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HomeMy WebLinkAbout02-24-2026 10am Property Tax WorkshopCITY of SQ3ASTIAN HOME OF PELICAN ISLAND SEBASTIAN PROPERTY TAX WORKSHOP MINUTES TUESDAY FEBRUARY 24, 2026 - 10:00 A.M. CITY COUNCIL CHAMBERS 1225 MAIN STREET, SEBASTIAN, FLORIDA CALL TO ORDER 2. PRESENTATION The City Manager opened the Property Tax Workshop by welcoming residents to Sebastian's first property tax workshop. He introduced the key staff members present: Chief Financial Officer Brian Stewart Human Resources Director Cindy Watson Fleet Superintendent Dave Moore City Attorney Jim Stokes Acting City Clerk Cathy Testa Chief of Police Hainey IT staff City Manager Benton also recognized council members in attendance: Council Member Ed Dodd Vice Mayor McPartland Mayor Jones A. What Prooertv Taxis Used For i. Overview of services funded The City Manager explained that the workshop's purpose was to provide factual information on property tax usage in Sebastian, noting that while there is considerable media discussion about property taxes statewide, the city wanted to focus specifically on Sebastian's situation. He outlined that the presentation would cover what property taxes are, how they're generated, what they fund in Sebastian, the difference between homestead and non -homestead properties, and potential alternatives or cuts if property taxes were reduced. The City Manager provided context about current state legislation, explaining that House Joint Resolution 203 had passed the Florida House on February 19th, proposing the elimination of all non -school ad valorem taxes. He clarified that if bills pass both legislative chambers and receive gubernatorial approval, they would be placed on the ballot for voter decision, emphasizing that voters would make the ultimate determination on property tax reform. The City Manager defined property taxes as local ad valorem (value -based) taxes on real property and commercial personal property, calculated using a millage rate set annually by the City Council through public workshops and hearings. He explained that properties are assessed annually by the county property appraiser and taxes are collected by the county tax collector, making property taxes a stable and predictable revenue source for general fund operations. The City Manager detailed the property tax calculation formula, explaining how the property appraiser establishes just market value, which is then reduced by state increase caps (3% annually for homestead properties, 10% for non -homestead), resulting in assessed value. After deducting exemptions like the $50,000 homestead exemption, the taxable value is multiplied by the millage rate. He noted Sebastian's current millage rate is 3.4455. Using a dollar bill analogy, the City Manager broke down property tax distribution: 36 cents goes to Indian River County (including emergency services), 34.8 cents to Indian River County School Board, 20.8 cents to the City of Sebastian, 4.6 cents to the hospital district, and 3.7 cents to other taxing districts, including improvement districts and mosquito control. B. Impact of Property Tax Reduction i. Review of budget impacts and service implications ii. Discussion of short-term and long-term effects The City Manager provided detailed information about House Joint Resolution 203, explaining that the original bill proposed increasing homestead exemptions by $100,000 annually for ten years, gradually eliminating property taxes except for school taxes. However, the bill was amended on the house floor to establish complete elimination of property taxes for homesteaded properties effective January 1, 2027, while maintaining school taxes. The City Manager presented Sebastian's specific vulnerability, noting the city estimates collecting $8,393,178 in ad valorem taxes from 14,540 total properties. Homestead properties comprise 64% of properties (9,279) but account for 57% of ad valorem revenue ($4,756,309), while non -homestead properties represent 36% of properties (5,261) generating 43% of revenue ($3,636,869). This would result in a $4,756,309 reduction in general fund revenues, equating to 24% of annual general fund revenue. The City Manager emphasized Sebastian's unique position compared to the state average, with homestead properties representing 64% versus the state average of approximately 36%, and generating 57% of property tax revenue compared to the state average of 36%. He noted Sebastian ranks in the top 20 cities statewide for homestead dependency due to its small commercial base, which residents have purposefully maintained to preserve the community's character as a small fishing village. The presentation showed general fund revenues totaling approximately $19 million, with property taxes representing about 38%, utility taxes 21%, intergovernmental revenue 21%, licenses and permits 7%, and other sources 13%. The City Manager illustrated how the $4.7 million reduction would create a significant budget deficit requiring either service cuts or alternative revenue sources. He explained that property taxes fund core city services including the police department (45% of general fund at approximately $8.4 million), public works including roads and fleet operations (8% and 2% respectively), parks and recreation (10%), information technology and cybersecurity (4%), planning and zoning, code enforcement, human resources, finance, and city administration. The bill requires maintaining current public safety levels, meaning the remaining departments would absorb cuts representing roughly 50% of the remaining budget. C. Makina__ ua the Lost Revenue i. Possible alternatives: fees, grants, growth strategies The City Manager outlined potential scenarios for addressing revenue loss, including shifting the burden to non -homestead and commercial properties through millage rate increases, implementing special assessments for specific services like road maintenance and street lighting, seeking increased state funding (though none has been proposed), and increasing fees for services, including potential parking