Like many cities and counties around the country, the City of DeLand is bracing for a hit to its finances due to decreased revenue caused by the fallout of the coronavirus crisis.
In addition to property-tax monies, cities like DeLand rely on revenue from things like Volusia County’s local-option gas tax, a half-cent sales tax, and fees for services like planning and building permits.
All those categories of money are down, Dan Stauffer, the city’s finance director, explained at a workshop to discuss the problem Monday. In all, the city expects to be short about $855,000 for the rest of the budget year, which began Oct. 1, 2019, and ends Sept. 30.
The crisis could mean a tax increase for property owners in the city for the next fiscal year, as well.
“The current year’s budget, as you know, we will fall short of our revenue estimates for this year,” City Manager Michael Pleus told the DeLand City Commission. “Dan and his staff have been working tirelessly to not only try to figure out what a good revenue estimate would be through the end of this year, but also working with the departments to make the necessary cuts to balance out.”
Stauffer explained that the city’s department heads have found $855,000 in savings to balance out the loss in revenue, in large part from cutting travel and training expenses, lower fuel costs, and not hiring people for five vacant positions.
The city is also spending $240,133 less on debt service than it expected, since it ended up getting a lower interest rate on a loan last year than was anticipated.
The loss in revenue for the rest of this year, however, could be even worse if COVID-19 numbers continue to rise in Florida and people don’t get back to business as usual in due course.
“These numbers are based on the get-back-to-work plan developed by the state,” Pleus said. “Based on the current COVID numbers going back up, if there’s any sort of possibility that there’s any sort of retraction, we’re going to have to revisit some of these numbers.”
The city’s projections are based on part of its March revenue being affected, all of its April revenues being affected, and part of its May revenue being affected, followed by a gradual recovery in June, July and August, and a return to normal by September.
Part of the issue with making projections, Pleus said, is that the city only gets revenues shared by the state two months in arrears — for example, city officials knew only in May what their March revenue numbers were.
One bright spot in the grim numbers is that, so far, Pleus said, property-tax revenue from new construction and annexations have continued to grow at a healthy pace.
According to pre-preliminary numbers for fiscal year 2020-21 from the Volusia County Property Appraiser’s Office, the value of taxable property in the city grew by 9.29 percent, to $2.108 billion.
Nearly $82 million of that is from new construction and annexations, down somewhat from $98.83 million in the current year.
Like most cities, DeLand begins planning its next year’s budget in the summer with a series of workshops.
While cautioning that the numbers are still very tentative, the city expects to see a drop of 13.18 percent in fuel taxes, a 24.43-percent drop in revenue from the state, and a 10-percent drop in local business taxes.
In all, the city projects a shortfall of $499,141 in its general fund for the fiscal year beginning Oct. 1.
Pleus and Stauffer explained that this early projection counts on the city not hiring any new personnel, not giving existing personnel merit pay increases, and keeping the city’s ad valorem property-tax rate at the same rate of $6.78 per $1,000 of taxable value, or 6.7841 mills.
That would mean a tax increase for property owners of about 4.65 percent, since property values have increased. To get back to the rolled-back rate — where the city would collect the same amount of revenue as the previous year with the new property values — would put the city an additional $588,727 in the hole.
“My recommendation at this point would be to advertise at the current millage,” Pleus said. “... I’m as comfortable as we can be with these numbers as an educated guess, but it’s still a guess.”
Part of the reason city staff want to leave the tax rate at its current level is because once the city advertises its proposed property-tax rate in August, it can adjust the millage rate down, but not up.
Pleus said that the Property Appraiser’s Office will release another series of estimates, known as the preliminary values, July 1, which may show some improvement for the city.
“I think that’s a great point — we can always go down, but we can’t go back up,” said Commissioner Kevin Reid. “With the uncertainty out there, we don’t know. I think pushing that down the road a little bit is probably a good idea, to get a little better numbers.”
“I would prefer not to be at that rate … but I think we have to plan for the uncertainty as well,” he added, saying he was hopeful the city could come down on the rate at later hearings.
The rest of the commissioners echoed Reid’s sentiments, and his hope that subsequent numbers will show a rosier picture for the city’s finances.
No binding action was taken at the workshop.