Formulating Next Year's Budget

The daily operation of the City is directed by the City budget. This lengthy document is adopted every year by the City Commission in September, and the formulation of next year’s budget deserves your attention.

For most local governments across the state, the preparation of the Fiscal Year 2009-2010 budget will be very difficult. We have come through two waves of property tax reform measures mandated by the state legislature, and the economic downturn is being reflected in expected reductions in many revenue sources. This is particularly true in our town, where like many cities in the county our tax base has declined and in the current budget year our water revenues are off by over $200,000.

On the expenditure side, we will be challenged to maintain the current level of service and to take on some new responsibilities – such as the maintenance of the new landscaping on the US 27 median at Central Ave. The warranty period for that landscaping expires on December 9. In addition, the medians from Mountain Lake Cut-off to Waverly/Cypress Gardens are scheduled to become the City’s responsibility in the future if the City goes forward with the landscaping planned for those medians.

The preparation of the City budget involves a number of special City Commission meetings, with the current year budget used as the starting point. The current budget is available on-line for review on the City’s website at www.citylflakewales.com.

A General Schedule for Budget Preparation

In a typical year with stability in City revenues and expenditures, there are relatively few citizens who attend Commission meetings to discuss the budget. At a time when a local government is facing budget challenges, it is more important than ever to seek citizen input. The general schedule for the formulation for the City budget for the October 1, 2009-September 30, 2010 fiscal year is as follows:

• Initial budget workshop held by the City Commission: Thursday, June 25, 6 pm, City Hall. At this meeting Commissioners will discuss the priorities for the preparation of next year’s budget. As noted above, the guideline for this discussion will be the current year budget.


• Presentation of the independent audit of the October 1, 2007-September, 2008 fiscal year by Purvis Gray, the City’s audit firm: Tuesday, July 21, 2009 during the regular City Commission meeting that begins at 6 pm. City staff usually schedules a Finance Committee meeting before the Commission meeting in which the audit is presented, at 5 pm, to provide the Committee with an opportunity to ask the auditor detailed questions on audit findings. Citizens are welcome to attend both meetings. The information contained in the audit indicates the City’s financial position at the start of the current fiscal year.


• Presentation of a Financial Forecast: July 21 regular Commission meeting at 6 pm, City Hall. This is the first year that a formal financial forecast has been prepared, and it is an important outlook on the revenues that can be expected for the next few years. This document is key for the City to ensure the sustainability of its services.


• Early August: The Commission will set special budget meetings during August to review the draft budget prepared by City staff. Each year the department heads submit a proposed budget for their departments to the Assistant City Manager, who then consults with the City Manager and prepares the first draft of the City budget. Information provided by the property appraiser’s office on the tentative tax base is essential to the budget, and this figure is due to be provided to the City by July 1. Citizens are welcome to attend these special meetings.


• September: During September the City Commission adopts the budget for the new fiscal year beginning October 1. The adoption must take place with two “readings” of the City’s millage rate (City property tax rate) and budget at two separate meetings. These meetings are advertised in a newspaper and are the subject of notifications mailed to property owners by the county property appraiser, which note the date, time, and place of the meetings, and the tentative millage rate that has already been adopted.

Everyone is cordially invited to these meetings, and input is welcome.

Looking at the Next 120 Days

The next 120 days will be particularly important for our town. Let’s take a look at what is possible, and what is definite:

• It is possible that we will see hurricane activity. Over the years, most of us have been through many predicted hurricanes that were nothing more than a thunderstorm. This experience fueled the popular notion that hurricane force winds always die down by the time they reach us in the center of the state. That thought was “blown away” by the three hurricanes of 2004.

  Everyone who was on the City staff five years ago remembers the seemingly endless hours, being away from our families when there were pressing needs at home, sleeping on the floor in the fire station, and directing sewer lift stations without power to be pumped out well after midnight.

  Forecasters are saying that we may have an active hurricane season, but I pray that they are wrong. Many people suffered terribly when their homes were damaged, and a number of families – including everyone living in the Sunrise Apartment complex – had to re-locate. Hopefully we will not revisit that experience.

