Andrew Thompson, CGFO

Chief Financial Officer

Rhea Rivera, CGFM

Asst. Director, Financial Services

Adoption of the Tentative,  FY23 Millage Rate and Operating Budget

Issue Statement: A public hearing is to be conducted on September 7, 2022, for the purpose of receiving public comments on the proposed Fiscal Year (FY) 23 operating and voted debt service millage rates and annual operating budget, after which the Commission will adopt a tentative FY 23 operating and voted debt service millage rates and annual operating budget.

Recommended Action:  Adopt a tentative FY 23 operating millage and voted debt service millage rates and annual operating budget after receiving public comments on these subjects.

As part of the City’s annual budget process, this is the first of meetings with public hearings in September leading to the final adoption of the City’s FY 23 property tax operating millage and voted debt service millage rates, annual operating budget, and special assessment rates related to various services provided by the City.

The public hearings are for the purpose of receiving comments on the proposed FY 23 operating millage and debt service millage rates and annual operating budget, after which the Commission will adopt a Tentative FY 23 millage rate and annual operating budget.  Notice was provided to property owners in the TRIM (Truth-in-millage) notice distributed by the Property Appraiser's Office in August.  

As indicated, the operating and voted debt service millage rates and operating budget are tentative.  At the September 21st  Commission meeting, the Commission will adopt the final FY 23 operating and debt service millage rates and annual operating budget after receiving public comment(s). The FY 23 Capital Improvement Program (CIP) and Compensation Plan will also be adopted at this meeting.

Between these two meetings, September 7th and 21st, there will be a public hearing on September 12th, at which time the Commission will adopt the final fire, residential solid waste, and stormwater assessment rates after receiving public comment. Of the three, only the fire assessment is a component of the General Fund, and as an important source of revenue for this fund, the fire assessment rate adopted will have a significant impact on the Commission’s flexibility in adopting a final operating millage rate and annual operating budget on September 21st. Advertisements for these special assessment hearings were published in August; property owners were also advised of these hearings as part of the TRIM notice distributed by the Property Appraiser's Office.

The City Manager’s Recommended Budget was distributed to the Commission on July 13th and presented during the July 20th City Commission meeting. The operating and voted debt service millage rates and operating budget were discussed during this meeting and the Commission adopted a preliminary operating millage rate of 5.8550 mills, a voted debt service millage of 0.4628 mills for Series 2020 General Obligation (G.O.) Bonds,  a voted debt service millage of 0.2344 mills for Series 2020 G.O. Bonds for a combined debt service millage of  0.6972 mills, and the recommended special assessment rates for inclusion on the TRIM Notices distributed by the County Appraiser in August.

As discussed, the rates on the TRIM Notices are, except in extraordinary circumstances, the maximum the City will consider for FY 23 and are the starting point for Commission deliberation as to what the final adopted rates will be. Additionally, the tentative operating millage rate adopted on September 7th becomes the maximum rate the Commission may consider for final adoption on September 21st.

During the July 20th Commission meeting, staff presented a summary of the Recommended Budget's key elements, including the proposed FY 23 business plan capital purchases, grant activity, and the financial impact of the proposed recommended operating and voted debt service millage rates and assessment rates on residents. The below sections detail the proposed tentative operating and voted debt service millage rates and budget.

Tentative Millage Rates (Operating & Debt Service)

As required by the TRIM process, the first requirement of the initial public budget hearing is to adopt a tentative millage rate. The Recommended Budget included a preliminary operating millage rate of 5.8550 mills; and two (2) separate voted debt service millage of 0.4628 mills and 0.2344 mills for Series 2020 and Series 2022 of the G.O. Bonds, respectively, or a combined debt service millage of 0.6972 mills, which were adopted by the Commission.

The recommended tentative operating millage is 5.8550 mills, which is unchanged from the preliminary rate.  This rate is 0.0340 mills  less than the FY22 millage rate of 5.8890. This will be the eighth reduction to the operating millage in a nine-year period.

The 2022 property tax base, which forms the basis of FY 2023's ad valorem revenue, has increased by 13.30% in the past year to $4.5 billion.  As part of the budget process, the City is required to calculate the "rolled-back rate", which is the millage rate that is needed to produce the same level of property tax revenue as the prior year's operating tax levy. With the property tax base increase and the proposed operating millage rate, there would be $2.6 million more in revenue than would be provided by the rolled-back operating millage rate of 5.2464 mills at a 95% rate of collection. Although the City is reducing the operating millage rate, the total property tax collections will be higher and the City will be required to advertise an 11.60% tax increase over the rolled-back millage rate of 5.2464 mills under the State's Truth-in-Millage (TRIM) Statute.  The rolled-back millage rate only applies to the operating millage rate - it does not apply to debt service millage rates.

