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
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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
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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
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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:
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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.
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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.
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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
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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.
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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.
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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
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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
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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.