Loading...
Interlocal Letter to CM Brown OFFICE OF THE COUNCIL AUDITOR Suite 200, St. James Building October 17, 2011 Councilman Reginald Brown Jacksonville City Council District 10 117 West Duval Street City Hall Suite 425 Jacksonville, Florida 32202 Dear Councilman Brown, In response to your request, my office has researched and analyzed the facts and circumstances relating to the taxing of and the provision of services to citizens living in the Town of Baldwin and the Cities of Atlantic Beach, Jacksonville Beach, and Neptune Beach as they relate to ongoing relationships and agreements between the City of Jacksonville and the Town of Baldwin and the Cities of Atlantic Beach, Jacksonville Beach, and Neptune Beach. We are providing this letter in accordance with Ordinance Code Section 102.102. This letter does not represent an audit or attestation conducted pursuant to Government Auditing Standards. You requested that we assess whether the interlocal agreements are equitable and whether property owners in the entire county are all paying their fair share. Specifically, you asked the following: (1) whether the City of Jacksonville should terminate existing interlocal agreements and relationships with the Town of Baldwin, and the cities of Jacksonville Beach, Atlantic Beach, and Neptune Beach, and negotiate new agreements, (2) whether current reductions in millage assessments to the citizens of Baldwin, Jacksonville Beach, Atlantic Beach, and Neptune Beach continue to be justified and supported by existing facts and circumstances or whether those reductions should be reduced, increased or eliminated (3) whether current services provided to the citizens of Baldwin, Jacksonville Beach, Atlantic Beach, and Neptune Beach at little or no cost, should be continued to be provided, provided at a reduced cost, or provided at an increased cost, and (4) whether any of the described communities are providing services to citizens of the City of Jacksonville, and whether the costs of those services are equitably administered and collected. Methodology The review and analysis of the interlocal agreements could be performed in many different ways. Whether they were perceived as fair or unfair at the time, the parties approved the agreements. Thus, the agreements were deemed acceptable at the time they were signed. Therefore, we decided to concentrate our review and analysis primarily on the changes that have taken place since the agreements were signed, as well as any apparent inconsistencies or inequities. We did not analyze and did not include in our analysis, parts of the agreement that are no longer relevant, for example past one -time payments or capital projects constructed pursuant to the 117 West Duval Street Jacksonville, Florida 32202 -3701 Telephone (904) 630 -1625 Fax (904) 630 -2908 www.coj.net agreements. We consider these to be sunk costs that have no impact on current or future revenues and expenditures. Also, we did not analyze and include parts of the agreement where revenues and taxes received from the Federal and State governments are simply distributed among the five cities in the county based upon each city's percentage of the county population. These include Community Development Block Grant funds, sales taxes, local option gas taxes, etc. We provide a very brief background to explain the origin of the interlocal agreements, summarize the relevant interlocal agreement provisions, and discuss our review and analysis of the present day interlocal agreement terms. We briefly discuss situations where various municipal taxes are used to fund countywide functions. In our conclusion, we answer the questions that have been posed to us. Background Although county consolidation was approved by Duval County voters in 1968, the municipalities of Atlantic Beach, Jacksonville Beach, Neptune Beach, and Baldwin voted to maintain their separate governments. Operating as separate communities, they have their own municipal taxing authority which they use to provide their own municipal services. In addition, they pay a county ad valorem tax to Jacksonville, which provides them with county services. In 1979 these municipalities sued Jacksonville over county taxes and services. As a result, in 1982, Jacksonville and the four municipalities executed an interlocal agreement to settle the issues. In 1993, Atlantic Beach filed suit against Jacksonville alleging that Jacksonville had breached the 1982 interlocal agreement. As a result, amendments to the 1982 agreement were executed with Atlantic Beach in 1995, Jacksonville Beach in 1996, and Neptune Beach in 1998. No amendment was executed with Baldwin. Summary of Relevant Interlocal Agreement Provisions 1982 Interlocal Agreement with Baldwin, Atlantic Beach, Jacksonville Beach, & Neptune Beach In 