Citing fiscal uncertainties, Mayor Danielle Moore and a majority of Town Council members said at a July 10 council meeting that they favor holding the line on the property tax rate during the year to come.
At a budget workshop at Town Hall, Moore and council members Julie Araskog, Ted Cooney, and Bridget Moran all said that – despite the healthy fiscal condition of the town – they would be reluctant to support a cut in the property tax rate at a time when Palm Beach faces another hurricane season, the potential elimination of the Federal Emergency Management Agency, the prospect of property tax reform in Tallahassee, and a heavy slate of capital projects on the horizon. The latter category includes most notably an estimated $24 million replacement of the Midtown Beach seawall, scheduled for 2027-28.
“We should keep our [tax] rate as is,” Araskog said. “We should not lower it. … I think we do need a cushion. There are lot of unknowns right now… we always have an unknown with hurricane season.”
Moore said it may be tempting to cut the tax rate, but it’s a decision that could easily backfire. She recalled how the recently renovated North Fire Station mushroomed from an original estimate of $3 million to an actual cost of $17 million once the job was completed.
“That seawall could go from $24 million to $30 million in a heartbeat,” Moore said. “Then we have to take the [tax] rate and spike it to cover that.”
Councilman Lew Crampton took an opposing view – saying he favors lowering the property tax rate. Crampton said the town has plenty of reserves on hand should an unforeseen expenditure or emergency arise. As of September 30, 2024, the general operating fund had an unassigned reserve balance of $35.7 million. The town’s other reserve accounts total nearly $15 million.
“The town has been running surpluses in our budgets over the past several years of roughly $2 million to $3 million a year,” Crampton said. “We are in great shape with respect to long-term funding.”
As council president pro tempore, Crampton chaired the workshop in the absence of Council President Bobbie Lindsay.
During a period of steep increases in real estate values on the island, the council cut the town’s property tax rate for seven consecutive years until last year, when it kept the rate the same, citing concern about the cost of upcoming capital projects. Throughout those years, property tax revenue continued to climb because of the real estate market, which exploded during the Covid-19 pandemic but has cooled considerably since 2022.
At the July 10 workshop, Town Manager Kirk Blouin presented the council with the option of lowering the property tax rate to $2.53 per $1,000 of taxable value, which would be a 3 percent reduction from last year’s rate of $2.61 per $1,000.
Under the lowered rate, homesteaded property owners, whose annual increases in taxable values are capped at 3 percent, would pay the same amount of property taxes to the town, per $1 million of taxable value, as last year. Non-homestead owners, who make up about half of the owners on the island, would pay $120 more per $1 million in taxable value, based on the 10 percent cap in annual increases in their taxable values.
Moore asked the town staff about the impact on the taxpayers if the town were to retain last year’s tax rate of $2.61 per $1,000 rate. Bob Miracle, deputy town manager for administration and finance, responded that homestead owners would pay a tax increase of $79 more per $1 million. Non-homestead owners would pay $206 more per $1 million.
Property taxes are by far the most significant revenue to the town, making up roughly two-thirds of the annual operating revenue.
Larger budget would add personnel
For fiscal 2025-26, which begins October 1, Blouin is proposing an operating budget of $124.7 million – an increase of about $5.5 million, or 4.6 percent over the current year’s spending plan. The budget includes 13 additional personnel positions, including four police officers, which would bring the town’s workforce to the full-time equivalent of 397 employees. Some of the new positions represent cost savings because they enable the town to cut the cost of contractual labor, Blouin said.
The budget also includes funds for a steep increase in employee health insurance, and pay raises including salary adjustments that enable the town to remain competitive in the regional job market.
Blouin said the town’s staff’s goal each year is to present the council with a budget proposal that includes no increase in property taxes. But he said it’s up to the council to decide if that is the best course of action.
“We build a budget that meets the needs and standards of the community at the lowest cost possible, but you can choose to keep the [property tax] rate the same and provide a little more cushion in reserves for the future,” Blouin said.
Because of the 8 percent increase in taxable values, property tax revenue paid to the town would increase under both the $2.61 per $1,000 and the $2.53 per $1,000 rates.
Under the $2.53 rate, property tax revenue paid to the town would increase by $3.4 million to $83.1 million. But if the town retains the $2.61 rate, that would generate an additional $2.6 million, bringing the total to $85.7 million, according to Miracle.
Decision in September
Blouin said the staff would present both options to the council for a final decision this fall, when approval of the new budget and tax rate is scheduled at two public hearings on September 8 and September 18 at 5:01 p.m. in Town Hall.
Blouin said there’s no right or wrong decision on the tax rate question. “There are valid points on both sides of this,” he said.
During the public comment portion of the meeting, Mark Zeidman, chairman of the Palm Beach Civic Association’s Tax and Finance Committee and a member of its Executive Committee, said he does not support lowering the tax rate below $2.61 per $1,000.
“The town today is in pretty good shape financially,” Zeidman said. “But, looking ahead, I see more headwinds than tailwinds.”
Operating expenses are up 9 percent over last year, Zeidman noted. The capital improvement and coastal management funds are both forecast to run deficits several times over the next few years.
Gov. Ron DeSantis’s select committee on property taxes in the Florida House of Representatives is working toward a statewide reduction in property taxes, which are a significant source of revenue for local governments, Zeidman said.
Annual increases in property values have slowed down. FEMA reimbursements to local or state governments for the cost of storm reparations could decline significantly, he said.
“Last – but by no means least – the likelihood of extreme weather events continues to grow,” Zeidman said. “I think the time to add to reserves is when times are good. Times are good now.”
Apart from the question about the tax rate, Moore and the council members did not request any changes in Blouin’s budget proposal.
Crampton thanked Blouin, Miracle, and Carolyn Stone, who is deputy town manager for business enterprise and culture, for putting the budget together.
“We are pleased to move forward in a safe, clean and well-managed town,” Crampton said.
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