operational expenses via the general fund.

The property tax change is not a certainty as a state constitutional amendment requires 60% voter approval. Prudence dictates, however, that fiscal planning for the possibility begin now.

“I have immediately pivoted, and my top priority right now is how we're going to deal with this because we have a significant impact to our budget if this is approved in November,” Friling said. “Right now we're really going through what does this mean, reading the language, talking to our attorneys, talking to our lobbyists who were in the room at the time, and trying to get to what our playbook is going to be as we move forward.”

The general fund budget for the current fiscal year is $108.3 million. Of that, the property tax revenue is $57.3 million, or just less than 53%. At a potential $3.18 million revenue reduction resulting from the first-year $150,000 exemption, that’s 3% of the general fund and 5.5% of property tax revenue. At $5.5 million minimum reduction at $250,000 exemption in year 2, it’s just more than 5% of the fund balance and 9.6% of revenue.

Meet and greet becomes a strategy session

During her first week, Friling was invited to a breakfast to meet and mingle with the other city managers in the county, Sarasota County Administrator Jonathan Lewis and others. It happened to be the morning after the referendum joint resolution was passed.

“It wasn't about Karie anymore. It was about what are we all going to do and how does this impact us,” Friling said.

That impact extends beyond the city’s anticipated $5.5 million gap. City residents are also residents of, and taxpayers to, Sarasota County government.

“We are not the only ones that have a gap. The county will have a tens of millions of dollars' gap that they have to figure out,” Friling said. “That happens to trickle down to the communities within the county as well in reduction in services and fees going up. All those things impact our residents. It will take us a while to figure that out, but right now the number is $5.5 million. That number will grow.” 

Included among the 53 meetings Friling said she had in her first week was huddling with senior staff and individually with city commissioners. The finance team and department heads have been instructed to begin identifying what must be funded versus what would be nice to afford. Those details will be shared with the commissioners for eventual official action during upcoming budget sessions.

“As the policymakers, they make those decisions,” she said. 

Local governments are required to approve their next fiscal year budgets by the end of September, about five weeks before the Nov. 3 general election. Although the fiscal impacts wouldn’t begin until FY 2028, “We have to prepare now, and the best way to do that is to look at our current budget under development and then plan out for those next two cycles after that,” Friling said.

That preparatory belt-tightening may halt, until the referendum outcome is known, many favored projects.

“My recommendations are for some of these larger initiatives, we need to pause and see how this plays out,” Friling said. “If it doesn't get passed, then we can regroup after that, but that's the most responsible thing that we can do right now. I’m sure every community in the state is doing that very same thing.”