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HomeMy WebLinkAbout02-25-2026 2pm Property Tax WorkshopCITY Of AT SQ3AST1��V HOME OF PELICAN ISLAND SEBASTIAN PROPERTY TAX WORKSHOP MINUTES TUESDAY FEBRUARY 25, 2026 - 2:00 P.M. CITY COUNCIL CHAMBERS 1225 MAIN STREET, SEBASTIAN, FLORIDA CALL TO ORDER 2. PRESENTATION The City Manager opened the property tax workshop by welcoming attendees and explaining the format. He noted that Mayor Fred Jones and Lance Lunsford, president of the Indian River County Taxpayers Association, were present. The City Manager outlined the presentation's goals: to explain what property taxes are and how they are generated, what they fund within Sebastian, the differences between homestead and non -homestead properties, and potential alternatives to property taxes. The City Manager explained the timing of the workshop, noting that once ballot language is drafted for constitutional amendments, the city is prohibited from expending taxpayer dollars to provide input for or against ballot measures. He emphasized the city's goal to provide factual information to residents about property tax usage before any potential November ballot measure. A. What Pro oertvTaxis Used For Overview of services funded The City Manager defined property taxes as local ad valorem (value -based) taxes on real and commercial property within Sebastian. He explained that millage rates are set by city council through a lengthy public process involving a citizen budget advisory committee, public workshops in June and July, and statutorily required public hearings in September. Properties are assessed annually by the county property appraiser, and taxes are collected by the county tax collector. He emphasized that property taxes provide a stable and predictable revenue source for general fund operations. The calculation process begins with just market value, less state increase caps of 3 percent for homestead properties under Save Our Homes or 10 percent for non -homestead properties. After applying exemptions, including the $50,000 homestead exemption, the result is multiplied by the city's millage rate of 3.4455. City Manager Benton explained that one mill equals one dollar per thousand dollars of taxable value. The City Manager distinguished between homestead and non -homestead properties. Homestead properties are primary Florida residences with up to $50,000 exemption and 3 percent annual assessment growth caps. Non -homestead properties include rentals, second homes, and commercial properties, with no homestead exemption and 10 percent maximum annual value increases. Regarding the property tax bill breakdown, the City Manager explained that Indian River County receives 36.1 cents of every tax dollar, the school district gets 34.8 cents, Sebastian receives 20.8 cents, the hospital district gets 4.6 cents, and other taxing districts collectively receive 3.7 cents. The City Manager highlighted Sebastian's unique situation compared to statewide averages. Assessment caps have reduced assessed value to only 71.87 percent of market value, meaning Save Our Homes has effectively reduced property taxes. Sebastian has 15.25 percent of assessed value as homesteaded versus a 5 percent statewide average, placing Sebastian in the top 20 cities statewide for this category. He attributed this to Sebastian's intentional character as a small, quaint fishing village with limited commercial development. B. Imp_ act of Property Tax Reduction i. Review of budget impacts and service implications ii. Discussion of short-term and long-term effects The City Manager discussed House Joint Resolution 203, which passed the Florida House on February 19th and proposes eliminating all non -school ad valorem taxes. He explained the legislative process, noting the bill must pass both chambers with identical language before going to the governor and potentially appearing on the November ballot. Kimberly Warren from the City of Fellsmere asked about the phase -in period. The City Manager clarified that while the original bill proposed a gradual $100,000 annual increase over ten years, a floor amendment changed it to immediate elimination of all homestead property taxes effective January 1, 2027. For Sebastian specifically, the City Manager presented detailed impact data. The city estimates collecting $8,393,178 in ad valorem taxes for fiscal year 2026. Of Sebastian's 14,540 total properties, homestead properties account for 64 percent (over 9,000 properties) and non - homestead properties account for 36 percent (over 5,200 properties). In dollar terms, homesteaded properties generate 57 percent of ad valorem taxes collected, while non - homestead properties generate 43 percent. The elimination would result in a $4,756,309 reduction in general fund revenues, equal to 24 percent of annual general fund revenue. However, the City Manager emphasized that since the bill requires maintaining current police funding levels at approximately $9 million, the actual impact is more severe. After setting aside police funding from the $19.8 million general fund, only $10 million remains for all other departments. Losing $4.7 million from this remaining $10 million would leave approximately $5 million to fund all non -police city services. The City Manager noted that Sebastian's 64 percent homestead property percentage is nearly double