Taxing District Could Be Set Up To Fund IG

Municipal and county officials might ask voters to approve a special taxing district to finance the Office of Inspector General, in lieu of a 0.25 percent charge on vendor contracts that has been challenged in court by 15 municipalities.

Attorney Glen Torcivia made the proposal toward the end of a meeting Monday, which drew applause from several people in a nearly full room at West Palm Beach City Hall.

Participants in the Monday meeting also agreed to pursue mediation, rather than the lawsuit, which county attorneys estimated could last two years or longer, and work toward a temporary funding agreement in the meantime.

Last week, county commissioners rejected a settlement agreement proposed by the municipalities, which included exemptions for numerous contractors and a different financing mechanism than the statewide LOGER (local government electronic reporting) system now in use by the inspector general’s office.

West Palm Beach City Attorney Claudia McKenna said Miami-Dade County has identified problems with collecting 0.25 percent on some contracts. “There are contracts where there is either a legal or pragmatic operational barrier to collecting the 0.25 percent,” McKenna said. “For example, we all receive federal funding for various federal programs. There are provisions in the code of federal regulations that would prohibit us from adding or deducting the 0.25 percent. That was something that Miami-Dade identified early on and listed in its exceptions.”

McKenna said the proposed exemptions were county-recognized legal and pragmatic issues. She added that the settlement agreement attempted to minimize the amount that would come out of the county’s general fund and assure that none comes out of the municipalities’ general funds, explaining that it is illegal for one governmental body to subsidize another.

County Commissioner Jess Santamaria asked David Baker of the Palm Beach County Ethics Initiative about exemptions, and Baker recommended exempting as few contractors as possible, but agreed that there are contractors that neither the county nor municipalities could collect the fee from. There are also exceptions where the money to collect the fee would exceed the fee itself, he said. “The vast majority of contracts should be subject to the fee,” Baker said.

McKenna said the LOGER system is not designed to be a fee-collecting system. “The net effect of that is all of the cities lose control over their budgets,” she said. “There is no way for them to manage their own budget… You can’t just send a bill and folks not be able to plan for it.”

McKenna said that a legal framework must be found to fund the system without creating continual budgetary problems.

“What we are looking for was a way that the county could manage its budget, the cities could manage their budgets and everyone would agree that it’s legal,” she said.

Assistant County Attorney Leonard Berger said the charter amendment asked the voters whether the inspector general’s office would be financed by all the government entities involved.

“Being funded is something different from having a contract fee that is purely a county contract fee that the cities only collect on our behalf, leaving the rest of operations of the office for the county alone to fund,” Berger said. “I think that’s the difference, and I’m not sure if there is a way to get around that difference here. We will not be able to say how much the county is going to be able to look for every year to meet that budget.”

McKenna agreed. “There is no ability for the municipality to come to you and say, ‘The budget’s too high this year; we can’t pay that, we have other challenges going on,’” she said. “If you try and create a model where the municipalities have no say in what their budget is going to look like, that’s a serious legal problem.”

County Commission Chair Shelley Vana said that the county must not have control over the inspector general. “It was written every which way but loose to say the county commission will in no way, including budget-wise, control,” she said. “[The voters] said that an independent inspector general will be funded by all these folks, including everyone at this table.”

West Palm Beach Commissioner Keith James asked whether there is a finite number so the entities would be in a better position to manage their budgets that would not be subject to arbitrary changes, and whether they would be willing to fund above 0.25 percent.

Santamaria said that the grand jury report stated that the 0.25 percent was to come from vendors’ contracts, not from the taxpayers. “That’s what the taxpayers expect,” he said. “The one-fourth of a percent is minuscule.”

McKenna told Santamaria that all the municipalities represented agree with him. “We are absolutely open to charging 0.25 percent to our contractors,” she said. “That’s exactly what our proposal says.”

Berger said the county has followed the Miami-Dade model of collecting 0.25 percent, noting that it did not defray all of the cost. “There would be a gap here that we would have to pay out of our general fund, and that is where our concern is,” he said.

County Commissioner Burt Aaronson said the county has no more control over the inspector general’s budget than the municipalities do. “The voters by 72 percent said all of you stay the hell out of it and let the inspector general run the show,” he said. “I’m willing to go with what the voters want… Each municipality may want to do it their own way, but at the end of the day, whatever the shortfall is, it should be done on a per capita basis with the county and the cities.”

Torcivia said he had been listening to the comments and felt the only solution was to get the county and the municipalities out of the equation.

“Has anybody thought of just simply going back to the voters and saying, ‘If the inspector general is to be truly independent, let them get their own funding source, one-tenth of one mil, or whatever the number needs to be for their budget, and let them levy their own tax,’” Torcivia said. “There’s no confusion with the county or with the cities. If the people want to be taxed by the inspector general, let them be taxed. If they don’t, then they won’t, and there won’t be an inspector general’s office.”

Jupiter Mayor Karen Golonka favored the idea. “I like that suggestion very much,” she said. “I’d definitely support that.”

Golonka also suggested that for the short term, the municipalities come up with whatever is necessary to finance the office. “Without a separate funding source, it’s going to be a couple of years before we know where it’s going, and it will have to be a vehicle that is amenable to how we cover that,” she said.

County Attorney Denise Nieman said that in her mind, a special taxing district had always been the ultimate solution. “The big ‘tax’ word is what scares people from it, and I understand that, but it depends on how the legislation would be drafted, and that would have to come from Tallahassee creating a special act,” she said.

Jupiter Councilman Todd Wodraska, whose company manages special taxing districts, said there might be a way of creating such a district through the county, rather than through the state. “There’s a lot of options to be able to do this,” he said. “It doesn’t necessarily have to go to Tallahassee. It doesn’t necessarily have to go to referendum.”

Torcivia pointed out that the purpose of the meeting was mediation to try to settle the lawsuit. “Lawsuits are only good for lawyers,” he said. “My suggestion is that the cities might be a little more amenable to a voluntary contribution if there is going to be a consensus that jointly, all 38 cities and the county commission will [get] behind this concept of a special district and work together, and only one year of having to share this pain.”

By consensus, the participants agreed to continue mediation to work toward a special taxing district and work out a short-term solution to finance the Office of Inspector General.