Local Taxation: The Sumter County Millage Dispute

In a case highlighting the intricacies of municipal taxation and compliance with statutory requirements, Sumter County has filed a petition for declaratory judgment against the Florida Department of Revenue. The dispute centers on the interpretation of Florida Statutes regarding millage rates for newly created Municipal Service Taxing Units (MSTUs) and the statutory voting requirements for initial levy rates.

In 2023 and 2024, Sumter County established two MSTUs: The Villages Public Safety Department MSTU and the Sumter County Fire Rescue Emergency Medical Services MSTU. The creation of these districts and the authorization to levy millage were achieved unanimously by the County Commission. However, setting the initial millage rates for these MSTUs proved contentious. On September 17, 2024, the Commission adopted millage rates of 0.0272 mills and 0.29 mills for the two MSTUs, respectively, through a 4-1 vote.

Subsequently, the FLDOR issued a Notice of Non-Compliance, asserting that the millage rates were invalid because they were not adopted unanimously as required by Section 200.065(5), Florida Statutes. This section establishes a maximum millage rate calculation framework, requiring either a two-thirds or unanimous vote depending on the circumstances.

The case presents a series of legal concerns:

1. Application of the Rolled-Back Rate:

   • FLDOR maintains that the rolled-back rate for newly created MSTUs is zero, effectively requiring unanimous approval for any initial millage levy. Sumter County argues this interpretation creates a mathematical impossibility, as a zero rolled-back rate cannot be used to calculate percentage increases under the statute.

2. Voting Thresholds:

   • Florida law specifies that a unanimous vote is necessary to exceed 110% of the rolled-back rate. Sumter County contends that the statute is unclear regarding the application of this requirement to newly created MSTUs with no prior fiscal history.

3. Procedural and Financial Ramifications:

   • FLDOR’s notice proposed three remedies:

     • Re-advertising and holding a new final hearing to adopt the same millage rates with unanimous approval.

     • Re-advertising and adopting lower millage rates to comply with voting thresholds.

     • Accepting a penalty in the form of withholding the County’s half-cent sales tax distribution for 12 months, totaling approximately $9.5 million.

   • The financial stakes are high, as the withheld sales tax revenue is pledged for debt service obligations, further complicating the County’s position.

4. Timing and Administrative Burdens:

   • FLDOR’s notice was issued on October 29, 2024, leaving the County with limited time to remedy the situation before the November 1 deadline for property tax notices. This compressed timeline exacerbated the administrative challenges of re-advertising and re-voting.

Sumter County’s Petition

In its petition for declaratory judgment, Sumter County raises several points:

1. Statutory Ambiguity:

   • The County argues that Section 200.065(5) lacks clarity regarding voting requirements for newly created MSTUs. The statutory language assumes the existence of a rolled-back rate, which is inapplicable to MSTUs without prior-year millage rates.

2. FLDOR’s Interpretation:

   • The County challenges FLDOR’s reliance on legislative intent to justify its interpretation. It contends that without clear statutory or regulatory guidance, FLDOR’s position imposes undue burdens on local governments.

3. Future Implications:

   • The petition emphasizes the need for judicial clarity as the County anticipates similar issues in future budget cycles. The County seeks a definitive ruling on whether a two-thirds vote or a unanimous vote is required to establish millage rates for new MSTUs.

4. Constitutional Considerations:

   • Sumter County also alludes to potential constitutional violations, arguing that FLDOR’s interpretation may infringe on local government autonomy and create inequitable outcomes for taxpayers.

Resolution Attempts and Current Status

In response to FLDOR’s notice, Sumter County took remedial action. On November 12, 2024, the Commission held a special meeting to reconsider the millage rates. Despite re-advertising and re-voting, the millage rates were ultimately reduced to zero, as the County sought to avoid forfeiting critical sales tax revenue.

FLDOR later issued a Notice of Compliance, acknowledging the County’s adherence to procedural requirements. However, this resolution left unresolved questions about future millage rate increases, as the County must now contend with the legal and practical implications of starting from a zero millage base.

The County’s decision to adopt a zero millage rate has significant implications for its budget. While it avoided losing $9.5 million in sales tax revenue, it must now address service funding gaps for the MSTUs and prepare for similar challenges in the next fiscal year.

Legal and Policy Implications

1. Impact on Local Budgets:

   • The financial impact of withholding sales tax revenue highlights the delicate balance local governments must maintain between compliance and fiscal stability. For Sumter County, the loss of potential MSTU revenue coupled with the need to maintain service levels presents an ongoing challenge.

2. Precedent for New MSTUs:

   • This case sets a precedent for how Florida counties handle newly created MSTUs. The judicial interpretation of Section 200.065(5), Fla. Stat., could provide much-needed clarity for local governments statewide.

3. Legislative Reforms:

   • The case underscores the need for legislative amendments to address ambiguities in millage statutes. Clearer guidelines on voting thresholds and the treatment of new MSTUs could reduce the risk of future disputes.

4. Taxpayer Impact:

   • The resolution of this dispute has direct implications for taxpayers in Sumter County. If MSTU funding gaps persist, the County may need to explore alternative revenue sources or risk reduced service levels for public safety and emergency services.

Conclusion

The Sumter County millage dispute serves as a case study in the complexities of municipal taxation, balancing legal compliance with practical governance. As the case progresses, its outcome will likely shape how local governments across Florida interpret and apply millage statutes, setting the stage for potential legislative reforms. For now, the County’s quest for clarity continues, highlighting the need for collaboration between local governments, state agencies, and the judiciary to navigate the evolving landscape of public finance.

As other jurisdictions closely monitor this case, it serves as a reminder of the importance of proactive planning, clear statutory language, and effective communication between state and local governments. Sumter County’s legal challenge may ultimately pave the way for a more equitable and transparent approach to local taxation.