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Hernando budget could be facing a $2.3 million shortfall

BROOKSVILLE — Earlier this month, with a split vote to increase the property tax rate, the Hernando County Commission approved a tentative balanced budget for 2012-13. Everything seemed set.

But as it turns out, the board's work is far from over. Since that vote, a couple of issues have arisen.

The first involves a proposed utilities surcharge. The budget approved by the board on July 10 included the levy, expected to generate about $1.1 million in revenue from Utilities Department customers. But after questions were raised about the fairness of the surcharge, and commissioners began expressing concerns about it, county staffers now are recommending that a public hearing, originally scheduled for Tuesday, be postponed so more analysis can be done.

The recommendation comes with a warning: If the surcharge ultimately dies, staffers will have to recommend increasing the millage rate even more — or the commission will have to make deeper cuts in programs and services — to keep the budget balanced.

That is an unpleasant reality for the commission, which already decided on a 3-2 vote to set the tentative millage rate for the county's general fund at 6.0851 mills — .4572 of a mill higher than last year. That rate is called the rollback rate because, when applied to lower property values, it brings in the same dollar total as last year. The rate would translate to $45.72 in additional tax for $100,000 of appraised taxable property value.

Now, another problem has surfaced: The state Department of Revenue has raised an issue related to the way county officials determined the rollback rate.

The state has notified county officials that they must calculate the rate based on the total taxable value of property for 2011-12 after the Value Adjustment Board voted to accept a challenge by cement giant Cemex. The company had argued that its cement kilns and related equipment had dropped in value by 50 percent due to the poor construction market.

The successful challenge by Cemex and other property owners knocked about $200 million in taxable value from the rolls.

If the previously approved rollback rate is applied to the smaller property value figure, it would bring in $1.2 million less for the general fund, said county budget manager George Zoettlein.

Add to that the hole left if the surchage is defeated, and the budget will have a shortfall of about $2.3 million.

Again, the commission has two choices: increase the millage rate to make up the difference or get out its knife and apply it to the budget.

Zoettlein is recommending that the board set a tentative tax rate of 6.2557 mills. The rate would be advertised on the preliminary notices property owners receive in August before government budgets and tax rates are set in September.

That rate would mean a tax bill of $625.57 for a $150,000 home with a $50,000 homestead exemption. The same property, with the same assessed value, would have paid $562.79 in taxes last year. Officials have noted, however, that property values once again have declined this year, meaning that most property owners would pay no additional tax.

Once a tentative rate is set, the commission can later decide to approve a lower rate, but not a higher one unless another notice is sent out. And that is costly.

With his recommendation, Zoettlein said, "At least we have the budget balanced, and that gives us a month and a half to work at reducing the budget and reducing the millage rate."

Commissioners are expected to take up the issue during their meeting Tuesday.

The utilities surcharge has not proven popular among commissioners. Only 75 percent of the homes and businesses in Hernando County are connected to the county utilities system, but the general fund affects everyone.

The Department of Revenue's notice about the rollback rate calculation came as a surprise, said assistant property appraiser John Emerson. It is counter to the method the county has used for years to calculate its property tax rate, he said, and his office is seeking a legal opinion on the matter.

Commissioner John Druzbick said Friday he does not favor the utilities surcharge, and he acknowledged the commission faces a tough decision, given the Department of Revenue's stance on the way the county's total property value is calculated.

"That obviously adds a new wrinkle," he said.

Tony Marrrero can be reached at (352) 848-1431 or tmarrero@tampabay.com.

Hernando budget could be facing a $2.3 million shortfall 07/21/12 [Last modified: Saturday, July 21, 2012 11:50am]
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