The city of Gainesville will give a final budget presentation on Thursday with three scenarios to balance its revenues and expenditures for the upcoming fiscal year beginning Oct. 1.
Gainesville faced a revenue shortfall early in the budget season, and the shortfall widened to $9.8 million in June. Updated August numbers show that gap dropped to $7.8 million as more departments cut costs and revenue estimates were revised.
Each of the scenarios that the Gainesville City Commission will review Thursday shows a tax increase—two include a millage rate increase, while a third has the millage holding steady but still netting more revenue because of higher property values.
The budget scenarios toggle between a few key levers: expense reductions, millage rate and excess fund balance (savings).
Before diving into the scenarios, a quick review of the millage rate and excess fund balance.
Property tax
To generate property tax, each Florida city and county sets a millage rate. The millage rate determines what percentage of a property’s value the owner must pay in taxes.
Florida remains a hotbed for real estate with more people moving into the state, contributing to higher property values. Each year, the property appraiser for a county estimates how much each parcel of land is worth before adding the total and sending it to the city and county governments.
With that property value total, cities and counties can determine what millage rate to set and how much property tax they will get.
Each mill equals $1 for every $1,000 of assessed property value. For example, a millage rate of 1.0000 mills would generate $100 in property taxes for a home valued at $100,000. A millage rate of 6.4000 mills would generate $640 for a home valued at $100,000.
The city of Gainesville’s current millage rate is 6.4297 mills.
The assessed property value is different from what a home will sell for. You can find assessed values at the property appraiser’s website.
In areas where the overall property value increases, local governments can generate the same amount of revenue with a lower millage rate. In areas where the overall property value decreases, a city or county would need to increase the millage rate to receive the same amount of taxes.
Excess Fund Balance
The city of Gainesville has reserve money to use for emergencies, like a wad of cash kept in the mattress, called the fund balance.
The city of Gainesville has $58.4 million in fund balance.
The city of Gainesville established minimum and maximum parameters for the fund. According to Gainesville’s ordinances, the fund balance must maintain enough money to operate the city for two months, but cannot have more than three months’ worth of funding.
According to the city, Gainesville needs $27.5 million as the minimum requirement and $41.2 million as the maximum threshold.
When the fund balance goes over the maximum threshold, the City Commission can use the excess funds as it sees fit. So far this budget season, the commissioners have said it would like to fund one-time budget needs instead of filling a budget hole that will return without a permanent change to either the city’s expenses or revenues.
Right now, the city of Gainesville has an excess of $17 million.
The city already allocated some of that excess cash, including $4 million for critical life/safety projects and $722K for Workday procurement modules. Another $3 million has been earmarked for a new Technology Department and radio replacements for first responders.
After these projects, the city has $9.4 million over its maximum fund balance threshold that it can use.
With property tax and excess fund balance settled, here are the three budget scenarios Gainesville commissioners will review at Thursday’s meeting.
Gainesville’s budget scenarios
For Scenario 1, the City Commission would adopt the maximum proposed millage rate, an increase of 0.4615 mils or 7% rate increase. This new millage rate would generate $11 million in additional property tax compared with the current fiscal year.
The new millage rate would be 14.9% over the rolled-back rate. This rolled-back rate is the millage the city would need to pass in order to earn the same amount of property tax as the previous fiscal year. According to the state, any millage rate above the rolled-back rate is listed as a tax increase.
The Scenario 1 millage rate jump would require approval by five of the seven members of the City Commission. The city would also reduce vehicle fleet payments and spend $1.1 million of its excess fund balance to fully fund its budget.
For Scenario 2, the City Commission would still increase its millage rate, but not as much. The millage rate increase would be 0.2500 mils, or a 3.8% rate increase and 11.4% increase from the rolled-back rate.
With less property tax compared to the first option, the city would make up the difference by reducing police and fire overtime, cutting $1 million in funding for outside agencies and spending $1.8 million of its excess fund balance.
The City Commission would also need a supermajority to pass this scenario.
For Scenario 3, the millage rate would stay flat at 6.4297 mils. Because of rising property values, this millage rate would generate $6 million more than last year.
With fewer tax dollars than the first two scenarios, the city recommends freezing nine police officer positions (currently vacant) to save $1.4 million, cutting $1 million in funding for outside agencies, reducing fleet-fixed payments by $2.9 million and spending $2.5 million of its excess fund balance.
Spending $2.5 million in fund balance would still leave $6.9 million in excess dollars within that account.
The City Commission will meet at 1 p.m. on Thursday to discuss the options. It’s the last scheduled budget meeting before the commission has the first of two votes to set the millage rate in September, currently scheduled for Sept. 10 and Sept. 24.