Okaloosa County’s proposed fiscal year 2027 budget totals $769 million, an $82 million increase over the current adopted budget, County Administrator John Hofstad told commissioners Tuesday during the first of two budget workshops.

• But Hofstad stressed that the bulk of that growth is tied to enterprise fund reserves and capital project planning rather than new general fund spending.

“A large portion of that is tied to your enterprise funds — whether that’s airports or TDD or water and sewer,” Hofstad said. “Yes, that’s growth, but that’s inside restricted dollars that have to be used within that department for capital needs.”

Of the $82 million increase, only $3 million comes from growth in ad valorem property tax revenue, according to the presentation.

The largest year-over-year increases by fund include:

• Water & Sewer: up $34.2 million to $128.4 million
• Airports: up $25.1 million to $98.2 million
• Capital Projects: up $9.3 million to $31.1 million
• General Fund: up $8.9 million to $191.1 million (25% of the overall budget)
• Solid Waste: up $4.9 million to $32.6 million
• Debt Service: up $3 million to $12 million

Other major components of the overall budget include Tourism at 12%, the Infrastructure Surtax Fund at 9% and miscellaneous funds accounting for 6%.

The proposed budget holds the countywide millage rate at 3.8308 mills, a level the county has maintained for a decade. Hofstad noted that Okaloosa is one of roughly five counties out of 67 in Florida with an aggregate millage rate below four.

“We take great pride in the fact that we keep the tax burden low for the residents here in Okaloosa County,” Hofstad said.

The municipal services taxing unit rate is proposed at 0.2880 mills, consistent with the rollback rate the board adopted last year when it reduced the MSTU from 0.2990.

Property values, revenues and reserves

Property values in Okaloosa County grew 2.4% this year, an increase of $744 million over the prior year’s final valuation. Hofstad said the growth follows a trend of declining increases over recent years.

“Still growth for property values, but not the large growth that we saw six or seven years ago,” he said.

The county-wide gross certified taxable value for operating purposes stands at approximately $31.5 billion, up from the prior year’s $30.8 billion.

Ad valorem budgeted revenue is projected at roughly $114.8 million for fiscal year 2027, up from $111.9 million in the current year. The county budgets at a 95% collection rate, though Hofstad said audited year-end figures typically show collections closer to 96.5%.

Unassigned general fund reserves were reported at $23 million as of Sept. 30, 2025, covering two months of operating expenditures in line with board policy. The county’s long-term issuance rating remains at AAA from its three main rating agencies.

• “The AAA reflects this board’s wise budgeting over the last several years, building those general fund reserves, keeping the tax burden rate to our residents,” Hofstad said, noting the rating had been AA when he took the role roughly a decade ago.

Approximately $8.7 million in general fund reserves is being used to balance the proposed general fund budget.

Homestead exemption looms large

Hofstad identified the potential homestead exemption legislation heading to voters in November as a major source of uncertainty hanging over the budget.

“I will tell you, if successful, in year two, this will impact our general fund revenues, our property tax revenues by 23%,” Hofstad said. “23% is a huge burden.”

He emphasized that property tax revenue serves as the county’s discretionary funding source across a wide range of services and cannot be supplemented by restricted enterprise fund dollars from departments like airports, water and sewer, or tourism.

• “I can’t take water and sewer dollars or airport dollars or TDD dollars and balance the general fund budget,” Hofstad said. “That’s just not the way municipal budgeting and county budgeting works.”

While the proposed budget includes new general fund positions and capital projects, Hofstad said a hiring freeze for non-essential positions will remain in place until the results of the November election are known. He said he has directed staff to hold any general fund position additions and capital projects that use general fund dollars.

“I don’t want to launch into adding new positions or taking on additional general fund capital projects until I know the results of the referendum in November,” he said.

Personnel and operating highlights

The budget includes 1,153 full-time equivalent positions, an increase of 16 over the current year. New positions were added primarily in corrections and facilities and parks maintenance.

Hofstad said the corrections positions are necessary to address the officer-to-inmate ratio at the county jail, while the facilities and parks additions reflect the workload created by the county’s recent land acquisitions.

• “Anytime we acquire new lands or new facilities, that results in a burden that’s placed on our facilities and parks folks,” he said.

A 3% salary market adjustment is programmed into the budget, based on the Bureau of Labor Statistics CPI index reaching 4.2% as of May 2026.

On the health insurance front, Hofstad said the county’s request for proposals resulted in a rate hold from Blue Cross Blue Shield for fiscal year 2027.

He also reported that the EMS fund will not require general fund support for the first time in several years, citing improved collections and contract management.

General fund revenue assumptions

Budgets for communication service tax, state revenue sharing and half-cent sales tax are based on current fiscal year revenue estimates because state projections for fiscal year 2027 are not yet available. Hofstad said the State Revenue Commission had not yet met at the time the budget was prepared and typically convenes in midsummer.

“We have not gotten the revenue projections out of the state at this point,” he said. “We will, as part of the budget, estimate those additional revenue sources flat.”

He said gas tax revenues have also remained flat for several years, with no growth projected.

Capital projects and accomplishments

Among fiscal year 2026 accomplishments, Hofstad highlighted the near-completion of the Southwest Crestview Bypass, Destin Harbor and Lake Clyde dredging, water main replacements on Okaloosa Island, the Sheila Dunning South Annex Extension Office, and the District 1 Medical Examiner facility, which is scheduled for a ribbon cutting Aug. 7.

At the Shoal River Industrial Park, Hofstad said Williams International’s 250,000-square-foot facility is progressing rapidly. Deputy County Administrator of Development Services Jason Autrey said the company plans to begin raising walls by late July.

• “That scale of capital project that has been undertaken and where they are — it seems like it just started just a few months ago,” Hofstad said. “They are moving at lightning speed out there, which is important to this county.”

Plans for fiscal year 2027 include continued construction at Patriot Park, drainage infrastructure work funded by the local option surtax, tourist development park improvements at Marler Park, East Pass Park and Beasley Park, completion of the Shoal River Ranch Wastewater Plant, and the start of construction on a new Public Works and Growth Management complex.

The new Crestview Tax Collector building is expected to be operational in early 2027, Autrey said.

What’s next

A second budget workshop is scheduled for July 21 in Shalimar, where constitutional officers and additional departments will present to the board.

A special commission meeting to approve the tentative millage rate is also set for July 21 at 8:30 a.m. at the Okaloosa County Administration Building in Shalimar.

Public budget hearings are scheduled for Sept. 3 at 5:01 p.m. at the Crestview Courthouse and Sept. 15 at 5:01 p.m. at the administration building in Shalimar.