1982, the City of Jacksonville entered into an interlocal agreement with the Town of Baldwin and the Cities of Atlantic Beach, Jacksonville Beach, and Neptune Beach. The parties agreed to the following: • The parties agreed to the governmental services which were county public functions to be provided by the City of Jacksonville from the levy of county taxes and other revenues derived by the City of Jacksonville acting as a county government. These included Property Appraiser, Tax Collector, Supervisor of Elections, Courts, Hospitals, Port Authority, Transportation Authority, Libraries, Agriculture, Health (except for nuisance control and abatement), Rescue, Animal Control, Human Resources, Sports Complex and Auditorium, Construction Trades Board, Public Housing, Jails and Prisons, Sheriff (except police operations), County Road Construction and Maintenance, Traffic Engineering on County Roads, Recreation - Regional and Countywide Recreational Facilities, and Sanitary Landfill. • The parties agreed that the Town of Baldwin and the Cities of Atlantic Beach, Jacksonville Beach, and Neptune Beach would have the right to deposit their garbage and refuse in the City of Jacksonville's sanitary landfill operation free of charge. • The parties agreed to maintain at least an 18.8% differential between the General Service District millage levy in the Cities and the General Service District millage levy for the -2- remainder of the county. (At the time the agreement was signed, there was an 18.8% differential. The GSD millage levy in Baldwin and the Beaches was 10.5219 and the GSD millage levy for the remainder of the county was 12.5067.) Baldwin Baldwin did not execute an amendment to the interlocal agreement during the 1990s so the 1982 agreement between Baldwin and Jacksonville remains in place. The only significant changes that have occurred have to do with the provision of police patrols and fire service. In March 2006, Jacksonville took over police patrols in Baldwin. Although Jacksonville did not charge Baldwin a fee for taking over police patrols (which are not a county function under the 1982 agreement), we noted that Jacksonville returned to the 18.8% millage differential the following year, after 11 years of larger millage differentials. On October 1, 2008, Jacksonville began staffing the Baldwin fire station on a reimbursement basis. In 2010, the agreement for staffing of the fire station was changed to an annual fee based on average Jacksonville firefighter salaries and benefits with an annual CPI adjustment. Atlantic Beach In 1995, Jacksonville and Atlantic Beach executed an amendment to the 1982 interlocal agreement. In this agreement, Jacksonville agreed to continue to provide the services required under the 1982 agreement, but also agreed to the following changes. • To replace the millage rate differential of 18.8% with a millage rate differential of 3.2907 mills. Jacksonville agreed to first set the GSD rate in Jacksonville and then reduce it by the amount provided in the following schedule: Fiscal Year Milla2e Rate Reduction 1995/96 2.2907 1996/97 2.7907 1997/98 3.0407 1998/99 and thereafter 3.2907 • Free use of Jacksonville's landfill would not apply to new, non - residential waste generators located within Atlantic Beach. • If, at any time in the future, Jacksonville imposes uniform solid waste processing and disposal fees against residential premises, free use of Jacksonville's landfill would terminate. • Jacksonville agreed to pay Atlantic Beach an amount equal to Atlantic Beach's FY 1995/96 budget ($130,635) for personnel and operating expenses for lifeguards and the cleanup of trash and litter on the beach. Thereafter, Jacksonville agreed to pay costs reasonably necessary for Jacksonville Beach to provide lifeguards and beach cleanup, but capped at 3% over the amount paid the previous year. In addition, Jacksonville agreed to pay capital outlay costs reasonably necessary for Atlantic Beach to provide lifeguard services, not to exceed $9,000 per year. • Atlantic Beach agreed to provide fire suppression response service to Neptune Beach in exchange for an annual payment from Jacksonville of $150,000 (with a 3% annual -3- inflator). In further consideration of this $150,000 annual payment, Atlantic Beach agreed to provide police patrol and response service to the northeastern corner of Jacksonville adjacent to Atlantic Beach. Pursuant to an agreement approved in Resolution 98- 1006 -A, the City of Jacksonville agreed to provide fire service to Atlantic Beach and Neptune Beach. Atlantic Beach agreed to pay Jacksonville $677,804 per year for the service plus a three percent annual inflator. Interestingly enough, the agreement did not include language canceling the required $150,000 annual payment from Jacksonville to Atlantic