What We Can Learn From Our Friends in the Sunshine State
By Julie Anderson
Consider the following visionary declarations taken directly from the websites of two of our nation’s counties:
The purpose of ______________ County government is to be responsive to citizens in providing an appropriate level of accessible services on a cost-effective basis. Critical county values include the following: continual improvement of infrastructure; health, safety, and well-being of the citizens; preservation of natural resources; responsible economic development; leadership; and stewardship.
____________ County will be recognized as the leader in local government through its excellent service to citizens and quality workforce. We will carry out our duties by respecting citizens, maintaining fiscal responsibility, demonstrating accountability, and fairly and equitably allocating resources.
The messages behind these proclamations are strikingly similar, prioritizing the citizenry, citing fiscal responsibility and promising leadership.
The two states that house these counties are among the five most populous states in the nation and the top five fastest-growing states, as well. In fact, experts predict that the population of both states will double within the next 50 years.
These two states include beautiful coastlines, diverse scenery, and a multitude of tourist attractions. Both citizens and public officials, alike, have exhibited pride in their “great state,” touting the blessings and beauty within their boundaries, not to mention energetic, kind-hearted people.
The Sunshine State of Florida (mission statement No. 1 – Okaloosa County) and The Lone Star State of Texas (mission statement No. 2 – Denton County) are certainly not identical. However, the similarities lend themselves to an “apples-to-apples” comparison, at least when it comes to growth and surroundings.
When it comes to the microcosm that is local government, county government in particular, the comparative results are a bit different, more like “apples and oranges.” In fact, the eyes of local elected officials in Texas have been turning more and more to the state known for its oranges, examining how Florida counties fund the multitude of services required in a burgeoning state.
Follow the Money
Throughout the year, we have taken an in-depth look at local government resources in Texas and found the following: Primary revenue sources to support mandated and discretionary functions include:
- Property tax
- Fees and fines
Other sources include:
- Intergovernmental revenue
- Miscellaneous revenues or transfers
In the majority of Texas counties, the property tax, or ad valorem tax, represents at least 50 percent of county revenue – more in other counties. For example, 95 percent of services in Loving County are funded by property taxes, confirmed Linda Clark, Loving County auditor. The remainder is funded by investment income and fees.
In Wichita County, the ad valorem tax currently represents 83 percent of the county revenue stream, reported County Judge Woodrow W. Gossom. Some 7.3 percent of county revenue is generated by fees, licenses, permits and fines; the remaining 9.7 percent comes from state and federal contracts, interest income and other payments.
According to the Texas Constitution, the county cannot levy a tax rate in excess of $.80 per $100 of property value for the county’s general fund, permanent improvement fund, road and bridge fund and jury fund. On top of the $.80, the county is authorized to levy a $.15 road and bridge tax and a $.30 farm-to-market road/flood control tax; however, these taxes are subject to voter approval. In addition, counties on the Gulf of Mexico can levy a special tax for construction of sea walls, breakwaters, or sanitary purposes, not to exceed $.50 per $100 valuation. Counties are also authorized by several statutes to levy certain special purpose taxes. However, these taxes when combined with the general fund tax may not total more than $.80 per $100 assessed valuation.
Some counties who are approaching the legal limit of the property tax are being forced to operate in a “maintenance mode” with zero dollars for infrastructure repairs, improvements or provision of additional quality-of-life services. For example, Pecos County’s 2016 tax rate and proposed 2017 tax rate is 0.799, just under the 80-cent limit.
The limitations of Texas county government including available funding can be explained by the following operational premise: As an arm of the State of Texas, counties can only do those actions that are specifically authorized by Texas law, including using revenue sources sanctioned by law. In contrast, Florida county government operates under “home rule authority” and can levy fees and special assessments unless prohibited by law. “Home rule is a tremendous advantage to local government and its citizens,” offered Okaloosa County Commissioner Kelly Windes. Okaloosa County is located in the northwestern region of Florida. “Home rule allows us to react faster to the needs in the county, and citizens have the ability to reach out to local government about their concerns,” Windes continued. “Two-thirds of Florida counties operate under home rule, and the remaining one-third are charter counties.”
The Sunshine Solution
Members of Texas County Commissioners Courts and professional organizations such as the County Judges and Commissioners Association of Texas (CJCAT) have been working for years to counteract a depleting revenue stream, with unfunded mandates consuming more and more of the dwindling waters. Proposed answers have included increased state funding, expanded tax revenues, and sales price disclosure, along with a cessation of unfunded mandates and continued opposition to proposed appraisal and revenue caps.
