Thoughts on city fees

[Adam Hollingsworth]

The memo below was sent to the Jacksonville City Council today. Thought you would find it of interest.

MEMORANDUM

To:       Jacksonville City Council Members
      
From:      Alan Mosley, Chief Administrative Officer

Date:      June 9, 2009

Re:      Budget Update

As provided to you in an e-mail update on May 11, the 2009 stormwater and solid waste bills were mailed to property owners on May 27.  As the fees are once again top of mind for many of your constituents, I hope you will find the following information helpful.

Property Tax Reform Reduced Local Government Revenue

As you may recall, as a result of the statutorily-imposed property tax reform and the impact of the constitutional amendment, that also reformed the property tax system, the city’s revenue has been reduced by more than $100 million. To partially offset these losses, diversify our revenue streams and institute user fees that can only be used for the intended purpose, the city instituted three fees two years ago. 

•   In the upcoming budget year, we expect the fees to generate approximately $79 million â€" less than the $100 million lost through property tax reform. 

•   As for property tax revenue, based on the June 1 property appraiser’s tax roll estimates, we believe an additional $30 to $50 million will be lost next year.  (Earlier estimates were very preliminary and were projections prior to receiving the first official estimate from the property appraiser.)  It is important to note that these numbers are still fluid and we expect an updated projection from the property appraiser in early July.

•   In addition, we anticipate the single largest expense growth driver to be pension costs â€" likely to increase by $30 to $40 million on a year-over-year basis (from approximately $70 million to between $100 and $110 million).

In short, without the fee revenue, the city’s current projected revenue to expense gap would grow significantly higher â€" meaning even more dramatic cuts to services at every level of government, including public safety.

A Primer on Fees

Key Facts

•   The three fees generate less what was lost from property tax reform on an annual basis.

•   The stormwater and solid waste fees can only be used to provide stormwater services and residential garbage collection.  The fee cannot exceed the cost of the service.

•   The three fees are lower than what is being charged in other parts of Florida.
Stormwater Fee

•   The stormwater fee, which will generate approximately $28 million in FY 09-10, helps address the cost of complying with federal mandates for stormwater treatment.

•   The City of Jacksonville is required to reduce the amount of nitrogen discharged into the river by 150 tons, which translates into a cost of between $300 million and $1.5 billion over 15 years, or between $20 and $100 million per year. 

•   The fee also supports drainage improvements throughout the county that will directly benefit residents. Most importantly, the fee provides a dedicated revenue stream to address Jacksonville’s stormwater needs â€" a revenue stream that does not require funds to be diverted from police, fire, parks, road maintenance or other critical services.

•   Approximately 80 percent of urbanized Florida pays a stormwater fee, and the fee is collected in more than 500 cities nationwide

Solid Waste Fee

•   The residential solid waste fee, which is $4 per month in the current fiscal year, generates approximately $13 million in FY 09-10 (at $5/month). 

•   The revenue generated by this fee covers only a portion of the cost to provide the service.  If the city was to pass along to homeowners the actual cost to provide the service, the fee would be closer to $14 per month. 

•   Solid waste fees in our neighboring cities far exceed what Jacksonville charges: Atlantic Beach charges $17.78 per month, Neptune Beach charges $20.05 per month, Jacksonville Beach charges $16.31 per month and Baldwin charges $13 per month.

Franchise Fee

•   The franchise fee is a charge from the city to JEA for the various rights and benefits that JEA receives as the city’s only utility provider. 

•   The three percent fee in Jacksonville generates approximately $38 million annually.

•   Jacksonville’s franchise fee is much less than what is charged throughout the state, which averages approximately 5.6 percent. 

[BridgeTroll]

Based on your first three bullets these fees will likely be raised significantly in the coming years.  The pension issue alone needs to be swiftly dealt with as this is a huge weight on Jacksonvilles shoulders...

[urbanlibertarian]

How does Florida law limit what the city can do about pensions?

[Dapperdan]

So, Why can't we raise the JEA franchise Fee to 6%. Let JEA know how it feels to have rates rise on you. OF course JEA would just rais e our rates again to compensate. Oh how I wish CLay Electric could somehow compete with JEA>

[Springfield Girl]

All I know is that my fees match, almost to the dollar amount the cut I recieved on my property taxes. I personally am fed up with the constant attack on our wallets. When my utility rates, taxes, school tuition etc. go up I can't go to my boss and demand more money to cover the difference. We, the taxpayers have to sacrifice and tighten our belts. I believe government needs to start doing the same instead of continueing to grow programs and spending. As a Springfield resident I am really offended at having to pay a stormwater fee when the city has done nothing to ease our flooding for tens of years. How many millions of our tax dollars has our government flushed down the toilet on giveaways to failed developments? COJ, you are like the irresponsible child who keeps coming to mommy and daddy for a handout. This parent is tired of the bleed and ready for you to grow up.

[Deuce]

It truly sucks that we have to pay these fees. When the cut to property taxes came up on the ballot, I voted against it (like the majority in Duval county). Yes my property taxes are high, but I didn't think that cutting them would solve anything. The loss of these taxes created a major problem for COJ. While they are certainly wasteful in their spending, the cuts required to meet the loss of revenue would have been deep and felt by all, and this is before the economy went full-on tits up. What galls me further is that now I have these fees and I can't write them off my Fed income taxes like I could the property tax.