Beach for providing fire service to Neptune Beach. Therefore, this payment is still made. Jacksonville Beach In 1996, Jacksonville and Jacksonville Beach executed an amendment to the 1982 interlocal agreement. In this agreement, Jacksonville agreed to continue to provide the services required under the 1982 agreement, but also agreed to the following changes. • The parties agreed to replace the millage rate differential of 18.8% with a millage rate differential of 3.2907 mills. Jacksonville agreed to first set the GSD rate in Jacksonville and then reduce it by the amount provided in the following schedule: Fiscal Year Milla2e Rate Reduction 1995/96 2.2907 1996/97 2.7907 1997/98 3.0407 1998/99 and thereafter 3.2907 • Jacksonville agreed to loan Jacksonville Beach $4,000,000 for capital improvements to be repaid by reducing the millage rate differential in the above schedule over a period of ten years. The loan (plus issuance costs) has been repaid with interest. • Jacksonville agreed to pay Jacksonville Beach an amount equal to Jacksonville Beach's FY 1995/96 budget ($445,768) for personnel and operating expenses for lifeguards and the cleanup of trash and litter on the beach. Thereafter, Jacksonville agreed to pay costs reasonably necessary for Jacksonville Beach to provide lifeguards and beach cleanup, but capped at 3% over the amount paid the previous year. Neptune Beach In 1998, Jacksonville and Neptune Beach executed an amendment to the 1982 interlocal agreement. In this agreement, Jacksonville agreed to continue to provide the services required under the 1982 agreement, but also agreed to the following changes. The parties agreed to replace the millage rate differential of 18.8% with a millage rate differential of 3.2907 mills. Jacksonville agreed to first set the GSD rate in Jacksonville and then reduce it by the amount provided in the following schedule: -4- Fiscal Year Millage Rate Reduction 1995/96 2.2907 1996/97 2.7907 1997/98 3.0407 1998/99 and thereafter 3.2907 • If, at any time in the future, Jacksonville imposes uniform solid waste processing and disposal fees against residential premises, free use of Jacksonville's landfill would terminate. • Jacksonville agreed to pay Neptune Beach an amount equal to Neptune Beach's FY 1997/98 budget for personnel and operating expenses for lifeguards and the cleanup of trash and litter on the beach, not to exceed $129,941. Thereafter, Jacksonville agreed to pay costs reasonably necessary for Neptune Beach to provide lifeguards and beach cleanup, but capped at 3% over the amount paid the previous year. • Beginning in FY 1997/98, Jacksonville agreed to pay Neptune Beach $20,000 per year (increased by 3% annually) to provide certain right of way maintenance (mowing, weed control, trash removal, unpaved shoulder repair, maintenance of surface drainage ditches, maintenance of existing sidewalks, fencing, and landscaping) on Penman Road from Atlantic Boulevard to Seagate Avenue and on Florida Boulevard from Atlantic Boulevard to Penman Road. Florida Boulevard and Penman Road are county roads which are maintained by Jacksonville, except for these specific road sections. Review and Analysis of Interlocal Agreement Terms (Present Day) Free Use of the Landfill by the Beaches and Baldwin For Fiscal Year 2010/11, Jacksonville was budgeted to pay $1,528,606 of landfill tipping fees for the Beaches and Baldwin. Each year, Jacksonville budgets these tipping fees as a general fund non - departmental expense and transfers the money to the Solid Waste fund. A significant change affecting free use of the landfill occurred when the City of Jacksonville enacted Ordinances 2009 -865 -E and 2010 -446 -E in which the City elected both to utilize the uniform method of collecting residential solid waste assessments and impose residential solid waste assessments. These solid waste assessments first appeared on the 2010 ad valorem tax bills. This is significant because both the 1995 agreement with Atlantic Beach and the 1998 agreement with Neptune Beach contain language terminating free use of the landfill if and when Jacksonville imposes uniform solid waste processing and disposal fees against residential premises. For Fiscal Year 2010/11, the City of Jacksonville budgeted $418,791 to pay landfill tipping fees for Atlantic Beach and $258,609 to pay landfill tipping fees for Neptune Beach. Payment of landfill tipping fees for Atlantic Beach and Neptune Beach is no longer warranted and should be discontinued in accordance with the interlocal agreements. Jacksonville Beach and Baldwin will continue to receive free use of the landfill until such time as it is negotiated out of their respective interlocal agreements. -s- Contract Fire Protection We noted three issues involving contract fire protection that