VERO BEACH — The Vero Beach City Council Thursday voted to take money out of reserves and the utility enterprise funds to balance the books instead of raising property taxes.
The council approved a property tax rate of 2.0336, or $2.033 per $1,000 of taxable property tax value. This rate is 4 percent higher than the current tax rate, but offset by reductions in property values citywide, will generate the same amount of tax dollars as last year. New construction assessed this year for the first time was not figured into the calculation of this rate, which is called the “rollback rate.”
Funding for the $21 million general fund budget is raised through about $4.1 million in property taxes, state cost sharing money, licenses, user fees and $11.6 million in direct transfers and administrative fees to the water and sewer utilities. The airport, marina and solid waste enterprise funds contribute another $485,000.
The tax rate and the budget were approved by a 4-1 vote with Councilman Brian Heady dissenting. Heady, throughout the budget process, had expressed a multitude of problems with the city’s budget strategy and with certain line items.
In August, the council had approved a maximum tax rate which could have increased property taxes paid to the city by about a third to give the city the option of spending more on areas such as police and recreation.
The decision left about $1.3 million in potential taxes out there for discussion as budget priorities developed. The higher tax rate, which was reported on the Truth in Millage (TRIM) notices for the City of Vero Beach municipal tax line will not be as high as stated. The City Council may further reduce the budget and tax rate, but it cannot go above the 2.0336 rate approved on Thursday.
Councilmembers asked the public to come forth and let them know which, if any, city services and programs they wanted so badly that they would be willing to pay more for in property taxes.
Councilwoman Tracy Carroll noted that, though there was quite a bit of complaining early in the budget process about departmental cuts, there was no outpouring from the public in favor of a tax hike.
In the end, Chief Don Dappen was tasked with cutting about $250,000 from his police budget and some funding was placed back into the recreation budget to keep staffing in place and programs running.
The city will be getting hit with huge increases in the self-insured portion of its employee health insurance benefits. The council approved the staff’s recommendation to fund those increases by a combination of tapping into reserves in the general fund for general fund employees and by having the enterprise funds — the water, sewer and electric utilities, airport, solid waste department and marina — fund the city’s portion of the premium increase from money in the enterprise funds.
For example, money will be taken out of the reserves of the electric utility to fund the increase for the utility’s 113 employees.
“The total of all health insurance costs in the Electric Utility Enterprise Fund at the higher rates for next year is $1,240,531 (including retiree premium assistance) and this is an increase of approximately $274,000 over what we had originally budgeted,” said Finance Director Cindy Lawson in an email Friday to clarify some confusion about all the moving parts regarding the utility reserves.
By the end of the current fiscal year, the electric utility reserves will be down babout $7 million. The increased health premiums would come out of next year’s reserves.
Lawson said that the $7 million reduction in reserves from the electric utility would leave the utility with about $17 million in working capital and more than $30 million in reserves. City Manager Jim O’Connor said the water, sewer and electric utilities would have reserves at or near the 60-day operating reserve level.
Vice Mayor Pilar Turner expressed concern that the electric fund reserves have taken a swing of $12 million to the negative and that the current electric rate structure might not be sufficient to sustain operations and liabilities of the electric system.
“Are your reserves down to dangerous levels? We don’t believe that is the case,” Lawson said.
O’Connor said that the city would be criticized if it kept reserves that were too large.
“We don’t want to be in the banking business,” O’Connor said.
O’Connor added that if the electric utility had any major capital needs, the city could always borrow money, as it will in the coming year to make more than $4 million in modifications to the Unit 2 and 5 combined cycle generators at the power plant.
With regard to the hikes in health costs, employees will also be sharing the premium increase as union contracts provide that employees may pay up to half any increased health benefit expenses.
The second and final public hearing of the budget will be considered on Sept. 20.
