Wednesday, April 25, 2018
News Roundup

Votes on Penny for Pinellas, homestead exemption loom over Largo's budget process

LARGO — In the midst of crafting next year's budget and updating the long-term financial forecast, city officials are facing several variables that could impact projects and services.

A contribution increase to the police and fire pension fund adds constraints to the budget for next year and beyond, while the financial plan is muddled by two major local government revenue sources left to the will of voters: a one-cent sales tax known as Penny for Pinellas that is up for renewal this year and a property tax break in the form of a homestead exemption increase that, if approved when it goes before voters next year, would cut at least $650,000 from the city coffers in the first year.

"There's always more needs financially than we have the ability to fund," said Meridy Semones, office of management and budget manager. "What's really going to be more challenging is going to be planning for beyond Fiscal Year 2018."

The city has a mandatory contribution increase next year of about $888,000 to the police and fire pension fund. Combined with similar hikes expected for the city's five-year financial planning period, the contributions forced the city to elongate a five-year public safety staffing plan by two years.

The plan was supposed to add three new firefighters and three police officers next year, but the city pushed back the police officers until 2019 with the goal to stagger police and fire positions every other year for the remainder of the plan, which will now go through 2022. The city can't keep up with the personnel and pension costs at the same time, Semones said.

A new code enforcement officer covered in the plan was also pushed back a year, and a part-time fire public educator job was removed.

Another fallout from the increased pension contribution, along with revenue sources that aren't growing at the rate finance officials expected, is that the city is relying on an 8 percent increase in property tax revenue — 2 percentage points more than initially expected. The bulk of it will be covered by a roughly 7.7 percent increase in property values, which includes annexations and new construction, Semones said.

A change in this year's property tax rate of about $5.37 for every $1,000 of assessed, taxable value is still to be determined. The draft budget, which will include a proposed property tax rate that commissioners vote on during public meetings, is due July 1.

"It's encouraging that the growth in property values was very close to the amount of revenue we were looking like we needed," Semones said.

The Penny for Pinellas sales tax and the homestead exemption increase won't have a direct impact on next year's budget, but city officials are already bracing themselves.

The one-cent sales tax provides funding for capital projects around the county. Voters will decide this November if they want to renew the tax for its fourth 10-year cycle, which would begin in 2020. Largo's wish list includes road work, fire station reconstruction and stormwater projects.

The homestead exemption referendum, added to the 2018 ballot by state lawmakers, would increase the exemption from $50,000 to $75,000. So, for example, a home valued at $150,000 would be taxed as if it were worth $75,000.

While lessening the burden to taxpayers, the increase would hit local governments across the state. Semones estimated Largo's first-year loss at about $650,000, but it could be higher. That number doesn't include the tax revenue the city receives from Pinellas County for emergency medical services.

At least one government in the Tampa Bay area — Hillsborough County — has already enacted a hiring freeze. Largo isn't at that point, said City Manager Henry Schubert, but during a presentation to city commissioners last month on a staffing analysis that suggested additions of several positions, Schubert said it would be difficult if not impossible to fund the new jobs.

"If the homestead exemption passes," he said, "it's entirely possible we'll be sitting here a couple years from now with a different type of list: a list of personnel and service level reductions, not additions."

Contact Kathryn Varn at (727) 893-8913 or [email protected] Follow @kathrynvarn.

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