Taxes

UNRAVELING THE COMMUNITY REDEVELOPMENT AGENCY

There is no separate tax district for the Community Redevelopment Agency (CRA). It is an arbitrarily designated area, set up by City Ordinance in 1985 as a depository for tax money that would receive special contributions from the City. Interestingly, both Bert Fish Hospital and the County make contributions, of essentially matching funds. The City's contribution is based on a City ordinance which has a formula of 95% of an underlying base number, (for property from South Atlantic Avenue to Myrtle Avenue on the west, between Esther and Third on the Beach, and Mary and Canal on the mainland), which is then credited to the CRA by the City. In other words, the $1.2 million is your tax money and it is a system for obtaining agreed upon grant money, which the City can also spend.

Now who are the Directors? The City Manager or his or her designee in fact runs the show. Now, it is Shannon Lewis, designated it would appear by Frank Roberts before he left office. However, it really does not matter, because it is really the City Commissioners wearing another hat and putting spending this money one step further from accountability. This is in fact similar in some ways to the shell game the County Council is playing when it sets up taxing districts that are no more than the County Council wearing different hats to hide the huge tax increases flowing from the property taxes directly to their coffers. In this case, the “CRA” makes a grant, which includes funding from the pot enhanced by the outside contributions and spends the money on projects that seem not to be controlled by the City. The gimmick is that it is made to appear as though it is a no cost deal to the rest of the taxpayers, but that is simply not true. Your contribution is less than the whole amount to be spent, but it looks like it is about 2% of the current budge. The 2006 contribution is $1.2 million and this is not chump change. If the City were not awash in funds it could not make that contribution, give all of its employees a 6.5% pay increase, and pay Frank Roberts an extra $100,000 of hush money.

INDIRECT TAXES; COUNTY REVENUE (REVISITED)

The chart showing all of the County revenue from all sources appears at pages 148-151 of the County budget proposal and shows a whopping $41 million increase in revenue over and beyond the property tax hit of $30 million they intend to take on the property tax alone. Check the link below. (http://volusia.org/budget/FY%202006-07%20Recommended%20Budget.pdf) Rather than go through each fund, we took the chart at face value, and were astonished at the sums raked in by the various fountains spewing money into the County tax gathering machine. Remember, we have only 4% inflation and a 5% growth County wide, so that when you see a two year income increase disproportionate to the expenditures you would expect with a no-growth government, you must wonder why. Here, for example, the Sheriff's office is increasing personnel by what looks like an extra 48 positions, with overall costs going up by $5 million. Apparently, the increased expenditure is justified by some work load increase, but the increase exceeds the limited growth in the County, and if the objective is to maintain the status quo, it exceeds that by a wide margin. The increased growth of government is in excess of the population growth, and the increased expenditures are more than the inflation costs, which explains why this budget needs every penny that can be squeezed from property tax, indirect taxes, and other revenue. Remember, it does not make much difference whether the money is coming out of your wallet or your other pocket, because, either way, you are paying. The result is the same; the County receives more money each year from these sources and spends it on bigger government. It is not wasted, if you believe that bigger government means more police on the beat, more fireman, and better roads. What it also means, however, is less money in your pocket to spend as you please. The County tax increases including indirect revenue increases this year, appear to be somewhere around $70 million. As we called it in the article on the New Smyrna City taxes, this is a lot more than chump change.

Taxes Now And Then

What Happened? At first, we thought this was funny...then realized the awful truth of it. Be sure to read all the way to the end!

Tax his land, Tax his bed, Tax the table at which he's fed.

Tax his tractor, Tax his mule, Teach him taxes are the rule.

Tax his cow, Tax his goat, Tax his pants, Tax his coat, Tax his ties, Tax his shirt, Tax his work, Tax his dirt, Tax his tobacco, Tax his drink, Tax him if he Tries to think.

Tax his cigars, Tax his beers, if he cries, then Tax his tears.

Tax his car, Tax his gas, Find other ways to tax his ass.

Tax all he has then let him know that you won't be done Till he has no dough.

When he screams and hollers, then tax him some more, Tax him until He's good and sore.

Then tax his coffin, Tax his grave, Tax the sod in which he's laid.

Put these words upon his tomb, Taxes drove me to my doom...