are in need of revision. They all relate to Jacksonville's provision of fire service to Atlantic and Neptune Beaches. Refer to Exhibit 1 (Fire Service Diagram). First, Neptune Beach receives fire service for free whereas Jacksonville, Jacksonville Beach, Atlantic Beach, and Baldwin each have their own fire department or pay for fire service. There is no rationale for Neptune Beach to receive its fire service for free. This is an inequity between Neptune Beach and the other municipalities in the county. Second, the payment process for the fire service Jacksonville provides to Atlantic and Neptune Beaches is convoluted. Atlantic Beach pays Jacksonville to provide its fire service. At the same time, Jacksonville pays Atlantic Beach for providing fire service to Neptune Beach. However, Atlantic Beach contracted Neptune Beach's fire service out to Jacksonville. Therefore, Jacksonville pays Atlantic Beach for providing fire service to Neptune Beach, even though Jacksonville actually provides the service. The third issue is that the cost of providing fire service for Atlantic Beach has grown at a faster rate than the 3% inflation factor allowed for in the agreement. For fiscal year 2009/10, Jacksonville received revenue from Atlantic Beach of $920,021 (This is the $677,804 amount from the original fire service agreement increased by 3% per year.) and paid Atlantic Beach $226,887 ($150,000 as increased at 3% per year) resulting in net revenue of $693,134. Per Jacksonville Fire Rescue, the FY 2009/10 cost of providing the fire service for Atlantic and Neptune Beaches was $1,143,188, so Jacksonville is effectively subsidizing fire service at Atlantic and Neptune Beaches in the amount of $450,054. (This is the direct subsidy and does not include any allocation of City of Jacksonville overhead.) The agreement to provide fire service to Baldwin was recently amended per Ordinance 2010 - 855-E and utilizes an annual CPI adjustment. Over time, this agreement may result in Jacksonville subsidizing Baldwin's fire service, if Jacksonville's cost of providing the service escalates faster than the consumer price index. However, the ordinance authorizing the agreement calls for the City of Jacksonville to review the agreement every three years and states that the agreement may be terminated by either party with one year's written notice. Lifesuards and Beach Cleanup Since the agreement amendments were signed in the late 1990s, there have been no significant changes involving lifeguard services or beach cleanup. The amount paid by Jacksonville has increased three percent per year in accordance with the agreements. In Fiscal Year 2010/11, Jacksonville is budgeted to pay $597,368 to Jacksonville Beach, $195,410 to Atlantic Beach, and $190,824 to Neptune Beach for a total of $983,602 for lifeguards and beach cleanup. We found that the Beaches spend more on lifeguards and beach cleanup than they receive from Jacksonville. In FY 2009/10, Jacksonville Beach spent $755,115.40 and received $579,968 from Jacksonville; Atlantic Beach spent $205,116 and received $189,980 from Jacksonville; and Neptune Beach spent $207,907 and received $185,265 from Jacksonville. -6- One might ask why Jacksonville provides approximately one million dollars per year for lifeguards and beach cleanup at the Atlantic, Jacksonville, and Neptune Beaches. There are probably many answers, but an argument has been made that the beaches are a countywide recreational facility and thus a county public function pursuant to the 1982 agreement. Value of the Millaue Differential In the 1982 interlocal agreement, the parties agreed on which governmental services were county public functions to be provided by the City of Jacksonville from the levy of county taxes and other revenues derived by the City of Jacksonville acting as a county government. To analyze the fairness of the tax rate, one could determine the cost of the services provided to each municipality and compare it to the revenue received from each municipality. In theory, they should equal. To cost out the portion of these revenues and expenses attributable to a specific geographic area is difficult to say the least. This was attempted during the nineties, prior to executing the interlocal agreement amendments. Although the parties came to agreement on many if not most revenue and expense allocations, there were significant areas on which they never agreed. Rather than attempt what never succeeded in the past, we opted to look at what has changed since the agreement amendments were approved. We performed a comparative analysis of the county ad valorem tax millage rates levied on each municipality from the time the interlocal agreements were signed through 2011. In doing so, we made two significant observations. 