Gainesville passes property tax and utility rate increases as GRU warns that additional rate increases are possible

BY JENNIFER CABRERA

GAINESVILLE, Fla. – During the evening session of their September 7 meeting, the Gainesville City Commission voted for a 29% property tax increase and told the City Manager and GRU General Manager to work out a dispute that could increase electric rates over the planned 3% increase.

City will go back to annual budgets

The first agenda item was a request from City Manager Cynthia Curry to consolidate the existing budget administration policy and budget amendment policy into a single policy. Curry said the name of the budget office will now be the Office of Management and Budget, and the City will no longer use two-year budgets but will budget on an annual basis. 

There was no public comment on the item, so Commissioner Bryan Eastman made a motion to approve the staff recommendation, with multiple seconds. The motion passed unanimously.

Mayor Harvey Ward pointed out that if they seemed to be moving through the budget process quickly, it was because it’s the “first reading culmination of months and months and months of workshops and special meetings and conversations, both one-on-one with staff and each Commissioner, but also a lot of very public meetings and conversations, both here in this room and between commissioners and the media and the public and individuals.” 

Fire Assessment Fee

The second agenda item was the Resolution that sets the Fire Assessment Fee for the next fiscal year. After the Clerk read the item, Ward and City Attorney Daniel Nee realized that the remaining agenda items had been publicly noticed for 6:00 and it was about 5:45, so they took a recess until 6:00.

When the meeting reconvened, Curry reminded the Commission that they had adopted a new methodology for the Fire Assessment Fee in March and that the fees will cover 51% of the fire operating budget; the assessment is projected to collect about $12.3 million, a 31% increase over the previous fiscal year. This was the final reading for the Resolution, which only requires one vote.

There was no public comment on the item, so Commissioner Cynthia Chestnut made a motion to approve the Resolution, and Eastman seconded the motion. The motion passed 6-1, with Commissioner Casey Willits in dissent. Willits had previously objected to the increased assessments for multi-family properties, which are significant for complexes with more than ten units.

Schedule of fees, rates, and charges – GRU

The third item was the schedule of fees, rates, and charges for GRU, which includes a 3% increase in electric rates and a 5% increase in wastewater rates, part of a July 2021 Resolution to reduce Gainesville Regional Utilities’ (GRU) debt. Water/wastewater connection fees will also increase.

Commissioner Ed Book gave GRU General Manager Tony Cunningham “one last chance” to bring up any recent changes that could allow the Commission to reduce the rates, but Cunningham said, “No, so really the culmination of all year’s working on the budget culminated on August 9, when the Commission adopted and approved the budget, and we are in the same situation today as then.”

There was no public comment on the item, so Book made a motion to approve the schedule of fees, rates, and charges, and Commissioner Reina Saco seconded the motion. The motion passed 5-2, with Commissioners Cynthia Chestnut and Desmon Duncan-Walker in dissent.

Schedule of fees, rates, and charges – General Government

The fourth item was the schedule of fees, rates, and changes for General Government; Curry said the fees and charges have increased by about 5% over the previous year. 

There was no public comment on the item, so Saco made a motion to approve the schedule of fees, rates, and charges, and Eastman seconded the motion. The motion passed 5-2, with Chestnut and Duncan-Walker in dissent.

Adjustments added to streetlight services

The fifth item was an ordinance amending the electric system fuel and purchased power adjustment added to public streetlight and rental outdoor lighting services. Cunningham said these are the fuel adjustment rates that GRU applies to different lighting types, and the amendment adds a lighting fixture. 

There was no public comment, so Saco made a motion to approve the ordinance, and Willits seconded the motion. The motion passed 6-1, with Duncan-Walker in dissent.

Property tax rate

The sixth item was the property tax (millage) rate for the upcoming fiscal year. Curry explained that the Commission had previously set the maximum millage rate on July 20 at 6.4297 mills, which is 16.9% higher than the previous rate and 29.2% higher than the rolled-back rate, which is the tax rate that would raise the same amount of revenue based only on valuation increases in the same properties that were on the tax rolls last year.

Curry showed the slide below, which charts the increase in taxable property values (bars) and the millage rate (line) since 2009. The property tax increase will generate $15.3 million in increased revenue over the previous year. 

Curry explained that the property tax increase was needed because the Government Services Contribution (previously called the General Fund Transfer) from GRU to General Government was sharply reduced this year, as shown below. 

The proposed budget of $156,419,483 is $2,062,797, or 1.3%, higher than the FY2023 adopted budget of $154,356,686. In April 2023, when the Commission made the decision to cut the Government Services Contribution, Eastman said, “This is a $19 million cut to our government… We cannot make up $19 million in millage increases alone, which we shouldn’t do because that’s going to really hurt–-this is going to mean very severe cuts to things that we care deeply about within our community.” 

The budget cuts a net of 116.5 full-time positions, but the total dollar amount is actually a small increase over the previous year’s budget; the budget that was presented in July was $327,372 less than the previous year, so the proposed budget has increased $2.4 million since that date. Curry said, however, that if you remove about a million dollars in local option gas tax that will be transferred to RTS to repay a loan from a previous budget year, the real increase is a little over $1 million, or 0.7%, compared to the inflation rate of about 3.2% in July. Curry said there is a $1.3 million contingency in the budget. 