When he's gone, Do not relax, Its time to apply The inheritance tax, Accounts receivable Tax, Building Permit Tax, CDL license Tax, Cigarette Tax, Corporate Income Tax Dog License Tax, Federal Income Tax, Federal Unemployment Tax (FUTA), Fishing License Tax, Food License Tax, Fuel permit tax, Gasoline Tax (42 cents per gallon, CA's more), Hunting License Tax, Inheritance Tax, Interest expense, Inventory tax, IRS Interest Charges, IRS Penalties (tax on top of tax), Liquor Tax, Luxury Taxes, Marriage License Tax, Medicare Tax, Personal Property Tax, Real Estate Tax, Service charge taxes, Road usage taxes, Sales Tax, Recreational Vehicle Tax, School Tax, State Income Tax

State Unemployment Tax (SUTA), Telephone federal excise tax, Telephone federal universal service fee tax, Telephone federal, state and local surcharge taxes, Telephone minimum usage surcharge tax, Telephone recurring and non-recurring charges tax, Telephone state and local tax, Telephone usage charge tax, Utility Taxes,

Vehicle License Registration Tax, Vehicle Sales Tax, Watercraft registration Tax, Well Permit Tax, Workers Compensation Tax,

Not one of these taxes existed 100 years ago. We were the most prosperous nation in the world had no national debt, the largest middle class in the world, and Mom stayed home to raise the kids! And now, I have to "press 1" for English. What happened?

HOMESTEAD September 11, 2006

On August 27, 2006, the Daytona Beach News Journal printed an article by the Volusia County Tax Appraiser, Morgan Gilreath, in which he sets forth problems with the current tax structure and claims the problem is primarily distortions caused by the Florida Constitution's enshrinement of Homestead exemption. The Shadow (NSBSHADOW.com) would beg to differ. We think the cause is shown in his chart of selective tax increases in Volusia County, which is the inability of government to live within a budget that only reflects inflationary growth. This would be about three percent over the last several years. Small increases in taxes may also be needed for infrastructure improvements. If the millage rate had tracked inflation, even with an additional couple of percent for infrastructure improvement, property taxes would not have skyrocketed into such astronomical numbers that we now see, and those with homestead exemptions would continue to pay close to their fair share. It is the willingness of elected officials to spend the “windfalls” from property value increases, instead of doing rollback that has caused almost all of the problems he addresses. Please consider that if the tax increases were limited to the inflation rate or three percent, there would be no excessive tax on either new arrivals, or businesses. We would all rise on the same tide and there would be no inequities in the property tax. So, Mr. Gilreath is right on both of his observations, but he should stay on target and insist that we fix what we can fix—stop the big tax increases and the big spending that goes with it. We should insist that our elected officials stop lying to the public about what a great job they are doing by keeping our taxes under control, they are not.

Mr. Gilreath does not hesitate to criticize those who want to call all of the indirect taxes on property “revenue.” He should start with the County Budget office, and then turn to the County Council that set the rates for the multitude of fire districts, lighting districts, and totally dependent County entities like the mosquito control district. Tell them to stop. Tell the Budget office to call these revenues what they are--taxes, or ducks if they prefer, they are what they are, and tell them to stop spending our money! It is the big spenders we must control, and the sooner the better. With an inflation rate of about three or four percent per year, tell the County Council that the voters will not stand still for another year of 20% or more property tax increases.

(Distributed prior to publication by Tax Reform at the County tax workshop on September 7, 2006)

WHERE DOES THE MONEY GO

(A TALLY)

1.$100,000 extra gift to ex City Manager Roberts of an additional six months administrative leave, which includes continued contribution to pension at 8%, health benefits, paid holidays, and increased time for computation of benefits for State managed annuity at 1.76% times years of service for the extra six months (.9 % times years of service calculated and paid by the City for 20 or more years). Additional gift of his computer and laptop. On the bad side: He will receive a 6.5% raise on October 1, 2006, on the good side: He turned in the SUV. No more free gas. No more conventions for him at City expense, we understand.

2.Larry Sweet is no longer at the City feeding trough. Money saved is $29,000 annually and 6.5% of increased salary that will not kick in on October 1, 2006.

Contract for $6,500 by the Community Redevelopment Board to come up with architectural plans to spend mucho money, a couple of hundred thousand dollars probably, to mess around with a perfectly sound Flagler Avenue Pavilion (cost in 2001 was $423,000 of your money) Not canceled.

Liz Yancey still driving around in an SUV and still filling it up at the City pump. How about a motorcycle with a sidecar so she and her husband can ride together to and from work.

