CLEARWATER — With a budget shortfall forecasted every year for the next 10 years, the City Council has two choices: slash services and employees or raise taxes for the first time in a decade.
All five council members on Monday gave City Manager Bill Horne their blessing to factor a tax increase into next year’s budget instead of closing libraries and recreation centers or laying off staff.
As the books stand now, expenses are on pace to surpass revenues by $160 million through 2028 as a result of a revival of spending on capital projects following recovery from the 2008 recession coupled with unforeseen costs from the state. Financial consultants estimated the city will need more than a 20 percent increase on the current property tax rate of $5.15 per $1,000 of assessed taxable value to eliminate the deficit.
Horne said staff will work to cut excess fat from each department before proposing a tax rate in July, but an additional $1.20 per $1,000 would be the maximum. It would be the first tax rate increase since 2009.
In weighing their options, council members said it was the only reasonable choice.
"At some point, you’ve got to pay the piper," said council member Hoyt Hamilton. "We want the community to continue to be the quality that it is, we want the citizens to continue to receive the services they receive."
There were various unexpected costs that factored into the next several years of budgeting. After the Feb. 14 shooting at Marjory Stoneman Douglas High School in Parkland that left 17 dead, Gov. Rick Scott signed a law requiring school districts provide security at all campuses by July 1.
The mandate is estimated to cost Clearwater about $600,000 a year to pay 14 more officers, according to data used by Stantec consultants, plus about $1 million in one-time vehicle and equipment costs.
The city is also bracing for an expansion of the homestead exemption, widely expected to be approved by voters statewide on the November ballot. The change will cost the city about $1.5 million a year in lost tax revenue.
But spending decisions over the last few years were also major factors. The city added about 21 employees last year, which will cost $10.35 million over the next decade, according to finance director Jay Ravins.
The city has $92 million in capital projects slated to be paid for through the general fund over the next decade, Ravins said. The city plans to spend $6.4 million from the reserve fund on renovating Crest Lake Park. And once the downtown waterfront redevelopment Imagine Clearwater is built in 2021, operating costs are expected to outpace revenues by about $300,000, according to Stantec consulting manager Erick van Malssen.
Following union negotiations, the city will also spend $1 million more annually on employee pay beginning this year.
This year the city also gave a combined $6.5 million to Ruth Eckerd Hall and the Clearwater Marine Aquarium, grants that will force the city to dip into reserves to end the year on balance.
"The situation is they’ve added a lot of cost to their fund over the last few years," van Malssen said. "Right now they’re just spending more than they’re earning and when you do that you have to fund that gap, that deficit, through their savings."
Horne said after years of belt tightening during the recession and recovery, the city is finally "responding to mission needs" by investing in infrastructure and capital projects.
Property values have increased every year since 2013, allowing the city to bring more tax revenue into the coffers under the same rate.
"We have done that successfully for nine years now but we’re at a point where we can’t do it anymore," he said.
City Council member Bob Cundiff said it is an impossible situation, but one he cannot see being solved through cuts to services.
"I would be the last one to say we need (a tax) increase, but I think we do," Cundiff said. "How else are we going to pay for what we’re going to do? What could we cut?
Contact Tracey McManus at [email protected] or (727) 445-4151. Follow @TroMcManus.