FELLSMERE — The Cities of Fellsmere and Sebastian are not overly optimistic this budget cycle and are planning to hold the line on spending until they hear otherwise from the county’s Property Appraiser who is busy now compiling the data needed for the local governments to craft their budgets.
Indian River County Property Appraiser David Nolte doesn’t have any advice for the cities’ finance directors – no hint of whether property values will be up or down from last year.
“You just can’t make a prediction,” Nolte said. “You have to do the work.”
And now, his office is doing just that – going out to properties, verifying new construction, assessing improvements made to buildings.
To say that values will be up or down by any percentage at this time would essentially be a shot in the dark, according to Nolte.
Yet, that’s precisely what some governments have to do in order to prepare even a draft budget ahead of the cycle’s process.
Fellsmere City Manager Jason Nunemaker said he’s bracing for a couple-point decline in ad valorem (property tax) assessments given a number of foreclosures that have been finalized and not much in the way of commercial development.
Fellsmere brought in $584,000 from property taxes for the current fiscal year 2012-13. By comparison, the city brought in $540,000 in 2007 and $612,000 at its peak in 2008-09.
“We’re really not sure” what to expect, he said. As for preparing a budget, “it’s more of a ‘stay the course’” proposition.
Sebastian is doing about the same – its department heads are crafting their budget requests now with the direction that they need to keep those requests in line with the current budget.
They have until May 16 to turn in their operational budgets to the finance department for review.
Administrative Services Director Debra Krueger said there is no sense of what the city could be facing in terms of ad valorem revenue.
“The data’s not there yet,” she said.
This fiscal year, Sebastian brought in $2.9 million in property tax revenue. By comparison, the city generated $4.6 million in fiscal year 2007-08.
All the same, City Manager Al Minner said he is expecting to see either a freeze on the values or a small decrease.
His estimate is based on history – Sebastian’s ad valorem revenue is typically a couple percent less than what Indian River County brings in.
“Sustainability is going to be an issue,” Minner said, explaining that as property values continue to decline – or, at least, not increase – the city will need to figure out how to maintain its level of service.
Road improvements are needed, as are upgrades and replacements of equipment such as the city’s computer system, Minner said.
Adding to that challenge is the negotiations for two collective bargaining agreements, according to Minner.
“The employees certainly have taken it on the chin,” he said.
The city takes an unpaid day off on the last Friday of the month and has done so for the last few years.
Indian River County Finance Director Jason Brown said he is moving forward under the assumption that property values will be flat or up 1 percent, which he calls optimistic.
The county received $69 million in property tax revenues this fiscal year. Five years ago, the county generated $102 million.
Just like Sebastian and Fellsmere, Brown will have to wait until Property Appraiser Nolte releases the preliminary ad valorem numbers on June 1.
Those numbers will give the governments a better idea as to how their proposed budgets stack up.
Nolte is expected to release the finalized figures in July before the various governments begin holding their budget hearings.
Nunemaker said Fellsmere is holding off on pulling together a fleshed out draft budget, waiting instead until the preliminary numbers come in.
“There’s no reason to get too creative,” he said with the budget at this stage.
One bright spot for Fellsmere’s property tax revenues, however, could be the newly opened Dollar General, which was built last year. Nunemaker said the retail store could help offset some of the city’s lost revenue from foreclosures.
The store could have a positive impact on the city’s general fund and the Community Redevelopment Area.
If realized, the CRA could then have some monies available for residents or businesses to improve their properties.
“If it’s good news, we can plan to do a little more,” Nunemaker said, adding, “If it’s bad news, we’ll have to tighten our belt.”
“Anything we cut has an impact,” he later noted.
He said that while the city might see a decline in property tax revenues, other funding sources for the city are looking better. The city’s finances come from property taxes, utility taxes, franchise fees, and shared revenues from the state.
Nunemaker said the city would also continue to pursue grant dollars to help supplement needed funding for various projects within the city.
Minner said Sebastian is looking about the same with its other funding sources. “Everything’s running about where we estimated,” he said.
Neither city manager would predict what would happen with their respective city’s property tax (millage) rate.
Minner said he doesn’t anticipate the Sebastian City Council increasing the tax rate beyond what would be needed to generate the same amount of revenue as last year.
Krueger said the city’s individual departments will sit down with the finance team to review their proposed budgets in mid-June, after receiving Nolte’s preliminary numbers.
About that same time, the city’s administration will begin work on negotiating the collective bargaining agreements.
By the end of June, Sebastian’s Budget Review Committee is expected to get the first look at the city’s draft budget.
From there, more meetings will be held to discuss and tweak the budget before the City Council holds its public hearings to finalize it.
In Fellsmere, the council might have to consider increasing the tax rate to a level that would bring in the same amount in order to maintain the current level of service, according to Nunemaker.
“I think there’s room for optimism,” Nunemaker said, “just not this year.”
He added that he foresees another year or two of flat property values before commercial development within picks up and helps increase the tax base.
