Adopting an Interim Millage Rate

State law requires every city to follow a complicated and time-sensitive process for the adoption of the millage rate (also known as the property tax rate) and budget. This year the process has become more complicated with the adoption of Amendment One last January, representing the second wave of property tax reform. In addition, the consideration of the Fire Assessment Fee by the City Commission adds more potential for misunderstanding, as City staff is recommending that the interim millage rate be adopted at 7.7459 rather than 5.7157. In this column let’s explore the requirements for the adoption of the property tax rate and budget, and why timing – as they say – is everything!

The Process

State law requires that cities have a fiscal year that begins on October 1 and ends on September 30; therefore, the adoption of the millage rate and budget for each new fiscal year takes place in September, at two separate public hearings.

State law also requires that property owners receive a mailed notice of the first of these two meetings, along with what is called the “interim” millage rate. In order to provide adequate time for the mailing of the notices, this year the interim millage rate must be adopted no later than August 4. To add a further complication to the process, state law also requires that the interim millage rate may be reduced later, at the adoption hearings… but it cannot be increased. Therefore, there may be a tendency among cities to adopt a higher interim millage rate and have the opportunity to reduce it at the adoption hearings. The untenable alternative is to set the interim rate too low and not have an opportunity to raise it upon adoption.

Millage Rates

In addition to the “interim” millage rate, there are several other rates that are calculated:

• The “rollback” rate is the rate that will provide the same amount of revenue that was produced last year;


• The “maximum” rate is the highest rate that can be adopted by a simple majority of the City Commission. The rate may be higher with a two-thirds vote.

In the past, the rollback rate was usually lower than the rate the City Commission adopted for the previous year, because when new growth is factored in, it will take a lower rate multiplied times the higher tax base to produce the same amount of revenue. However, for the first time in anyone’s memory, this year the rollback rate is higher than our present millage rate – because the value of our tax base declined (by over $18 million or 2.25%) rather than increased. The actual rates are as follows:

• Current rate 7.3521


• Rollback rate 7.7459


• Maximum rate 7.3277

City Staff Recommendation for the Interim Millage Rate

City staff is recommending that the City Commission adopt the rollback rate as the interim millage rate. The rollback rate is revenue neutral for the City, providing the same amount of revenue that was provided in the current year. If the Commission wishes, this rate can be reduced at final adoption.

Effect of the Fire Assessment Fee

City staff is also recommending adoption of the fire assessment fee and an equivalent reduction in the millage rate. The schedule for the timing of these actions is as follows:

• Second reading of the ordinance to establish the fire assessment fee ordinance August 4


• Final approval of the fire assessment fee rates September 2


• First public hearing of the millage rate (with the equivalent reduction in the millage rate allowing for the fire assessment fee revenue) and the budget September 3


• Second public hearing of the millage rate (with the equivalent reduction in the millage rate allowing for the fire assessment fee) and the budget September 16

Conclusion

The interim millage rate cannot be set assuming that the fire assessment fee and the proposed rates will be approved; therefore, the rollback rate is proposed for the tentative millage rate. If the Fire Assessment Fee and the proposed rates are approved, then City staff recommends a millage rate of 5.7157 be adopted – which is the maximum millage rate with the equivalent reduction provided by the approval of the Fire Assessment Fee and the proposed rate schedule. This would provide the revenue allocated in the proposed budget and reach the goal of significantly reducing the millage rate.

Adopting a Fire Assessment Fee

The City Commission will finally get to consider the fire assessment fee this month! First reading is scheduled for the July 15th meeting, and if approved, it will be heard on second reading at a special meeting on July 29, at 6 p.m. in the City Commission chambers at the Municipal Administration Building.

The fire assessment fee has been discussed at four open forums. It wasn’t until the final forum that City staff could present preliminary numbers on the effect of the fire assessment fee on the City budget in terms of a tax reduction – the tax base figures from the county property appraiser’s office were not received until Monday, July 7. This figure is the basis for determining how much property tax revenue will be received by the City. The formula is: Tax base x millage rate = property tax revenue. The millage rate this year is 7.3521.