In 2018, over two-thirds of Oakland Park's voters approved the issuance of $40 million in General Obligation (G.O.) bonds to rebuild and enhance the City’s Fire-Rescue and community facilities.  In May 2020, the City was assigned an investment grade AA credit rating by Standard and Poor’s and in June 2020 the first tranche of bonds (Series 2020) was sold, securing $26 million of the approved $40 million. In late 2021, it became clear that large increases in the interest rates could be expected - to avoid higher interest costs, the City moved quickly to sell the remaining bonds and secure lower interest rates. In February 2022, the remaining $14 million of the approved $40 million G.O. bonds were subsequently sold (Series 2022).  These proceeds will be utilized to fund Oakland Park’s Building Our Second Century program facility efforts.  These G.O. bond proceeds are financed over a 20-year period.  The City is required to pay the bonds' debt service costs by levying the voter-approved debt service millage. 

The G.O. bond debt service to be paid next fiscal year is approximately $3.0 million, which will require a debt service millage rate of 0.4628 mills for Series 2020 and a debt service millage rate of 0.2344 mills for Series 2022.  The combined debt service rate for Series 2020 and Series 2022 is 0.6972 mills.  The Commission is asked to adopt a specific rate for each specific series.  

Tentative Budget

In July, staff presented the City Commission with a Recommended Budget of $138.2 million. The document represents a financial plan based on the policy direction established by the Commission and the best information the staff has available at this time. As changes occur and new information becomes available that impacts these plans, revisions to the budget will be needed, either as part of the adoption of the final budget or later through the budget amendment process after the fiscal year begins. The Tentative Budget is attached as "Exhibit A."  The attached FY 2023 Budget Message also provides a detailed narrative explanation of the proposed budget. Additional detail regarding the proposed fiscal year 2023 budget is included in the FY 23 Recommended Budget Book.  This document is available upon request thru the City Clerk's Office. 

After adoption of the Tentative Millage and Tentative Budget, public notice is required by state law.  A tentative budget advertisement in conformance with Florida Statute 200.065 will be published in the Sun Sentinel to provide notification of a public hearing to be held on the 21st day of September, 2022 at 6:30 p.m. for the tentative budget and millage. This meeting is for the purpose of setting a Final Tax Levy and Final Budget. 

As part of the Final Budget adoption on September 21st, the City Commission will also approve the Five-Year Capital Improvement Program, the City's Fiscal Policies, and the Citywide Compensation Plan.  The Five-Year Capital Improvement was presented to Commission in June and the full document was provided as part of the recommended budget distributed in July.   The City's Fiscal Policies are adopted annually at the time of the City's adoption of the annual budget; the only change to the Financial Policies contemplated is to ensure the City complies with changes to Section 218.39, Florida Statutes regarding the selection of external auditors to perform annual financial audits.  The citywide Compensation Plan includes all job classifications for all employee groups and updates will be made to ensure consistency with the provisions of the second year of the collective bargaining agreements approved by the Commission; new job classifications and modifications approved by the Civil Service Board will also be incorporated.  A memorandum from Human Resources will accompany the revised document outlining these changes. 

The recommended operating millage rate is 5.8550 mills and the combined debt millage rate  is 0.6972 mills.  The operating millage will generate about $2.6 million over the rolled-back rate for a total property tax revenue of $25.04 million while the debt service millage will generate about $3.0 million for the debt service of the Series 2020 and Series 2022 G.O Bond due in FY 23.  This presumes a 95% collection rate.

As provided for in Florida Statute Section 193.155(1), beginning in 1995, or the year after the property receives homestead exemption, an annual increase in assessment shall not exceed the lower of the following:

For 2022, the CPI change reported by the Florida Department of Revenue is 7%.  As such, the maximum growth in taxable value a homestead residence can experience is 3%. About 60% of all Oakland Park residential properties  are homesteaded. 

With the maximum taxable value increase of 3.0% and the proposed operating millage rate of 5.8550, the median, homesteaded single-family home from last year would experience a $27.77 increase in City property tax for operations, or equivalent to $2.31 a month.

With the combined debt service millage of 0.6972, the estimated cost to a homesteaded single-family home would be $97.31.  This represents an increase of $24.76 over last year, or $2.06 in monthly terms.  All $40 million of the general obligation bonds approved by voters have been sold.  The annual cost of $97.31 to the median, homesteaded, single-family home is the equivalent of $8.11 a month.  This is well below the $10.00 a month estimated cost that was shared during public educational outreach in 2018.

To ensure compliance with TRIM requirements, it is recommended that the City Commission do the following in the indicated order to ensure proper adoption of the tentative millage and budget:  

1. Conduct a public hearing in regard to the FY 23 tentative operating and two (2) debt service millage;  

2. After deliberation, adopt the FY 23 tentative millage resolution.  Prior to adopting the millage levy resolution, staff must formally announce the name of the taxing authority (the City of Oakland Park, the rolled-back rate, and percentage increase over the rolled-back rate, and the millage rate to be levied);  the following millage rates are recommended:

• Operating Millage: 5.8550 mills (11.60% over the rolled-back millage rate of 5.2464 mills)
• Debt Millage Series 2020: 0.4628 mills
• Debt Millage Series 2022: 0.2344 mills

3. Conduct a public hearing in regard to the FY 23 tentative budget;  

4. After deliberation, adopt the FY 23 tentative budget.