PROPERTY TAX Oct 9 2006

The Shadow agrees that the application of Save our Home provisions in the State's constitution has gotten out of hand. However, it is not the law that is at fault, it is the Volusia County Council's determination, joined by a number of the cities, to take tax increases each year, which exceed the inflation rate, or 3%, whichever is lower, that has caused the major disruption in property taxes among both homesteaders and business interests. For each year after enactment, the County Council could have limited property taxes so that any revenue remained limited to the previous year with a rollback consistent with the rise for homestead exemption holders. Any additional revenue could then have been collected from other tax sources so that the property tax would remain low for everybody, and not disproportionate depending upon property tax increases.

Let us use an example of a house bought in 2003 for $100,000 and holding a homestead exemption (assessed taxable value of $75,000 with a tax in 2005 of about $1,800). The identical house next door sold for $200,000 in 2005 and has a homestead exemption (assessed taxable value of $175,000 with a tax of about $4,200). This latter tax bill computation reflects the County Council's decision in 2005 to raise property taxes by 20% and its original proposal to do the same in 2006.

But if roll back had been applied so that the millage rate was just a little over the 2003 rate, and reflected only an inflation charge on the homestead exemption holders, the amount collected on property would not have risen by over 35%. This would make no change in the disparity between the two properties used in the example above, but if rollback had been applied to the last two years, the tax bill for the $200,000 house owner would be about $2,800. We think it is more of the heavy tax burden on property, than the disparity in payments that has caused the voters to revolt. It is one thing to know that you will pay more than an older neighbor. You knew that when you bought your house. It is quite another to be gouged by a system not designed to collect inordinate revenue from a select group of pigeons.

So let us address the other revenue. The County and the incorporated cities are awash with additional revenue. When your electric bill doubled, the City collected double the tax. For rollback on property to be meaningful and reflected across the board by tax reductions, the Cities should have reduced their tax on utilities, for example, by the same percentage points that are shown by the increase price to the consumer from the Utility. Why should the County, for example, collect 10% on your $400 bill when its tax structure was predicated on collecting $20 from your $200 utility bill? These non property taxes brought in $41 million to the County and $6.5 million to New Smyrna Beach last year. New Smyrna Beach deserves credit for voluntarily doing a 100% rollback, but the County Council had to be threatened with a voter revolt to do the same. Please do not forget, that even with complete rollback the County still had a 15% increase in revenue and so did New Smyrna Beach.

Had limits been placed on use of property tax increases over the last ten years, there would be no crushing burden on new owners and businesses. This human failing is what has caused the current problem, and it can be fixed, in part, by no property tax increases over the next ten years. The usual sale of properties will change the base over time and within that period; there will be only a few properties that remain disproportionately low. so she and her husband can ride together to and from work.

TAXES

Taxes are an issue and will remain one due to the decisions made by our elected officials. Rather than budgeting for small rises tied to inflation and growth, the elected officials have expanded government and services, and at the same time have increased employee salaries more than the cost of inflation. Grade creep, resulting in more and more administrators for less and less workers, drives up costs, and results in more need for tax increases. Construction of new offices is not just the initial cost, but the maintenance costs and the service of the loans on the money borrowed. We, as taxpayers, may want more services and do not mind paying the taxes necessary, but the problem is that our elected officials have seldom put forward these as choices.

This is graphically displayed by the huge increases in indirect taxes that are almost never displayed and therefore not accounted for to the tax payers. The Shadow examined the County budget proposal and found that the County was taking in what looked like $41 million in extra revenue above what was taken in last year. Increases are everywhere such as taxes on your telephone, cell phone, electric bill etc. On a $300 million budget, this represents about a 14% increase that the County budget office is now using to make up the final budget upon which you will be taxed. When the proposed County budget was first revealed, it also included an additional 20% property tax increase yielding $30 million additional funding that the County has now agreed will not be collected.

We need a better and more timely system of informing the taxpayers of the money that is available to the County government. We should be informed monthly and where, if we want to look it up, we can find a comparison of what the revenues are today and what they were last year in the same month. We would know well in advance what money would be available to the County from these indirect revenue sources before the Appraiser’s office publishes its 2007 revisions of individual properties. It is obvious from what happened in 2006 that the County government can only be trusted if there is transparency with their revenue resources. Moreover, remember, the County Council only took action to rollback the millage rate, when the electorate became enraged and stormed its chambers. Do not let your guard down; keep the bureaucrats and our elected officials on their toes.

