The Indian River Shores Town Council last week took first steps to return $2 million of the $4.4 million proceeds from a recent land sale to residents via a temporary property tax reduction.
In the first round of budget talks, the staff had recommended approving a tax rate for the next fiscal year of $1.56 per $1,000 of taxable value. That would have been a slight decrease from the existing rate but would have produced approximately the same amount of tax dollars because of increased property values in the Town.
If the proposed “tax rebate” is approved, the Shores rate for 2017-18 would be 86 cents per $1,000 of assessed property value, about half the current year’s rate of $1.71 per $1,000 of assessed property value.
The savings to the owner of a non-homesteaded residence with an assessed value of $1 million would be about $850 on the Shores municipal tax portion of the bill. Nothing would change on the county, school board or special taxing district portions of the tax bill.
Florida law protects property owners from extreme and sudden hikes in the tax rate by requiring increasing thresholds of approval when the rate jumps significantly from the previous year, but local governments can drastically reduce taxes without this heightened oversight.
Four members of the council voted to return $2 million in one chunk this fall by reducing the tax rate. Council member Bob Auwaerter dissented, saying he would rather reduce the tax burden by $1 million this year, with the intent to deliver the other $1 million in tax cuts next year, thereby leveling the rate out and not creating such a drastic dip and then a drastic hike the next year to return taxes to a level where the town can operate, pay its bills and make payroll.
The council’s failure to get four votes next year to hike taxes back up to near the current level would require the town to drain its reserves, or perhaps activate its $1 million line of credit it has in place for emergencies.
The council also voted to pay nearly $1.2 million of the sale proceeds to shore up retirees’ health benefits by keeping the premium cost for the aging retirees the same as if they were still employed.
Finance Director Heather Christmas assured the council at the beginning of the budget process that if they dropped the tax rate, it would be no problem boosting it back up the following year. Christmas said that since the Florida Department of Revenue looks at the prior year and that the allowed rate hike is a blended or smoothed rate of the previous two years, the increase would be greater than what three council members could approve, but that only four yes votes would be required.
Still, Christmas and Town Attorney Chester Clem said they would double check to make sure that only four votes would be required next year, and not a unanimous vote or a referendum.
“We can always un-do it if we find something out to the contrary,” Councilman Dick Haverland said.
Christmas said there is no alternative mechanism by which the town could refund the cash to residents.
The next scheduled Shores election would be two months after the 2018 budget process is concluded, so the same council members committing to the one-year “rebate” would presumably, barring a resignation or recall, be the same five people voting to hike taxes back to their previous level.
But they would be doing so during an election season with possible challengers who could use the hike from the artificially low rebate-rate as political fodder.
The Shores will have two public hearings on the budget and the property tax rate, on Sept. 14 and Sept. 28.