the state average of 30-35 percent, and the 57 percent of property tax revenue from homestead properties is over 20 percentage points higher than the state average of 36 percent. The City Manager displayed a bar graph showing current expenditures by department, current revenues creating a balanced budget, and the dramatic reduction that would result from eliminating homestead property taxes, dropping from $19.8 million to approximately $15.1 million. Property taxes fund numerous essential city services. The police department, consuming 45 percent of the general fund ($8.4 million not including capital), provides road patrol, detective services, SWAT team, dispatch, and code enforcement. Public works (8 percent) maintains roads, bridges, sidewalks, garage and fleet operations, and engineering services, responding immediately to citizen requests. Information technology and security (4 percent) handles broadcasting of public meetings, cybersecurity, and specialized police software required for state and federal compliance. Parks and recreation (10 percent) maintains Sebastian's 23 parks and provides programs from youth to seniors, including support for the senior center and special events. Public facilities (5 percent) maintains park restrooms, police department, city hall, and public works facilities. The finance department (4 percent) manages daily finances, investments, and procurement. Community development (4 percent) oversees all development applications, from simple permits to major projects. Other departments include code enforcement maintaining quality of life standards, human resources handling internal operations and union contract negotiations, and city administration including the city attorney, city manager, and city clerk offices. An attendee named Andrew asked about other areas' revenue sources. The City Manager explained that other municipalities rely heavily on commercial development, which generates more property tax revenue than residential properties. They also establish fees and special districts that Sebastian has avoided, such as parking fees, boat ramp fees, and special taxing districts for roadway lighting. The City Manager emphasized property taxes' advantages over other funding sources. Property taxes are more stable, flexible, predictable, and allow resources to be diverted where most needed, unlike restricted funding sources such as discretionary sales tax and local option gas tax that can only fund infrastructure improvements. He noted local option gas tax actually decreased last year, while property taxes consistently collect at 96-97 percent annually. Bond markets also prefer property taxes as stable revenue sources for municipal borrowing. The City Manager explained that the constitutional amendment includes no implementing bill and no state assistance to replace lost revenue. There has been no legislative discussion of sales tax alternatives. Potential funding alternatives include shifting the burden to non -homestead and commercial properties, implementing special assessments on tax bills, road maintenance assessments for neighborhood paving projects, and street lighting assessments similar to existing county districts. New or increased fees for services could include parking fees, boat ramp fees, and recreational program fees. However, the City Manager cautioned that service fees are limited by market acceptance - if fees become too high to fund services adequately, people simply won't pay them, eliminating the revenue source. Immediate impacts of property tax elimination would include removal of local control and responsiveness, major general fund revenue loss, longer response times to citizen requests due to staffing reductions, reduced parks and recreation programs and maintenance, infrastructure maintenance delays, and increased reliance on fees or other taxes. D. Questions The question and answer session included several inquiries. Kimberly Warren asked about recent legislation requiring permit completion within 45 days or refunding fees, noting the contradiction of reducing revenues while mandating faster service. The City Manager confirmed this concern and mentioned additional bills potentially eliminating local business taxes and preempting local growth control authority. An attendee named Dave asked about eligibility requirements, wondering if homes must be paid off and homesteaded for two years. The City Manager clarified that based on the legislation language, homestead status is the only requirement - mortgage status and length of homesteading do not appear to be factors. Deb Schellenberger asked about the city's current 20 percent state revenue share and whether it might increase. The City Manager confirmed the city receives approximately $3.9 million (20 percent of general fund) through various state shared revenues including municipal revenue sharing, motor fuel tax, and other sources, but noted no indication of increases to offset property tax elimination. The City Manager concluded by emphasizing that property taxes fund core city services that residents experience daily, core services require consistent funding, homestead exemptions currently reduce individual tax burden, and eliminating property taxes would necessitate either service cuts or new revenue sources, requiring trade-offs between taxes and service levels. 3. ADJOURN