Highland Beach previews capital‑focused FY 2026 budget; millage held at 3.5875 mills

Town of Highland Beach staff presented a preliminary Fiscal Year 2026 operating budget at the Finance Advisory Board meeting, proposing to hold the millage rate at 3.5875 mills and directing revenue growth toward capital projects rather than a lower tax rate. The presentation framed the budget as “capital focused,” with water and sewer work, a marine docking facility, crosswalk lighting and building‑fund improvements among the priorities.

The town’s taxable values rose about 6.7 percent in the update staff presented. Because roughly 73–75 percent of the town’s revenue comes from property taxes, staff said that maintaining the millage at 3.5875 mills keeps the town’s tax burden steady while capturing that assessed‑value growth to fund capital needs. Staff described the FY 2026 plan as preliminary and said several line items — notably health insurance and final personnel compensation — remain subject to change.

Why it matters: staff proposed drawing on accumulated reserves to pay for several major capital projects rather than increasing the millage. That approach affects current ratepayers and the timing of future capital work; it also prompted discussion about the building fund’s unusually large reserves and how the town should respond to state expectations for funds that “charge for services.”

Key budget assumptions and priorities - Millage: staff proposed maintaining the overall millage rate at 3.5875 mills (operating portion 3.4159 mills plus debt service for the fire department). The presenter noted that the town has kept that millage level since FY 2023. - Personnel and operating assumptions: staff used a baseline assumption of roughly a 5 percent increase in staff compensation and flagged collective bargaining for police and an anticipated bargaining request from fire personnel in 2026. - Utility rates: preliminary planning assumes a 5 percent increase for water and sewer rates (down from an earlier estimate of about 8 percent). - Theme: capital investment. The budget shifts some prior transfers-to-reserves into capital outlays to advance a list of projects identified by the board.

Major capital items highlighted - Sanitary sewer lining: staff described a sewer‑lining project as one of the year’s largest capital priorities. The most recent estimate presented at the meeting was about $1,750,000, down from earlier, higher estimates staff said had ranged between roughly $2 million and $3 million. Staff said the project is largely “shovel ready” and recommended using available reserves to begin work on side streets while other road work continues. Staff noted the trenchless lining method typically works between manholes and reduces infiltration of saltwater, which can lower treatment costs. - Water fund projects: among planned work is well improvements, an acid‑tank replacement and structural work such as mezzanine and beam repairs. Staff proposed a 5 percent water rate increase and said they are comfortable lowering estimated cash days to reach capital needs. - Police marine facility dock: the budget includes planning for a dedicated dock for the marine patrol — staff and several board members said the dock will be built to support both police and fire response on the water and that a design and cost estimate are forthcoming. - Crosswalk lighting and police body cameras: discretionary sales tax proceeds are planned for a crosswalk lighting project and continued payment for Axon body cameras for police; staff said the town will deplete the discretionary sales tax fund, which was scheduled to end 12/31/2025.

Building fund reserves and Gulfstream interlocal agreement Staff drew extended attention to the building fund, which the presentation said carries unusually high reserves — about 513 days of operating cash under current projections. The building fund’s revenue rose after the town began providing building services to the nearby Town of Gulfstream under an interlocal agreement; staff said Gulfstream work produces substantial net revenue (presented as roughly $750,000 in revenue this year with estimated net cash benefit of about $500,000 after related variable costs).

Because Florida regulators review funds that “charge for services,” staff said the state disfavors a building fund that retains very large cash reserves. To address that, staff proposed two principal actions for FY 2026: reduce permit and related charges by a little more than 12 percent and increase the annual transfer from the building fund to the general fund from $500,000 to $700,000. The proposal is intended to (a) show regulators the town is reducing reserves and (b) maintain funds for building‑related capital needs (roof work, chillers, entrance upgrades) rather than move those dollars into unrelated municipal uses.

Staff and board members discussed alternatives: increasing building‑fund spending on permit‑customer services (technology, faster permit turnaround, “value‑added” services for small contractors and residents) as another way to lower reserves without a large fee cut. The board asked staff to develop options and, where applicable, cite the controlling Florida statute staff referenced that constrains how much the town may hold in that fund.

Use of reserves versus borrowing Staff said the town will use excess reserve funds in multiple funds to pay for capital needs in FY 2026 rather than rely on bank loans. For example, staff proposed using water/sewer reserves to fund the sewer lining project and other utility capital work. The presenters noted that some grant opportunities and low‑interest state revolving loans were available but could delay project schedules; using cash avoids administrative delays if the town has the funds and a contracted vendor ready.

Fund balances and days of cash (selected figures presented) - General fund: projected total reserves after FY 2026 of about $8.7 million, with roughly $2.8 million unassigned. - Building fund: projected reserves shown as about 513 days of operating cash before proposed rate adjustments; staff proposed lowering that through fee reductions, increased transfers and building‑related capital spending. - Sewer fund: staff said reserves would decline from roughly 417 days to about 125 days after funding the sewer lines, leaving the fund with an operating cushion consistent with the proposed plan. - Water fund: staff said the lowest projected point is about 54 days of cash in FY 2026 before recovering in subsequent years.

Revenue notes and timeline Staff highlighted that revenue growth across funds is roughly 5.6 percent on the bottom line in the current preliminary plan, helped by higher property values and greater building‑department work. The town’s ARPA funds used in recent years have been spent, staff said, and grants (including a roughly $230,000 lift‑station grant staff credited to Representative Peggy Gossett Seidman’s efforts) appear as one‑time aids to capital work.

Next steps and hearings Staff noted the current meeting is the Finance Advisory Board (FAB) review. The near‑term schedule presented was: call for a not‑to‑exceed maximum millage rate in July; possible additional budget meetings in August if needed; first public budget hearing on September 2 at 5:01 p.m.; and a second public hearing on September 18 at 5:01 p.m. If adopted, the FY 2026 budget would take effect Oct. 1, 2025.

Votes at a glance - Agenda approval: motion made and seconded; board approved the meeting agenda by voice vote (recorded in the minutes as approved). The transcript does not show a roll‑call tally. - Minutes of Feb. 24: motion made and seconded; board approved the minutes by voice vote (recorded in the minutes as approved). The transcript does not show a roll‑call tally.

What was not decided Staff presented the preliminary plan and requested direction; no final adoption occurred at this meeting. The building‑fund rate change, transfer increase, and specific capital contract awards remain subject to further committee work, public hearings and final commission action. Staff committed to return with legal citations for the Florida statute(s) governing building‑fund reserve limits, more detailed cost estimates for the marine dock and sewer‑lining useful‑life/guarantee details, and options for permit‑service enhancements.

Meeting context and tone The review drew extended discussion and multiple board questions on the building fund, Gulfstream interlocal revenue, and the sewer lining estimate. Board members applauded the town’s prior performance on the new fire station — staff said it was completed on time and under budget — and emphasized wanting to balance prudent reserve management with maintaining service quality for residents.