• Another possible event is the renovation of the Grand Hotel. City staff continues to make steady progress in the complex contract negotiations with the developer and we are looking forward to a successful conclusion!

• Topping the list of the “definite” events that lie ahead is the preparation and adoption of the City budget for the next fiscal year, which starts October 1. This year will be especially tough, as there have already been two years of tax reforms imposed by the state legislature and Governor. Many areas of the city’s budget have already been trimmed, and this year the city is also suffering the effects of the recession and a shrinking tax base.

  With the tough choices that have to be made, citizen input is needed and welcomed. The schedule for budget meetings will be published once it is finalized, and everyone is invited to attend the budget review meetings.

• The Clerk of the Courts office provides a variety of services, including taking payments for traffic tickets and child support. At the end of this month, our branch of the Clerk of Courts office in the shopping center behind IHOP will close. Clerk Richard Weiss says that budget cuts from the state are to blame, and invites us to visit his branch office in Winter Haven (on Lake Alfred Road) or the main office in Bartow. Mr. Weiss has offered to meet with City representatives to discuss this situation.

• The new branch of the Polk County Health Department is scheduled to be open in July! The new building is located on West Central Ave and is a vast improvement over the crowded and outdated facility on Central Ave at Sharp Street. We are all looking forward to this new facility and we want to thank Dr. Haight, his staff, and everyone involved for this wonderful addition to our community!

• At the June 25 workshop meeting the City Commission will review the results of the municipal swimming pool survey with the group who did the survey, Unity in Community. Several years ago the City Commission set aside $1 million of the proceeds from the sale of the former Cooperative Fruit Property to build the pool, and interest income is building up. However, the annual cost of operating the pool is estimated at over $100,000, with entrance fees not expected to cover even 20% of this cost. Innovative ideas are requested!

• The Florida Department of Transportation is revising their drawings for the medians on East State Road 60. The plans should be completed for distribution well before the July 21 Commission meeting, when FDOT staff is scheduled to present the revised plan.

Mark Your Calendar. . .

Within the next 30 days there will be two important City events! The budget process will draw to a close in anticipation of the start of the new fiscal year on October 1; and the new soccer/multi-purpose park will open on September 13.

City Budget Meeting

The draft of the City’s fiscal year ’08-09 budget was discussed at a budget workshop on Wednesday, August 20, at City Hall, and will be discussed again at a budget workshop to be held in the next week (probably either Wednesday or Thursday at 6 pm in the Commission Chambers).

The preparation of this year’s budget was particularly difficult, given the effects of two waves of tax reform and the poor condition of the economy. Despite a shrinking general fund revenue picture, there are some bright spots:

• The draft CRA budget contains funding for a community policing effort in the Lincoln Avenue area. The effort is another facet of the revitalization of neighborhood commercial in the area. In the past 12 months there has been one new business, Massey’s Meat Store that has opened on Lincoln between C and D streets. The barber shop building a block away has been sold, and the new owners are remodeling the interior and plan to open soon. Improvements are also planned for the 2 story building at the SW corner of C and Lincoln which is owned by the CRA. When completely renovated, the building will provide 5 apartments, a police sub-station, and professional offices on the second floor;


• Capital improvements in the draft budget include the following:


• A modest allocation for Police Department replacement vehicles;


• The Twin Lakes water level pump station project, to keep the water level low so that rainfall does not raise the lake level above the stormdrain system on Grove Ave;


• Several water utility improvement projects, including Phase 2 of the downtown water main replacement, and the Southside water tower near the corner of Hunt Brothers Road and Scenic Highway; and


• The replacement of the blue light poles on Lincoln Avenue and the installation of the standard black pole, “acorn” lens lights similar to those downtown.

Grand Opening of the New Soccer/Multi-Purpose Park

The grand opening of the new soccer/multi-purpose park on Hunt Brothers Road, between US 27 and SR 17, is scheduled for September 13 at 10:00 am. Following the ribbon cutting, the Ridge Soccer League has scheduled a game for an under-17-year-old team. The park has been in development for several years, beginning with a donation of 18 acres by Feltrim Developments, a $400,000 grant from the Polk County Board of County Commissioners, a $200,000 grant from the Florida Recreation Development Assistance Program, and a significant donation from the Breakfast Rotary Club.

