By Jane Smith
Delray Beach commissioners have unanimously approved a slight cut in the tax rate, keeping a promise to city property owners to reduce the tax rate for 10 consecutive years.
The July 9 vote capped the total tax rate at $6.86 per $1,000 of taxable value for the financial year that starts Oct. 1. This marks the seventh consecutive year that Delray Beach is lowering its tax rate.
“I know we are trying to get things done, but I think we can drop the tax rate,” Mayor Shelly Petrolia said. “Dropping the rate would make us more attractive to people coming in.”
Commissioner Adam Frankel agreed. “We will have additional fees from the new hotels opening,” he said to justify his decision.
“For the first time, I agree,” said Vice Mayor Shirley Johnson, who is up for re-election in March.
Neal de Jesus, the interim city manager, presented staff’s recommendation for a slight increase in the tax rate to $7.06 per $1,000 of taxable value.
“Philosophically, there’s different ways to look at it,” de Jesus said. “In this time of economic prosperity, we should be spending now.”
The city just passed an amendment to cover a $3 million gap in the current year’s budget, he said. Last fall, $2 million was taken out of reserves to cover a shortfall in the public safety pension funds.
“Every time they lower their assumptions (of the rate of return on investments), it causes the city to contribute more,” de Jesus said.
For the next budget year, the public safety pension boards and the general employees pension board are reducing their rates of return, he said. “For the next year, another $1.5 million to $2 million.”
The second major cost comes from increases in employee salaries from contract negotiations and the rising cost of health insurance.
Third, de Jesus said, were the new hotels with increased visitors and buildings coming online. They will affect city services from trash pickup to public safety. “That all costs money,” he said.
De Jesus said reducing the tax rate would translate into a $2.1 million deficit compared with department requests.
Because property values rose in the city by 6.6 percent, Delray Beach has an extra $689.4 million of property to tax, said Laura Thezine, interim financial director.
At the slight tax reduction, the city will have $70.3 million for its general fund.
For a city homeowner with a house valued at $1 million for tax purposes, the decreased tax rate translates into a $100 annual savings.
Thezine also said the city’s roll-back rate is $6.46 per $1,000 taxable value. The roll-back rate is the number that would generate the same tax revenue as the prior year with allowances for new construction.
In addition, she gave this schedule of budget meetings: Aug. 13, budget workshop; 5 p.m. Sept. 5, a tentative budget hearing; and Sept. 19, the final budget adoption.
The city’s proposed tax rate has two components. The operating tax rate is $6.66 per $1,000 value and the debt service rate is 20 cents per $1,000 value.
The tax rates had to be set by the end of July for the county property appraiser to mail notices in mid-August to every property owner. The notices cover assessed values and proposed tax rates.
The rates can be lowered but not raised during the city’s budget hearings in September.
Just before the vote, de Jesus reminded commissioners that they were below their 25 percent target for reserves.
“It’s now 23 percent,” he said. “I want to make sure the commission understands this.”
In other tax-related news, the Downtown Development Authority received unanimous commission approval to continue its $1 tax levy per $1,000 property value in its district. The DDA will have a $1.1 million budget for the next financial year, up nearly 6 percent from the current budget year with an additional $59,721 of property tax revenue.