Budget Crunch Redux
by Carl Wagenfohr
CLEARWATER - It was just a year ago when the Clearwater City Council began considering the effects of what would become a state mandated rollback of municipal tax rates. They ultimately lopped $4.5-million from the city's 2007/08 general fund budget, much of that coming from quality of life programs including parks and library. About 60 employees were cut from the city's payroll, but public safety operations were largely unaffected.
But last year's budget cutting efforts may seem a cakewalk in comparison to what the City Council must face this year. With the city's budget considered lean following last year's cuts, the passage of Amendment 1 last month will reduce property tax revenue by an additional $3-million. And for the first time in recent history, the city may be facing a reduction in the values of properties on its tax rolls, an event that could impact city revenue even more than the passage of Amendment 1.
Councilmember Paul Gibson exposed the potential effects of the city's declining property values during Tuesday's Council worksession. While their market value may have declined over the last year, the taxable value of most homesteaded properties will continue to increase at the 3-percent Save Our Homes cap rate for the foreseeable future. But homesteaded properties represent only 31-percent of the city's tax rolls, Gibson said. The other 69-percent of the city's tax base are non-homesteaded properties whose market values have also been in a decline.
The reduction in non-homesteaded property values could have a devastating effect on tax revenues. Using an assumption of a 15-percent decline, the city would suffer a weighted-average reduction in overall taxable value of 9.42-percent according to Gibson. Based on the city's current taxable value of $10.4-billion, that reduction erases nearly $1-billion from the tax rolls. Budget Director Tina Wilson explained that would mean a $4.5-million reduction in city tax revenue on top of the $3-million from Amendment 1.
"To get to $8-million, we are seriously looking at some service level impacts," Wilson said. Alternatively, the city could implement what Wilson called a "roll-up" millage rate. The maximum allowable rate of 5.3615 mills, a 14-percent increase over today's 4.66 mills, would still result in a $2.7-million shortfall according to Wilson.
Gibson said that he initiated the discussion to expose the order of magnitude of this years budget issues. "We're making spending decisions right now and will continue to make them every time we meet. If we make them without thinking about this, we're not doing justice to the process," Gibson said.
Indeed, budget concerns pervaded much of the discussion during Tuesday's worksession. Councilmember George Cretekos questioned spending $50-thousand for city participation in the Tampa Bay Partnership and suggested spending $10-thousand for a lesser membership. The Council also nixed a proposed purchase of flood-prone property because they thought that the $420-thousand price was too high.
But the discussion about constructing a new recreation center in Morningside was the most telling. The proposed 25,000 square foot facility would cost about $5-million according to Parks and Recreation Director Kevin Dunbar, about $2.9-million more than the city had budgeted. In addition, the larger facility would require 3.5 more headcount at an annual cost of about $120-thousand.
"I hardly know where to begin," said Gibson in response to the Morningside rec center proposal; "My recommendation would be that we table this until we get our arms around what the numbers really are. If we spend a dollar in the non-essential services basket, there's a dollar that won't be available in the essential services basket - It's really as simple as that."
Mayor Frank Hibbard said, "I'd love to be able to do this, but it's a matter of dollars and cents." Referring a decision the Council nearly made last year to close the Ross Norton rec center, he said, "If we have to revisit that decision and yet we're going create plans to build a new rec center that's not even in existence, that's absurd. That really is absurd."
The proposed new Morningside rec center project will be discussed during tonight's City Council meeting.
As for the city's ongoing budget issues, Hibbard concluded Tuesday's worksession with, "We're going to be talking about this at every meeting."
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