The park features four soccer/multi-purpose fields, a concessions/storage building with a covered picnic area, and a parking lot. One field is lighted at this time.

City Charter

Just a quick note on the City Charter, as there seems to be some confusion expressed in a recent letter to the editor. The city charter is included with the city’s code of ordinances and appears as Part 1 of the code. The charter and the entire code is available for review at City Hall, at the public library, and on the City website at http://www.cityoflakewales.com/. The website can be viewed at one of the public access computers in the public library.

Changing the City charter requires a public referendum. City staff is not working on any proposed changes at this time.

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.

Two Important Meetings

Everyone is cordially invited to two significant City meetings coming up this month:

• The City Commission’s first budget workshop for the preparation of the Fiscal Year 2008-2009 City budget; and


• The City’s third Recreation Summit, hosted by the City Recreation Advisory Board.

Budget Workshop

All cities in Florida operate on a fiscal year that begins on October 1 and ends September 30. The City staff prepares the draft City budget every year and usually submits it to the City Commission in early August. The City Commission then conducts one or more special meetings to consider the draft budget and then adopts the final millage rate and budget at the regular City Commission meetings in September.

This year will be different in many ways. The City Commission has set the first budget workshop as follows:

• DATE: Thursday, June 26, 2008


• TIME: 6:00 P.M.


• PLACE: The Lake Wales Arts Center, NW corner of SR 60 and 11th St.

The City Commission wanted to get a head start in the budget process, as the preparation of next year’s budget promises to be very difficult. At a time when the City needs to build cash reserves in the General Fund, fuel and materials prices are sending operational costs into the stratosphere. In addition, the legislature has passed two tax reform measures in two years. The second wave was voted in last November, which will shrink our town’s tax base.

Preliminary figures from the county Property Appraiser’s Office indicate that if our tax rate remains the same, the City will have about $140,000 less in tax revenue than last year to provide services. Coming on the heels of a very minimal increase in last year’s tax revenue due to the first wave of tax reform, preparing this budget will be a real challenge.

Some of the areas already cut back include:

• The current year budget did not provide the normal replacement of some police vehicles;


• One police patrol officer position was eliminated;


• For the first time in many years the City switched from a partially self-insured health insurance plan to a plan offered by a health insurance provider, which reduced benefits;


• A reduction in funds for the Depot Museum.

The City staff will make recommendations on where additional reductions will need to be made.

Recreation Summit

The City’s Recreation Advisory Board will hold its third “Recreation Summit” as follows:

• DATE: Tuesday, June 24, 2008


• TIME: 6:00 P.M.


• PLACE: The Boys and Girls Club, located at the corner of Seminole Ave and Fourth St in the old elementary school. Seminole Ave crosses Scenic Highway less than one mile from downtown. Turn east off of Scenic Highway and go two blocks and the Boys and Girls Club is on the left.

The purpose of the Recreation Summit is to review the recreational opportunities available in our town and determine if there is an interest in offering new programs. At the last Recreation Summit one of the topics discussed was a need to provide an adult softball league. Mr. Ken Duel stepped forward and the adult league plays at Frazier Field in the Northwest Sports Complex off of Florida Ave.

It is hoped that this year there will be interest in expanding the programs available, perhaps in the areas of tennis and volleyball. The City has tennis courts available and the Kirkland Gym is equipped for volleyball courts.

This is also a great opportunity to visit one of the City’s newest recreational locations! The Boys and Girls Club has a no cost lease for this City owned building in the Hardman Recreation Complex. The building was re-habilitated to historic preservation standards with grant funding from the state, which was matched by the Boys and Girls Club.

Again, everyone is cordially invited to attend these significant meetings! If you have any questions please call Jacquie Hawkins at 678-4182 extension 225.

Opportunities & Challenges

Our town is presented with a number of exciting opportunities as well as some difficult challenges. Let’s explore some of the more prominent opportunities and a difficult challenge that are before us.

