_add-on a) Memo Annexation Millage Reduction fCITY OF SOUTH MIAMI
OFFICE OF THE CITY MANAGER
INTER-OFFICE MEMORANDUM
Page 1 of 9
TO: The Honorable Mayor & Members of the City Commission
FROM: Steven Alexander, City Manager
DATE: August 15, 2017 Agenda Item No.: Add-on a)
SUBJECT: A Resolution formally stating the intent of the Mayor and Members of the City
Commission to reduce the millage rate following annexation of certain areas.
BACKGROUND:
In February of 2017, the City Commission discussed inquiries from some residents of the
High Pines area regarding their interest in receiving a Preliminary Annexation Feasibility
Report indicating South Miami’s interest and approach to the potential annexation of the
areas. The Commission’s Resolution No. 030-17-14831 directed the City Manager to
explore and engage the process of annexing the unincorporated High Pines & Ponce Davis
neighborhoods and craft a preliminary feasibility assessment process.
The Preliminary Annexation Feasibility Report reflects a refinement of the revenue and
cost information, as well as, creating a document to assist with the assessment of the cost
of services and programs to be provided and to evaluate the level of neighborhood support
for annexation into the City of South Miami.
High Pines and Ponce -Davis:
Figure 1 provides an aerial view of the High Pines and Ponce-Davis neighborhoods. These
areas encompass 675 acres and are generally situated southeast of the intersection of SW
72 Street (Sunset Drive) and SW 57 Avenue (Red Road) and share a border with South
Miami along SW 57 Avenue (Red Road) from SW 72 Street (Sunset Drive) to SW 88th Street
across from Dante Fascell Park. The population is estimated to be 4,128 with
approximately 3,096 voters. The population is 31% Hispanic and 65% Caucasian (non -
Hispanic). High Pines has approximately 756 single family homes, while Ponce -Davis has an
estimated 169. The average household income is $158,367 and 78% of the housing units
are owner-occupied. The land use pattern in High Pines and Ponce -Davis is decidedly
single-family residential comprising 95% of the neighborhood. There are also 28 acres of
multi-family residential and five acres of commercial property. These two neighborhoods
have approximately 20.5 miles of paved roads combined.
CITY OF SOUTH MIAMI
OFFICE OF THE CITY MANAGER
INTER-OFFICE MEMORANDUM
Page 2 of 9
CITY OF SOUTH MIAMI
OFFICE OF THE CITY MANAGER
INTER-OFFICE MEMORANDUM
Page 3 of 9
High Pines Only Annexation Scenario
Benefits of Annexation for the City: The High Pines neighborhood, if annexed, is estimated
to generate an estimated net revenue surplus to the City after expenses of $1,594,083 for
2018 based on the increase in property tax revenue only using the millage rate adopted for
FY 2016-17 and the taxable values provided by Miami-Dade County for 2016 for High
Pines.
Currently, High Pines residents and owners within the proposed annexation areas are
subject to a millage rate of 1.9283 mills. Annexation at the cur rent City of South Miami
millage rate of 4.3000 will increase the annual property tax bill of residents and owners
within the proposed annexation areas by 2.3717 mills. It is critical to note that this new
millage rate includes South Miami’s Solid Waste c ollection service, therefore, if annexed,
the residents of High Pines will no longer have to pay the County $4 64 each year for the
County Solid Waste collection service. Property taxes are typically deductible on IRS Form
1040 and the County imposed solid waste fee of $464 is not. Therefore, since South
Miami’s property tax bill includes solid waste service, the homeowners in this area will, in
theory, be able to deduct (save) more property tax than currently.
Based on the median average of the 2016 taxable value of homes in High Pines ($398,597),
the resulting estimated net annual impact on a typical property tax bill in the annexation
area of High Pines is approximately $481 per year. This figure is arrived at by taking the
typical property tax bill in the annexation area of High Pines of $945 per year and
subtracting the County solid waste fee $464 per year which will no longer be charged of
High Pines residents after annexation, $945 - $464 = $481.
