Unexpected road-repair costs derailed a $2 million tax rebate last week when the Indian River Shores Town Council voted 3-1 to cancel a planned, one-time cut in the property tax rate.
Faced with a $4.4 million windfall from the auction of a city-owned piece of land to Naples-based Lutgert Companies for the development of a luxury residential community, the Town Council voted this summer to consider drastically reducing the property tax rate – temporarily.
The one-time tax reduction would have, in effect, rebated nearly half of the windfall back to residents in a manner proportional to the taxes they pay on their homes, businesses and land. The idea was that the tax rate would return to normal next year.
In the meantime, though, the town got hit with a one-two punch of bad fiscal news. First, it turns out a major reconstruction of Old Winter Beach Road is not going to benefit from grant funding Town Manager Robbie Stabe thought was probable. Second, a periodic engineering assessment of other town-owned roads revealed the need for additional expensive repairs that will total $500,000 or more.
The combined price tag for all the road work is projected at $1.5 million to $2 million.
“What seemed to be a prudent decision [earlier in the year] now seems to be an irresponsible decision,” said Vice Mayor Mike Ochsner, who presided over last Thursday’s council meeting in Mayor Brian Barefoot’s absence.
Ochsner, a retired chief financial officer who for years chaired the town’s Finance Committee, said he felt it was best to avoid “gyrations” in the millage rate, which is down slightly this coming year due to gains in property values. The rate billed this fall will be $1.37 per $1,000 of taxable property value.
“Taxpayers have a fuzzy memory. They’re going to forget the refund more than they’re going to forget the big tax hike the year after,” Ochsner said.
Councilman Dick Havilland was the lone dissenting vote, contending that the town’s $2.1 million emergency reserves plus its $1 million line of credit, if needed, would be sufficient to take care of the road concerns and the $2 million from the proceeds of the land sale should be returned to the taxpayers.
Councilwoman Deb Pension said, “I don’t want it to appear as if we’re jerking people around. What I would like to support … is getting the millage rate down and keeping it that way for the foreseeable future.”
Councilman Bob Auwaerter said in his opinion, the council will just have to “exhibit discipline,” as it’s accustomed to doing, to spend its windfall money wisely. “I like a tax decrease as much as the next person; however, we’ve been hit with some new information.”
Auwaerter said the town could always return some or all of the money later on when it gets a better handle on the cost of the road projects. “If we make this decision to rescind … [the rebate], that money is not going away; it’s not going into a lock box,” he said.
There were already some concerns about the process of hiking the tax rate back up after the temporary drop, but Finance Director Heather Christmas and Town Attorney Chester Clem had researched the matter and said it would not be a problem – though it might require a unanimous vote of the council to do so.
Since there is no scheduled election in the Shores, council members said they were comfortable that the same five members who voted in the rebate would have the political mettle to vote for a much higher tax rate next year.
That concern is now moot.