After hot debate from the public and council, the Palm Coast City Council has voted to reduce the city’s maximum millage rate but also preliminarily approved entering into a franchise fee agreement with Florida Power and Light.
The franchise fee agreement would fund the city’s pavement management program.
Palm Coast Mayor David Alfin proposed that the City Council adopt the rollback rate of 4.2570 — or $4.2570 per $1,000 in taxable property value — which would reduce the budget by $2.8 million in existing property taxes.
The council voted 3-2 at a July 18 meeting to adopt 4.2570 as the city’s maximum millage rate, with Vice Mayor Ed Danko and Council member Cathy Heighter dissenting.
This is the first time since 2022 that the city has changed its millage rate from 4.6100 mills. It has been even longer since the city has had a similarly low millage rate.
Residents had packed the seats of City Hall’s community room for the meeting, and almost all opposed to the franchise fee.
Danko, Heighter and many of the residents who spoke said the council needs to trim the budget first and find the money there instead.
Danko said he voted against the rollback rate because adding a new “tax” through the franschise fee while telling residents the city is cutting taxes is a “smoke and mirrors” political tactic by the mayor.
“I’ve got to tell you, Mr. Mayor, I am ashamed of you today,” Danko said. “This is the oldest trick in the book.”
Alfin defended his reasoning for reducing the millage rate maximum, saying that going to the rollback rate means that the budget will need to be cut regardless: The rollback rate will generate the same dollar amount in property taxes as the current rate did this year, which is $2.8 million less than the originally proposed 2024 budget.
“How can you possibly get to a rolled back rate without cutting the budget,” Alfin said.
“By taxing people on their electric bill,” Danko said in reply.
Council member Theresa Carli Pontieri proposed a motion that the council enter into an agreement with FPL at a 0.5% rate on the condition that the fee rate is placed on the 2024 general election ballot, and that revenue from the agreement is only used to maintain the city’s current roadways. The agreement has a fee rate range of 0.5% to 6%.
The council approved Pontieri’s motion in a 3-2 vote, with Danko and Heighter dissenting. The council will need to vote a second time on Aug. 1 to adopt the franchise fee ordinance with the stated conditions.
The franchise fee agreement would last 30 years if the council approves it in the second vote, but the council could review and adjust the percentage annually.
What we're trying to consider here is how do we make ourselves more recession-proof."
— THERESA CARLI PONTIERI, council member
Pontieri said the 0.5% rate would cost residents about $1 per 1,000 kilowatt-hours each month.
Diversifying the city’s income away from property taxes will help protect the city and residents if property values drop again like they did in the 2008 recession, when they dropped from $7 billion in 2008 to $3.6 billion in 2014, Pontieri said.
“What we’re trying to consider here is how do we make ourselves more recession-proof, diversify our revenues and are not so heavily reliant on ad valorem,” Pontieri said.
City attorney Neysa Borkert said the franchise fee agreement would go into effect 60-90 days after the council’s second vote, if the council approves it. She did not know if the fee rate could legally be placed on the ballot, but said her firm would find out and tell the council at the second-reading hearing.
Pontieri said she would vote against adopting the franchise fee ordinance if the fee rate cannot be placed on the ballot.
The July 18 meeting is the third time a Palm Coast council has considered a franchise fee.
Most recently, in 2018, the council proposed a franchise fee to help pay for a new public works facility. The initiative failed.
Well-structured and fair taxing policies — regardless of their popularity — support and strengthen where we live.
— DAVID ALFIN, Palm Coast mayor
Danko proposed tabling the franchise fee proposal altogether and reviewing other options, but the motion failed 3-2, with Danko and Heighter voting in favor of tabling.
The budgeting schedule places a time constraint on the franchise fee vote. Proposed ordinances require two votes by the City Council. If the franchise fee agreement is approved, the city must account for that revenue in the 2024 budget, which takes time to adjust and must be finalized by September.
Council member Nick Klufas asked Danko if he had any ideas of where to make cuts. Danko said he did, and listed several, including slashing city jobs and budgets and implementing a hiring freeze for every department, excluding the fire department.
He also suggested allocating $10 million for the pavement management program, rather than the $12 million city staff requested in April.
Klufas said ideas for cutting the budget were great starting points, but the discussion required a group effort, not one person throwing out a thousand different ideas.
“This is an exercise, Councilman Danko, in us trying to come to a joint decision for this budget,” Klufas said. “You’re here grandstanding.”
After the council meeting, Alfin gave the Observer a set of written comments about the tax rate and franchise fee.
He wrote that lowering the millage rate — and thus the burden on property owners — but supporting the franchise fee will help the city diversify revenue streams for a fairer way to maintain city infrastructure.
The fee impacts every FPL customer, across the economic spectrum — from homeowners to renters to businesses, he wrote.
“This levels the playing field for everyone,” he wrote. “Well-structured and fair taxing policies — regardless of their popularity — support and strengthen where we live.”