Counties do not need a greater share of the over-burdened property tax. Rather, local leaders are looking for local option alternatives to the property tax. As we approach the 85th Texas Legislature, CJCAT leaders are encouraging County Judges and Commissioners to give their senators and representatives specific suggestions on how to pump up the revenue volume. Just which local options should our lawmakers consider? Enter the Sunshine State.
Florida: County Government Responsibilities, Expenditures
As outlined in Florida Statute 125, Florida counties:
- Adopt an annual budget to control county fiscal year expenditures.
- Levy taxes and special assessments; borrow and expend money; issue bonds, revenue certificates and other obligations.
- Adopt county ordinances, resolutions, and rules of procedure, prescribing fines and penalties for violations of ordinances.
- Provide for the prosecution and defense of legal causes on behalf of the county.
- Provide and maintain county buildings.
- Prepare and enforce comprehensive plans for development of the county.
- Establish, coordinate and enforce zoning and business regulations necessary for public protection.
- Place issues on the ballot at any primary, general or special elections.
- Provide services related to the health and welfare of citizens, such as fire protection, parks and recreation, and waste collection/disposal.
- Appoint members to and create boards, authorities, committees and commissions as required by law.
According to the Florida Department of Financial Services, the eight primary categories of county government expenditures are:
- General Government Services – daily government operations.
- Public Safety – correctional facilities, ambulance and rescue services, etc.
- Physical Environment – garbage collection, water and sewer services, etc.
- Transportation – road construction and maintenance, airports, etc.
- Economic Environment – industrial park development, etc.
- Human Services – treatment of mental illness and injury.
- Recreation – parks, libraries, recreation, etc.
- Debt Service – fees associated with county bond issues.
Florida: County Government Revenue Sources
Counties, municipalities and special districts share many common revenue sources that fund government services in Florida. According to the Florida Department of Financial Services, the major sources of revenue are:
- Charges for Services
- Ad Valorem Property Taxes
- Intergovernmental Revenue
- Sales and Use Taxes
- Licenses and Permit Fees
- Fines and Forfeitures
- Miscellaneous Revenues
- Utility Taxes
Florida County Spotlight: Okaloosa County
The Okaloosa County Commission (the Commission) is comprised of five members elected at large to serve staggered terms of four years. One commissioner residing in each district is elected as provided by law. The county manager is hired by the Commission to execute policies established by the Commission and administers all departments responsible to the Commission.
The Okaloosa County tentative FY17 budget is approximately $369 million, according to Commissioner Windes. Some 15 percent of that $369 million comes from the ad valorem (property) tax.
Rather than a property tax rate, Florida counties set “ad valorem millage rates” with one mill equaling $1 for every $1,000 of taxable property value. The FY2017 millage rate for Okaloosa County is 3.4308. This millage rate and resulting funds represent the ad valorem or property taxes.
The Florida Constitution limits the ad valorem tax as follows:
- Ten mills for county purposes.
- Ten mills for municipal purposes.
- Ten mills for school purposes.
- A millage fixed by law for a county furnishing municipal services.
- A millage authorized by law and approved by voters for special districts.
The state constitution provides two exceptions to the 10-mill cap. The exceptions include a voted debt service millage and a voted millage not to exceed a period of two years. Additionally, no property may be subject to more than 20 mills of ad valorem tax for municipal and county purposes without elector approval, regardless of the property’s location, under the state constitution. Duval County-City of Jacksonville is a consolidated government; therefore, it has a 20-mill cap since it operates as both a county and municipal government.
In Okaloosa County, the ad valorem or property tax currently provides 15 percent of the revenue. So what about the remaining 85 percent?
County authority to raise revenue is defined in the Florida Legislature’s Office of Economic and Demographic Research 2015 Local Government Financial Information Handbook, http://edr.state.fl.us/Content/local-government/reports/lgfih15.pdf
Florida: Local Government Home Rule Powers, Fees and Assessments
According to the handbook, under Florida’s Constitution local governments possess expansive home rule powers. Given these powers, local governments may impose proprietary fees, regulatory fees, and special assessments to pay the cost of providing a facility or service or regulating an activity. Each fee imposed under a local government’s home rule powers should be analyzed in the context of requirements established in Florida case law that are applicable to its validity.
