Sam Kaufman, Vice Mayor of the City of Key West, joined Good Morning Keys on KeysTalk 96.9/102.5Fm this morning to talk about what’s been going on in the city.
While there’s no city commission meeting in August, the group had a special call meeting last week to discuss the 3.2 acre project at Truman Waterfront.
Kaufman said, “I’ve been following this very closely for the last couple of years as all of my colleagues have on the City Commission. First I want to say the contractor and AH of Monroe, they’re doing a great job. They’re following the parameters of the RFP. That’s the request for proposals, which is the contract that the city put out for building this development. It’s 98 units of rental housing, and 28 units of purchased housing. The real concern for myself and my colleagues is that the price point for purchase of 14 of the 28 homes were well above what anyone would consider to be affordable.”
The price was between $600,000 and $700,000 for the 14 units.
Kaufman said, “The good news is that we came to the decision that the land authority funds, which is bed tax money, which is the 12.5 percent of tax that’s added to each hotel room and Airbnb in the city of Key West. That money can be used for this project. So the good news is those prices will come down and there was some question whether or not those funds could be used. In the end, it looks like those prices of those 14 units would come down to the mid $300,000 and low $400,000. So that’s a good news. The problem is that there’s a provision in the Florida Statute concerning land authority funds, that forces the land authority to cap on an annual basis, the eligibility for those owners at a certain income level. Tat’s something that the Commission and the community was really concerned about.”
So the Monroe County Land Trust Fund funds will be used for the project.
Kaufman said, “That’s what the consensus was, and I think, a unanimous agreement of the City Commission, because really, there’s no other good choice. The choice would be use those funds or keep the price points at that very high level. I think it’s a good decision. By the way, this developer and AH Monroe, they’ve been on track, their groundbreaking to start the construction is next month. That’s light speed compared to a lot of projects. I think we should be pleased with that. In the long run this project will get completed.”
Applications for the rental housing will likely come out a year from now, so those interested should keep an eye out on the city website and AH Monroe.
What about the concern for the need to reapply or re-qualify yearly?
Kaufman said, “Well, that’s not unusual for affordable housing. All affordable housing in the city of Key West and Monroe County and throughout the state of Florida have income requirements and that makes sense, right? When there’s government subsidies, we want the government subsidies to go to families and individuals that have the need for those subsidies. So that’s fair. The issue is that with ownership units, we want people to be able to climb higher. We want people to gain more wealth, we don’t want to hold people back. That’s the issue for these 14 units. But on the other hand, the folks who will be purchasing these units will be advised of this, they’ll have fair warning. They’ll understand it in advance, and they’ll make the decision for themselves and their family if this is best for them. So it may be just the best that the government can do for these 14 units. It may be that’s something we have to live with, but the commission is also committed to trying to change that particular rule with the county and the state of Florida. So we’ll see how that proceeds. But the good news is this project is on track, and it will get built.”
The threshold beyond which people would not be able to qualify is $160,000 a year.
Kaufman said, “It’s 160 percent of AMI, of annual median income, which means it could even be higher than that, depending on how many individuals live in the unit. It depends on how many income earners there are. But it’s is a project that’s important. We don’t want it to stall, we want it to get built. Those people that are in that quandary, in that predicament, they’ll have to figure it out. In the meantime, the best the City Commission can do and the government can do is to try to change that rule. We are committed to doing that and we’ll see how it goes. It is an amazing opportunity for a lot of families to have a house of their own. There is a significant subsidy that will be included. So a lot of people could say well, that’s a fair exchange. I mean, you’re getting a significant government subsidy and these are the rules and if this is what you’re going to be purchasing, I could see it working the way it is.”
The next city commission meeting will be September 14 where this will likely be on the agenda.
Kaufman said, “The closing on the property by the developer, actually, I think takes place that week as well. So that’s why we had to have a special meeting.”
Speaking of dollars, the budget process has begun.