Some Exciting Opportunities

• Downtown Investment - It has been estimated that there is more money being invested in downtown in 2007-08 than in any time in the last 20 years. Planning and renovations are in process or just completed at the North Arcade, Bank of America building, old City Hall, the Bullard Building, and Ed Pilkington’s building on Park Ave. next to the Arcade. Substantial investment has also been made at Tres Jolie and the Arcade Coffee Shop. Brenda’s Gifts adds another fine retailer, and another restaurant is opening in place of the Stuart Ave. Café. These improvements will help crystallize our position as a premier destination in Central Florida.



• Downtown Study - The study of downtown by Martin Vargas, funded by Richard Quaid, is nearing completion. It will be the starting point for healthy discussions on the direction for downtown capital improvements.



• Grand Hotel - The City’s acquisition of this landmark building is a step forward. On March 30 the CRA board and the Chamber’s CRA Steering Committee will meet at 6 p.m. in the Commission Chambers to discuss the downtown study and the next round of requesting proposals.



• CSX - The CSX development proposed in Winter Haven is expected to bring companies that will use the facility to SR 60 in our town’s utility service area (and future city area) east of the railroad track at Petersen Industries. The City Commission recently gave an endorsement of this project with conditions relating to the abatement of pollution and traffic.

A Difficult Challenge

Budget Woes
The downturn in the economy is affecting cities as well as households. At this point City staff projects that at year end, budgeted revenues will be short nearly $400,000; however, because of spending cutbacks to this point, the current difference between revenue and expense is projected to be $91,550 in the General Fund. The City’s Finance Committee and City Commission will hold special meetings to determine how this shortage will be corrected. The dates and times of these meetings are now being arranged and will be announced in the near future.

The need for spending cuts comes at a time when the City needs to improve the amount of reserves in the General Fund. The General Fund contains the funding for critical emergency services (police and fire) as well as culture/recreation, and many of the departments in City Hall. A major funding source in the General Fund, property tax revenue, has the bulk of its receipts after January 1. The General Fund reserves are used not only in case of unanticipated, emergency expenditures, but to “carry” the General Fund in the early part of the fiscal year (October, November, and December) until the bulk of the tax revenue is received.

Our town has been through difficult times in the past, and the City Commission will make the necessary corrections. In this process, your input is welcome.

Cost-saving Measures & Service Delivery

At the last City Commission meeting the continuation of the contract with Florida Refuse, our garbage collector, was discussed. A citizen asked if the City would look into operating that service in-house, and someone else mentioned that all that is needed is one truck.

Following the City Commission meeting, the citizen that made this suggestion – Mike Carter, a member of the City’s Airport Authority – offered to help with the analysis and suggested that a group of interested citizens might be useful in looking into this and other cost saving measures. I told Mike that I welcome this effort, and I would ask for his help and the assistance of other interested citizens.

I take this opportunity to call the first meeting of interested persons to review the in-house garbage collection option and other cost-saving measures. The meeting will be held at the next City Manager Open Forum meeting, on Thursday, April 17, at 5 pm at the Austin Community Center on Dr. Martin Luther King Jr. Blvd.

Finding cost savings is a priority for city staff, and there have been some significant cost saving measures in the last few years. One such measure can be seen in maximizing the use of community service workers. These workers are available at no cost on weekends, and for the cost of transportation and supervision, we have made many accomplishments. For example, they have helped maintain the beautiful new look of the medians on Central Ave. and the shoreline on Lake Wailes.

The analysis of municipal projects begins with the understanding of two basic principles:

1. The municipal budget is a grouping of individual funds with restricted uses. A municipal refuse operation should be expected to fund itself and cannot pull money from, say, the CRA (Community Redevelopment Agency). The restrictive nature of municipal funds is sometimes overlooked – for example, three letters in Saturday’s edition of this paper applauded a recent editorial questioning the use of $133,000 to match a trail grant. Unfortunately, the editorial did not mention that the $133,000 was from recreation impact fees and not from money that can be used for operating expenses. These funds are paid by new homeowners and can only be used to expand recreation facilities.