Proprietary fees are based on the assertion that local governments have the exclusive legal right to impose such fees. Examples of proprietary fees include admissions fees, franchise fees, user fees, and utility fees. The guiding legal principle is that the imposed proprietary fee is reasonable in relation to the government-provided privilege or service, or the special benefit received by the one paying the fee.
Regulatory fees may be imposed pursuant to a local government’s police powers in the exercise of a sovereign function. Examples of regulatory fees include building permit fees, impact fees, inspection fees, and stormwater fees. A regulatory fee should not exceed the regulated activity’s cost and is generally required to be applied solely to the regulated activity’s cost for which the fee is imposed.
Special assessments are used to construct and maintain capital facilities and to fund certain services. Generally, the courts have deemed special assessments to be valid if the assessed property has derived a special benefit from the improvement or service and the assessment has been fairly and reasonably apportioned among the properties receiving the special benefit.
In summary, all local government revenue sources are not taxes requiring general law authorization. When a county or municipal revenue source is imposed by ordinance, the question is whether or not the charge meets the legal sufficiency test for a valid assessment or fee. If the charge does not meet the test, it is considered a tax and requires general law authorization. If the charge is not deemed a tax, the imposition of the assessment or fee is within the constitutional and statutory home rule powers of county and municipal governments.
Revenue Sources Authorized by the Legislature
In addition to constitutionally authorized and home rule revenue sources, local governments have other available revenue sources that have been authorized by the Legislature. For purposes of discussion, these revenue sources are grouped into two categories: 1) state-imposed fees or taxes shared with local governments or school districts, or 2) other local revenue sources. Generally, state-shared revenue programs allocate all or some portion of a state-collected fee or tax to specified local governments based on eligibility requirements.
In some cases, a formula has been developed for the allocation of funds between units of local government. While general law restricts the use of several shared revenues, proceeds derived from other shared revenues may be used for the general revenue needs of local governments.
Several revenue-sharing programs require as a prerequisite that the county or municipality meet eligibility criteria. One such criterion requires that the local government have levied ad valorem taxes to produce the revenue equivalent to a millage rate of 3 mills on the dollar based on 1973 taxable values, or produce revenue equivalent to that which would be produced by a 3 mill ad valorem tax from any combination of the following four sources: receiving a remittance from the county, collecting an occupational license tax or a utility tax; or levying an ad valorem tax.
The category of state-shared revenues includes the following sources, explained in detail in the handbook:
- Alcoholic Beverage License Tax
- Cardroom Revenues
- Constitutional Fuel Tax
- County Fuel Tax
- County Revenue-sharing Program (Derives Funding from Transfers of 2.9 Percent of Net Cigarette Tax Collections and
- 0810 Percent of Sales and Use Tax Collections)
- Distribution of Sales and Use Taxes to Counties
- Emergency Management Assistance
- Enhanced 911 Fee
- Fuel Tax Refunds and Credits
- Indian Gaming Revenues
- Insurance License Tax
- Intergovernmental Radio Communication Program
- Local Government Half-cent Sales Tax Program (Derives Funding from Separate Transfers of Net Sales Tax Proceeds)
- Miami-Dade County Lake Belt Mitigation Fee
- Miami-Dade County Lake Belt Water Treatment Plant Fee
- Mobile Home License Tax
- Municipal Revenue-sharing Program (Derives Funding from Transfers of 1.3653 Percent of Sales and Use Tax
- Collections and Net Collections from the Municipal Fuel Tax)
- Oil, Gas, and Sulfur Production Tax
- Payments from State Forest Timber Sales to Eligible Fiscally Constrained County Governments
- Phosphate Rock Severance Tax
- State Housing Initiatives Partnership Program
- Support for School Capital Outlay Purposes
- Vessel Registration Fee
In addition to state-shared revenue sources, the Legislature has authorized a number of other local revenue sources. In many instances, the local government must enact an ordinance providing for the levy and collection of the fee, tax or surcharge. However, in some cases, referendum approval is required. For a number of revenue sources included in this category, general law restricts the expenditure use of the generated funds. The following revenues are included in the category of other local revenue sources.