The slide below summarizes the revenue and expense changes in the budget; the biggest changes are the loss of $19 million in Government Services Contribution, an increase of $15 million in property taxes, and an increase of more than $10 million in public safety costs, countered by reductions in General Government positions and operating expenses.

There was no public comment on the proposed millage rate, so Chestnut made a motion to approve it, and Saco seconded the motion. 

Book said the action items they were taking in the meeting “are so difficult, very challenging to make.” He suggested that given the $1.3 million of contingency, they might be able to roll the property tax back by 0.1 mills: “It’s meaningful in the fact that we’ve raised other items on our community, and this one, we know we have the money, and we can still balance the budget… I realize, on a contingency, it means we have to operate tightly. There’s no doubt about that, but we’re gonna have to be doing that for the next 24 to 36 months, anyway, and we’re doing it right now.”

Willits also favored reducing the millage rate but also said the City will have less “wiggle room” next year with fewer vacant positions, “and that contingency is just going to be important.” Willits said he was unwilling to cut spending any more because “we have a goal to achieve things in our city… If we change this too much, it’s more about who are we not going to pay because most of our expense… is staff.”

Eastman said he would also like to cut the proposed millage rate, but he was concerned that the incoming GRU Authority might cut the Government Services Contribution to zero, forcing another $19 million in cuts on General Government: “How will we be able to protect, not just our police and fire…but all of our employees?… We’ve got to do this… My hope is that when GRU comes in, and we say that we’re going to have them pay their full fair share of what their taxes would be, then I’m happy to bring this tax right back down to 5.5 mills… You know, that 0.1 mill’s not the difference between safe and unsafe, but it is the difference, you know, it’s that little bit of wiggle room.”

Ward agreed, “We have in this budget less than a 1% contingency for personnel and operating, and I don’t think that’s prudent… And while I’m not looking forward to paying higher taxes, personally, and I know no one is, this is where we are.”

During public comment, Jim Konish said that the University of Florida’s budget is seven times as large as the City, the County, and the School Board, “and not only are they not paying anything on campus, they’re not paying anything on this burgeoning UF Health apparatus… So when you go for your bailout on GRU, which is coming, you might want to go for a bailout on the City because we have an entity that’s not paying a dime… I don’t think [UF President Ben] Sasse is going to go rogue and write you a check without consulting with the legislature, but at some point, some leader is going to have to stand up and have the State bail GRU out and figure out a way where we can fund the City of Gainesville. But we can’t do that if the University of Florida keeps expanding off campus and doesn’t pay a single dime.”

Ward replied, “Thank you, Mr. Konish. I knew that sooner or later we would find common ground.”

The motion passed 5-2, with Book and Duncan-Walker in dissent.

GRU Budget

The seventh item was the GRU budget. During public comment, Jim Konish said that 24.35% of the budget will go to debt service: “The massive debt is not being paid off; it’s merely being postponed… You have no basis whatsoever to command a $15.3 million transfer payment that is not contemplated under a new Charter, which you choose to ignore… The Authority that’s coming in,… there’s almost no way they’re going to approve this, once they see how bad the GRU finances really are… You’d be well-advised to plan on not having a $15.3 million transfer… We’ll see what happens in the fall.”

Disagreement about who pays for County streetlights

Before making a motion, Eastman drew attention to “a discrepancy between what I’m seeing here in GRU’s budget and what I think we’re about to pass in the General Government budget.” He asked about a transfer from the General Fund for County streetlights.

Cunningham said there’s been an agreement for the past “25 to 30 years… where the County lights are paid for through the General Fund of the City of Gainesville… In October of 2022, the City Commission passed a motion that GRU would pay for those County lights and then reduce the General Fund Transfer by that amount.”

Cunningham said he told the City Commission on August 9 that if GRU had to pay for County lights, they would need to raise electric rates by 3.75% instead of the planned 3%, “and that was not the recommendation of staff. So the recommendation of staff is what was approved, which did not include the additional 0.75% increase in GRU rates to pay for that difference.”

Eastman said he “distinctly” remembered making a motion to “direct you guys to come back, and that’s how we wanted to move forward.”

Eastman made a motion to approve the tentative budget for GRU with the modification that the transfer for County streetlights “reflect General Government’s budget.”

Curry said General Government did not include the transfer of $1.1 million to GRU to pay for streetlights in the unincorporated county in their budget: “We’ve had that discussion with Mr. Cunningham. I know he doesn’t agree, but we did not include it because I thought the direction from this commission was for us not to do that.”

Cunningham said GRU addressed that direction from the Commission on August 9 by saying they would need the 3.75% increase in the electric rate, “which was not our recommendation to do that; it was to continue the same way that we’ve been doing that expense for the last [however long it’s been]… What was approved from the Commission is that 3% that did not include the County streetlight expense as part of the GRU budget.”