2. There must be an element of redundancy programmed into many municipal projects. The collection of garbage, recycling, and yard waste is a good example of this type of project, as they must be collected every business day - without fail! Extra capability must be provided to account for unanticipated equipment failures or emergencies. Therefore, it would take more than one truck, even if we had only one route! But our town has grown, and the landfill is no longer on Lewis Griffin Road - it is much further away. Florida Refuse uses four trucks to collect the residential and commercial can garbage (not including dumpsters) four days per week. There are also dumpster routes, recycling routes, and yard waste collection to consider. But there are also some cities in the county that perform this service in-house, so there is some available data.

Every local government, and more recently, each school board, is dealing with the State Legislature’s tax reform measures. It will take a good deal of innovation and creativity to maintain the previous levels of service as we move forward. I welcome all interested persons – including letter writers and editorial writers – to bring your ideas and participate in designing the services to be provided in this new era.

Tax Reform and the City's Budget

Our state legislature set up the second wave of tax reform as a proposal to be decided by the voters. The vote will take place at a special, statewide election on January 29. A 60% approval is needed for passage.

This proposal covers a range of complex items. If approved, it will have a destructive effect on the City of Lake Wales budget, and it will be the first time that school tax revenues will be affected. Let’s review the effect of the first wave of tax reform, and then look at the “second wave” tax reform proposal to be voted on, and the projected effect of the second wave on our town.

The Effect of the First Wave of Tax Reform

The first wave of tax reform contained a provision that allowed local governments to override it. Over one-third of the local governments in the state did so. Our City Commission voted to comply with the state legislature’s intent, and this year’s tax rate is 1.1 mills less than last year. The effect of this reduction, had the City Commission kept the same tax rate as last year, is as follows:

• The General Fund was reduced by $645,108;


• The Community Re-Development Agency (CRA) fund was reduced by $201,098;


• The Library Fund was reduced by $75,070


• Total reduction in tax revenue: $921,276

In order to meet the challenge of balancing the budget with such reductions, the City Commission took a number of cost-cutting measures, including:

• Trimming the City workforce by 13 full-time and one part-time positions. All of the full-time positions were, in effect, vacant – some employees were shifted to other positions, and police dispatching and payroll preparation were contracted out at a lower cost;


• The City changed from a self-insured health insurance plan to a less-expensive traditional plan, selected after bids were received;


• Finding other ways to accomplish tasks, such as closing the cemetery office and moving those two positions to the Parks Maintenance division, which allowed the termination of the contract for grass cutting at Lake Wailes and other parks.

The Second Wave Tax Reform Proposal

The proposal includes the following:

• It doubles the homestead exemption, from $25,000 to $50,000. This would not apply to school taxes;


• It ensures the “portability” of the “save our homes” provisions, up to $500,000. This allows homestead property owners to transfer their Save Our Homes benefit to a new homestead within two years of giving up their previous homestead. This provision will apply to school tax levies;


• It ensures a tangible personal property exemption of $25,000. This exemption will apply to school levies;


(Note: if approved, these three items would take effect January 1, 2008; the item below would take effect January 1, 2009)


• It provides a 10% cap on assessments for non-homesteaded property. This cap does not apply to school levies and will sunset in 10 years unless re-approved by voters.

The Projected Effect of the Second Wave on Our Town

The second wave of tax reform, if approved by the voters on January 29, will have the following projected effects:

• It will cut the General Fund tax revenue another $276,486;


• It will cut the CRA tax revenue another $293,838;


• It will cut the Library Fund tax revenue another $31,148.

The City Commission had already reduced the City’s tax rate by one mill over the two years before the first wave of tax reform. The first wave then cut the rate an additional 1.1 mills. Managing the second wave of tax reform, should it be approved by the voters, will be much more difficult.

Dealing with the Challenges of Tax Reform

When I was in college a professor told us that the founding fathers intended for the government of these United States to be like a layer cake with three distinct layers: federal, state, and local. However, over 230 years later, our layer cake looks more like a marble cake. The federal government is setting priorities for states and local governments; the state is reviewing and approving city annexations and zoning designations; and the cities and states are lobbying Congress for favorable legislative action.

The “marble cake” analogy comes to mind when I think of Tax Reform, a popular topic in Tallahassee these days. Our town’s budget has been through one wave of tax reform, and on January 29 voters across the state will decide if there will be a second wave. What were the consequences of the first wave? And what will likely be the consequences of the second wave?