fees, boat ramp fees, and recreation program fees. He explained property taxes' advantages over other revenue sources, noting their stability and predictability for budgeting, flexibility allowing resource allocation to needed areas (unlike restricted funding sources), and preference by bond markets for stable revenues resulting in lower borrowing costs. The City Manager emphasized that Sebastian's general fund currently carries zero debt. The presentation compared property taxes favorably to alternatives: fees are limited to services provided and can reduce usage if set too high; assessments can only apply to specific service areas receiving benefits; grants are project -specific, limited, and increasingly scarce; and special assessments have restricted uses requiring direct property impacts. D. Questions. Scott Baker asked about the city's authority to enact new taxes. The City Manager explained that the state preempts municipalities from establishing new taxes, though the city can increase and establish new fees for services. David Garner, originally from Palm Beach County, argued that other counties already charge for parking and boat ramps regardless of property taxes, and that Governor DeSantis stated Florida has sufficient revenue to eliminate property taxes. He contended that residents shouldn't pay ongoing taxes on property they already own. The City Manager responded that Sebastian has chosen not to implement such fees and that the current bill provides no additional state funding to municipalities, with Indian River County not qualifying as fiscally constrained for potential state assistance. Council Member Ed Dodd added that Representative Toby Overdorf, co-chair of the House Property Tax Evaluation Group, indicated that replacing lost property tax revenue would require a 16-18% sales tax increase, emphasizing that infrastructure maintenance costs would ultimately fall to the state if not handled locally. Bobby Brown, a recent Sebastian resident from Palm Beach County, asked about impacts on local decision -making authority. The City Manager explained that losing 24% of general fund revenue while maintaining police funding requirements would necessitate approximately 50% cuts to remaining departments, significantly affecting forward -facing services like parks maintenance, special events, and public works that residents encounter daily. Mark Dietrich questioned why municipalities aren't more vocal in opposing the legislation to state representatives, expressing frustration with lack of communication from elected officials about revenue replacement mechanisms. The City Manager confirmed that city staff and council have expressed concerns to state legislators and provided fiscal impact documentation, noting that the workshop serves to inform voters before the referendum since the city cannot advocate for or against ballot measures once they're finalized. Julie Judson, a 40-year Sebastian resident, questioned Governor DeSantis's endgame and expressed concern about potential 15% sales tax increases. The City Manager clarified that no formal sales tax increase proposals have been introduced in accompanying legislation, though such measures have been mentioned informally. Susan Larusso shared experience from Connecticut where income tax implementation led to both income and sales tax increases, and expressed concern about proposed state legislation removing local planning and zoning authority. She emphasized that Sebastian's character as a small fishing village cannot sustain such revenue losses through fees and staff cuts alone. Sandra Williamson raised concerns about municipal bonds backed by ad valorem taxes potentially going into default. The City Manager acknowledged this issue was raised during house floor debate, but noted no solutions were included in the current legislation. Bobby Brown asked about Sebastian's staffing levels compared to other municipalities. The City Manager explained Sebastian currently has 5.91 employees per thousand residents, down from 7.63 in 2006, noting that comparisons are difficult due to varying municipal services, particularly since Sebastian doesn't operate water/wastewater utilities. Michael Ho suggested implementing parking and boat ramp fees, noting other communities already charge such fees, and requested that sales tax increases be considered as a last resort. The City Manager explained that sales tax control rests with the state, and that boat ramp fee implementation would be complicated by grant restrictions, though trailer parking fees might be possible. Michael Anderson asked about local sales tax components. The City Manager confirmed that a half -cent sales tax generates approximately $2.5 million annually for the city's general fund as part of intergovernmental revenue, but control rests with state mechanisms rather than local authority. Scott Baker inquired about requesting departmental budget reductions in anticipation of property tax changes. The City Manager confirmed that staff meetings have already addressed being creative with potential reductions, though fiscal year 2027 budgets will be established before the November referendum, with implementation timing dependent on voter outcomes. A resident expressed opposition to property taxes, citing restricted access to facilities he pays for, though the City Manager corrected that Barbara Street Sports Complex has never been locked. David Garner noted that the skateboard ring previously required payment for access. The City Manager concluded by emphasizing key takeaways: property taxes fund core daily services residents depend on, consistent funding is required for emergency services, homestead exemptions reduce individual tax burden, eliminating property taxes would require either service cuts or new revenue sources, and decisions involve trade-offs between taxes and service levels. He reminded attendees that the city cannot advocate for or against referendum measures once finalized, making the informational workshop their opportunity to understand service impacts before voting. 3. ADJOURN