The preliminary figures indicate the following:

1. If institutions such as non-profit agencies and churches are charged the fire fee, the millage rate can be reduced to 5.7157


2. If institutions such as non-profit agencies and churches are not charged the fire fee, the millage rate can be reduced to 5.7451

The latest draft of the report on fire assessment fee indicated the fees to be as follows:

• Residential & Duplexes - $68.68 per unit


• Multi-Units & Mobile Homes - $52.72 per unit


• Commercial - $88.13 per 1,000 square feet


• Industrial/Warehouse - $108.08 per 1,000 square feet


• Institutional - $13.68 per acre


• Vacant/Agricultural - $87.56 per acre

It is important to note that if the City Commission adopts the fee, the fee amount will not be set until the Commission meeting on August 26th before the Commission adopts the millage rate, budget, and all other fees for the next fiscal year.

The Effect of the Fee

A good argument can be made that user fees are more equitable than property taxes. A user fee is based on the cost to produce the service; the property tax is based on the value of one’s home and has no relation to the cost of providing services to that home or that type of house.

At the last forum, which was held on July 8th, I pointed out that while a user fee is more equitable as noted above, the imposition of the fee, coupled with a reduction in the millage rate, will affect homeowners in different ways depending on the assessed value of the house. For example, there is an exemption on the first $25,000 on assessed value of a home (assuming it is listed as the owner’s homestead). This means that anyone who owns, lives in, and has a homestead exemption on a home that is assessed at $25,000 or less has never paid any property taxes. (It has been estimated that there are about 130 such properties in the City). However, if the fire fee is implemented, this home owner will now pay a fee for fire protection – a service that is provided to the homeowner’s property but one that this exempted homeowner has never before paid for. City staff is recommending that the City implement a lifeline program for such properties, similar in concept to the lifeline rate adopted by the City Commission in the water billing rate structure last year.

Some property owners with large tax bills will see a reduction in their overall payments. Why? Because the millage reduction is going to be greater on a highly assessed property than the amount of the fire fee. Taking the amount of cash raised by the fee and lowering the millage rate by that amount is revenue neutral for the City – but as noted above, it affects individuals differently, depending on the value of the property.

Why do this?

The fire fee will raise about $1.1 million, which the City staff is proposing to reduce from the cash raised by property taxes by lowering the millage rate. Again, why are we doing this? For three very good reasons:

1. For economic development – our town is in competition with every other town in this area to attract new industry and commercial businesses. One of the cost factors that stands out is a city’s tax rate, and this year ours is the second highest in the county. We have a great opportunity here to significantly reduce our tax rate. The fact that we are raising the same revenue with a fee is not felt as much, since every city has different fees – some have stormwater fees, some have downtown development fees – we have neither of those fees.


2. More equitable - every property owner will pay what it costs our town’s fire department to serve their category of property.


3. A sure revenue stream for one of our most critical services – as the state legislature set up two waves of tax reforms that are being felt by every city and county statewide, some legislators have said there is still more cutting to be done. The fire fee provides a sure revenue stream for one of our most basic, critical services. Unfortunately, this is the only public safety service for which such a fee is permitted.

Discussing a Fire Assessment Fee

One of the topics that has brought out a great deal of citizen interest is the discussion of the feasibility of having a fire assessment fee for city property owners. There has been good attendance at the first three forums on the subject, and the City Commission is scheduled to hear the proposal on first reading at the July 15 regular meeting (6 p.m. in the City Commission chamber at City Hall). Baring technical difficulties, this meeting will be broadcast live on Comcast channel 5.

The City staff is bringing this proposal forward for the City Commission to consider. In this article, let’s take a look at what the fee is and why staff believes that this fee is a good idea to pursue.

What is the Fire Assessment Fee?

Cities and counties are permitted to assess a fee for the cost of providing fire response services. When approved, this fee appears on the property tax bill and is paid along with the annual property taxes. The residents of unincorporated Polk County pay a fee for fire service, as do property owners in the City of Avon Park. The City of Sebring is considering the fee and recently voted to proceed with it.

The fee charged to each property must reflect the actual cost of that fire department to properly respond to that type of property to combat a fire. Without the fire assessment fee, the cost of fire service is paid with general fund revenues, including property taxes. The goal of assessing the fire fee is to remove the amount of money raised by the fee from the amount needed to be raised by property taxes -–thus allowing the City Commission to lower the tax rate.

Determining the actual cost to provide fire service to each type of property is a task with very exacting requirements. A company has been hired to make these calculations, which includes a review of our fire department’s response to fire calls at all the different types of property, with the number of firefighters needed and the equipment used. Costs are then calculated, and the cost per property type is determined.