THE FIRST WAVE

In the last three years the Lake Wales City Commission has lowered the city tax rate over two mills, from 9.44 mills to 7.3521 mills. The reduction of the first mill was called for by the City Commission; the reduction of the second mill came after careful deliberation as the Commission’s response to tax reform. (Please note that some cities did not follow the path intended by the legislature and kept their previous millage with a super-majority vote of their city council.)

If our City Commission had not reduced the tax rate the second mill it would have received $921,276 more than what is now being received at the adopted millage. This was a very difficult decision for the City Commission to make in light of these prevailing conditions:

1. Just like in everyone’s household, the price of necessary items keeps going up. In the last three years, City expenditures for the listed items have gone up as follows:


• Gasoline - 40%


• Insurance - 40.2%


• Electricity - 35.2%


• Operating Supplies - 41%

Also note that in the first two years, insurance costs – health, worker’s compensation, and property – went up 74%! In response, the City Commission approved a change in the health insurance carrier and the terms of coverage. With these changes and fewer employees to be covered, insurance costs leveled off to 40% in the third year.

These and many other necessary items have risen drastically in the last three years, leaving the City (just as in your own household) with a limited ability to control these cost items. Despite the increases noted above, the overall General Fund expenditure budget for the current year is below the level it was two years ago.


2. The City has been working to build up its cash reserves since the 2001 fiscal year, when cash reserves were used to cover a serious budget shortfall. The City had made good progress towards establishing a healthy cash reserve until the unanticipated insurance costs rose drastically in the last two years. The City is committed to re-building this reserve.
   
   These reductions have been welcomed by taxpayers, especially small business owners and the owners of rental property who are not covered by the “Save our Homes” Act, (which came into effect in 1995) that capped the county property appraiser’s office assessed value of homesteaded property at 3% per year. At the same time, the difficulty of achieving a balanced budget in the face of these thorny conditions faced by the City Commission last September can now be appreciated.

THE SECOND WAVE

On January 29, voters will have the opportunity to vote on the second wave of tax reform. Next week’s column will explore the expected results and ramifications of that important election.

Effects of Tax Reform on the City Budget

In June, the state legislature held a special session and approved a two-part tax reform package. A number of newspaper stories have appeared reporting on the effect of tax reform on various cities. In Lake Wales, the effect from Part One of the tax reform is severe. If Part Two is approved, it will amount to a fiscal train wreck.

TAX REFORM PART ONE

Part one of the tax reform package requires cities and counties to cut their tax rates. (The legislature also provided a method for cities and counties to exempt themselves from the requirement, but most local governments felt that the exemption was not feasible.) The formula for the tax rate cut results in a property tax reduction of 12.89% for Lake Wales --from 8,44 mills in the current yeaar to 7.3521 mills in the new fiscal year starting October 1. (A mill is $1 of tax per $1,000 of taxable value.)

Because Lake Wales is growing, even with the rate reduction next year, the tax revenue proceeds will increase by $16,251 in the General Fund over the proceeds from the current year. But to put this in perspective, had there not been tax reform, at the current 8.44 millage rate, the General Fund would have realized $921,276 next year in additional revenue over the current year.

The problem with this relatively small increase in tax revenue next year is that other revenues are also down, and expenses continue to climb. For example, revenues other than property taxes in the City's General Fund, which include state revenue sharing and other intergovernmental revenues, are down to the same level as six years ago; and the County contract for City fire services to the unincorporated area around the City has been cut 40% below what it was two years ago.

At the same time, the City has had alarming increases in some expenses. Insurance categories in the General Fund other than health insurance have increased 31.2% in the past six years! This expenditure now tops $1 million annually. Health insurance costs have risen drastically --over 20% from the current year adopted budget. Recently the City went to bid to provide other options. Other expenses gave grown to ensure that City services are adequate to cover the growing areas of the City. Furthermore, the City is still re-building reserves from the reduction in General Fund balance in the 2000-2001 fiscal year.

Tax Reform Part One had had a severe effect on the City's proposed budget, eliminating 12 positions (one person serving in a part-time position is the only actual lay-off), and not funding $487,450 in capital outlay requests including the purchase of replacement police vehicles and a fire department truck.