1. The change in the millage levy methodology from a millage differential percentage (18.8% pursuant to the 1982 agreement) to a millage differential of a specific number of mills (3.2907 mills pursuant to the amendments signed in the 1990s) increased the millage differential percentage between the beaches and the City of Jacksonville considerably. The 18.8% differential between the General Service District millage levy in Baldwin and the Beaches and the General Service District millage levy for the remainder of the county was maintained from 1981 through 1995. In 1998, the first year of the full 3.2907 differential, the millage differential percentage was 43.2 %. This is significant in that it is more than double the percentage in the 1982 agreement. The City of Jacksonville then reduced its millage rate each year from 1996 through 2009, which caused the millage differential percentage to increase above 43.2 %. In 2008, the differential percentage rose to 63.4% when Jacksonville's millage rate was 8.4841 and the GSD rate assessed on the Beaches was 5.1934. Then in 2009, the rolled back rates were imposed pursuant to state law after the Mayor's veto of the City Council's proposed millage rates. This caused the differential percentage to increase further. The resulting differential of 3.8247 mills represented a differential percentage of 70.2 %. In 2010, the differential percentage dropped to 48.8% when Jacksonville approved millage rates with the differential calculated strictly in accordance with the interlocal agreements. Note however that the millage differential was still 5.6% higher than in the first year of the full 3.2907 mill differential. (Refer to Exhibit 2 to see the millage differential for all years.) In 1982, an 18.8% differential was viewed as the appropriate millage discount for the Beaches (based on the fact that the parties signed the interlocal agreement). In the mid to late nineties, a differential of 43.2% was viewed as the appropriate discount as that was the differential resulting from the amended agreements, signed by Jacksonville and the -7- Beaches. If a 43.2% differential was appropriate, it seems that a 50% or 60% differential would not be appropriate and would indicate that City of Jacksonville residents have subsidized the residents of the Beaches by the difference between the 43.2% and the 50% or 60 %. Conversely, if the City of Jacksonville had raised its millage rate for many years rather than lower its millage rate, the differential percentage would have gone the other way causing the Beaches residents to subsidize Jacksonville residents. It appears that the use of a set millage differential is not a fair method for determining municipal millage rates. Because millage rates usually go up or down each year, this method will almost always be unfair to one side or the other. We recommend a return to a percentage differential. 2. Jacksonville did not levy as high a millage rate on Baldwin as it could have levied, from 1995 through 2005 and from 2007 through 2009. If it had, Baldwin property owners would have paid an additional $638,811 in county ad valorem taxes, which would have gone into Jacksonville's general fund. (Refer to Exhibit 3) From 1995 through 2005, the millage rate levied on Baldwin was the same as that levied on the Beaches, even though Baldwin never executed an interlocal agreement amendment and still operates under the 1982 agreement. From 2007 through 2009, the county millage rate levied on Baldwin was higher than that levied at the Beaches, with a differential from the Jacksonville rate ranging from 22% to 31 %, but still considerably more than the 18.8% differential called for in the interlocal agreement. In the interest of Jacksonville taxpayers, we recommend that the City of Jacksonville levy the rate calculated pursuant to the interlocal agreement. Penman Road and Florida Boulevard Maintenance As previously discussed, the interlocal agreement requires Jacksonville to make an annual payment to Neptune Beach for maintaining parts of Penman Road and Florida Boulevard. There have been no changes related to this interlocal provision since this payment was initiated in FY 1997/98. Jacksonville's payment to Neptune Beach started out at $20,000 per year and has increased to $29,370 in Fiscal Year 2010/11 due to the three percent annual inflator. Jacksonville receives no accounting for how these funds are used. Jacksonville should require an annual accounting of the use of the funds and limit payments to the actual amount of Neptune Beach's expenditures. Discussion of Additional Funding Provided by the City of Jacksonville Which Benefits County Public Functions As noted earlier, the Port Authority and the Transportation Authority were included within the list of County Public Functions in the 1982 interlocal