BY MARK SCHUMANN

VERO BEACH – In presenting a model which projects city’s finances following the sale of the electric system, Finance Commission Chairman Peter Gorry told the City Council yesterday the likely tax consequence for city residents and property owners will be a 50 percent increase, from $2.04 to $2.9 per thousand in assessed value.

With a combination of staff reductions and other savings, along with revenue increases from new fees, such as a 6 percent franchise fee on electric bills, the city will still need to close a budget gap of approximately $2 million, Gorry said.

Though Gorry’s estimate of a 50 percent increase in city property taxes was a higher number than some wanted to hear, it was also lower than projections others have made.  There have, for example, been suggestions that property taxes would likely double.

Gorry prefaced his presentation with the caution that his five-year model, with some 900 line items, has many “moving parts” and a number of key assumptions.

In a nearly one-hour presentation, Gorry led the Council through an overview of what he and his fellow Finance Commission members believe the likely impact will be from the loss of $7 million in annual transfers from the electric system to the city’s General Fund.

Perhaps the most salient point in Gorry’s report was the suggestion that savings on city electric bills, staff reductions and decreased pension liabilities will cushion the expected shortfall.

At least for the first four years following the sale, the city will receive $1.5 million in rent from FPL for use of the power plant site.  Gorry’s model also assumes additional revenue from a new 6 percent franchise fee on electric bills.

Though the franchise fee will reduce savings for city residents and businesses, as compared to county customers, it will also, he said, raise $1.6 million in revenue, preventing the need for a larger tax increase.

Pointing out that just 14 percent of the General Fund budget is attributable to operating expenses, with the remainder being salaries, benefits, debt service and transfers to reserves, Gorry said a hoped-for reduction of 15 percent in the General Fund would be “untenable.”

However, with the sale of the electric system alone, the city will see a 25 percent reduction in staff.  Beyond those cuts, Gorry said there should likely be other opportunities to reorganize and to further reduce staff.

Because the city’s remaining enterprise funds will save on electric costs and will also benefit from pension restructuring, Gorry said it would be possibly to increase transfers from these enterprise funds to the General Fund, another move that could also cushion the need for tax increases.

Gorry cautioned, though, that his model assumes a closing date of January, 1014.  A later closing date, he has said, would cause key assumptions in the model to change.