TAX REFORM PART TWO

This part of the program will be voted on in a statewide referendum on January 29. If approved, the General Fund would lose an estimated $683,000. When coupled with the cuts already made in Part One, there would be noticeable reductions in service.

Part One of the Legislature's tax reform package did not include schools. Taxes supporting schools will be included in Part Two.

Judy Delmar contributed to this article.

Adopting a Budget for Fiscal Year 2007-2008

Like every city and county in our state, the City of Lake Wales is deep into the process of preparing the budget for the October 1 start of the new fiscal year. Each year in August the City Commission holds one or more budget workshops, and this year a budget workshop is scheduled for Thursday, August 23, 2007, at 5:30 pm in the City Commission chambers at City Hall. The final budget is scheduled for adoption at the regular Commission meetings in September, on the 4th and 18th, at 6:30 pm at City Hall. Everyone is cordially invited to attend these and all City Commission meetings.

The preparation of the draft budget this year has been unusually challenging. The state legislature’s new Property Tax Reform law will have a drastic effect on the City’s General Fund budget. (The General Fund provides for most City services other than utilities, street repairs, and special programs like the Community Redevelopment Agency or CRA.) At the City’s current tax rate of 8.44 mills, the General Fund would have received $921,276 more than it will at the new property tax rate mandated by the state legislature. As a result, many difficult decisions will have to be made on how to best accommodate the loss of funds. The proposed budget message can be viewed on the City’s website at cityoflakewales.com, and the full budget document can be reviewed at the Library or at the City Clerk’s office at City Hall. Anytime anyone has a question about the budget or city finances, City staff is always willing and able to provide the answer. Questions can be called in (678-4182 extension 225), e-mailed in through the city website, or discussed at the City Manager’s Open Forum held on the third Thursday of each month at 5 pm at the James P. Austin Jr. Community Center, 315 Dr. Martin Luther King Jr. Blvd.

A few highlights of the Fiscal Year 2007-2008 draft budget include:

• Property tax rate: It is anticipated that due to the tax reform, property taxes will be reduced slightly more than one mill. This year’s rate of 8.44 mills would go to 7.3521 mills next year. (A mill is equal to $1 in taxes for every $1,000 of assessed value after exemptions.) For example, a house assessed by the County Property Appraiser with a taxable value of $125,000, minus the $25,000 homestead exemption, was charged $844 this past year in City property taxes, and would be charged $735 in the upcoming budget year, a savings to the resident of $109;



• Utility rates: Last year at this time City staff proposed raising utility rates to cover the cost of repairing our aging water and sewer facilities. The City Commission asked that staff develop a rate to assist low income persons. The City’s engineering firm has just completed a study that recommends new rates: for the lowest water users, the rates are lower than the present rates. For higher water users, the rates are higher – significantly higher for persons using more than 15,000 gallons per month. The entire utility rate study is available on the city’s website, with review copies available at the Library and at the City Clerk’s office;



• The CRA bond issue is included in the draft budget, which will provide funds for utility and street improvements;



• The City Commission has emphasized code enforcement, and the draft budget continues with two code enforcement officers;



• Proposed budget cuts include the elimination of one police patrol position; the re-assignment of the museum curator and elimination of that position, and the addition of a half-time position for a net loss at the museum of a half position; and the elimination of the following items: college tuition for city employees, July 4th fireworks, Christmas decorations, most city grant programs, travel expenses, and newspaper subscriptions; and significant reductions in mowing contracts, recreation services, and capital expenditures;



• The City budget must be viewed in the context of the City’s overall financial situation. The City ended Fiscal Year 2000-2001 with an alarmingly low cash reserve in the General Fund and has by necessity been making efforts to re-build “fund balance” every year since then. It is presently projected that just over $200,000 would be available to contribute to General Fund balance at the end of next year. At this rate, it will take us another five years or more to reach our General Fund cash reserve goal.

In most years, the budget discussions receive relatively little citizen input. This year, because of the changes proposed, City officials are encouraging more input and discussion. Your thoughts, comments, and input are most welcome.