agreement. The City of Jacksonville provides substantial funding for both the Port Authority and the Transportation Authority. Each year since 1968, the City of Jacksonville has provided the Jacksonville Port Authority (JPA) with funding for port capital. Jacksonville has issued bonds for port expansion and provides cash funding which JPA uses for capital projects. Jacksonville, Baldwin, and the Beaches all receive telecommunications taxes. Jacksonville uses these taxes to subsidize JPA. -8- Baldwin and the Beaches utilize their respective shares of these taxes within their respective municipalities. In fiscal year 2009/10, the cash funding provided by the City of Jacksonville for JPA totaled $8,163,002. In addition, Jacksonville paid debt service of $4,900,975 on bonds issued for JPA. This amounts to a contribution of $12,990,139 for FY 2009/10. Jacksonville has provided subsidies for the Jacksonville Transportation Authority (JTA) since the early seventies. These subsidies have grown substantially since passage of the 2000 Better Jacksonville Plan. Jacksonville, Baldwin, and the Beaches all receive Better Jacksonville Plan sales taxes as well as local option and constitutional gas taxes. Jacksonville uses these taxes to subsidize the JTA. Baldwin and the Beaches utilize their respective shares of these taxes within their respective municipalities. In fiscal year 2009/10, the funding provided by the City of Jacksonville for JTA totaled $99,981,214. As the Port Authority and the Transportation Authority are considered to be county public functions, Jacksonville's financial support of these entities benefits all residents of Duval County. Conclusion In conclusion, we will attempt to answer the questions that you posed to us. Overall Question - Are the interlocal agreements equitable and are property owners in the entire county all paying their fair share? Answer — It appears that there are inequities in the agreements which could be improved upon. The largest inequity is due to the change from a percentage millage differential to a differential of a fixed number of mills. We calculated the value of these differentials based on the actual percentage millage differentials versus the 43.2% millage differential in 1998, the first year of the full 3.2907 fixed millage differential. The value of this inequity ranged from a low of $71,777 in FY 1999/00 to a high of $5,047,053 in FY 2009/10. The total of these differentials for the 12 year period from FY 1999/00 through FY 2010/11 is estimated at $20,540,807. (Refer to Exhibit 4) In addition, Jacksonville is effectively subsidizing the cost of fire service for Atlantic and Neptune Beaches by spending more to provide the service than it is receiving in revenue. For Fiscal Year 2009/10, the fire service subsidy was $450,054. Question #1 - Should the City of Jacksonville terminate existing interlocal agreements and relationships with the Town of Baldwin, and the cities of Jacksonville Beach, Atlantic Beach, and Neptune Beach, and negotiate new agreements? Answer - This is a policy decision to be made by elected officials. -9- Question #2 - Are current reductions in millage assessments to the citizens of Baldwin, Jacksonville Beach, Atlantic Beach, and Neptune Beach justified and supported by existing facts and circumstances or should those reductions be reduced, increased or eliminated? Answer — The current millage reduction formula between Jacksonville and the Beaches is flawed and will almost always be unfair to one side or the other. The millage differential should be a fixed percentage, not a fixed number of mills. As previously discussed, if a millage differential of 43.2% was considered fair when it was implemented, then a millage differential of 50% or 60% is not fair. (Refer to Exhibit 2) Question #3 - Should current services provided to the citizens of Baldwin, Jacksonville Beach, Atlantic Beach, and Neptune Beach at little or no cost, be continued to be provided, provided at a reduced cost, or provided at an increased cost? Answer — A. Pursuant to the interlocal agreements, free use of the landfill should be discontinued immediately for Atlantic and Neptune Beaches. Jacksonville should negotiate the elimination of free use of the landfill by Baldwin and Jacksonville Beach in any future interlocal agreement amendments. B. The fire service agreement between Jacksonville and Atlantic Beach should be revised to make sure that Jacksonville recoups its cost of providing the service (similar to the recent Baldwin agreement). The revised agreement should be a three party agreement which includes Neptune Beach and requires Neptune Beach to pay for its fire service. The agreement should be based on average Jacksonville firefighter salaries and benefits, include an annual CPI inflation factor, require