- Communications Services Tax
- Convention Development Taxes
- Discretionary Surtax on Documents
- Green Utility Fee
- Gross Receipts Tax on Commercial Hazardous Waste Facilities
- Highway Safety Fees – Red Light Cameras
- Insurance Premium Tax
- Local Business Tax (Including Panama City and Panama City Beach’s Local Business Taxes on the Gross Sales of
- Retail and Wholesale Merchants)
- Local Discretionary Sales Surtaxes
- Local Option Food and Beverage Taxes
- Motor Fuel and Diesel Fuel Taxes (Ninth-Cent, 1-6 Cents, and 1-5 Cents Local Option Fuel Taxes)
- Municipal Pari-mutuel Tax
- Municipal Parking Facility Space Surcharges
- Municipal Resort Tax
- Public Service Tax
- Tourist Development Taxes
- Tourist Impact Tax
Florida counties may also establish “municipal service taxing or benefit units” known as MSTUs and MSBUs for any part or all of the unincorporated part of the county.
“This is a great tool and another great example of the use of home rule. MSTUs have been used to pave roads, add street lighting, and build and maintain parks, to name a few,” Windes specified.
If a municipality agrees, the unit may include all or part of the municipality. MSBUs and MSTUs are units within the county, created by ordinance, through which specific services are provided. The unit assessment share is levied for residents and areas that directly benefit from the service. MSBU and MSTU services can include road maintenance and improvements, drainage and waterway dredging, garbage collection, stormwater, road paving, lighting, transportation, beach restoration and community development.
Generally speaking, the largest revenue source for Florida counties is charges for services, or payments based on the consumption of publicly provided goods and services, such as garbage collection, water service, fire protection or ambulance service, and recreation services. Ad valorem property taxes are the second largest revenue source for counties, with intergovernmental revenues from grants and other federal and state government transfers constituting the third largest revenue source for counties.
The latest figures in Okaloosa County cite the largest revenue source as “cash carryforward,” noted Windes, representing 42.4 percent of the county’s revenue pool. This broad category includes money for projects started in the current year and carried into the next year, reserve funds, and issues bonded but not yet brought to completion. The majority of this category is comprised of unexpended funds from fee-supported operations including water and sewer, solid waste, airports, inspections, emergency medical services and use of the conference center.
The fee structures are set by the board of county commissioners, sometimes with assistance from a rate consultant, explained Gary J. Stanford, finance officer/deputy clerk for Okaloosa County. The EMS services are partially subsidized by ad valorem taxes. However the majority of enterprise operations are completely fee supported.
Another significant revenue category includes charges for services, representing 18.2 percent of the budget. This includes projected fees for the current year budget, which are in addition to the carryforward amounts, Stanford said. These two categories, cash carryforward and charges for service, comprise some 60 percent of the Okaloosa County revenue base. The detailed budget is available at http://www.co.okaloosa.fl.us/sites/default/files/doc/bcc/budgets/Summary_16A.pdf
“Along with providing local options for gas taxes and sales taxes, each year we submit a list to the Florida State Delegation to assist us in meeting the needs of our citizens with transportation and infrastructure needs,” Windes shared. “At the same time, the state also mandates the county to provide additional funding on local costs for employee retirement, health care and the Department of Juvenile Justice, for example. So it is very much a balancing act, and we try to work together and maintain a good relationship with our state legislators.”
The home rule concept, supported by local option user fees and local option taxes along with general state support and expanded revenue-sharing, has resulted in a county government system that has piqued the interest of Texas counterparts, who are stringently limited by state statutes.
As Texas County Judges and Commissioners schedule meetings with their senators and representatives, what message should they bring? Certainly one of pride in their county. Commissioners Court members across the Lone Star State are known for their close connection to their communities and genuine concern for their citizenry. As evidenced by comments at recent CJCAT conferences, teamwork, unity, and an attitude of servant leadership characterize those at the grassroots level.
Perhaps the collective message to Texas lawmakers should be along these lines: We are here to serve, and we need the tools to do so. The current revenue system limits our ability to grow, improve, and implement quality-of-life services. Please consider the following local option alternatives to the property tax, deemed workable by our counterparts in Florida:
- Proprietary fees
- Admission fees
- Franchise fees
- User fees
- Utility fees
- Regulatory fees
- Impact fees
- Inspection fees
- Stormwater fees
- Building permit fees
- Special assessments
- Additional local option taxes
- Local option fuel tax
- Local option tourist tax
- Additional shared revenue sources
Take evidence along with you, including pertinent sections of Florida’s 2015 Local Government Financial Information Handbook. Point your lawmakers to the Okaloosa website at www.co.okaloosa.fl.us./index.asp.
It’s not a matter of becoming more like Florida. Rather, it’s a matter of recognizing a problem and seeking a solution through education, idea-sharing, and forward-thinking, all for the betterment of the Great State of Texas.