On Thursday morning, Tampa City Council members will hold a budget workshop just hours before they could possibly vote on the first property tax increase in 29 years.
Last week, Councilmembers narrowly approved (by a 4-3 vote) to increase the millage rate from $5.73 to $6.33 per $1,000 of assessed property value. That could add $105 to the average homeowner’s tax bill.
There is also the possibility that they won’t vote to raise taxes, which would only increase the city’s deficit further into the future.
In July, Tampa Mayor Bob Buckhorn stunned Councilmembers when he announced old debts — going back to 1996 — have suddenly come due, which forced him to request the first increase in Tampa property taxes since 1988. Those debts also went back to 1996, when then-Mayor Dick Greco asked the council to approve borrowing approximately $24 million, with repayment delayed 20 years, to pay for a new Tampa Police headquarters, some police substations, new fire engines and a fire and police communications center.
The bill on that proposal is $6.8 million this year and $13.8 million over the next few years. There is also a $6 million note that needs repayment for developing the Centro Ybor shopping complex.
Over the weekend, Council Chair Yolie Capin reacted with alarm after coming across a document about the 1996 Utilities Tax Improvement Bonds, showing that the first payments were originally scheduled to be made starting April 1, 2016, with subsequent payments due Oct. 1, 2016, and April 1, 2017.
City of Tampa budget director Sonya Little said that the city actually began restructuring that debt in 2012 and again in 2015. Doing that to the city cost an additional $3 million, a figure that displeased Capin.
That restructuring gave the city cash-flow savings by issuing “refunding” bonds. Those bonds paid the bondholder, and the city pays the debt on the refunding bonds.
However, the bonds are non-callable, which benefits investors but is not great for local governments. Those bonds can’t be repaid (or called) before their maturity date, meaning that even if the city had wanted to pay off these debts earlier, they couldn’t.
After learning that Buckhorn and Little were aware of these looming payments for several years, several Councilmembers responded with subdued anger. Several said that they never would have supported spending $15 million from the BP settlement funds for a $35.5 million renovation to Julian B. Lane Riverfront Park if they had known these impending debt payments would require the mayor to ask to raise taxes — a politically unappealing notion.
“If these bonds were callable, we could have paid off the original $95 million, and those investors would not be due any interest rates through 2022,” Little explained. “That interest obligation goes away. I can’t do that because the bonds are non-callable.”
Originally, Buckhorn requested a tax increase of nearly a full point — $5.73 to $6.63. The increase would cost owners about $180 more each year for a property valued $200,000, raising taxes on an average property from $1,147 a year to $1,327.
However, the mayor received strong pushback from Councilmembers, and Little later came back to Council with two less expensive alternatives. On a 4-3 vote last week, the Council approved the lowest alternative — an increase of 0.6, from $5.73 to $6.33 in tax per $1,000 of assessed property value. That would add $105 to the tax bill of the average homeowner.
In addition to the large debt payments now due, the mayor is factoring the likelihood of diminished revenues in upcoming years if voters approve a proposed constitutional amendment to expand the homestead exemption next year. There is also discussion in the Florida Legislature to require local governments getting approval from state lawmakers before raising property taxes.
City Councilman Mike Suarez voiced anger last week over the way the Buckhorn administration had neglected to tell Council members about upcoming debt payments, something they had been aware of for the past couple of years.
Suarez said he has no problem with the city restructuring bonds for the city to save money in the long run, but he still remains upset that there weren’t earlier discussions about the city’s long term debt, specifically with non-callable bonds on the horizon.
“That was never brought forth by anyone in the administration,” he said. “The job of the administration was to say, ‘this is what’s coming forward. We need to prepare for this.’ And they didn’t do that.”
Councilman Harry Cohen estimates the total interest required to pay back for the 1996 Utilities Tax Improvement bonds stands at more than $71 million, a number he called “staggering.”
Little maintained the city would not be engaging in this conversation about these bonds if the economy hadn’t bottomed out so massively beginning in 2008 – staying that way for years — and if the bonds hadn’t been made non-callable.
Council meets at 9 a.m. Thursday for its workshop. The second and final public hearing on Buckhorn’s $974 proposed budget begins at 5:01 p.m.