the City of Jacksonville to review the agreement every three years, and allow termination by either party with one year's written notice. The reason that this and all similar service agreements should have a definite review process is to limit the difference between the actual cost of providing the service and the revenue received for providing the service. Long -term agreements have a tendency to become unfair to one side or the other due to differences between the actual increase in the cost of providing the service and the inflation factor used. C. In consideration of the funds paid to Neptune Beach for maintenance of Penman Road and Florida Boulevard, Jacksonville should require an annual accounting for the use of the funds and limit payment to the actual amount of Neptune Beach's expenditures. Question #4 - Are any of the described communities providing services to citizens of the City of Jacksonville, and are the costs of those services equitably administered and collected? Answer — As previously discussed, the Beaches provide beach cleanup and lifeguard service. Although Jacksonville provides significant funding for these services, the Beaches provide partial funding and actually perform the functions. The beaches are available for use by everyone. Atlantic Beach provides police patrol and response service to the northeastern corner of Jacksonville adjacent to Atlantic Beach. Per the interlocal agreement, this is in further consideration of the annual payment from Jacksonville to Atlantic Beach for providing fire -10- service to Neptune Beach. (As previously discussed, Jacksonville now provides fire service for Neptune Beach.) Although JSO confirmed that Atlantic Beach police do respond to calls in Duval County, JSO stated that it has sufficient assets in the area to respond to all Duval County calls. Recap of Recommendations 1. The set millage differential between Jacksonville and the Beaches should be replaced with a percentage millage differential. 2. The City of Jacksonville should levy the highest millage rate allowed pursuant to the interlocal agreements. 3. Free use of the landfill should be discontinued immediately for Atlantic and Neptune Beaches pursuant to the interlocal agreements. 4. Jacksonville should negotiate the elimination of free use of the landfill by Baldwin and Jacksonville Beach in any future interlocal agreement amendments. 5. The fire service agreement between Jacksonville and Atlantic Beach should be revised to make sure that Jacksonville recoups its average cost of providing the service (similar to the recent Baldwin agreement). The revised agreement should be a three party agreement which includes Neptune Beach and requires Neptune Beach to pay for its fire service. The agreement should include an annual CPI inflation factor, require the City of Jacksonville to review the agreement every three years and allow termination by either party with one year's written notice. 6. In consideration of the funds paid to Neptune Beach for maintenance of Penman Road and Florida Boulevard, Jacksonville should require an annual accounting for the use of the funds and limit payment to the actual amount of Neptune Beach's expenditures. Sincerely, Kirk A. Sherman, C.P.A. Council Auditor cc: Council Vice - President Bill Bishop _11_ EXHIBIT 1 Fire Service Diagram NEPTUNE BEACH ATLANTIC BEACH Receives Fire Service Pays for Fire Service for FREE $920, ��/$226,887 Fire Service + Fire Service JACKSONVILLE Provides its own fire service and provides fire service for Baldwin, Neptune Beach, and Atlantic Beach Fire Service / Average cost reimbursement TOWN OF BALDWIN JACKSONVILLE BEACH Pays for Fire Service Provides its own fire service EXHIBIT 2 Millage Rate Comparison - FY 1979/80 - 2010/11* Atlantic Beach Neptune Beach Beaches Baldwin Fiscal Jacksonville Jacksonville Beach Millage Baldwin Millage Year Millage Millage (1) Differential Millage Differential 1979/80 9.6350 9.6350 0.0% 9.6350 0.0% 1980/81 12.5295 10.5447 18.8% 10.5447 18.8% 1981182 12.5067 10.5219 18.9% 10.5219 18.9% 1982/83 10.5067 8.8440 18.8% 8.8440 18.8% 1983/84 12.2567 10.3170 18.8% 10.3170 18.8% 1984/85 12.2567 10.3170 18.8% 10.3170 18.8% 1985/86 12.2567 10.3170 18.8% 10.3170 18.8% 1986/87 11.5317 9.7068 18.8% 9.7068 18.8% 1987/88 11.5317 9.7068 18.8% 9.7068 18.8% 1988/89 11.5317 9.7068 18.8% 9.7068 18.8% 1989/90 11.5317 9.7068 18.8% 9.7068 18.8% 1990/91 11.5317 9.7068 18.8% 9.7068 18.8% 1991 /92 11.2776 9.4929 18.8% 9.4929 18.8% 1992/93 11.3158 9.5251 18.8% 9.5251 18.8% 1993/94 11.3158 9.5251 18.8% 9.5251 18.8% 1994195 11.3158 9.5251 18.8% 9.5251 18.8% 1995/96 11.2158 8.9251 25.7% 8.9251 25.7% 1996/97 11.1158 8.3251 33.5% 8.3251 33.5% 1997/98 11.0158 7.9751 38.1% 7.9751 38.1% 1998199 10.9158 7.6251 43.2% 7.6251 43.2% 1999/00 10.7861 7.4954 