Tax reform jitters are spreading through cities across the state as legislators move forward with a plan set in motion by Gov. Ron DeSantis to give homesteaded property owners a much-needed tax break.
Fort Lauderdale officials say they are well aware of the fiscal fallout that might be coming and are already making plans for what could be a worst-case scenario: A staggering $72.8 million shaved from the city’s day-to-day budget.
DeSantis has called for the elimination of property taxes, referring to them as a burden that forces homeowners to pay perpetual “rent” to the government.
Property tax reform would require a constitutional amendment passed by 60% of the voters.
If voters approve tax reform in November, cities across the state would likely have no choice but to slash budgets, with one caveat. They’d be prohibited from cutting spending on fire-rescue and police departments below current levels.
Vice Mayor John Herbst has told his colleagues he has no doubt the tax reform proposal is going to pass.
“We need to be leaning into the fact that we’ve got to start scaling down operations,” he said last month. “Winter is coming. Let’s just not put our heads in the sand.”
Commissioner Ben Sorensen echoed that refrain during a recent City Hall meeting, urging staff to be prepared now for what might be coming down the pike.
“We need to be doing everything now to prepare for a worst-case scenario,” Sorensen said. “It’s not the sky is falling, but we’ve got to be reasonable that there is a strong likelihood that we’re going to face a significant deficit in our budget.”
Sorensen asked how the city would handle an extreme drop in property tax revenues.
Fort Lauderdale’s budget team has been evaluating various scenarios, City Manager Rickelle Williams told the commission.
“Our mindset is geared toward (the fact that) anything could happen,” she said. “We can’t predict what the Legislature will do. What I’ve shared with our budget management team is that our focus is going to be on fiscal prudence, resourcefulness and innovation. We just don’t know what the true impact might be.”
Last year, the city’s financial consultant shared a grim financial forecast that did not even contemplate the potential of property tax reform.
At the time, Mayor Dean Trantalis dismissed the gloomy prediction as a worst-case scenario.
“We don’t need to take on these doomsday attitudes,” Trantalis said at the time. “We may have to cut corners in some of our programs. We’ll see how the numbers shake out and go from there.”
According to the forecast from city consultant Stantec, the shortfalls would grow each year as budget expenses rise and property values level off: $38.4 million in 2027; $47.2 million in 2028; $61.3 million in 2029; $54.2 million in 2030; $59.1 million in 2031; $75.6 million in 2032; $86.5 million in 2033; and $107.1 million in 2034.
Based on staff’s current estimate, Fort Lauderdale is facing a $28 million deficit in fiscal year 2028. In the most extreme scenario, property tax reform could increase the shortfall by another $72 million.
“That’s possibly a $100 million deficit if the worst-case property tax proposal passes,” Sorensen said. “This is a huge number. Share with me how we start thinking about this and how we start preparing for a worst-case scenario.”
The city manager said Fort Lauderdale is preparing for that scenario, just in case.
“I believe we will have to potentially sacrifice some of the services that we offer or find opportunities to generate revenue that we have not yet pulled the trigger on or leveraged,” she said. “That scenario will lead us to making some dramatic changes in the way that we operate and staff at the city.”
Last year, the city was bracing for possible shortfalls based on an anticipated drop in property tax revenues, Bill Brown, chair of the city’s Budget Advisory Board, told the South Florida Sun Sentinel.
“Then the property tax reform came up,” Brown said. “We were already preparing for a shortfall. And the tax reform just compounds it.”
The 10-member Budget Advisory Board meets monthly to provide input on the city’s annual operating budget, analyze financial data and brainstorm ways to bridge projected budget shortfalls.
Layoffs, pay cuts and hiring freezes rarely happen in the public sector, though they can happen during extreme budget deficits and economic downturns.
“That would be a last resort,” Brown told the Sun Sentinel. “First we’d look at cutting services. But when you cut services, what do you do with the surplus of employees? There’s no need for them.”
For years, some members of the budget advisory board have recommended the city stop giving away millions every year to local nonprofits, but the commission has continued the practice.
“There’s $2.6 million going to nonprofits and city-sponsored special events,” Brown said. “The nonprofits feel entitled to it because they’ve gotten it for years. I would recommend those be eliminated.”
City-sponsored festivals and drone shows might also have to go, Brown said.
“That’s a nice to have,” he said. “But is it a need to have? At the end of the day we have to balance the budget. It’s going to be a chess game in prioritizing the most essential services required. The nice to have vs. the needs to have.”
Chris Williams, a longtime resident and former member of the budget advisory board, says he does believe there’s fat in the budget that can be cut.
“There’s always fat in any government budget,” he said. “If they end up with a $100 million deficit, they may have to cut employees. Salaries too. When it’s that big of a deficit, you’re looking at scaling back salaries and hours. I’d get rid of any new hires or newly created positions. If you lived without it before, you can live without it now. I’d also eliminate the practice of donating money to the nonprofits. You have to look at everything.”
Susannah Bryan can be reached at sbryan@sunsentinel.com. Follow me on X @Susannah_Bryan