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Gainesville City Commission, Facing Deficits, Looks for Ways to Collect More Money from Citizens

BY JENNIFER CABRERA / APRIL 29, 2019

Mayor Lauren Poe made it clear that the current push for equity is driving at least some of the budget increases

Under cover of a meeting titled “Ironwood Golf Course,” the Gainesville City Commission met last week to discuss their options for extracting more money from the citizens of Gainesville and the surrounding area. If you looked at the list of Gainesville city meetings last week, you would have seen that the City Commission Workshop scheduled for April 23 had the title “Ironwood Golf Course,” but there was only one item on the agenda, “Budget Planning Workshop (B): This budget meeting is to discuss and provide direction to staff for preparation of the City’s General Government FY20/21 Budget.”

It became clear during this meeting that the City Commission has no desire to decrease the general fund transfer from GRU, but this is a problem because that decrease was cited last month as critical to shoring up GRU’s cash flow, as captured in this screenshot taken from the video of the March 21 meeting.

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The top line shows the projected GRU budget deficits FY2019-FY2025, and the remaining rows show projected sources of income to offset the deficits. This table was shown as part of the presentation to support issuing bonds (borrowing money) to add some cash in the short term and restructure the debt payments to push them into later years. According to this chart, GRU proposes transferring $6 million less to the city’s general fund than it currently transfers, starting in FY2020. It is likely that the credit rating agencies (who essentially decide how much interest GRU will pay on its debt) take this projected plan into account when they decide on the credit rating, so keeping the transfer steady instead of decreasing it by $6 million could have a negative effect on future credit ratings. However, the general fund transfer currently makes up about 31% of city revenues, so the city is not enthusiastic about cutting it.

Mayor Lauren Poe did most of the talking during the meeting and indicated that the City Commission has no intention of cutting any expenses, so the commission mainly discussed ways to raise more revenue in the form of taxes. This table from the budget presentation shows the projected deficits in FY20 and FY21 (the full presentation can be downloaded here). 

If GRU increases or maintains the general fund transfer instead of decreasing it, as they currently project, they would need to raise rates to make up the difference. Mayor Poe briefly discussed increasing electricity rates by 4%-7%, but he focused on the four funding sources the city has most control over: property taxes, utility taxes, communication taxes, and the general fund transfer. 

The commission first discussed increasing the millage (the percentage of property value that is paid in property taxes to the city). Mayor Poe said, “Regardless of how our priorities shake out, we know we can fund it through millage.” Translation: we can spend as much as we want by increasing property taxes. They are looking at an increase of 0.75-1.5 mills, although Poe said he’d like to cap it at 1 mill. That’s an extra $182.90 per year for the median home in Gainesville.

Mayor Poe instructed staff to investigate how much they would need to increase the property tax millage to compensate for a loss of $1.5m, $3m, and $6m in general fund transfer from GRU. 

They also discussed increasing the Special Assessment for Fire Services. This is a fee charged to city residents in addition to property taxes; it is based on the size of the buildings on each property. It was originally intended to fund 50% of fire services, but now it funds about 45%. Poe said he was ok with increasing this assessment to cover 75% of fire services, which would mean that these assessments could increase by 67% (they are currently projected to increase by 10% to get the amount back to 50% of fire services). 

Poe made it clear that the current push for equity is driving at least some of the budget increases (we will begin publishing our detailed report on the Racial Justice Task Force meeting this week, but the bottom line for the city on equity issues was about $5 million this year). Poe wants to increase funding for programs that “support diversion and deflection” – i.e., keeping law-breakers out of the criminal justice system. He wants to jointly fund some positions connected with Court Services and the county, thus “fixing” equity issues by hiring more high-wage administrators. Poe said it’s “not going to be a small amount [of money], I don’t think.”

The commission also talked about the fact that their communication tax on landlines is bringing in less money than in the past because fewer people have landlines. He asked the city attorney to find out whether they can add a communication tax on cell phone numbers. So yes, your cell phone bill will also go up if the city has its way.

During the citizen comment period, Nathan Skop made several good points about the commission’s discussion. Skop pointed out that utility taxes have increased $2.7 million (see chart below) because of the purchase of the biomass plant – just one more way that the biomass plant has led to higher bills for GRU customers. According to Skop, this increase occurred because the cost recovery of biomass fuel was previously a separate, untaxed line item. After the purchase, the biomass fuel became part of the base rate, where it is now taxed. 

Skop also pointed out some unknowns in the budget planning, including the fact that the city does not currently have a contract with the police department — so those costs can’t be accurately projected. 

If you are a resident of Gainesville and you are concerned about increased taxes, you should contact your city commissioner and let them know that they should prioritize cutting expenses instead of raising taxes.

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