Should the City wish to reduce the millage for all of the residences due to the annexation
of the High Pines Annexation, the City may reduce the South Miami millage, possibly to
3.3000, without affecting City services. Under this scenario, High Pines would realize an
approximate net increase of $83 (after eliminating the County solid waste fee) on their
property bill and fees on a median average 2016 home price.
Revenues: The primary revenue sources will be from property taxes, which are estimated
to generate a total of $2,867,083 based on the current City of South Miami millage rate
and the taxable assessed values provided by Miami-Dade County for 2016 for High Pines.
The total estimated revenue from all sources are estimated to be $3,191,945 million
annually from the High Pines neighborhood, including Municipal Sharing Sales Tax and
Communication Service Tax and various other taxes such as Franchise Fees and Utility
Taxes similar to currently imposed by Miami -Dade County.
CITY OF SOUTH MIAMI
OFFICE OF THE CITY MANAGER
INTER-OFFICE MEMORANDUM
Page 4 of 9
Both Neighborhoods Annexation Scenario :
Financial Impact Based on Both Neighbor hoods
In addition to other property taxes, residence in the subject neighborhoods currently pay
an Unincorporated Municipal Service Area (UMSA) tax rate of 1.9283 mills, plus 2.4207
mills for the County Fire District service. A “mill” is defined as $1 for every $1000 of
property value. If annexed into the City, these areas would begin to pay the City’s
property tax rate of 4.3000 mills, and continue to pay the 2.4207 mills for County Fire &
EMS service. This combination of taxes produces an estimated inc rease of millage on tax
bills, if the neighborhoods become part of South Miami. Currently 1.9283 mills, plus
2.4207 mills is levied on the two neighborhoods by the County but under the South
Miami annexation the tax levies would be 4.3000 mills plus the 2 .4207 mills for County
Fire & EMS service if annexed by the City of South Miami.
It is important to put these municipal tax rates into a context showing the real estimated
financial impact of annexation on neighborhood property owners. Using the current
South Miami millage rate of 4.3000, a n estimated median average 2016 home price in
High Pines of $398,597 and an estimated median average 2016 home price in Ponce-Davis
of $1,536,577, the resulting annual estimated impact on property tax bills for High Pines
and Ponce-Davis areas will experience a median average increase in High Pines of $945
(which is typically deductible on Federal taxes ). When factoring in the elimination of the
County imposed fee for solid waste collection, the following net increases result for the
two neighborhoods: ($945 property tax - $464 County solid waste fee = $481 net
increase) and in Ponce Davis of ($3,64 4 (which is typically deductible on Federal taxes )
($3,644 property tax - $464 County solid waste fee = $3,180 net increase) on their taxes
and fees.
Revenues and Expenditures:
As shown in Table 1, the annual estimated revenues for the High Pines and Ponce -Davis
area are expected to exceed City services and program costs, based on the City’s current
millage rate of 4.3000.
Table 1: Estimated Revenues and Expenditures* for Fiscal Year 2018
Total Revenue/Costs High Pines & Ponce-Davis
Operating Revenue $4,561,151
Operating Expenditure 1,273,000
Annual Operating Net Difference 3,288,151
CITY OF SOUTH MIAMI
OFFICE OF THE CITY MANAGER
INTER-OFFICE MEMORANDUM
Page 5 of 9
Note: Excludes capital outlays and improvements, which may be added
subsequently. Neighborhood capital improvement projects are typically agreed
to by the neighbors prior to approval by the City Commission.
Financial Feasibility: The annexation of the subject areas is financially positive for the City,
as the City’s projected revenues will exceed projected expenditures in the annexation
areas. If support from the residents of High Pines and Ponce -Davis appears to be strong,
and the City Commission endorse s the proposal, once the process of annexation is
ultimately completed, the City could lower its millage rate in the near future to reflect the
net increase in revenues from the newly annexed areas.
Tables 2 and 3 of this report provide a yearly, detailed estimate of revenues and
expenditures for 2018, associated with the annexation of High Pines and Ponce -Davis.