SPENDING CUTS

The effort to reduce taxes next year is one of severely pruning expenditures and can start with limiting future pay increases to both County and municipal employees, eliminating unnecessary positions, and not filling positions where the need is not justified, and the expense far exceeds the benefit. Personnel costs are where savings can be made most expeditiously. Secondly, there are many projects on the wish list of everyone who runs a program and thinks that holding taxes down is less important than having a large staff to justify their existence and compensation. At the City level there are certain positions which glaringly are out of sight for the services provided, and there are also positions where the incumbent would not only not be missed but would increase efficiency by not being there. The original County budget included, it seems, an expansion of the County Sheriff’s personnel that exceeded the population growth. Of course, we all know the Sheriff’s budget is independent of the County budget, and who wants to irritate the Sheriff. After all, he is responsible for enforcing the law. This type of growth is what is crushing the taxpayer. The Shadow asked when the County property tax rollback issue was yet to be resolved why new capital equipment for the mosquito control district needed to be purchased. Now that rollback has occurred, it will be interestingly to see if the same equipment is purchased with a bond issue that will require servicing from increased taxes. Perhaps those purchases should be delayed.

The taxpayers must start now to insist that spending be cut. If Bert Fish Hospital still intends to use its taxing authority to provide over $400,000 to the Community Redevelopment Agency of the City, money that is matched by a County grant that is also funded from our County taxes, we should have a say. The Shadow is not impressed with the fairness of this tax, particularly since a good number of Bert Fish taxpayers do not live in the City, and are being double taxed to improve only City neighborhoods. It is CRA funds that will “improve” Orange Street. In addition, how about letting the County Council know that we do not favor going forward, at least this year, with a bond for a new office building in DeLand? The Shadow is certain that a huge number of tax related issues are out there and that with due diligence it should not be hard to expose them. Please start now. what looked like $41 million in extra revenue above what was taken in last year. Increases are everywhere such as taxes on your telephone, cell phone, electric bill etc. On a $300 million budget, this represents about a 14% increase that the County budget office is now using to make up the final budget upon which you will be taxed. When the proposed County budget was first revealed, it also included an additional 20% property tax increase yielding $30 million additional funding that the County has now agreed will not be collected.

PROPERTY TAXES

Now say this repeatedly. We can not possibly live within last year's budget with a modest increase for inflation plus a small buffer of 2-3%. Now we all know that the County budget must increase to reflect the increased costs of inflation. It must also increase to cover the cost of the unfunded pensions and medical cost for employees. It must also cover the extra costs for construction of roads, including the disastrous overrun costs for the poorly planned school placement on a street, Tenth Avenue in New Smyrna beach, that could not accommodate the traffic, and whose expansion cost to four lanes has soared because of it. However, why is there new construction for an office building in the budget? There are empty offices all over DeLand, and there is probably cheap space that can be rented if the County government gives up its “edifice” complex---forget about killing your mother, kill the taxpayer. The cost of County government will never be reduced, as long as we allow this type of budgeting to continue. How about a drive to require “Zero” base budgeting?

Chairman Bruno stated that they need the money. They have been squeezing you dry for the last five years. How about telling James Dineen, the County Manager, that they need only half the tax increase and to come back with a budget reflecting that directive. If John Hagood, the new City Manager of New Smyrna Beach, could come up with no new property tax increases, we have trouble believing that the County Manager can not come up with a solution that is only half as good. Look, every jurisdiction in the county is awash with huge amounts of indirect taxes, or indirect revenue, as the bureaucrats like to call it, and not one of them can justify the huge extra hit on the property taxes. The only refrain we hear from them is we can not live with last year's budget adjusted for only the costs needed to offset inflation.

TAXES

As you prepare to pay your tax bill, remember that rollback at the County level is only in the eye of the beholder. The City of New Smyrna Beach did a 100% rollback on its entire property tax, but those of you who live in the County only received it on part of the tax groups that the County Council controls. There was no complete roll back on the Mosquito Control District, library, Ponce Inlet, fire districts, and lighting districts. While none of these represents the increased bite, the County intended to take. Like the late Senator Dirksen once said, a million here and a million there pretty soon it adds up to real money. Then, add in the hefty increase from Bert Fish Hospital that to our knowledge still kicks in about $400,000 to the City of NSB CRA fund, and has administrative personnel at salaries that seem excessive for our otherwise poorly paid County workers. The County School Board has a real good thing going. When there was more school children expected to enroll last year, they needed the increased taxes from the property assessments to hire new teachers and build more classrooms. When not all of the kids showed up, they needed the money to cover the short fall from the per capita payment from the State. The Shadow thinks they have a two headed coin. By this logic, there will never be a justification for lowering taxes, or not taking all they can squeeze from the taxpayer. Think of next year when the assessed valve of property will likely remain static or could even increase. Bet the School Board will raise the current millage rate!

