$48M in tax money frozen
The state locked up the Pinellas funding, parked in an investment pool, to prevent a grab for it.
By ANNE LINDBERG, Times Staff Writer
Published January 9, 2008
Frustrated and angry city officials blame the county tax collector because some of their property tax revenues have been frozen.
Municipalities aren't the only ones affected. None of Pinellas' 47 taxing districts are able to tap some money they are supposed to get from property taxes. And they face the possibility of forever losing some of that funding.
The money - a countywide total of $48.1-million - was in a state-run investment pool when the State Board of Administration froze the fund in late November to prevent a run on the account.
Cities, counties and other taxing authorities began pulling investments out of the pool late last year as the stock market began tanking and it became obvious that some of the pool's investments were not performing well. Embarrassed state officials are investigating why those investment decisions were made.
In the meantime, local governments across the state have to deal with the fallout.
"It's absolutely still locked up, (but) the money's there," Pinellas Park City Manager Mike Gustafson said Monday. "No one's real happy with the situation, but we're all trying to wait and see what happens statewide."
The freeze on funds is bad enough for cities that have already been hit by a tax cut, but they have other revenue streams, such as franchise fees. Gustafson said Pinellas Park is in good financial shape and, if necessary, will take money from its contingency fund to cover the frozen funds.
Tax collector blamed
It is unclear how the freeze will affect St. Petersburg, which, of the cities, has the largest amount frozen - $3.2-million. Deputy Mayor Tish Elston could not be reached for comment.
But some taxing authorities, like the Lealman Special Fire District, have no source of revenue other than property taxes. Right now, $135,876 of the district's money is frozen.
"It's not that big of an impact right now," Lealman fire Chief Rick Graham said. "If it becomes (permanent), we're not going to make payroll."
Carlos Thomas, chief deputy in tax collector Diane Nelson's office, said there's no fear of that. This is a one-time situation, he said. Nelson is holding the money in an account at Wachovia bank.
City leaders fault Nelson for failing to pull the money out of the investment pool before the freeze took place,failing to tell the cities in a timely way what she was doing with their money, and for placing more money than expected in a fund consisting of investments that could prove to be worthless.
Thomas said Nelson did draw down her account to make a distribution in mid November, but did not want to make the situation worse by taking out all the money when others started pulling out. The $48-million was still in there when the accounts were frozen. Thomas said he does not want to minimize the seriousness of the situation, but the money involved is a small portion of the taxes each authority receives during the year.
What Nelson did
The process is complex.
Nelson receives the tax money property owners pay each year. Her job is to make sure that each taxing entity gets the amount it's entitled to.
Money paid by a St. Petersburg homeowner, for example, would be divided among the city, the School Board and the other agencies on that owner's tax bill.
But Nelson does not cut a check to those entities every time she receives a payment from a taxpayer. Instead, she parks the money someplace safe and, basically, writes the cities and other entities one check a month consisting of the total she has collected for them during that time.
In the past, she has put the money in the state-run investment pool. She's not the only one.
Several Pinellas cities and other taxing authorities have accounts in the investment pool. So do other municipalities and counties across Florida.
But late last year, as the stock market began dropping and the investment picture became tumultuous, cities and others began pulling their money out of the state investment pool.
The state froze the pool before everyone got out. Some of the money Nelson was holding was still in the pool when it was frozen.
That put Nelson in a bind. She is required by state law to transfer that money to the correct taxing entity, but she was unable to do so because of the freeze.
Her solution was to transfer the amount of money each city or taxing authority was owed into new or existing accounts in the frozen state pool.
If the taxing authority was like Clearwater and did not have an account with the state pool, the state opened one for them.
That way, the money would go to the right group, but officials there were not able to touch it.
In the frozen state pool, the money was divided into two funds - A and B - one containing riskier investments than the other.
Gustafson, the Pinellas Park city manager, said he understood 14 percent was supposed to go to the riskier B fund.
But, instead, about 16 percent, or $100,653 of Pinellas Park's total $609,876, was put into the B account.
That's money, Gustafson said, that could well be lost because the investments are so bad.
The effect, he said, is that Pinellas Park and other Pinellas agencies are being penalized because Nelson did not take the money out fast enough.
"The tax collector takes our money and puts it in the (state) account ... but they don't pull it out and it's our fault," he said.
Deputy tax collector Thomas said the thought was that putting money into individual accounts would make it easier for the cities to get their money because the amounts were smaller.
If the state partly thawed accounts, it would be easier to get those smaller amounts out than the whole $48-million.
Nelson's office, he said, is sensitive to the situation and is working to have the state thaw the accounts and make each city whole again.
South Pinellas County tax collection
Source: Pinellas County Tax Collector