For 2018, these neighborhoods are expected to generate an estimated revenue surplus
to the City of $3,288,151 ($4,561,151-$1,273,000 = $3,288,151) if annexed together,
based on state revenues and on the millage rate adopted for FY 2016 -17 and the gross
taxable assessed values provided by Miami-Dade County for 2016 for High Pines and
Ponce-Davis.
Revenues: The total gross taxable property value of H igh Pines and Ponce-Davis are
$1,028,846,941, as provided by Miami -Dade County Property Appraiser’s Office. The
current South Miami millage rate would be applied to this total gross taxable assessed
value to produce a projected ad valorem revenue of $4,202,840. Potential City revenue
estimates are summarized in Table 2. The primary revenue source will be from property
taxes, which are estimated to generate a total of $4,202,840 (95% of ad valorem) based
on the current City millage rate adopted for FY 201 6-17 and the taxable values provided
by Miami-Dade County for 2016 for High Pines and Ponce -Davis. The total estimated
annual intergovernmental revenues from all sources are estimated to be $4,561,151
from both neighborhoods, which also includes Municipal Sharing Sales Tax and
Communication Service Tax.
TABLE 2: ESTIMATED R EVENUES FROM ANNEXATION
Estimated Revenue Sources High Pines and
Ponce-Davis
Property Tax (At 4.3000) (at 95%) $4,202,840
Sales Tax (Municipal Sharing Program) $268,253
Communication Service Tax $90,058
Total Estimated Tax Revenues $4,561,151
CITY OF SOUTH MIAMI
OFFICE OF THE CITY MANAGER
INTER-OFFICE MEMORANDUM
Page 6 of 9
Fee Reduction:
It is critical to note a few facts related to the fiscal impact of annexation on the individual
homeowner. As of October 1, 2017, the residents of High Pines and Ponce-Davis pay a
Solid Waste Fee of $464 per year in addition to their ad valorem tax amount. Should the
residents of High Pines and Ponce-Davis decide to opt for annexation by South Miami,
they would be provided with Solid Waste Services from the City. Doing so will result in
the elimination of the requirement to pay the Solid Waste Fee of $4 64 per year in
addition to their tax bill, as South Miami includes solid waste collection service in the ad
valorem tax. Although the inclusion of Solid Waste ser vice within the ad valorem tax of
South Miami adds to the increase the ad valorem tax for the residents in the annexed
area, it also reflects a reduced expenditure by residents who are annexed for the solid
waste collection fee by the County (-$464). The net effect based on both neighborhoods
assuming the current City millage rate is $6 53 ($1,117-$464 = $653 ), a slight increase
(estimated average property tax increase for annexed home minus the County Solid
Waste yearly fee equals the new true financial impact for an average property in the
annexed area as it moves to South Miami). South Miami’s solid waste collection is
second to none, as it offers twice -weekly automated garbage pickup with back door
service for those who need it, weekly vegetative trash removal (the county only provides
this service twice per year), and white goods removal on demand.
Estimated City Costs:
Table 3 below provides a summary of projected expenditures for necessary City road
and infrastructure improvements, new equipment, and personnel. The immediate
increased cost of providing services to this area would total an estimated $1,2 73,000
annually starting in 2018, in addition to a projected $2,260,000 initial capital cost, which
includes additional Police and Solid Waste vehicles for the area. This cost will not recur
from year to year.
The capital expenditures for this area are expected to decline in future years. Fire,
Water and Sewer, Planning and Zoning, and Building will have not experience any
significant budgetary or financial impact due to the proposed annexation.
CITY OF SOUTH MIAMI
OFFICE OF THE CITY MANAGER
INTER-OFFICE MEMORANDUM
Page 7 of 9
Table 3: Estimated Expenditures by South Miami for Fiscal Year 2018, including Solid
Waste
City Services Annual Cost Capital Cost
Solid Waste $510,000 $625,000
Parks 100,000 775,000
Police 400,000 160,000
Public Works 200,000 675,000
Code Enforcement 63,000 25,000
Total Expenditures $1,273,000 $2,260,000
Initial New Expenditures and Services immediately after annexation
Solid Waste: Solid waste disposal is included in the CSM property tax, however, there is an
additional one-time capital cost of $625,000 for trucks.
