1. St. Johns County Association Roundtable June 8, 2015 Jesse Dunn Assistant Director OMB St. Johns County BCC Fiscal Year 2016: Separate Challenges Looking Forward to FY 2016

2. Short-Term: FY 16 Operational Challenge  Recurring budget shortfall for Fire Services and Pavement Management at a combined amount of up to $16 million annually. Long-Range: Ten-Year Capital Projects Challenge  County-wide capital infrastructure needs within the community in excess of $270 million. Two Separate Funding Challenges

3. St. Johns County’s Financial Backdrop

4. SJC Financial Backdrop Assumptions under which OMB considers the FY 2016 tentative budget:  The Commission is committed to not increase the millage rate for the next several years (OPERATE WITHIN OUR MEANS).  2008 Property Tax Reform placed limits on revenue growth from existing inventory of homes (non-homesteaded properties).  The County's Capital Improvement Program reflects in excess of $600 million reflecting the community’s desire to maintain/enhance existing County-wide services.

5. The Price of Government Measurement Percentage of Income The County has maintained a consistent (even lowered) per-capita percentage of residents’ income used to fund programs and services. This measure reflects the Commission’s direction to OPERATE WITHIN OUR MEANS. Note: The Price of Government includes property taxes, gas taxes, sales tax, and charges for services.

6. Residential Growth (Single Family) Fiscal Year Permits Issued

7. Impact of Property Tax Reform Property Classification Percent of County’s Taxable Value FL Statute Max Increase Maximum Growth FY 16 Growth Homestead50%X3%=1.5%0.4% Non - Homestead50%X10%=5% Maximum on Existing Inventory=6.5% New Construction (average 8 years)=5% Maximum Taxable Growth on New and Existing=11.5%8.62% The State of Florida established maximum annual increases on the rate of taxable property value growth.

8. Governmental Fund Restrictions  The majority of the County’s $619 million budget is restricted to specific uses by statute or ordinance and cannot be used to fund general county programs. The remaining $135 million is what the Board utilizes to operate County programs. Total County Budget $619 Million

9. Fire District Fund Reserve Utilization The Fire District Fund continues to utilize reserves to fund operating deficits In $ millions

10. TTF Pavement Management Deferring pavement management compounds the long-term financial impact. In $ millions

11. General Fund Reserve Utilization Adherence to budgetary guidelines will resolve General Fund’s structural deficit by FY19. Note: Reserves are declining from $47.9 million to the recommended minimum of $26.3 million in FY19. In $ millions

12. Short-Term: FY 16 Operational Challenge  Recurring budget shortfall for Fire Services and Pavement Management at a combined amount of up to $16 million annually. Long-Range: Ten-Year Capital Projects Challenge  County-wide capital infrastructure needs within the community in excess of $270 million. Two Separate Funding Challenges

13. Short-Term Operational Challenge

14.  Recurring Fire Services and Pavement Management (essential services) budget shortfall at a combined amount of up to $16 million annually.  The underlying direction is to OPERATE WITHIN OUR MEANS.  Estimated 8.6% growth in property tax for FY 16 will provide $1.2 million combined toward these essential services shortfall.  If additional funding is not directed toward these essential service areas, pressure will escalate for a property tax increase for Fire Services and Pavement Management.

15. Short-Term Operational Options  Fiscal Year 2016 Operational Budget Options:  Levy additional taxes and fees to fund essential services.  Draw down on reserves and postpone addressing the problem for one year.  Adopt lower levels of service for Fire Services and Pavement Management. (OPERATE WITHIN OUR MEANS)  Reallocate existing revenues from non-essential to essential services. (OPERATE WITHIN OUR MEANS)

16. Short-Term Operational Solution  Reallocate existing revenues from non-essential to essential services and allocate property tax millage to Fire Rescue, Pavement Management.  The combination of (1) 8.6% in property tax growth and (2) the reallocation of existing revenues would result in approximately $5.6 million annually for Fire Rescue and Pavement Management combined.  Reallocating existing revenues IMPLIES expenditure reductions.  Certainly some expenditure reductions could be offset by increases in user fees.  The Recommended Budget for FY 16 will reflect OPERATING WITHIN OUR MEANS.  Represents the first year in a multi-year solution to address the essential services funding gap of $16 million.

