No property tax increase for Key West, thanks to Irma

BY PRU SOWERS

KONK LIFE STAFF WRITER

What a difference a hurricane can make.

Thanks to the damage and repair costs many Key West property owners are facing post-Irma, city officials, who had been looking at a tax increase in the upcoming fiscal year of between three and five percent, were able to reduce that to “rollback,” meaning no tax rate increase for the upcoming year.

The Key West City Commission voted unanimously Sept. 15 to approve a millage rate of 2.3466, meaning property owners will pay $2.3466 on every $1,000 of assessed value. For a home valued at $460,000, the tax bill will be $1,079,44. The 2017-18 city budget will now total $180,781,774.

Commissioners had asked city officials at their last budget hearing in July to work towards the rollback rate. However, City Manager Jim Scholl was proposing a five percent tax increase. He agreed to try to work that back down to three percent.

Then Hurricane Irma hit. And while Key West escaped the catastrophic damage felt in the middle Keys, repairs to landscaping, fences and other exterior structures may add significantly to property owners’ costs. That persuaded city officials to look for new ways to reduce the municipal budget and accompanying tax rate.

Budget Director Mark Finigan came up with three new sources of revenue to make up most of the estimated $547,000 budget gap needed to achieve rollback. He proposed increasing fees to property owners seeking Historic Architectural Review Commission (HARC) approval for building construction or renovation, a move that would raise approximately $50,000 in the next fiscal year. Fines for parking tickets will also rise $10 (excepting handicapped parking violations), generating $160,000 in new revenue. But the largest piece of the shortfall will come from the Key West Bight Management District Board, which will contribute a one-time $337,000 payment from its surplus fund.

“Most of this [new revenue] was accomplished through the recognition of surplus, unreserved dollars from the Key West Bight, bringing it over. We had long discussions on the value of doing that,” Finigan told commissioners.

Commissioner Richard Payne said property owners are already suffering from Irma clean-up costs. And he expects that some homeowners will see the value of their properties reduced due to Irma.

“I just don’t think we should be hitting them with any [tax] increase over last year due to the damages many of them are suffering and will suffer for a long time,” he said.

“Fences, all the stuff that was damaged, you don’t collect on your insurance. So that’s out of pocket expense,” added Mayor Craig Cates. “So, I agree with leaving [the tax rate] where it’s at.”

The Bight Board payment will bring that body’s reserve fund “a bit below” the $6.5 million it likes to keep for emergencies, according to Doug Bradshaw, port and marina services director. But the shortfall should be able to be made up in the next fiscal year from fees the city charges commercial and recreational boat owners to use city-owned marinas and piers.

“I don’t think it [$337,000 payment to the city] is going to affect us. So, I think we should be good,” Bradshaw said.

But while the city is trying to help storm-damaged property owners by not raising their taxes, it is likely to face its own financial storm reckoning down the road, according to Finigan. Key West has its own storm damage and debris removal to pay for. While it expects to be reimbursed by the Federal Emergency Management Agency (FEMA) for the bulk of those costs, the city could still take a significant financial hit. Lost parking lot revenue for September and possibly lasting into October is one deficit city officials expect to see. But there are likely to be others.

“Your real exposure will come six months down the road when you start to feel the effects of the economic impact,” Finigan said. “It’s the things you don’t control like your revenue sources, your sales tax, your business tax receipts. If this really slows down the economy, then it’s going to slow us down a little bit. We’ll start to feel the effects when we start to put the budget together for next year.”

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