The Fort Walton Beach City Council on Tuesday night identified recreation programs, the city daycare, the library system, surplus property and several other city operations for review at its June 16 budget workshop, as members work to balance next year’s budget under the voter-approved 3% operating cap and a slate of state-level property tax proposals.

• City Manager Jason Davis led the discussion and told the council the city is approximately $500,000 over the operating cap and has roughly $2.7 million in capital projects the general fund cannot currently afford. Finance Director Nicole Nabors confirmed both figures. 

Davis said state property tax proposals could cost the city approximately $1.532 million in revenue next year and $2.303 million the following year, with the loss approaching $3 million under a larger exemption scenario. Nabors said the city’s property tax revenue totals approximately $10 million.

“We either cut services, raise millage, combination thereof,” Davis told the council. “That’s where we’re struggling here.”

Davis indicated the city will likely come in with a higher millage rate proposal this year, though no specific rate has been set. He used a hypothetical rate of approximately seven mills to illustrate that the millage rate is driven by which capital projects the council chooses to fund, telling members that backing off projects would reduce the rate. 

Nabors said staff will return with multiple millage options for the council to consider, given that $2.7 million in capital cannot currently be funded from the general fund. Fort Walton Beach’s current millage rate is 4.52 mills, compared with 6.64 in Crestview, 5.02 in Mary Esther and 4.5 in Niceville.

Council members were asked to submit topics for the June 16 workshop to City Clerk Kim Barnes by 5 p.m. Wednesday, June 10. The areas put forward Tuesday include:

• Recreation programs, which Davis said could save approximately $165,000 with no staff losses.
• The city daycare, which Davis said loses hundreds of thousands of dollars annually.
• The library system, including potential public-private partnerships.
• Sports programs, with Councilman David Schmidt suggesting a phased transition to local vendors which already provide recreational sports in the community.
• Boat launch and parking fee structures, with Schmidt suggesting the city mirror Okaloosa County’s approach, in which county residents do not pay.
• A list of all city properties for potential surplus, requested by Councilwoman Debi Riley and supported by other members.
• The Gulfview Motel, including grant pursuit to designate it a historic property and increased rates for tenants.
• City-funded events including parades and fireworks, recreation center membership fees and senior citizen programs, suggested by Councilman Logan Browning.
• All city departments, with Councilman Payne Walker citing previous discussions with the police chief about a possible police department consolidation and raising the option of privatizing the city golf course

On the surplus property discussion, Davis cited two specific examples he said he would be open to declaring surplus. 

The first is the city’s portion of a shared parking lot across from The Landing Park downtown, where another entity owns the other half and a buyer has approached the city about purchasing the city’s share. 

The second is a small park with a bench at the end of Bay Drive near Brooks Street that requires regular mowing. Councilman Ben Merrell suggested the city offer any surplus properties to Okaloosa County first, citing interest from county commissioners in maintaining certain properties in their current state. 

• Several council members supported developing a full list of city-owned properties so the council can identify additional candidates, with some parcels potentially being returned to the tax roll for development.

Davis told the council that the city’s fuel and electric costs have doubled from last year, while the operating cap allows for an annual increase of approximately 3%. He said the gap between rising operational expenses and what the cap permits is forcing reductions across the budget.

He also outlined cuts the city has already made to stay under the operating cap, including elimination of an annual $15,000 employee gift card program, removal of a $200,000 length-of-service stipend, no cost-of-living adjustment for staff and the end of half-day Fridays. He said the city is now under a hiring freeze and will begin cutting training and conferences. Davis said the cap also limits his ability to add staff to maintain new parks and facilities the council is approving.

Davis also raised the possibility of a fire assessment fee as a revenue option, acknowledging the term carries contention in Fort Walton Beach. The city previously implemented a fire assessment fee that drew legal challenges and led to the formation of the FWB Watch Group, which advocated for the 3% operating cap voters later approved. Davis was not the city manager when the original fee was implemented, with two managers having served in the role since.

• “A fire fee, right? That’s like the four-letter word here,” Davis said.

Davis told the council he attended a recent conference at which 480 of approximately 500 city officials in attendance indicated their cities have a fire fee. He said he would not support placing a fire fee on residential properties and that any commercial fee would need to be scaled based on property size and use, contrasting a small office with a large storage facility. He said a properly structured fee could take some of the property tax burden off homeowners. 

Davis said he has asked the Florida City and County Management Association and the International City/County Management Association for examples of cities with successful fire fees and why those programs have worked, and that any fire fee proposal in Fort Walton Beach would still require voter approval. He also referenced a Municipal Service Benefit Unit, or MSBU, as another revenue option, but described it as a property-based tax that could be viewed as a different version of a fire fee. He said an MSBU would also require a vote.

Walker pressed Davis on what he described as the city manager’s responsibility to deliver a balanced budget within the cap. “You’re the big money guy, right? You’re the problem solver. You’re the one that’s supposed to solve the problems,” Walker said.

Davis responded that the city council, not the city manager, sets policy direction and capital project priorities, and that the millage rate follows from those decisions. He said he can work with department directors to operate within the cap on day-to-day spending, but capital projects, which are not subject to the cap, are driven by council priorities. “I am going to execute that mission once we have the instruction,” Davis said.

A separate discussion centered on whether to bring an amendment of the 3% cap back before voters. Merrell told the council he wants to amend the cap rather than eliminate it, citing concerns that the current 3% threshold is forcing the city to move money between accounts and consider cuts to services and staff positions. He suggested an amendment to 5% plus the Consumer Price Index could give the city more flexibility while keeping a cap in place. Merrell said he would continue to propose the change until the council agrees to refer the question to a ballot.

• City Attorney Jeff Burns said it is too late to place the question on the November ballot but that Okaloosa County Supervisor of Elections Paul Lux has indicated flexibility on a March 2027 special election date.

Councilman Bryce Jeter said that while he personally opposed the cap and spoke against it during the campaign, voters have approved it twice and the council must now work within it rather than return repeatedly to the ballot. 

“It’s passed twice. The voters have spoken,” Jeter said. He told the council the city will have to cut some services regardless of what happens with the cap or state property tax proposals, and that the council should not pass difficult decisions on to a future board.

Jeter also proposed exploring a meeting with the FWB Watch Group to discuss possible interpretations of the charter amendment that would not require another referendum. Burns said avenues exist outside of a ballot referral and recommended that any such meeting take place after the June 16 workshop. He pointed to Destin’s city charter, which includes a millage cap that predates a state statute generally prohibiting such caps and has never been legally challenged. 

• Mayor Nic Allegretto said the actuals-versus-budget interpretation and other implementation details of the cap were established by the previous council through ordinances, separate from what voters approved at the ballot.

Davis said any meeting with the FWB Watch Group should be recorded. “I have some severe trust issues with some of those people,” Davis said. “Some of the stuff that was passed on was fabricated to a degree that I’m very uncomfortable with, so it would have to be recorded as well.”

The June 16 budget workshop is scheduled to begin at 4 p.m. with a possible hard stop at 10 p.m. Davis told the council he will return after the workshop with budget options that reflect the direction members provide. A balanced budget is expected to come before the council in August, with adoption scheduled for September.