Soaring property values on the island have enabled the Town Council to lower property tax rates for the last six years even as revenue and spending continued to grow.
But it appears that trend is coming to an end. With stiffer fiscal headwinds on the horizon, the council on Thursday decided against trimming the property rate again this year. It will instead retain last year’s tax rate of $2.61 per $1,000 of taxable value.
The Palm Beach County Property Appraiser is estimating an 11.3 percent average increase in taxable values on the island during the last year. Because of that, Palm Beach can keep its tax rate steady and collect an additional $7.6 million.
Owners of homesteaded properties, which make up 60 percent of residences in the town, will pay the town $79 more per $1 million of taxable value. Non-homesteaded properties will pay $249 more per $1 million.
The town collects roughly 18 percent of all property taxes paid by owners in the town. The remainder goes to Palm Beach County, the county schools, and other taxing districts.
Total property tax revenue to the town would climb to $79.7 million for the budget year that begins October 1, by far the biggest source of funding for the town’s $119.1 million budget for fiscal 2024-25.
At Thursday’s meeting, the council unanimously approved the new spending plan, which is 13 percent larger than this year’s $104.8 million budget. Formal adoption of the new budget and tax rate is scheduled for a public hearing on September 19 at 5:01 p.m. in Town Hall.
Inflation is driving up costs, especially for labor and materials in the South Florida construction market, Town Manager Kirk Blouin said. Steep price increases are hitting the town hard on capital projects – especially for street paving in neighborhoods where the town-wide burial of utility lines is being completed.
“We’re seeing 15 to 20 percent year-over-year increases,” Blouin said.
Bob Miracle, deputy town manager for finance, said there are several street paving projects scheduled during the next five years as the townwide utility conversion moves toward completion in 2027. Those paving projects will total $15 million or more and, until Thursday’s council meeting, none of them had been funded.
Miracle said the overall fiscal landscape is changing for the town. Even as inflationary pressure increases, a dwindling number of property sales on the island during the last year is signaling the end of a hyperactive real estate market that peaked in 2022.
“The town has done a great job of managing finances and keeping property taxes as low as possible,” Miracle said. “However, it’s getting tighter and tighter. We’re seeing revenues level off. That is causing more pressure on the budget.”
The new budget includes $11.9 million in major spending increases. Within that is $3.6 million for employee salaries, including a 5 percent cost-of-living adjustment for inflation, and for 13 additional employee positions.
Some of the 13 positions were previously approved, and some are conversions from contractual workers to town employee positions, Blouin said. The new jobs include four firefighter/paramedic positions intended to reduce a spike in overtime costs in the Fire-Rescue Department. The other positions are fire inspector, police officer, police sergeant, three parking enforcement/traffic control officers, a tennis manager, an information technology manager, and an administrative assistant.
Also within the $11.9 million:
- $2 million for an increase in obligations of to the retirement program.
- $1 million more to meet costs increases for health care and other employee benefits.
- $1.4 million more for contractual costs.
- $3.9 million in additional transfers into the capital improvement fund.
Blouin presented the council Thursday with a $116.7 million original budget proposal for fiscal 2024-25 that called for lowering the property tax rate from $2.61 per $1,000 of taxable value to $2.53 per $1,000, a 3 percent decrease. Under that scenario, homesteaded property owners would not have seen an increase in property taxes paid to the town, and property tax revenue would have grown by $5.2 million instead of $7.6 million.
But the council decided against lowering the tax rate at the urging of Mayor Danielle Moore, who expressed concern about the shortfall facing the town because of the street paving and other capital projects in the next few years. Among those is a drainage improvement in the canopy area on North County Road just north of Wells Road. The project, slated for 2025 and 2026, yielded a single construction bid of $4 million – double what the town had anticipated.
“Lowering the millage rate is optics and makes us feel good and our residents feel good, but looking to the future … the more we put off these projects the more they cost … I’d rather hold the line now rather than get to next year or the year after and have to significantly increase the millage rate,” Moore said.
Mark Zeidman, a member of the Palm Beach Civic Association’s Executive Committee and chairman of its Tax and Finance and Audit committees, agreed with the mayor and council that the town should prepare now for shortfalls in its reserve accounts.
“Let’s begin to address these needs for funding of capital projects sooner rather than later and keep the millage rate where it is,” Zeidman said.
The town has for years been drawing from annual surpluses from the Town Marina to help offset cost overruns in the townwide underground utilities conversion. The marina is expected to generate $10 million in reserves next fiscal year.
The annual contribution from the marina to the undergrounding will increase, from $4.2 million this year to $6 million next year, the council decided.
Another $4 million in marina reserves will be used to fund street paving in Phase 4 South (Peruvian Avenue to Royal Palm Way) and Phase 5 North (Country Club Road to Southland Road), of the utility undergrounding project.
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