To me the solution was simple, revise the Save Our Homes law. Make everyone pay their equitable share in taxes for the current market value of their home. If they did that, I think they could have reduced the millage and not tacked on any fees and come out even.

So, Why can't we raise the JEA franchise Fee to 6%. Let JEA know how it feels to have rates rise on you. OF course JEA would just rais e our rates again to compensate.

I think you're confused about how the Franchise Fee works. JEA doesn't pay it. It was added to your utility bill. The money gets collected from you and goes straight to the city. In fact, it cost JEA to collect it.

[JeffreyS]

I haven't made up my mind on these fees yet but I do want to thank Adam for addressing them here.

[fatcat]

Just a small stink on top of all these:

for our own residence, the tax is deductible on our Federal personal income tax even if you chose not to itemize deduction. The fees for specific service is NEVER deductible, itemize or not.

A quick look at my home JEA bill, there are some very interesting names on the billing items: City of JAX Franchise fee~3% on electricity, water and sewer; Gross receipts Tax~2.65% on electricity; Public service Tax~6.15% on electricity.

I think it is time for letters to be written.

[lindab]

Mr. Hollingsworth and Mr. Mosley,
We just paid our stormwater fee of $480 on a commercial property which has a stormwater pond permitted at construction by the St. Johns River Water Management District. We paid the state for the permit, about $600 in 1989. We paid engineers and materials to construct the pond to make it comply. Also, we paid hefty water management district taxes annually for the same property.

Another property we own has a City 54 inch diameter stormwater main drain crossing the property. The drain is such bad repair that the parking lot is collapsing from soil erosion. The City was notified in August of 2008 of this problem. To date no repairs have taken place. We just paid the City $207.60 and whenever the drain is fixed we will have to pay to fix the parking lot.

We understand the need for stormwater cleanup and make no complaint about our residential fee. But it is double dipping when commercial businesses which make payments and builds stormwater ponds for the state should also pay a fee to the City for stormwater. What the hell for?  And it really angers me to pay a fee when the City can't even get out to repair your own damn drains for almost a year!

[Adam Hollingsworth]

Lindab -- If you will contact me at adamh@coj.net or 630-1776, we can talk further about the commercial property you reference.  We have a stormwater credit program for which your property may be eligible; however, I won't know that until we get more details.  Further, I'd like the opportunity to address the city maintenance issue you raised.Thanks!  ADAM

[lindab]

Thank you, sir. I will call. However, the City should re-think the inequity of making commercial property pay twice for stormwater.

[strider]

To me the solution was simple, revise the Save Our Homes law. Make everyone pay their equitable share in taxes for the current market value of their home. If they did that, I think they could have reduced the millage and not tacked on any fees and come out even.

From our experience with our non-exempt property, the city has raised the tax amounts far more than anything we have saved on exempt property. In fact, while the market values of our properties have dropped, the taxable values have risen drastically, in a few cases, to well above market values.  And the city has continued to raise the values for the coming tax year.  If I understand the current exempting amounts, if the property qualifies, it is basically an additional $25,000 exemption.  If they raise an equal number of property's taxable values by $25,000, doesn't that equal it out?  Perhaps the first year they would indeed lose, but it does seem that by year two, the revenue would be back from the raised values on the non-exempted properties. If so, then the fees would become extra income.  It makes me wonder if the city is truly losing or just playing with the numbers.

[vicupstate]

As far as these fees go, here is my primary question.

One of the state legislators (I seem to remember it was Jim King, but it may have been someone else) put a provision in the property tax relief bill that would have exempted Jacksonville.  This was done because Jax has consolidated government and generally low taxes, so there were fundamental differences versus the rest of Florida. 

As I understand it, this provision would have allowed Jax to maintain the status quo on property taxes (ie no reductoin of revenue).  Without that reducton, there would be no need for these fees.  In fact the city would actually have MORE revenue according to Hollingsworth's post.  These fees have a specific collection cost too.  There is no 'collection cost' in merely maintaining the current property tax. 

Why wasn't this 'get out of jail free' card used?  I further understand that the legislator (King or whoever it was) wasn't too happy about going to all that trouble for naught. 

There may be a good reason for not taking advantage of the exemption, but I haven't read it.  Does anyone have any info. on this?  

I do know that Glorious Johnson was in favor of taking the exemption, and Peyton and the council majority were not.     

[Deuce]

If I understand the current exempting amounts, if the property qualifies, it is basically an additional $25,000 exemption.  If they raise an equal number of property's taxable values by $25,000, doesn't that equal it out?  Perhaps the first year they would indeed lose, but it does seem that by year two, the revenue would be back from the raised values on the non-exempted properties. If so, then the fees would become extra income.  It makes me wonder if the city is truly losing or just playing with the numbers.

Interesting idea. When I slammed the Save Our Homes, I was not thinking of people who own multiple properties of which some were exempt and some not. I was thinking of the vast majority that only own their primary residence (me included). From a fairness in tax purposes, it doesn't seem right that I pay 2-3 times in taxes what someone else pays when both our properties are equal in market value now, but they bought 10 years ago so they are assessed at a much lower valuation.

[urbanlibertarian]

I agree that the Save Our Homes amendment is unequal and unfair.  Unfortunately it's very popular among people who vote regularly.

Also, taxing businesses much higher than residences is unfortunately very popular.  IMO reducing the tax burden of all businesses relative to residences would be a better way to get corporations to locate here and promote general economic growth than the incentive packages to individual corporations.

BTW I'm a blue collar guy, not a business owner.