If you want to have an effect, start telling you Council representative now, that you want to see budget cuts and no new taxes. You also do not want borrow and spend. If you do not want to see inflated bills as you received this year, start now, or keep quiet and it will be business as usual. Spending cuts are the only way you can reduce taxes, and spending cuts do not sit well with the bureaucracy. It was no different from Rome. Emperor Diocletian stated that if he could reform the bureaucracy he would consider his rule a success. He exclaimed 20 years later he had failed.

TAXES

We want you to get started on reinforcing the message citizens sent to both the City and County governments this year about high taxes by reminding them that this year’s spending must be controlled so that next year’s budget can be reduced, and, therefore, property taxes reduced. First, as stated elsewhere in this edition, the County Council did not provide rollback on the property tax assessments of all of the separate pockets where they hide money to prevent you from becoming aware of their extravagance. The Library, Mosquito Control District, Ponce de Leon Inlet tax district, fire districts, and lighting districts, just to name the most important ones, had various degrees of rollback, but for most of them, the County took the money and ran. However, the fleecing of the taxpayer and the expansion of government was not just on the property taxes, but also on what they call indirect revenues. We call it what it is, indirect taxes. By our calculations, it appears that the County collected over $41 million in additional indirect taxes last year. You screamed over the $30 million they were taking on property, but one way or another, you also paid most of the $41 million they proceeded to spend. We agree that some of that money was needed for higher road construction costs, and lighting districts probably needed most of the increases for increased utility costs. However, aside for inflation, why the additional levies for personnel and extra pay for employees that exceed the inflation factor?

Now, the problem is that everyone sees their property tax bill. In discussing property taxes and how that tax was formulated, we lose sight of the other taxes because they do not hit you in the face with a single bill. You pay the franchise tax on your utility bill monthly ($6 per hundred paid by the Utilities Commission to the City, and $9 per hundred to the City collected by the Utilities Commission from you and turned over to the City--$10 per hundred for you County folks). You pay the tax on your telephone bills and the State reimburses the City a portion of that tax. That extra nickel of tax you pay on a gallon of gas netted the City about $1 million last year. It is not just nickels and dimes, and last year it added up to about $6 million that the City collected, and then used to give everybody a 6 ½% pay raise. On top of the 4% pay raise the fire department received last year, this means some employees received a 10% pay raise while the average employee in Volusia County had trouble getting any pay raise. The City, to its credit, did a 100% rollback without being threatened by a taxpayer revolt, but it was not as magnanimous as they would have you believe since there was all that money rolling in from your discomfort on items like your utilities bill. They spent it on, among other things, questionable pay raises. .

Compared to the County and City, the School Board and Bert Fish are the real terrors. Bert Fish is a small hospital that does not, in the Shadow's opinion, warrant a $250,000 chief executive officer, a $150,000 comptroller, and a Public Relations office that costs $150,000, plus benefits for each of about 30% over their salaries. Then there is the Bert Fish contribution to the City's Community Redevelopment fund, “only” $400,000, which is partially paid for by people who do not even live in the City. The School Board took the whole increase and kept it. It gave its administrators an 8% pay raise (see link to article in Sentinel) and only gave the teachers a 6% pay raise. One of the justifications for keeping all your money last year was that they needed it to pay for the additional students attending our schools. However, there were fewer students than anticipated, but they kept the money this year because the State sent less money because they had fewer students. If you want to know where your money goes, visit the Taj Mahal at the corner of ISD and Clyde Morris, and see what the school administrators built for themselves on State road 92. Remember they gave themselves a bigger raise than the school teachers.

If you want tax reform, start questioning why there is any increase in the County or City governments that is not directly related to inflation. Better quarters are always wanted, but older quarters do the job, unless the repairs cost more than new construction. Rentals frequently are cheaper than owning, put more money in the private sector, and do not remove property from the tax rolls. The County has planned to build a new administrative building in Deland. The City is moving toward building two new firehouses, and a police station. Given the tax burdens now being experienced by every property owner, maybe these decisions should be revisited?