There is a great deal of work required, with its attendant cost, to set up a fire assessment fee system – so why would this be of interest to the City?

Facilitating Economic Development

One reason for considering this fee is that it helps facilitate economic development. One of the most important goals for the City is to set conditions that encourage business expansion and attract new businesses to locate here. Our county includes two other towns (Auburndale and Haines City) that are about our size, and by comparison we have the lowest tax base and the highest tax rate. The City Commission has directed that major efforts be made to encourage economic development, and this goal is included in the City’s Strategic Plan. (The strategic plan can be viewed on the City’s website: http://www.cityoflakewales.com/)

When considering whether or not to move to a community, one of the criteria that is reviewed by company representatives is the city’s tax rate. Our present rate of 7.3521 mills is not the highest in the county, but it is not far from being so. Only Mulberry is higher, at 7.8358 mills. The implementation of a fire fee would permit the City to decrease the present millage rate to a rate that is below a number of other cities in the county.

The addition of the fire fee is one of many potential fees that new business reps would expect to find in a prospective new location – but the tax rate always stands out as a key indicator.

Fairness

The argument has been made that the charging of a fee that is based on the service provided is more equitable than a tax based on the value of property. Many citizens have expressed their distain of the property tax system. Some cities seek to charge user fees as much as possible to keep their property tax rates low. User fees are directed at the persons or entities benefiting from a particular service, and thus make a direct connection to a service made available.

In this era of state legislature mandates for property tax reform, Lake Wales and many other cities are exploring the use of fees (rather than taxes) to pay for city services. This is especially important for the critical services provided by our fire department.

Next week let’s continue on this topic and take a look at the fees recommended by the independent company hired to conduct the fee study.

Volunteers --A Valuable City Resource

Cities, counties, and school boards all over the state are finding that the preparation of the fiscal year 2008-2009 budget is very challenging. The effects of the poor economy are being felt in reduced revenues from a variety of sources, and the second wave of tax reform set up by the State Legislature and voted in last January in the statewide referendum will now be felt with the adoption of the City budget that starts October 1.

Our City Commission held an early budget workshop last Thursday to brainstorm ways to cope with reduced revenues while providing needed services. City staff stated that one area being explored is to seek new partnerships, such as the contract recently approved by the City Commission with the Chamber of Commerce for the Main Street program. This partnership has the potential to save dollars down the road as the Chamber provides management services to this important program, which markets downtown businesses and promotes revitalization activities.

Another important resource to look to for the future is the use of volunteers to carry out work that would otherwise be done by paid staff or consultants. Our town has greatly benefited from the work of several concerned volunteers with special expertise, as well as through the efforts of community service workers. Let’s explore this resource and the opportunity for volunteer efforts.

Volunteer Efforts

Volunteers such as Mimi Hardman, Nancy Furland, and Bob Dioguardi have each given a great deal of their time in a particular area of interest to benefit our town.

In the area of historic preservation, Mimi Hardman has led the effort that created the depot museum and the preservation of a number of buildings. The latest such building is the former CSX building on Scenic Highway near Kissimmee Ave. Mimi is also a member of the State Historic Preservation committee, appointed by the Governor.

Nancy Furland has led the effort to maintain the lakes in the city, most notably Lake Wailes, Crystal Lake, North Lake Wales, Lake Alta, and Twin Lakes. She served as chairman of the committee she helped to form, the City’s Lakes Advisory Committee, and continues now to work on lakes projects and coordinate the efforts of city staff and various regulatory agencies.

Bob Dioguardi is the city’s volunteer bicycle coordinator, and as such he promotes bicycle safety and bike events. Bob also writes a column in this newspaper to alert everyone to safety matters and bicycling programs.

Volunteer Opportunities

There are a number of opportunities for volunteers to help our town save money and continue valuable services:

• Voice – This unit (Volunteer Observers Impacting Community Effort) in our Police Department and helps extend police services in many ways, such as performing traffic duties during parades and other events;


• Office assistance – volunteers have been very helpful in the City Clerk’s office, performing routine office duties and disposing of documents in compliance with the city’s records retention schedule; and


• Offering special expertise – volunteers with special expertise are particularly helpful. In addition to the individuals listed above, Chris Smuck has assisted in the inspection of work done by the city’s asphalt contractor, as he is a retired road company executive.

Anyone who wishes to volunteer their time and expertise is cordially invited to call the Human Resources Department and describe what work they are available for, and when. Your City needs you!