For government and taxpayers, it’s budget season

By Al Everson
BEACON STAFF WRITER

posted Jul 21, 2010 - 1:43:46pm

‘Tis the season for elected officials to have visions of sugar plums dancing in their heads as they make their wish lists for Santa Claus.

By the end of this month, leaders of local governments and special taxing authorities, such as the Volusia County School Board and the hospital taxing districts, must set their tentative property-tax rates for the 2010-11 fiscal year.

Members of these localities and taxing authorities, along with their administrative staffs, use the preliminary tax roll released July 1 to formulate the tentative ad valorem tax rate.

The adoption of the rate and meetings to slash spending or to trim it are open to the public, if they care to attend and watch their government in action.

The tax rate is expressed in mills, and a mill is equal to $1 of tax for each $1,000 of taxable property value. Once the tentative rate is adopted, it will be advertised for possible adoption at public hearings in September.

The tentative tax rates of each of the local governments and special districts will also be printed on the preliminary tax notices, or TRIM notices, that will be mailed to property owners in mid-August.

Summer or bummer?

The tentative tax rate represents a sort of worst-case scenario. It is the highest expected rate. The taxing authority may later lower the property-tax rate, but may not increase it during the final rounds of decision-making on the budget and how to fund it.

Those final rounds of budget action include more meetings on the fiscal plans for the new fiscal year, and there will be public hearings.

Quite often, a government board sets a tentative tax rate and promises to work to reduce it later. In many instances, the tentative figure becomes the final tax rate, as elected officials and staffers defend the need for the spending they recommend.

Sometimes public meetings on the budget and tax rates take the form of workshops. A workshop is an informal session, in which no actual decision may be made. The taxing body, however, may reach a consensus on spending policies or outlays, and direct its staff to adjust the budget up or down.

Hear ye! Hear ye!

At the public hearings, taxpayers may address their elected officials, asking for more money to be allocated for some things, or pleading for less money to be spent on other things, as well as commenting on the proposed tax rates.

Members of the public may also tell their elected representatives how they rate their work performance.

The TRIM notices will have information about the times, dates and locations of the public hearings.

After the last private citizen speaking out on the proposed budget and tax rates has been heard, the presiding officer closes the hearing and the taxing body may vote on the actual or final tax rate.

All of the fiscal decisions are supposed to be completed no later than Sept. 30. The new fiscal year for local governments — counties and cities — in Florida begins Oct. 1, and a new budget is supposed to be place.

As a matter of interest, education is a state function in Florida, and the state’s fiscal year actually begins July 1. The School Board, however, follows local governments by setting the tentative millage for education during July. The School Board, too, sets its final public hearing and a binding vote in September.

Recession effects

The tax scenario this year is a strange one, compounded by the ongoing economic recession and falling property values. Those declining property values stand in sharp contrast to the long trend of ever-rising values that has been part of the post-World War II boom and Florida’s growth.

In second half of 2008, the boom quickly turned into a bust, as oil prices spiked to record levels, people were thrown out of work, and home foreclosures accelerated.

During the years before, consistently rising property values had given rise to a term for gauging whether the tax burden was rising. That term is rollback.

The rollback is the tax rate that would generate property-tax revenues equal to those of the preceding fiscal year, without including new construction and, in the case of cities, annexations.

New construction and annexations are included in the tax roll of the following year, as they become “old” and part of the overall tax base.

Return to normalcy?

The rollback rate was lower as values went up. In other words, there is an inverse relationship between values and tax rates.

Imagine for a moment a city with a tax base of $1 million, and imagine the tax rate is 1 mill, or $1 per thousand. That tax base will yield ad valorem revenues of $10,000.

If the tax base doubles to $2 million, and if the levy remains level, the city will take in $20,000, or double the revenue it had in prior years.

The mayor and the city council might even tell constituents their taxes did not go up, because the rate of 1 mill did not change. However, the homes of the citizens appreciated in value, and their tax bills increased.

This imaginary city’s rollback tax rate would have been .5 of a mill, or 50 cents per $1,000 of taxable value, to generate the same $10,000 in revenue that was taken in the year before. Anything higher than that number is an increase in taxes.

As a sidelight, the steady escalation of property values throughout the years produced “stealth” tax increases. By leaving rates unchanged while values rose, leaders of counties, cities and other taxing authorities took in larger sums of cash. Those revenues often grew at rates that outpaced increases in the incomes of those paying the taxes.

Let’s roll

In these times, rollback was often a sort of ideal or benchmark figure, a point of reference for taxing authorities and property owners. By state law, any ad valorem tax rate that is higher than the rollback must be advertised as a tax increase.

Now, fast-forward to today: This year, as well as last year and even 2007, the rollback rates have been higher than current tax rates, to compensate for plunging values.

For Volusia County, for example, the tax rate for the general fund was 5.37 mills last year, but the rollback this year is 6.19 mills. Rollback has to be higher to keep the county’s income level with that of the preceding fiscal year.

What to watch

This year, TRIM notices will be mailed to property owners just a few days before the Aug. 24 primary, and the decisions on tentative tax rates and proposed spending may affect voters’ attitudes.

Too, knowing that voters will be going to the polls with fresh memories of seeing their tax notices, may affect what incumbents do in deciding how much of their constituents’ wealth to take.

— al@beacononlinenews.com

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