TAXES Jan 22,2007

The proposal put forward by the Volusia County Appraiser, and quickly adopted by many of the elected official, is for voters to accept cost of living plus 3% as an appropriate formula for tax increases, why not cost of living and nothing unless the voters specifically approve them, like capital improvements? The proposal assumes that a three percent increase should be the normal growth of government, and that we should all agree to it as being in our best interest for the future. We disagree. Local governments have been growing for years, and rather than increasing productivity, which in the case of government would be to provide increased services for a larger population by a non increasing, or better yet, decreasing number of employees. Municipal governments have done just the contrary, expanded the number of employees without increasing productivity, and increased the cost of government, without concern for taxpayers!

Why should we pay more taxes for the pension plans that have grown in large measure from the increased employment of more municipal employees, with no adjustments of these plans to reflect that the salaries are also increasing? Why have our elected officials not been forced to address salaries and adjust pension plans to match the increased salaries they have been providing to these employees?

Why not tell our elected officials to reign in costs, cut out frills, and stop funding more and more services that are more amenities and not needed to either serve or protect residents. How about deferring projects that are not necessary, repair what needs to be repaired, and not build new and munificent edifices merely because various groups of City employees want and will feel better in a new facility with more modern equipment. Remember, many of the original fire houses were either built or augmented by volunteers who sold barbecue on Saturdays to raise money for the buildings they then built with volunteer labor. There are no more volunteers because we now have a fully paid service, but if a major metropolitan area like Bethesda, Maryland, has a combination of paid employees and volunteers, we should be able to figure out how to make it work here. It would clearly enhance service while at the same time decrease costs. On the other hand, would it upset the unions?

Unless an employee has a contract of employment, the job can be abolished or the employee can be terminated. Of course, there are costs associated with any employment action, but it is unlikely that those costs would exceed the current costs of either the greens keeper at $85, 000, or the Parks Coordinator for $42,000 plus benefits for both at about 30%.

If the greens keeper making $85,000 is still within a probationary period, and can be let go at will, the termination costs could be negligible. Ditto the Parks Coordinator, and probably a whole slew of other jobs that we do not even know about. Not filling non-essential positions would be another way to pay for these increased costs. They should try spending less money instead of working on how to increase growth. The three percent annual increase over say a four percent inflation factor (2006) will result in an increase of almost 30% in tax needs over a four year period. We do not think this is a formula that can be justified. It should not be accepted as the answer to the current tax problem.

THE TAX ASSESSOR AND YOU, Jan 1, 2007

Yesterday was the magic day when the tax assessor for Volusia County determines the value of all property in the County. That amount is then taxed at a millage rate, dollars collected per thousand dollars of assessed value that you pay as your annual property tax. For those who have homestead exemption, there has been little pain associated with what, in the past, has been inexorable rises in assessed values because of the three percent cap, but this year may bring a rude shock. There will be no increase in assessed property values, more likely a substantial decrease. Unless the property appraiser decides to be somewhat less than forthright, Beachside values are likely to drop by 20% to 25%, and this will have huge tax consequences for homestead owners with low appraisals. When the millage rate is raised, there is no cap, and if any jurisdiction with authority to tax seeks to raise the same revenue from the decreased value of property, they must do so by raising the millage rate.

Here is a simple example of what is likely to happen by looking at the 800 block of 16th Avenue, 1 block from the ocean in New Smyrna Beach. On one side of the street in a fixed up Periwinkle is John with an appraised just value of $400,000 (what the assessor says it would be worth if sold), but a homestead assessed value of $87,000 with $25,000 off for the homestead. ----taxed at $62,000. Now, right across the street is a rental Periwinkle, never renovated, and abused by renters over the last 30 years. Poor Jane, the owner of this speculative wreck of a fixer upper, tired to sell it in 2006 for the $335,000 appraised value effective January 1, 2006, before the market crashed, however, since she was in need of money, she just sold it for $205,000 to get out from under the crushing property tax and insurance bills. Now, if the appraiser assesses the new owner of the house $205,000, the tax shortfall on this property will be about $100,000 in lower assessment value, which means about $2,200 less property tax revenue, at the current rate. To maintain the same revenue, the taxing jurisdictions can raise the millage rate, to recover the lost $2,200. Keep in mind, however, that both houses would now be taxed equitably by this increase in the millage rate, because there is no cap on the rate, just the assessed value. In this simple but realistic example, John pays $1,100 more dollars in property taxes for 2007. By the way, Jane bought the house for $135,000 in 2001.

