Reducing Pensacola Beach lease fees is no easy fix
Freddie Falgout in some ways is one of the lucky Pensacola Beach leaseholders.
Kimberly Blair, pnj.com 2:18 p.m. CST February 22, 2015
Santa Rosa Island lease fees
Freddie Falgout owns a home, a rental home and recently sold this vacant lot on Pensacola Beach. He and other home owners don't think it's fair to pay taxes on property they don't actually own, especially on top of their annual lease fees.(Photo: Ben Twingleyemail@example.com)
Freddie Falgout in some ways is one of the lucky Pensacola Beach leaseholders.
He only pays $150 and $165, respectively, in annual lease fees on each one of his two Via de Luna lots on which he has his primary residence and a rental property.
So paying the fees on top of the taxes he's now required to pay Escambia County for his properties in paradise is not that hard on his budget, he said.
A lot he's selling off is another story.
"The lease fee on the lot is almost equal to the $1,250 in taxes I pay on it," Falgout said. "I didn't know that when I bought the lot. It was a surprise since I was paying $165 in lease fees on a lot with a house. So, I decided I'm not building a house on the lot. I'm selling it."
Many beach leaseholders are facing similar hard financial decisions now that the Florida Supreme Court upheld the right for Escambia County Property Appraiser Chris Jones to assess taxes on Pensacola Beach land and improvements on the land on top of paying the original lease fees for which they signed on.
Since that court ruling last year, residents and business owners, most of whom are facing paying thousands of dollars more annually since they began paying taxes on dwellings in 2004 and land in 2011, have been demanding Escambia County commissioners roll back or eliminate their lease fees, similar to what Santa Rosa County has done for Navarre Beach residents, and put an end to what they call "double taxation."
Last week, Santa Rosa Island Authority, a beach resident, a commercial representative and Escambia County officials sat down to begin looking into immediate ways to address rolling back lease fees — $3.2 million collected on residential property annually and $4.7 million collected on a percentage of revenues commercial properties generate.
The game plan is for the county to take over payment of basic services it provides every other county resident with the roughly $7 million in its share of taxes collected on the beach (the school board gets about the same amount), which the Island Authority provides with lease fees, such as repairing pot holes and cleaning and maintaining public park.
The challenge is figuring out a way for the county to do this and still maintain "the cleanliness on the beach and all the different activities we provide beach and county residents and tourists," said Tammy Bohannon, Island Authority board chairwoman.
Terry Preston, who serves on the Pensacola Beach Advocates governmental affairs committee, is representing residents at the lease fee meetings.
"The immediate goal is moving whatever we can out of the budget this fiscal year so they (SRIA) can reduce lease fees immediately, in my opinion," she said. "Can they eliminate fees? Maybe not."
What it pays for
For instance, the Island Authority's $8 million annual budget, based solely on lease fees, provides everything from lifeguards, ambulance service and fire protection to cleaning streets, beaches and public restrooms, beach renourishment, salaries for 45 full-time staffers and 60 seasonal staffers, along with hosting some of the biggest events in the area.
W.A. "Buck" Lee, Island Authority executive director, said there's only about three and a half hours a day when a maintenance employee tasked with picking up trash on beaches and maintaining public areas and cleaning restrooms is not on duty. That's how much work there is to do to keep the beaches ready for visitors, he said.
Whether the county will pick up the tab on this same level of service the Island Authority provides will likely be a topic for debate, Lee said.
Many visitors have come to expect a clean and safe beach. They are responsible for naming Pensacola Beach one of the top five U.S. beaches for a 2015 TripAdvisor poll last week, Lee said.
Beyond the basics, figuring out how to pay for other services and events the Island Authority funds without lease fees gets complicated.
What's at stake
Who, for instance, would pick up the $150,000 tab the Island Authority pays for the annual Blue Angels Beach air show and the $45,000 it earmarks for the popular Bands on the Beach concert series from April 7 to Oct. 27, Lee asked.
Melanie Waite, with the Pensacola Beach Krewe of Wrecks, is worried that if lease fees go away, the Island Authority will no longer be able to support the hugely popular Mardi Gras parade on the beach.
"We are really worried about the changes in the Island Authority," she said. "If not for the $23,000 they contribute for the (crowd) barriers, we could not control our expenses for the parade."
And it could mean the end of the parade.
Lee's also concerned about where sponsorship money the Island Authority provides will come from for events that attract visitors, such as the Songwriters Festival, Art and Wine Fest and Santa Rosa Island Triathlon.
"All of this on the table," he said. "Nothing is written in stone and there are no recommendations yet."
Ron Ellington works for Innsfree Hotels and represents Portofino Resort Developer Robert Rinke, Innifree Hotels founder Julian MacQueen who owns Holiday Inn Resort, Hampton Inn and Hilton Gulf Front, and Marilyn Hess, who owns Margaritaville Beach Hotel, Holiday Inn Express and SpringHill Suites at the lease fee meetings.
These hotels pay the Island Authority a 2 percent to 5 percent fee on revenue from sales of things such as retail items, drinks, food and lodging. Hilton alone paid $504,000 on its sales in 2014.
Ellington said they are looking to roll that back now that the hotels are paying hefty taxes.
The people he represents understand their visitors expect a high level of service.
This is the county's most-used park, and 70 percent of the people who come out here are local, he said.
"It's a huge economic engine ... generating $280 million in economic impact every year," he said
Ellington said residents in other parts of the county should be invested in what happens to the beach because they benefit from beach visitors.
