Budget plan calls for tax rate cut with options for surplus
Town Manager Kirk Blouin is proposing an $83.2 million spending plan for next year that is nearly 3 percent larger than this year’s $80.9 million budget.
A robust climb in property values will enable the town to reduce the property tax rate yet still pay for the spending increase, Blouin said Friday.
Depending on how deeply it cuts the tax rate, the Town Council also has the option of creating a surplus to help meet long-term financial goals, he said.
The 2021-22 budget proposal is for the fiscal year that begins Oct. 1. The council will take it up at 9:30 a.m. on July 15 in Town Hall. Final council approval of the budget and property tax rate will be at a public hearing on Sept. 23.
Most of the $2.3 million spending increase is for operating expenses, including $1.3 million to cover a nearly 5 percent overall hike in employee pay. That includes a 2 percent cost-of-living increase and market-based pay adjustments. Overall salary and wage costs would rise to $27.8 million.
Contractual obligations are up by $530,000, or 5 percent, to nearly $11 million.
There are also some larger transfers from the general operating budget into other programs or funds. These include a boost of $266,000 or 10 percent more for capital improvements and $143,000 more for coastal management, 3 percent above this year.
The plan would earmark $2.6 million in annual reserves from the Town Marina to wipe out a $12.7 million deficit in the underground utilities program.
Three new full-time staff positions would be added at the marina, which is being upgraded and scheduled to reopen Sept. 1. The town workforce would grow by three positions to the full-time equivalent of nearly 349 employees.
Taxable property values in the town have climbed 8.13 percent since last year, according to Palm Beach County Property Appraiser Dorothy Jacks’ June 24 estimate. Total taxable values are up $1.6 billion to nearly $21.7 billion.
The property tax rate is currently $2.99 per $1,000 of taxable value.
Blouin proposes to reduce it the rate low enough so property owners with a homestead exemption would pay the town the same amount as last year, or less.
He is presenting the council with three alternatives, two of which would lower the rate while generating a surplus that could be applied toward large, long-term liabilities. The third would cover the 3 percent spending increase without a surplus.
“We will present some options to the council on what to do with the surplus,” Blouin said. “There will be a reduction in the [tax] rate, regardless.”
If there is a surplus, Blouin suggests applying it toward “resiliency” funding to strengthen defenses against sea level rise; capital improvements, including construction of a new North Fire Station in the next few years; or toward the long-term unfunded liability in the town’s pension program, he said.
Any surplus funds devoted to paying down the pension liability would be over and above the $5.4 million annual discretionary payment already approved by the council for that purpose.
The first of the three property tax proposals would lower the rate from the current $2.99 per $1,000 of taxable value to $2.95 per $1,000 of value. That would cover the spending increase and generate a $2.7 million surplus.
Under that scenario, property owners with a homestead exemption would pay the same amount of taxes to the town as last year. Those without the exemption would pay $196 more per $1 million.
“People don’t mind paying their taxes,” Blouin said. “They just want to make sure it’s spent wisely. That is why we create a budget document that is as transparent as we can.”
The second alternative would lower the tax rate to $2.87 per $1,000 of value, which would cover the spending increase with a surplus of $1 million. Property owners with a homestead exemption would pay $81 less for each $1 million in value. Those without the exemption would pay $105 more per $1 million.
The third option, lowering the tax rate to $2.82 per $1,000, would cover the spending increase but create no surplus. Those with the homestead exemption would pay $128 less per $1 million; those without it would pay $53 more per $1 million.
The council is free to embrace any of those options or to do something different, Blouin said.
Pat Cooper, consultant for the Civic Association, praised Blouin for presenting the council with choices that enable it to lower the tax rate and shield homesteaded property owners from a tax hike while tackling major long-term financial challenges.
“He’s very smart to present these options to the council,” Cooper said. “It will be very interesting to see how it turns out.”
Most of the property taxes paid in the town go to other taxing districts. For every $100 in property taxes paid by Palm Beach property owners last year, the town collected only $18.17. The Palm Beach County School District and Palm Beach County combined collected over 71 percent.
The town is on a solid financial footing after several years of climbing property values because of the vibrant real estate market in southeast Florida. Blouin, town manager since early 2018, said the executive staff including department heads have also worked hard to find operational efficiencies, implement leaner spending practices, and plan for the long term.
“We have been doing an incredible amount of financial planning,” he said. “We are going to continue to strengthen our financial policies. In less than five years, the town will be in unbelievable financial shape.”