How realistic is this example? The School Board essentially takes all of the tax revenue that can be generated from appreciated property values every year and spends all of the money it collects. If it continues to maintain or escalate the demand for money regardless of outside events that suggest the need for fiscal conservatism, and spends money merely because it has been collected, like pay raises exceeding the cost of living, expect your property to increase significantly for 2007. Bert Fish did the same and unless these appetites for your money are curbed, they will also take a big increase. The only way these taxing jurisdictions can raise that money is by raising the millage rate for that portion of the property tax over which they have control. Since the School Board component is about one-third the of rate, and Bert Fish is another 15%, Periwinkle John is certainly going to be hit with a big increase in taxes. Interestingly, the great County Tax Revolt of '06 resulted in the County not gouging property owners in 2006 with the 36% Beachside property tax increases (although you did get hit by the County for Mosquito Control, Ponce Inlet, Library, etc.), and the City voluntarily did the same, so that the taxes both collected and spent were from other sources.

The phenomena of the homesteaders being in the same pickle as the non-homesteaders should cause elected officials to understand that the entire electorate will rail against increases in the millage rate. The elected officials must either cut back in expenditures and numbers of government employees or taxpayers are likely to do it for them. And when taxpayers do it, they use an ax, not a stiletto. Remember California and Proposition 13! That was not a good solution, but the taxpayers' vengeance resulted from the frustration of having organizations like the School Board, Bert Fish, and other taxing jurisdictions consistently ignoring their demand to reduce expenditures instead of a policy of tax and spend, or just as bad, borrow and spend.

What is Zero Based Budgeting?

Zero Based Budgeting (ZBB) is a method of budgeting in which all proposed expenditures must be justified each new budget period, as opposed to only explaining the amounts requested in excess of the previous budget’s level of funding.

For example, if an organization used ZBB, each department would have to justify its funding every year. That is, funding would have a base at zero. A department would have to show why its funding efficiently helps the organization toward its goals. ZBB is especially encouraged for Government budgets because expenditures can easily run out of control if it is automatically assumed whatever was spent last year, must be spent this year, plus an increase for inflation or other real or imagined costs.

Zero-Base Budgeting is an oft forgotten budget planning and decision-making technique. It reverses the working process of traditional budgeting. In traditional budgeting, departmental managers must only justify increases over the previous year budget. This means what has been spent in previous years is automatically sanctioned. In case of ZBB, no reference is made to the previous level of expenditure. Every department function is reviewed comprehensively, and all expenditures, rather then only increases are, justified and approved. ZBB is a technique, by which the budget request must be justified in complete detail by each division manager starting from the Zero-base. The Zero-base is indifferent to whether the total budget is increasing or decreasing.

Traditional vs. Zero-Base Budgeting

Advantages of Zero-Based Budgeting

1.Results in efficient allocation of resources as it is based on needs and benefits

2. Drives managers to find out cost effective ways to improve operations

3. Detects inflated budgets

Useful for service department where the output is difficult to identify

5. Increases staff motivation by providing greater initiative and responsibility in decision-making

6. Increases communication and coordination within the organization

7. Identifies and eliminates waste and obsolete operations

Disadvantages of Zero-Based Budgeting

1.Difficult to define decision units and decision packages, as it is very time-consuming and exhaustive.

2.Forced to justify every detail related to expenditure.

3.Necessary to train managers. ZBB should be clearly understood by managers at various levels otherwise they could not successfully participate.

4.Difficult to administer and communicate the budgeting because more managers are involved in the process.

Steps involved in the introduction of Zero-Based Budgeting.

Decision Units: The organization must be divided into decision units. The manager of the decision unit justifies the budget proposal. An organization can have as many decision units as appropriate. The division of the organization into the decision units should be in accordance to the organizational objectives.

Identification of decision package: Each decision unit should be broken down into smaller decision packages. A decision package can be defined as a document that distinctively defines function, operation, and activity. It should contain the following information:

1.Identification of data

2.Economic benefits

3.Alternative course of action

4.Intangible benefits

Ranking of decision package: Ranking implies prioritizing the available decision packages. This facilitates efficient allocation of resources by directing resources to the highest priority services.