Shifting non-ad valorem money won’t make you richer

Whenever a government authority decides to lay claim to your money in the form of taxation or assessments, it always reminds us of the famous truism from the late Nobel economist Milton Friedman:

“What you give to one, you must take away from another.”

That economic wisdom came to mind again after the Longboat Key Town Commission voted Monday night to change the way the town will pay off the bonds it will issue to bury the town’s utility lines.

In a 5-2 vote, commissioners apparently acquiesced to the pressure from constituents that the town’s proposed property assessments were too onerous for some residents. To ease the burden, Town Manager David Bullock proposed using between $300,000 and $400,000 from the town’s franchise-fee collections on electricity and communications. Altogether, the town is expected to collect about $940,000 in franchise fees in the next fiscal year.

Even though Longboat taxpayers went to the polls last November and March voting on the idea they would pay for the $49 million in bonds via property assessments and not property taxes, the language of the two referenda contained an escape clause to which voters paid little attention. The ballots said the bonds would be paid off “solely from special assessments imposed against real property throughout the Town and other non-ad valorem revenues if necessary (italics added).” … Voila.

Bullock clearly sensed the displeasure around town at the cost of the assessments for the Gulf of Mexico and neighborhood underground utility  projects. So he offered commissioners an out:

Thanks to the 5% increase in property values, the town’s property-tax collections next fiscal year are expected to increase $458,000 over the current fiscal year. So there you go: a creative domino effect. That new property-tax revenue can replace the franchise fees that will be used to lower everyone’s underground assessments.

To be sure, Longboat taxpayers and property owners will welcome any reduction in underground utility assessments. But here’s where Milton Friedman’s kernel of economic wisdom surfaces: When you “give” franchise-fee money to lower underground assessments, you take it away from the general fund. 

In the end, no one is really better off. To stay even, the town must either reduce its services in the amount taken from the franchise fees in the general fund; reduce its rainy-day savings account; or raise property taxes to replace the funds taken from franchise fees. Either way, everyone is poorer.

Perhaps the only real good news out of all of this money shifting is that Longboat Key Mayor Jack Duncan is convinced the final cost of the underground projects should end up at least $10 million less than what taxpayers previously have been told. That would make everyone a little wealthier.

— Ed.