"Overnight beach guests generate 35 percent of the (local option sales tax) revenue," he said. "So they are contributing to infrastructure of the county."
They pump 50 cents on the dollar into the economy on food, libations, museum visits and other attractions, he said.
To be sure, Preston, who is looking for relief from her own $600 annual lease fee bill, said there will be hard decisions to make down the road as the Island Authority and Escambia County look for ways to pay for services not provided to the rest of the county.
"We'll have to decide, do we want them or do we pay for them with alternative funding?," she asked.
While the county looks at what it can take off the Island Authority budget, the Island Authority board hired the West Florida Regional Planning Council to help it analyze its operations and identify other possible funding sources to replace lease fees.
One idea that has been floated at Island Authority meetings is a resort tax that could fund special events and beach projects, Lee said.
Even more complex is figuring how to eliminate lease fees all together, Escambia County attorney Alison Rogers said.
"It gets complicated when you're dealing with a situation like a condominium," Rogers said. "You may have a developer who has some interest. The association and unit owners may have some interest. Some things are purchased by holding corporations or trust. The list of possibilities is endless."
Bohannon has been leading the charge on figuring out how to deal with the master leaseholder issue because she subleases property in Lafitte Cove from a master leaseholder.
"As a resident and having lived out here 30 years, of course I'm not in favor of paying lease fees and taxes because we were told we'd never pay taxes," she said. "Unfortunately, that's not the case. And unfortunately, there are many master lease holders out here that derive revenue by paying one sum to the Island Authority and charging their leasee another fee. I'm not sure how this is going to be untangled."
Bohannon, a realtor, is paying a $2,000 annual lease fee and $6,000 in taxes on her home. She's managed to afford it, but she knows many people who can't afford the burden of the double taxation.
Beach leaseholders and business owners have been hanging high hopes on obtaining fee-simple title to their land, which would absolve them of paying lease fees.
The county has been pursuing that option through a bill U.S. Rep. Jeff Miller, R-Chumuckla, introduced in 2013. It passed the house and died in a Senate subcommittee.
Dan McFaul, Miller's chief of staff, said the congressman plans to reintroduce the bill to the new Congress sometime this year.
"It has to be updated and redrafted ... that's being done now," McFaul said. "We'll coordinate with the Senate to introduce it at the same time."
Miller is seeking a senator to sponsor the bill.
The bill, if passed, would also convey land that falls in the jurisdictional boundaries of Santa Rosa County, but is owned by Escambia County, back to Santa Rosa.
This is all a moot point until all the litigation fighting taxation is settled. There's still lingering litigation opposing taxation of the land for Portofino Resort towers 1-5 and Beach Club Condominiums.
Commissioner Grover Robinson III, whose district includes Pensacola Beach, is anxious for lawsuits to be settled one way or another because it keeps everyone in limbo.
"That creates the uncertainty," he said. "Do we have taxes or not? I want a solution. That would be one way to move forward."
Creating more complications
While it's still a long way off, a fee-simple title, if passed, could create complex legal issues.
"If and when we have to determine conveyance of deeds to property, that will be fairly complex," Rogers said.
For instance, what will be the government process and legalities for buying or selling of beach property? Retaining a company to do title searchers can get bogged down in the bureaucratic process, she said.
And what about those sublease holders who are paying taxes on their subleased property? There could be problems with them obtaining titles, Rodgers said. And there could be legal battles over the rights to the titles.
In the meantime, Falgout hopes the double taxation issue won't spook his potential buyer.
"He was concerned about double taxation," Falgout said.
When Falgout explained the situation, "He said, 'I don't understand. So I have to pay taxes and leases?'"
A question many residents of Pensacola Beach have been pondering lately.
By the numbers
- $3.2M: Amount of annual lease fees Pensacola Beach residential leaseholders pay the SRIA.
- $4.7M: SRIA fee collected from businesses on rooms, food, drinks and souvenir sales.
- 3,899: Residential leases.
- 230: Vacant lots.
- 176: Commercial entities.
- 58: Master leases on such things as condominiums.
- 91: Subleases.
- $135: Lowest residential lease fee.
- $1.06M: Highest lease fee on the five towers with 765 units of Portofino Resort.
- $4,000: Highest single-family home lease fee.
- $504,000: Highest commercial lease fees collected from Hilton Pensacola Beach Gulf Front.
- $150,000: Amount SRIA pays to put on the Blue Angel beach air show.
- $45,000: Amount SRIA pays for April through October Bands on the Beach weekly concert series.
- $55,000: Amount SRIA gives the Pensacola Beach Chamber of Commerce for New Year's Eve and Fourth of July fireworks.
- $96,000: Amount SRIA gives Pensacola Beach Chamber of Commerce to pay two chamber staffers, including the CEO/president.
- $250,000: Amount SRIA paid to secure permits to restore sand on the Gulf side of Pensacola Beach.
- $8.5M: Amount Island Authority is paying Escambia County for a loan to pay half of the beach renourishment slated to begin this year.
- $200,000: SRIA gives to county's Pensacola Beach fire department.
- $70,000: For EMS ambulance service.
- $150,000: For Escambia sheriff's deputies for tourism season.
- $2.8 million: Cleaning parking lots, beaches, restrooms and picking up trash from 4 a.m. to midnight each day.
- $1.6M: Public safety, including lifeguard service.