Not bad for an interim city manager shepherding her very first budget through a fractured, spectral and distempered City Council with more curveballs per meeting than Nolan Ryan threw in an inning: Lauren Johnston’s proposed budget and tax rate for the year starting Oct. 1 survived almost intact Thursday evening as the council, keeping its swaggering fringe in check, approved in a series of 3-1 votes a $61.2 million general fund budget with a $5.3 million increase and a slightly lower tax rate, but nowhere near the so-called rolled-back rate.
The council last year ended up with the rolled-back rate–the tax rate at which the city would generate the same revenue in the coming year as it did the previous year, aside from revenue generated by new construction–which required a $2.7 million cut from the budget then-City Manager Denise Bevan had proposed. It wasn’t what a majority of the council wanted to do. It wanted the lower rate in exchange for a new utility tax, but got cold feet after a public outcry. The new tax died. The rolled-back rate survived.
Several new positions the administration had sought had to be “frozen,” in Johnston’s description and the street-repavement program–already skimpy–scaled further back, among other budgetary constraints. Johnston’s challenge was to ensure that those new hires could be funded this year, in addition to positions the council wanted added, such as an extra code enforcement officer to police a new short-term rental ordinance and an additional swale-maintenance team. (That extra team is not paid out of the general fund.) In her budget outline to the council at the start of the meeting Johnston was careful to describe every budget increase not as an administrative ask but as council’s doing, if the council’s priorities were to be followed.
The overall budget will be $358 million. Only 17 percent of that–$61 million–is in the general fund, and the general fund is really the only portion of the budget that directly matters to taxpayers. That’s the fund that drives the property tax rate and that pays for cops, firefighters, streets, public works, parks, and so on. (The budget calls fir nine new sheriff’s deputies to police Palm Coast.) Everything else falls under what the city calls “proprietary funds,” capital funds and special revenue funds, like the water and sewer utility, which accounts for $154 million of the budget, the garbage fund ($18.6 million), stormwater, the fund that takes care of your swales and keeps your house from flooding ($47 million), and so on. Fees through your utility bill, not taxes, keep those funds going.
So the battle over “rollback” really comes down, literally, to a few dollars.
The current property tax rate in Palm Coast is 4.2154 mills, or $4.2154 per $1,000 in your property’s taxable value. If you have a $250,000 house with a $50,000 exemption, you’re paying $843 in city taxes this year. The council on Thursday voted to reduce the tax rate slightly, to $4.1893. It’s mostly a symbolic cut. You’ll be paying $838 in taxes next year, a $5 saving you’ll blow next time you buy one of those creamy crams of calories at Starbucks.
Council member Ed Danko wanted rollback: the $3.9961 per $1,000 rate that would result in an $800 tax bill, or a saving of $43 from your current taxes. Still not much for the homesteaded, who account for the majority of taxpayers in the city, but in the aggregate, it would mean a loss of $2.1 million out of the proposed general fund budget.
Danko blustered as he explained why he would not vote for anything but a full rollback, saying the city could spend less on some of its projects or hold off on new hires: “I think we need to give our public a break. They have suffered enough under bidenomics,” he said. “I mean, come on, we all have–well, maybe not you, Mr. Mayor, I know you spend more money on hay for your horses than most of us spend on food every week.” The statement was hypocritical–Danko’s net worth of $2.5 million is barely distinguishable from Alfin’s $2.7 million–and it relied on a misconception about rollback.
There is, in fact, little truthfulness about “truth in millage,” as the state refers to the property tax process, which relies on a economic falsehood: that applying the rolled-back rate results in a one-to-one comparison between one year’s budget and the next. Such a comparison would be possible only if inflation did not exist, which–as Danko would be first to note, but ironically not in this context–would not be reality. Rolled-back rates don’t account for inflation. (This has been especially true with school budgets, which have been forced to contend with sharply lower tax rates almost every year shifting existing dollars to subsidize private education. See: “Flagler Schools’ Budget Is Millions Short from 10 Years Ago as District Is Forced to Shift Tax Dollars to Private Schools.”)
So every rollback results in a reduction in a government’s purchasing power, even if the budget remains the same, because $60 million in 2025 will not have the same purchasing power as $60 million in 2024, let alone 2023: every rollback cut compounds the loss, year after year. It would leave a government playing catchup year after year.
Danko was on stronger ground when, after some efforts–the administration was oddly cagey about the figure when he first asked for it last week–he learned what the city’s general fund reserves were: “Your general fund balance for September 30, 2023, was $20.1 million,” Helena Alves, the city’s finance director, said. City policy is to maintain General Fund reserves between 10 and 20 of the annual budget. The current reserve exceeds 30 percent.
“So we got a lot of leeway there, following our own policy,” Danko said. “Obviously not saying, Go down to $6 million, but we can find $2 million there to do this full millage rate rollback without cutting a thing.”
Council member Theresa Pontieri appreciated Danko’s point, but not its potential consequences. “From a poly policy perspective, in doing that,” she said, “we could make that excuse every single year, and then we’re just dwindling down our reserves year after year after year in order to save the average taxpayer anywhere between $15 and $30 on their on their yearly tax bill, if they’re homesteaded.” It would also remove an incentive for the administration to be disciplined with the budget, if it could always fall back on dipping into reserves, she said.
Pontieri then enumerated the more appropriated uses of the reserve, such as supplementing dollars for a new fire station on Palm Coast Parkway near Colbert Lane or road improvements. “When you reduce millage, it’s not just for that year,” she noted: last year’s rollback eliminated $2.7 million for the current year, but also for the coming year and every year after that, if the rate is not restored. “I candidly don’t see a lot of fat” in the budget, she said, “and city manager has already rolled back the millage rate a little bit twice, because we have instructed her twice: Look for more cuts. Look for more cuts, and she’s done that. So at this juncture, I have to go with the reduced millage rate that we’ve come up with.”
Alfin and Council member Nick Klufas went with Pontieri. The council was down to four members. Cathy Heighter resigned last month. It was a fortunate turn for the administration: the seat was more predictable empty than filled, since Heighter, the unwitting wildcard, never seemed to know which way to vote until the roll was called. By December, Danko, Alfin and Klufas will be off the council and out of electoral office altogether: Alfin lost his re-election bid. Danko, a first-term council member, lost a County Commission bid to Pam Richardson. Klufas, who was term-limited on the council, lost his County Commission bid to Kim Carney. The council is appointing a replacement for Heighter on Oct. 1.
Johnston’s administration could breathe a bit more easily after Thursday’s relatively brief hearing, but not entirely: Thursday’s votes were in the first of two required tax hearings. The second is scheduled for Sept. 18 at 5:15 p.m.
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