Proposed five percent Key West tax increase knocked down to three percent

Proposed five percent Key West tax increase knocked down to three percent

BY PRU SOWERS

KONK LIFE STAFF WRITER

The annual battle for your wallet is under full steam.

Key West officials recently held a series of workshops to hammer out the budget for fiscal year 2017-2018. City Manager Jim Scholl and Key West Budget Director Mark Finigan recommended a five percent increase. But several city commissioners pushed back, asking for a three percent hike. Scholl and Finigan will report back on their efforts at a special commission budget meeting in August.

But even the three percent increase might be reduced further. Several commissioners said during the budget discussions that they want city taxes to remain the same as last year, either by cutting expenses or by using other revenue sources to cover the increase in the cost of running Key West.
“I’m just not sure any tax increase is justified this year,” said Commissioner Sam Kaufman. “Maybe next year we can come back and consider a tax increase. But so far, I’m not convinced any tax increase is justified.”

The original proposed five percent tax hike would translate into a $53 dollar per year increase for a home valued at $460,000, Finigan said. The proposed increase would put the millage rate at $2.4573 per every $1,000 of assessed value, raising an additional $750,000 in revenue.

“Five percent might sound like a big number but it’s pretty small,” said Scholl, referring to the actual dollar increase on property. “We’re losing the margin. Every year we squeeze it tighter and tighter.”

The last local property tax increase in Key West was in the 2014-15 fiscal year, when rates went up five percent. Over the past 10 years, city property taxes have increased in four of those years.

However, local property taxes account for only approximately 25 percent of a property owner’s total tax bill, which includes taxes levied by Monroe County, the county school district, mosquito control and water district charges. Monroe County Commissioners just voted to increase their portion of the tax bill by four percent. And the Key West stormwater fees are proposed to increase by three percent in the upcoming fiscal year. Sewer and solid waste charges will remain the same.

“There’s about 10 mills on average every year [$10 per every $1,000 of assessed value],” Finigan said, referring to the total tax bill for Key West property owners. “The city’s portion would be 2.4 mills, or 25 percent of that tax bill, what we control.”

Scholl said that employee pay raises and increases in pension payouts account for about $1 million in higher costs in 2017-18. Salaries and benefits are responsible for approximately 75 percent of general fund costs so the only way to reduce the city budget would be to eliminate staff positions, “reduce bodies,” he said.

But like last year’s budget discussions, some commissioners want to use part of the revenue set aside for potential emergencies to reduce expenses, thereby keeping local tax bills the same as last fiscal year. Currently, the city sets aside 92 days of operating revenue, at about $133,000 per day, in the emergency fund. In last year’s budget, commissioners voted to reduce the 92 days to 89 days to avoid a tax increase.

“We didn’t use any of those [reserve] days last year. And now we’re looking at [a] five percent [tax increase]. I think we should be looking at rolling some of those days back,” said Commissioner Richard Payne.”

“At 92 days we’re fully funded,” said Commissioner Sam Kaufman. “But the city policy is between 72 and 92 days. It doesn’t have to be 92 days.”

Finigan acknowledged that the three reserve days funding approved last year ended up not being needed in the current fiscal year because of budget adjustments. In addition, an additional $1 million in unanticipated revenue came in because of favorable budget variations, he said. However, under city tax policy, that $1 million cannot be rolled over into the general fund. It can only be used for one-time purchases.

Commissioner Clayton Lopez said that using reserve monies set aside in the 92-day emergency fund should be the last option. Making further cuts to the budget should be the priority, he said. Commissioner Margaret Romero agreed, saying there were city departments where positions could be consolidated, reducing employee costs. Another way to cut staff expenses would be to reduce overtime pay by better scheduling staff. She wouldn’t specify which departments she believed could cut their budgets.

“I see a definite area where positions can be consolidated and it’s not necessarily getting rid of a person. Perhaps assigning them other duties where they can be more effectively used,” Romero said, adding, “I’m calling on senior management and department management to take a look at where things can be consolidated and where scheduling can really make an impact.”

But Scholl argued that the only way to reduce the budget on an ongoing basis – thereby avoiding a tax increase this year – was to fire staff.

“This year our pay and benefit obligation goes up a million dollars. Well, next year it’s going to go up a million dollars. And the following year it’s going to go up a million dollars,” he said. By putting off a tax increase in the upcoming fiscal year, “all that does is make it a bigger stair step when you have to do it.”

The final budget hearings will take place in September.

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