By John Pacenti
Ocean Ridge’s town manager has proposed a modest but potentially crucial new revenue stream as Tallahassee debates sweeping changes that could strip local governments of hundreds of thousands of dollars over the next decade.
At the Feb. 2 Ocean Ridge Town Commission meeting, Manager Michelle Heiser proposed the town raise its communication services tax as a way to diversify revenue should state legislation to cut property taxes for homestead properties end up on November’s ballot.
Like all Florida initiatives, such a proposal would need 60% of the vote to be approved.
The CST is levied on the sale of communication services — think smart phones, landlines, cable, and internet. If you’ve ever looked at your monthly cell phone or internet bill and noticed a list of fees that make the total significantly higher than the advertised price, the CST is usually one of the biggest culprits.
Ocean Ridge currently levies the CST at 2%, generating roughly $41,800 in the current budget year, Heiser told elected leaders. If the commission were to adopt a commonly used rate of 5.22% — the maximum allowed for many municipalities — the town could see CST receipts rise to about $109,300, an increase of roughly $67,500 annually.
“(It) doesn’t seem like a lot, but it does make a difference. Every little bit is making a difference,” Heiser said. Gulf Stream to the south has its CST rate at 5.22%, but Manalapan to the north uses a rate of 1.6%.
The CST discussion came after the town’s elected leaders last November directed staff to explore other sources that could mitigate potential reductions to property tax revenues resulting from state-level initiatives.
Commissioner Ainar Aijala Jr. described proposed state legislation that could drastically reduce local property tax revenues over time. The version discussed at the meeting would create a new homestead exemption that phases in by $100,000 per year until it reaches $1 million. It then eliminates the town’s ability to levy certain non-public-safety property taxes on those homes.
Using conservative local assumptions, Aijala’s preliminary “back-of-the-envelope” projections show the town would lose roughly $61,000 in the first year under the draft state plan, $122,000 the next year and about $180,000 the third year.
If the exemption reaches its full phase-in, the town could see cumulative annual losses on the order of several hundred thousand dollars — and potentially more than $1 million once the cap phase ends and limitations take full effect, he said. “So we either have to find some things to do, like communication services or fee-based, or we’re going to start reducing the services that we provide to our residents,” he said. “Why should our people pay less for a cell phone than somebody in Gulf Stream does?”
Mayor Geoff Pugh said he wants to take a wait-and-see approach with what comes out of Tallahassee. “I’m not raising the tax just because somebody else is 5.2%, unless we need to,” he said.
Heiser recommended that commissioners consider the CST as a budget season option and, if they want to proceed, direct drafting of an ordinance and public hearings. Legally, the town must adopt an ordinance and notify the Florida Department of Revenue by Oct. 1 to have any rate change take effect Jan. 1 of the following year. “We’re in pretty good shape today, but these proposals in Tallahassee change the context,” Heiser said. “The CST could help us remain net neutral in year one if the law passes, but we need a clearer picture before making a decision.”
If a CST of 5.22% is adopted, the average impact would likely be roughly $100 per household annually, Aijala said, but the exact increase depends on families’ communication usage and bills.
The CST is collected from service providers and remitted to municipalities by the state.
Public hearings and ordinance drafting will provide residents a chance to ask questions and weigh in before any change is enacted.
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