Code Enforcement: Total estimated cost for an additional Code Officer annually is $63,000 for
2018 with an additional one-time capital cost of $25,000 for a vehicle.
Parks: As desired by the Community, $775,000 is estimated for park and open space renovations
at the medians of 76th St. & 54th Ave. Also, full “park like” renovations of those same areas, with
trees, plant new foliage, and shrubs, as necessary.
Street & Landscaping: Routine Landscape maintenance in the right of ways is estimated to be
$300,000 for 2018. Landscape services including tree trimming, and landscaping replacement, as
necessary.
Police: Additional Police expenditures are estimated to be $400,000 with a p rojected Capital Cost
of $160,000 for new vehicles and equipment.
Roadway: Lighting, improvements, and maintenance of roads in these neighborhoods are
estimated to be $200,000 annually to include the re -milling of deteriorated streets, installation
and renovation of sidewalks, and installation of crosswalks, as determine d in the City Budget.
Directional Signs: The City would install the new decorative directional street name signs on each
of the intersections for an estimated $300,000 for High Pines and an additional $75,000 for the
Ponce Davis neighborhood.
Fire: Fire Rescue will continue to be provided by Miami-Dade County at no change in cost as the
result of annexation.
CITY OF SOUTH MIAMI
OFFICE OF THE CITY MANAGER
INTER-OFFICE MEMORANDUM
Page 8 of 9
PROPOSED OPERATIONAL EXPENDITURES
4 Police Officers (Approx. $75K x 4) $300,000
4 Police Officers Expenses ($25K x 4) $100,000
Total $400,000
3 Solid Waste Staff ($55K x 3) $165,000
MDC Recycling $40,000
Tipping Fees $250,000
Solid Waste Supplies and Gas $55,000
Total $510,000
Parks Staff and Special Projects $100,000
FPL Street Lights $50,000
Street Repairs and Maintenance $100,000
Public Works Streets Staff $50,000
Total $200,000
Code Enforcement Officer 57,000
Code Enforcement Expenses 6,000
Total 63,000
Overall Estimated Annual Operations Total $1,273,000
Capital
4 Police Cars ($40K x 4) $160,000
Public Works Small Truck $25,000
Sanitation Dump Truck $100,000
Sanitation Crane Truck $200,000
Sanitation Garbage Truck $300,000
High Pines New Directional Signage $300,000
Ponce Davis New Directional Signage $75,000
Streets and Landscaping $300,000
Parks Small Truck $25,000
Parks $750,000
Code Enforcement Vehicle $25,000
Total Estimate Capital Costs $2,260,000
CITY OF SOUTH MIAMI
OFFICE OF THE CITY MANAGER
INTER-OFFICE MEMORANDUM
Page 9 of 9
OPTION IF ANNEXATION AREAS ARE APPROVED
Millage rate reduction
The City could reduce the millage for all its current and newly annexed residents and
businesses, due to the increased revenues resulting from the annexation of the High
Pines and Ponce-Davis. Under one example the City could reduce the millage to 3.3000,
including the newly annexed areas. Under this scenario, High Pines and Ponce -Davis
would benefit from a lower millage rate than the City of South Miami is currently using.
Based on this hypothetical example of a new millage rate of 3.3000, the annexed a reas
would have a reduced property tax impact, and therefore, based on a 3.3000 millage rate
for the City, the hypothetical net increase for High Pines would be $83 ($547 - $464 = $83
) and in Ponce Davis of $1,644 ($2,108 - $464 = $1,644 ).
RECOMMENDATION: It is recommended that the attached resolution be approved which
provides that it is the policy and intent of the City of South Miami to reduce the millage
rate to 3.3 in the year following the completion of the annexation process.
ATTACHMENTS: Proposed resolution
Miami-Dade County Property Appraiser’s 2016 Taxable Assessed Values