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Shores facing cuts or a tax increase?

(Week of May 26, 2011)

Indian River Shores’ freshman Town Councilman Dick Haverland isn’t letting the fact that he’s new keep him from rocking the boat.

For discussion at Thursday’s Town Council meeting, Haverland, a John’s Island resident who worked for many decades in corporate finance, has analyzed the town’s funds, assets and liabilities and is calling for budget cuts of about $500,000 or a property tax increase.

“The Town’s financial condition has deteriorated in recent years as net assets have decreased. The prospects for revenue growth are slim. The prospects for higher costs are high,” Haverland wrote last week in a memo to Town Council.

The town’s budget for the 2010-2011 fiscal year ending Sept. 30 is $4.36 million, down from $4.69 million the prior year. More than $3.4 million of the current year’s budget goes for public safety.

That doesn’t leave a whole lot of places to cut, except for possibly the 3 percent cost of living increases which town employees receive annually.

Haverland took a hard look at the town’s liabilities, including the unfunded portion of the pensions and what is called Other Post-Employment Benefits (OPEB), which is essentially, a taxpayer-subsidized health plan for retired employees. When employees retire, they may keep their health insurance for the same group rate as if they were employed.

“Our pension plan is underfunded by $2,789,000 as of Sept. 30, 2009. Pension costs are likely to accelerate,” Haverland wrote.

The town’s current property tax rate is $1.41 per $1,000 of assessed property value. That is up from $1.39 the previous year. Property values in the Shores declined by about 2.5 percent last year – not bad compared to countywide declines of up to 12 percent. The total taxable value of all real property in the town in 2010 was estimated at $2.5 billion.

“More than 70 percent of the Town’s revenue comes from property taxes. Based on recent sales and limited construction it is unlikely that any increase in 2010 revenue can be expected from this source,” Haverland stated in his memo. “Other taxes (infrastructure, half-cent sales tax, local option gas tax, etc.) decreased markedly in 2009 and were flat in 2010. There is little prospect of this category generating increased revenue next year.”

To offset these declining revenues last year, the Town Council voted to take $313,000 out of reserves. As of Sept. 30, 2010, the town’s fund balances, according to the audited financial statements, were roughly $4.3 million.

“Without major cost reductions and/or tax increases, net assets and funds flow are likely to worsen,” Haverland’s memo stated.

The tax picture will become clearer when the new property values are released around July 1.

Haverland pointed out that the town currently owes its employees about $435,000 in accumulated leave time – a liability that he says is not listed appropriately on the financial statements as a current expense chargeable to current taxpayers as the benefits accrue.