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Pinellas Park may raise tax rate, tap into reserve funds

PINELLAS PARK — This city's tax rate would go up under a budget proposed for the coming fiscal year.

Officials would also tap into Pinellas Park's reserves in order to balance the proposed $50.8-million operating budget, which represents a 2.3 percent increase in spending over the current $49.7-million operating budget. If passed later this summer, the new budget would go into effect Oct. 1.

The decision to increase the tax rate and to dip into reserves was a necessary one, said Dan Katsiyiannis, head of Pinellas Park's Office of Management and Budget.

"We need the money," Katsiyiannis said.

It is unclear if any other governments in mid-county plan to follow Pinellas Park's lead in increasing the millage rate or using reserves to balance their budgets.

The Lealman Fire Commission's budget will not be ready until July, and Seminole's operating budget will not be released until late this week.

However, Seminole released its proposed capital improvement budget last Tuesday.

The $7.1-million capital budget includes the construction of a Public Works building and an emergency operations center, but other big construction projects, such as a senior center, have been put off until 2010.

City Manager Frank Edmunds said that it makes no sense to construct buildings that would require new staff when the city might not be able to afford those new workers. Waiting to build those will give the economy a chance to turn around, he said.

Pinellas Park is also hoping things will turn around soon, city spokesman Tim Caddell said.

Generally speaking, officials do not like to use reserves for recurring expenses.

Reserves are supposed to be for one-time emergencies.

But Pinellas Park's proposed budget shows an estimated $1.2-million out of the city's $11.2-million in reserves being used to balance the books.

"We're hoping that, with additional cuts, and policies we have in place, this will be a one-year thing," Caddell said.

The city is also planning to take advantage of a loophole in Amendment 1, which voters passed in an effort to decrease property taxes.

Amendment 1 increased the homestead exemption from $25,000 to $50,000 but it failed to change other areas of the property tax laws.

In particular, it did not change the ability of cities to alter their "roll" rate.

The roll rate is the tax rate, or millage, that a city would charge to get the same amount of dollars from property taxes that it got the preceding year, said Harry Kyne, Seminole's budget expert.

It works this way: If property values stay the same from one year to the next, and a city wants to get the same amount of money, its millage, or tax rate, would not change.

But if property values go up and a city does not want to collect more money than it did the year before, it would decrease its millage, or tax rate. That's called a rollback.

On the other hand, if property values drop, the city would have to increase its millage rate to get the same dollar amount it got the year before.

That's called a roll forward.

Because property values dropped this year, Pinellas Park would get less money than last year if its current tax rate of 4.5478 mills is retained.

But the city wants to collect the same amount, so it may increase the millage rate to 4.615.

"It's a tax rate increase; it is not a tax increase," Katsiyiannis said.

That is true overall, but the rate change will affect individual taxpayers differently.

Some property owners could see an increase based on the new rate even though property values have dropped.

That could happen to someone who had owned a home for a long time.

In that case, the owner might have a home valued, for example, at $150,000 for tax purposes.

But if the neighborhood has an overall value of $200,000, the owner would see the valuation increase by 3 percent even if the overall neighborhood value had dropped. In that case, the owner could see a slight increase in property taxes.

But some of that could be offset by the effect of Amendment 1. Each person's situation is different, Kyne said.

Katsiyiannis cautioned property owners not to jump to conclusions about the budget or how it would affect them. This is the first draft, he said, and there are still many unknowns.

Pinellas Park is still negotiating raises with its firefighters, and other data, such as the cost of health insurance, have not been received.

And, he said, there are mistakes because it is in draft form.

One of the biggest mistakes concerned the salary of City Manager Mike Gustafson. The draft showed Gustafson getting a 13.8 percent salary increase for the coming year.

"I am?" Gustafson asked when told about his whopping raise. Then, he said, "No! No! I can tell you for sure … (that's) not going to happen."

Gustafson said his contract ties his raise to those of city employees.

With the exception of the firefighters, whose contract has not been negotiated, Pinellas Park employees are getting an overall 3 percent raise.

That would take Gustafson's annual salary from its current $120,678 to about $124,905.

Katsiyiannis said a 10 percent contribution the city makes to Gustafson's retirement was mistakenly added in twice.

"You've got to remember, this is draft one," Katsiyiannis said.

Many of these numbers will change, he said.

Pinellas Park may raise tax rate, tap into reserve funds 06/14/08 [Last modified: Monday, June 16, 2008 11:22am]
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