43.9% 7.4954 43.9% 2000/01 10.5723 7.2816 45.2% 7.2816 45.2% 2001 /02 10.3675 7.0768 46.5% 7.0768 46.5% 2002/03 10.1842 6.8935 47.7% 6.8935 47.7% 2003/04 9.8398 6.5491 50.2% 6.5491 50.2% 2004/05 9.6879 6.3972 51.4% 6.3972 51.4% 2005/06 9.6500 6.3593 51.7% 6.3593 51.7% 2006/07 9.6400 6.3493 51.8% 8.1145 18.8% 2007/08 8.4841 5.1934 63.4% 6.9448 22.2% 2008109 8.4841 5.1934 63.4 6.9206 22.6% 2009110 (2) 9.2727 5.4480 70.2% 7.0792 31.0% 2010111 10.0353 6.7446 48.8% 8.4472 18.8° Footnotes: 1. Millage rate shown does not reflect a modification to Jacksonville Beach's millage rate that occurred from FY 1996/97 through FY 2003/04. During this time, Jacksonville Beach was assessed an additional millage as repayment for a $4 million capital project loan from the City of Jacksonville. 2. The City did not file a proposed millage rate with the Property Appraiser in the required time. Therefore, pursuant to state law, the millage rate could not exceed the rolled back rate. * Millages shown are the total millages, which include both operating and debt service. A debt service millage was levied on all Cities from FY 1979/80 through FY 2002/03. EXHIBIT 3 Calculation of Tax Revenue Forfeited by Jacksonville by Setting the Baldwin Millage Rate Lower than the Interlocal Agreement FY 1995/96 - 2010/11* Actuals 18.8% Millage Differential Baldwin Value of Baldwin Value of Forfeited Fiscal Baldwin Millage Millage Baldwin Millage Millage Tax Year Millage Differential Differential Millage Differential Differential Revenue (1) 1995/96 8.9251 25.7% $56,817 9.4409 18.8% $44,023 $12,794 1996/97 8.3251 33.5% $74,386 9.3567 18.8% $46,888 $27,498 1997/98 7.9751 38.1% $89,618 9.2726 18.8% $51,378 $38,240 1998/99 7.6251 43.2% $124,432 9.1884 18.8% $65,319 $59,113 1999/00 7.4954 43.9% $116,531 9.0792 18.8% $60,445 $56,086 2000/01 7.2816 45.2% $146,028 8.8992 18.8% $74,244 $71,785 2001/02 7.0768 46.5% $111,345 8.7269 18.8% $55,513 $55,831 2002/03 6.8935 47.7% $126,181 8.5726 18.8% $61,798 $64,383 2003/04 6.5491 50.2% $133,605 8.2827 18.8% $63,221 $70,384 2004/05 6.3972 51.4% $127,671 8.1548 18.8% $59,480 $68,190 2005/06 (2) 6.3593 51.7% $114,781 8.1229 18.8% $53,266 $61,515 2006/07 (2) 8.1145 18.8% $60,323 8.1145 18.8% $60,323 $0 2007/08 6.9448 22.2% $70,608 7.1415 18.8% $61,585 $9,023 2008/09 6.9206 22.6% $68,799 7.1415 18.8% $59,079 $9,720 2009/10 (3) 7.0792 31.0% $103,467 7.8053 18.8% $69,217 $34,250 2010/11 8.4472 18.8% $74,930 8.4472 18.8% $74,930 $0 Total $638,811 Footnotes: 1. This column represents the difference between the value of the actual millage differentials and the value of the millage differentials that would have existed had 18.8% been used pursuant to the 1982 Interlocal agreement between the City of Jacksonville and Baldwin. 2. The City of Jacksonville began to provide Police Patrol Service to the Town of Baldwin in March of 2006. 3. The City did not file a proposed millage rate with the Property Appraiser in the required time. Therefore, pursuant to state law, the millage rate could not exceed the rolled back rate. Millages shown are the total millages, which include both operating and debt service. A debt service millage was levied on all Cities from FY 1979/80 through FY 2002/03. EXHIBIT 4 Estimated Value in Reduced Ad Valorem Tax Revenue FY 1999/00 through FY 2010/11* Purpose: This table shows the estimated value in reduced Ad Valorem tax Revenue to the Consolidated City of Jacksonville if a constant percentage millage differential had been used instead of the agreed fixed millage differential. The table below estimates the value of the incremental percentage millage differentials versus the 43.2% millage differential in 1998, the first year of the full 3.2907 fixed millage differential. Jacksonville Atlantic Neptune Fiscal Year Beach Beach Beach Totals 1998/99 - 0 0 $ - 1999/00 37,029 23,055 11,692 $ 71,777 2000/01 116,756 67,9731 36,119 $ 220,848 2001/02 209,536 122,129 64,077 $ 395,742 2002/03 312,200 174,756 93,422 $ 580,378 2003/04 527,456 287,967 148,887 $ 964,309 2004/05 672,109 361,307 189,827 $ 1,223,243 2005/06 861,858 442,890 227,135 $ 1,531,883 2006/07 990,597 495,397 255,052 $ 1,741,046 2007/08 2,226,073 1,037,238 533,194 $ 3,796,505 2008/09 2,239,328 988,285 524,492 $ 3,752,105 (1) 2009/10 2,996,446 1345,860 704,747 $ 5,047,053 2010/11 709,839 332,773 173,308 $ 1,215,919 Grand Total $ 20,540,807 * The table shown does not reflect a modification to Jacksonville Beach's millage rate that occurred from FY 1996/97 through FY 2003/04. During this time, Jacksonville Beach was assessed an additional millage as repayment for a $4 million capital project 1. The City did not file a proposed millage rate with the Property Appraiser in the required time. Therefore, pursuant to state law, the millage rate could not exceed the rolled back rate.