Eastman repeated his motion, and Cunningham responded that his recommendation would then be to increase the electric rate by 3.75%.

Ward said, “So there would have to be a change at the second reading of that ordinance.”

There was initially no second to Eastman’s motion, but after some back and forth, Chestnut agreed to second it “and discuss it thoroughly.” She said she “had no idea that this was happening until I got here this morning,” but she thought GRU should pay the expense because “this expense can’t be borne in General Government.”

Cost not built into either budget

Cunningham said his recollection was that the agreement with the County for streetlights says the funds will come from the General Fund of the City, but Nee said he recalled “that was not a material part of the agreement” and that the funds had “sort of in fact” come from GRU through a reduction in the transfer. Acting Director of the Office of Management and Budget Steve Varvel said that in 2023, the General Fund Transfer was increased by $800,000 over the projected amount, then the City paid for the streetlights, and “there was a true-up at the end of the year.”

GRU Director of Accounting & Finance Mark Benton said the GRU budget presentation on August 9 had explicitly discussed pulling back $1.1 million from the General Fund Transfer for streetlights: “We made a point of bringing up the fact that the Commission had asked us to come back and say, what would the impact be on GRU if we were to shoulder that burden. As Mr. Cunningham pointed out, we raised the point that that would be about three-quarters of 1% on the electric system, but that was not our recommendation, and that was never built into any of these budgets.”

Curry responded, “I’ve always made it clear in my conversations with Mr. Cunningham that we had no intention, based on the direction from this Commission, to put that money in the budget for next year. And so it is not in there.”

Ward, clearly frustrated, said that staff was putting the Commission in a position where they had to “figure this stuff out on the dais.”

Curry said she sent a memo to Cunningham on August 25 that said her budget would not include the $1.1 million, “as this is not an expense Gainesville residents should bear.”

Chestnut: “There isn’t any money there. There’s no money to come up with $1.1 million.”

Reading from the budget, Chestnut said that the General Government contingency consists of $600,000 for operational contingency, $630,000 for personnel service adjustments, and a set-aside of $150,000 for future gun violence prevention programming. She said, “There isn’t any money there. There’s no money to come up with $1.1 million.”

Ward said they needed to “solve something this evening,” and Eastman said a vote for his motion would be “clear direction, before we second-read your budget, that we intend for this to be on GRU’s ledger… By not voting for this, we would be turning to the City Manager and saying, ‘You need to find $1.1 million in your budget.’… I don’t know how else we would do it… And my recommendation is that we have that discussion with GRU and say [the General Government] budget is balanced.”

Chestnut suggested a 30-minute recess “to see if Mr. Cunningham could get with us to work this out.”

In response to a question from Ward about how much contingency is in GRU’s budget, Cunningham said they don’t specify contingency: “It’s part of our reserves.” He said the only alternatives are to increase rates or “reduce the excess reserves, which we have put into the net debt reduction plan, that $315 million that you’ve discussed and approved.”

Saco asked whether the reduction in the debt for the next fiscal year could be reduced by $1.1 million, and Cunningham responded that the City Commission had approved the net debt reduction plan to meet specific goals, including the concerns from the Joint Legislative Audit Committee about the extent of GRU’s debt. 

Saco responded, “I can’t worry about ten years from now if we don’t get a budget today.”

Willits said he could find $250,000 if the Commission would agree to get rid of the natural appliance gas rebate, which he has previously advocated. 

40-minute recess

The Commission went into recess for about 40 minutes, and when they returned, Eastman repeated his motion, and Cunningham repeated that the amount in question could only come from a rate increase or out of reserves. 

Chestnut said she did not want a 3.75% electric rate increase, “so I would say take it from the GRU reserve; it would just reduce the amount you would pay on debt defeasance.”

Duncan-Walker was also “not of the mind to accommodate any more rate increases.”

Ward said he preferred to “not be specific about where to find [the money]… I prefer, in the light of day, for everybody to be able to rethink and find the money at GRU, because I cannot possibly figure out how to make that a responsibility of General Government… I can make a twisted case–it’s not a good case, but a twisted case for why Gainesville Regional Utilities should do that.” He said he preferred to vote for Eastman’s motion and give GRU a little under two weeks to come up with “a really good solution… We’re talking about a quarter of a percent [of the combined budgets]… I refuse to believe that all the smart folks that we’re working with can’t figure it out. I refuse to believe that; I won’t accept it… And that then becomes Job One, even ahead of Open Container, for the next two weeks.”

Ward suggested that Cunningham bring options to the individual commissioners over the next two weeks.

Chestnut said she wanted to be clear that “that money cannot be a 3.75% increase on the ratepayers,” and Ward said, “I agree, I don’t think that will pass.”

Eastman’s motion passed unanimously.

General Government budget

The eighth agenda item was approval of the General Government budget. 

There was no public comment, so Eastman made a motion to approve the budget, and Chestnut seconded the motion. The motion passed 6-1, with Duncan-Walker in dissent.

Ward concluded by saying, “We’re so close to the top of the hill, y’all! So close to the top of the hill!”

The final reading of the budget and the associated taxes and fees will be on September 21.