Kaufman said, “The millage rate is basically the percentage of property tax that you pay based upon the value of your property. That value is determined by the property appraiser’s office. In the city of Key West, property values have gone up from from 2022 to 2023 by 10 percent across the island. What that means is keeping the same tax rate or millage rate equates to a 10 percent tax increase because if you use the same percentage, and you multiply the percentage by the the property values that go up 10 percent, well, that equates to a 10% increase in the taxes. My concern is, and I think a lot of people’s concerns are with the enormous increases in property insurance, the county’s taxes are going up 17 percent. With all the other costs going on, and the real impact on residential housing, we could see residential rents going up even higher than they are now. That is really incredible. My advocacy is for not increasing taxes and and if we do, a small amount as possible and that determination will be made in the final budget hearings, which start September 8.”
Kaufman actually suggested a decrease in the millage rate.
He said, “I did so last week at the budget hearing. In fact, in my opinion, we don’t need any tax increases. But I’m the outlier on taxes every year. We have a great finance department. City staff is fantastic. We have the finest fire department in the world or definitely in the country that help people when they are in distress. We have to pay for these things. And I get that. But at the same time, the city has no debt. We have $400 or $500 million worth of property, without any debt, no liens. We have income that is incredible outside of property tax. So if you really look at the budget as a whole, property taxes really play a very small part in a $250 million annual budget where the property taxes only bring in about $18 million total. My point is, why are we focused so much on property taxes and property tax increases when it’s less than 10 percent of the actual budget for the city of Key West? There are a lot of other revenue sources. There are other a lot other cost saving measures. I could see a small increase, but these double digit increases in taxes, they add up and put that with insurance increases, a lot of property owners are going to have to think twice about how they’re using their property and the rents that they’re charging to their tenants. This is not good for our local economy. I just think we have to be very cautious about it.”
What is the biggest source of revenue for the city?
Kaufman said, “It’s a number of things. For example, parking is a very big revenue source, in the millions of dollars. The city is a very big landowner in the city of Key West, rents collected, all of those boat slips, where all those people are living and recreating, all of the businesses, all of that brings in a great amount of revenue to the city. There’s just a lot of different sources. It’s an incredible budget, and the process is incredible for anyone interested. It’s really something to look at and to see. Another big part of it is collection of sewer fees, and stormwater fees and garbage fees.”
The city also has a rainy day fund.
Kaufman said, “The city of Key West is required by its code to keep a minimum of 72 days of operational costs, and a maximum of 92 days of operational costs. This year, the cost of running the city for one day is $173,000. That’s up $10,000 per day from last year, which is incredible to think about. There’s in excess of I think it’s $13 or $14 million that’s kept in an account, that’s called our reserve day account. There’s plenty of healthy funding. If you have $100 million, or $200 million, or $500 million in assets, and you have zero debt, that is incredible. And that’s the position, the financial position that the city of Key West is in. It’s incredibly strong position.”
Another budgeting issue is Fire Station Three will need to be replaced and the MLK pool in Bahama Village is looking at a big project.
Kaufman said, “There is a point in regards to taxation that these projects are in the $5 to $10 to $15 to $20 million range and we do not want to saddle that with the taxpayers. We need to find either grants, or we need to consider bonding. And that’s something I think you’re going to hear a lot more about in the next year. As far as I know, the city of Key West has never issued what’s called general obligation bonds to help pay for these bigger capital projects. So that’s something that I think the public should be aware of and discuss more.”
There are an incredible number of services needed to support the influx of visitors and guests in Key West.
Kaufman said, “Few small towns have the type of sewer system that we have. Miami Dade County doesn’t have the type of sewer systems, I mean, the quality of sewer system that we have. We’re the envy of the mainland when it comes to sewer, believe it or not. They don’t have the stormwater system, they don’t have the sewer system, very few places have what we have, and the fine police department that we have, and fire and we have our own ambulance service. Very few small towns of our size have that. But we also have an influx of three million visitors a year. So we need to have all these services. And overall, we’re doing great, we just need to really decide which direction we want to go. And if it means higher taxes, there are consequences. And that’s what I’m concerned about. What are the consequences and how can we live with those? It looks like we’re going to have to, and it puts even more pressure on the working people of Key West, which is is my concern.”