CLEARWATER - During his election campaign earlier this year, Council member Paul Gibson discovered a document that scared the heck out of him, Clearwater's Five-Year Budget Forecast. It didn't take him long to share his concerns with Council colleagues.
The Five-Year Forecast document, prepared in September 2006 by the city's budget department, contains some eyebrow-raising numbers. Based on the forecast assumptions, Clearwater's General Fund operations are predicted to have deficits ranging from $4.45-million in fiscal 2007/08 to $16.66-million in 2011/12.
To overcome those deficits, the city's property tax rate, or millage, would have to grow from today's 5.2088 mils to a rate of 6.8366 in 2011/12, a cumulative increase of 31.25-percent. To an owner of a home valued at $200-thousand, that millage increase would result in a 2011/12 city tax bill $325 higher than today's without even considering a possible 3-percent annual increase in assessed value.
Gibson was not only surprised by the numbers; he was also concerned by how they were produced.
"I've been requesting for a while a five-year forecast that we're comfortable relying upon. In my opinion, long-term planning must go beyond the current budget year, and we should be looking at the impact of our decisions down the road… It might be my priority, but I don't think it's staff's priority," Gibson said during Monday's City Council work session, asking his colleagues for their opinion of the importance of an accurate forecast.
Mayor Frank Hibbard agreed that the forecast was an important planning tool. "I don't have a problem refining the process that we use for a five-year forecast," he said, and asked Gibson what he would like to see changed.
Gibson said that the most important part of the forecasting process is the assumptions that are used. "As an example," he said, "in a down real estate market, we have 2007/08 [real estate tax revenue] as flat, and then immediately thereafter we're back into an appreciating market, which I hope is true."
"But the facts might be taking us in a slightly different direction," Gibson said, referring to the likelihood that changes in real estate appraisal and taxation will be imposed by the Legislature and Governor of the State of Florida. "If we convert those extremely high-valuations, these $4-million Ma-and-Pa hotels on the beach, to what they are currently being used for, we could be talking about reducing our tax receipts a very significant amount."
"I'm very uncomfortable not having any confidence in where we are ending up in five years," Gibson concluded, asking that the forecast be driven by better assumptions.
But Council member John Doran defended the city's Five-Year Forecast, pointing out details that implied to him that the assumptions used were thoughtful, and that the taxable value of existing homesteaded properties would continue to increase.
Budget Director Tina Wilson described several of the assumptions used in the forecast, and explained one big uncertainty; "The only one that's difficult here, that's really difficult, is the property tax revenue number… I don't know the parameters; I don't have a clue as to how to estimate what changes might occur," she said.
The Council's new emphasis on the city's Five-Year Budget Forecast will begin during their April 27th Budget Workshop, when they will be presented with refined numbers. At that meeting the Council will also discuss the final report of the Budget Task Force and learn of the measures that City Manager Bill Horne will propose to implement a "rolled-back" budget for fiscal 2007/08.