There has been plenty of news coverage lately on how the city plans to spend its money next year, but where does the city get the money to begin with?
There are many sources, but two account for more than half of the annual collection.
In Jacksonville’s 2015-16 general fund budget of about $1 billion, property taxes accounted for 34.9 percent of the city’s revenue.
The second-largest source of revenue was JEA.
Last year, the utility transferred $235 million to the city, about 24 percent of the budget.
The projected transfer in the 2016-17 spending plan under review is $239 million.
The funds come from the annual contribution from the utility, plus a 10 percent public service tax and a 3 percent franchise fee enacted in response to changes in state law that affected property taxes.
Utilities — first electricity and decades later, water and sewer service –– have been a steadily growing source of revenue for more than 120 years.
The story goes back to March 7, 1895, when the switch was thrown at the new Main Street Power Plant at First and Main streets, powering up Jacksonville for the first time. Only nighttime service for lighting was available.
People who lived south of the St. Johns River didn’t have electricity until April 8, 1912, when service was made available from 6 p.m.-12 a.m. to 37 homes and businesses.
By 1938, the system had grown to cover 42 square miles, serving 30,000 residential customers and nearly 7,000 commercial and industrial accounts.
Some of the city’s most significant capital infrastructure improvements have been made possible by utilities.
In 1942, an 8-inch oil pipeline was completed from the Gulf Coast to the Talleyrand Avenue Light Plant to assure its fuel supply.
Power lines were run to Baldwin in 1943 to support the war effort to provide power backup for Camp Blanding and Jacksonville Naval Air Station.
In 1953, the Southside Generating Station was put in operation after cables were installed under the St. Johns River to connect the plant to the rest of the electric system.
By 1964 improvements to the Southside and J. Dillon Kennedy (formerly Talleyrand) generating stations allowed the electric system to serve 150,000 residential and commercial customers.
The Northside Generating Station went online in 1966. That increased the system’s generating capacity to nearly 1 billion kilowatts, making it the second-largest municipally owned utility in the country.
In 1967, the voter-approved consolidation of city and county government established the Jacksonville Electric Authority, now known as JEA.
By 1974, JEA became one of the first electric systems to install a computerized distribution center. Electricity was provided to 198,000 customers over 3,300 miles of power cables.
Thirteen years later, St. Johns River Power Park, a joint venture with Florida Power & Light, went into operation.
Water and sewer services were added to the portfolio when in 1997 operations of the city Department of Public Utilities was merged with JEA.
In 1999, two new treatment plants opened and four new wells were dug to increase the system’s water capacity.
All along the way, JEA has provided utilities to the community on a not-for-profit basis while making a substantial annual contribution to paying Jacksonville’s bills.
That became even more important in 2008, when voters approved a reform of the state property tax laws.
Changes included increasing the homestead exemption from $25,000 to $50,000 and capping increases in property tax on rental and commercial property and on out-of-state property owners.
Proponents called the reform “tax relief for Floridians.” City officials viewed it as creating a $65 million gap between revenue and expenses, since ad valorem taxes represent the largest single revenue source.
To make up a portion of the impending annual shortfall, $38.5 million was cut out of the budget City Council approved new fees on residential solid waste and stormwater runoff, Council also amended City Charter Section 21.07 –– which regulates JEA fiscal and budgetary functions –– to implement a franchise fee to be paid by JEA equal to 3 percent of the utility’s gross revenue, excluding the Beaches and Baldwin.
The franchise fee diversified the city’s revenue to deal with the impact of the state tax reform. It was justified based on the city’s administrative costs incurred in coordinating functions and services with JEA.
The legislation also referenced JEA’s exclusive right to provide utility services, JEA’s use of city rights-of-way to provide its services and its status as a wholly owned public utility.
“We’re a growing community and our service costs will continue to rise. We know we cannot continue to cut funding and still provide quality services, but property tax revenue is no longer a reliable source of income,” said then-Mayor John Peyton when he presented the proposed 2007-08 budget to council.
“The state changed the rules and we had to come up with a plan to compensate for that,” said Alan Mosley, who was city chief administrative officer.
The franchise fee covered $18.3 million of the property tax shortfall in 2008-09 and put $37.3 million into city coffers last year.
In the past nine years, JEA’s total annual contribution, including taxes, fees and the base transfer, has increased 50 percent, from $192.6 million in 2007-08 to $288.6 million projected for 2015-16.
In addition, JEA made a one-time contribution of $15 million, to be matched by the city over five years, to eliminate septic tanks in environmentally-sensitive areas and expand the sewer system.
Based on the average $194.27 monthly bill for 1,000 kilowatt hours of electric service, 6,000 gallons of water used and sewer charge, $30.84 goes directly to government agencies — about 16 percent.
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