17. Long-Range Infrastructure Challenge

18.  County-wide capital infrastructure needs within the community in excess of $270 million ($27 million annual investment).  Florida Housing Data Clearinghouse (FHDC) estimates that more than 68,000 people will move to St. Johns County during the next ten years for a total 2025 population of 283,199.  Future property tax growth cannot be utilized to fund new infrastructure as it is to be redirected to address existing essential services.  Population growth accelerates the “wear-and-tear” on existing infrastructure and amenities.  Any county-wide infrastructure investment program will require the identification of a new or enhanced revenue source(s). Long-Range Infrastructure Challenge

19.  County-wide infrastructure investment program options include:  Defer investment in capital infrastructure projects.  Establish lower levels of service for public services and facilities.  Identify a new or enhanced capital revenue source(s). Fee/Tax IncreaseWho PaysAnnual RevenueUsed For 1% Infrastructure Sales TaxResidents, Tourists$23.6Capital Projects Property Tax Increase (1 Mil)Property Owners$17.9Operating / Capital Utility Franchise FeeProperty Owners$7.0Operating / Capital Stormwater Utility FeeProperty Owners$6.0Water Quality Additional Gas TaxesResidents, Tourists$5.8Transportation 1% Additional Bed TaxTourists$1.5Tourism Increase/Add User FeesResidents$1.0Operating / Capital Long-Range Infrastructure Options

20.  A 1% Infrastructure Sales Tax for ten-years with a specific list of capital projects and including a citizen oversight committee.  State of Florida authorized this option specifically for capital infrastructure investment and requires voter approval.  Would generate estimated $23.6 million for community investment within the County, and estimated $2.5 million annually for the three municipalities.  Substantial portion paid by visitors and tourists. Long-Range Infrastructure Solution

21. Sales Tax Remitted Back to County  Of the current 6 cent sales tax charged in St. Johns County, only ½ of a cent is returned to the County. The other 5 ½ cents remains with the State.  Of an additional 1 cent sales tax, the entire amount remains in St. Johns County. Source: The Florida Legislature’s Office of Economic and Demographic Research Note: A 1% sales tax would also generate an additional $2.5 million for the County’s municipalities.

22. County Comparisons St. Johns County is the only county in Florida that does not have a Sales Tax greater than 6% and does not have additional Gas Taxes.

23. Sales Tax Facts  Sales tax is NOT applicable to most food items and medications.  Sales tax is applicable ONLY to the first $5,000 of an item’s sales amount which limits the tax to $50 per item.  Sales tax is NOT paid solely by County residents but includes tourists, commuters, and visitors.  Service reductions for non-essential services may be greater than the impact of a sales tax to a lower income person. Sales Tax Facts

24. Sales Tax Effect by Income Level Adjusted Gross Income Sales Tax at 6% Sales Tax at 7% Sales Tax Increase Per Year Sales Tax Increase Per Month $20,000 or less$276.00$322.00 $46.00$3.83 $20,001 - $40,000$561.00$654.50 $93.50$7.79 $40,001 - $60,000$734.00$856.33 $122.33$10.19 $60,001 - $80,000882.00$1,029.00 $147.00$12.25 $80,001 - $100,000$1,014.001,183.00 $169.00$14.08 $100,001 - $120,000$1,101.00$1,284.50 $183.50$15.29 Source: http://apps.irs.gov/app/stdc.html? entitled “IRS Sales Tax Deduction Calculator”  The chart below reflects the household effect for an average St. Johns County family of three.

25. Short-Term: FY 16 Operational Challenge  Recurring budget shortfall for Fire Services and Pavement Management at a combined amount of up to $16 million annually.  Proposed Solution:  Reallocate current revenues and OPERATE WITHIN OUR MEANS.  Does not resolve long-range challenge Long-Range: Ten-Year Capital Projects Challenge  County-wide capital infrastructure needs within the community in excess of $270 million.  Proposed Solution:  One-cent sales tax  Also resolves short-term challenge  Eliminates program cuts  Eliminates draw down on reserves  Relieves pressure on property taxes  Addresses capital projects backlog  Provides sustainable funding for long- range community investment Two Separate Funding Challenges