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Leon County
Board of County Commissioners Agenda Item#1 August 12, 2025 |
| To: | Honorable Chairman and Members of the Board |
| From: | Vincent S. Long, County Administrator Chasity H. O`Steen, County Attorney |
| Title: | Fire Rescue Services Assessments and Fees – Dispute Update and Related Matters |
| Review and Approval: | Vincent S. Long, County Administrator |
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Department/Division Review and Approval: |
Ken Morris, Assistant County Administrator |
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Lead Staff/ Project Team: |
Chasity H. O`Steen, County Attorney |
Statement of Issue:
This item provides an update regarding the County’s pending dispute with the City of Tallahassee (City) regarding fire rescue services assessments and fees. Staff recommends that the County rescind the dispute resolution notice related to any potential rate increase because the issue is not arbitrable; only the City and County can mutually agree to a rate increase. Since the City and the County have not agreed to any rate increase, this item recommends that the Board direct staff to proceed with the issuance of first-class notices for the September 15th public hearing to establish the FY 2026 fire rescue services rates at the current FY 2025 rates. While engaging in the dispute resolution process, County staff has identified additional areas that the Board may wish for staff to pursue related to potential underfunding of the Fire Services Fund and/or the Fire Services Reserve Fund and use of monies in such funds for unauthorized expenditures. Any such actions may have materially impacted the availability of funds available to pay for costs and expenditures contemplated in the Third Term Rate Study and any potential new costs the City has identified this year as the basis for requesting a mid-term rate increase. This item recommends that the Board direct staff to proceed with the dispute resolution process for all arbitrable issues related to the collection of fire rescue services assessments and fees and permissible expenditures to ensure the necessary resources are provided to fund fire rescue services.
Fiscal Impact:
This item seeks to minimize the fiscal impact on unincorporated residents and, based on the Board’s direction, may have a fiscal impact related to any future dispute resolution process with the City including the retention of a financial consultant. This item also seeks to ensure the full collection of fire rescue services assessments and fees and permissible expenditures to provide the necessary resources to support fund fire rescue services.
Staff Recommendation:
Provided on the following page.
Staff Recommendation:
Option #1: Authorize staff to rescind the dispute resolution notice related to any potential rate increase to be imposed for fire rescue services.
Option #2: Direct staff to proceed with the issuance of first-class notices for the September 15th public hearing to establish the FY 2026 fire rescue services rates at the current FY 2025 rates.
Option #3: Direct staff to proceed with the dispute resolution process for all arbitrable issues related to the collection of fire rescue services assessments and fees and permissible expenditures to ensure the necessary resources are provided to fund fire rescue services.
Report and Discussion
Background:
This item provides an update regarding the County’s pending dispute with the City of Tallahassee (City) regarding fire rescue services assessments and fees. Staff recommends that the County rescind the dispute resolution notice related to any potential rate increase because the issue is not arbitrable; only the City and County can mutually agree to a rate increase. Since the City and the County have not agreed to any rate increase, this item recommends that the Board direct staff to proceed with the issuance of first-class notices for the September 15th public hearing to establish the FY 2026 fire rescue services rates at the current FY 2025 rates. While engaging in the dispute resolution process, County staff has identified additional areas that the Board may wish for staff to pursue related to potential underfunding of the Fire Services Fund and/or the Fire Services Reserve Fund and use of monies in such funds for unauthorized expenditures. Any such actions may have materially impacted the availability of funds available to pay for costs and expenditures contemplated in the Third Term Rate Study and any potential new costs the City has identified this year as the basis for requesting a mid-term rate increase. This item recommends that the Board direct staff to proceed with the dispute resolution process for all arbitrable issues related to the collection of fire rescue services assessments and fees and permissible expenditures to ensure the necessary resources are provided to fund fire rescue services.
In 1988, the County began contracting with the City for fire rescue services in the unincorporated area through an interlocal agreement. In 2009, the first fire rescue services assessment study was adopted and implemented in FY 2010 by interlocal agreement to uniformly charge properties for fire services in both the City and unincorporated areas of the County (Interlocal Agreement). In 2023, the City and County most recently amended the Interlocal Agreement to provide for a five-year term (FY 23-24 – 27-28) (Current Term) and the potential for two one-year extensions, with the imposition of flat fire services rates during the Current Term to provide consistency and certainty to property owners and tenants, and revenue assurances for the provision of high-quality fire rescue services.
Pursuant to section 125.01(1)(d), Florida Statutes (F.S.), counties are authorized to provide fire protection. Consistent with Section 125.01(1)(r), F.S., and Chapter 7, Article IV of the Leon County Code of Laws (Code), fire rescue services are funded through a fire rescue services assessment imposed by both the County and City to residential, commercial, and industrial/warehouse properties, and a fire rescue services user fee is charged to government properties. The fire services assessments levied in the unincorporated area are collected, and except for a small portion of funding for the Volunteer Fire Departments and to pay administrative costs of collection, are required to be remitted to the City to pay for fire rescue services in the unincorporated area of the County. Although there is a legal distinction between special assessments and user fees, for ease of reference the term “assessment” may be used throughout this item to reference the fire rescue services charge to all assessable properties.
The assessment rates have been developed as part of a joint study by a third-party consultant that is adopted by the Board and City Commission. The funding of fire rescue services through a dedicated assessment is a common approach used by numerous cities and counties throughout Florida. This funding method is legally defensible as it directly ties the cost of the services to the property benefiting from the services. Emergency management services and non-assessable costs of fire rescue services are excluded from the analysis and the rates. This method of assessment also ensures funding transparency to those paying the assessment, while providing a dedicated consistent revenue source to fund these critical services.
Under the Interlocal Agreement, the City is required to provide fire rescue services continuously within the primary response area of each fire station and provide the level of services and minimum staffing and apparatus in accordance with the Third Term Rate Study incorporated into the Interlocal Agreement. In lieu of litigation, the Interlocal Agreement allows for either the City or the County to initiate a formal conflict resolution process with prescribed steps and timelines to resolve disputes including mediation and, ultimately, binding arbitration.
In April 2023, the Board approved the most recent fire rescue services assessment study (Third Term Rate Study) (Attachment #1), which is incorporated into the most recent amendment to the Interlocal Agreement providing for the flat rates for residential, commercial, industrial/warehouse, and government properties to be imposed during the Current Term. The rates went into effect on October 1, 2023, and were based on the City’s estimated costs at that time to provide fire rescue services through the Current Term ending on September 30, 2028.
The flat rates contemplate the collection of surplus revenues in the earlier years of the Third Term to be placed in a Fire Services Reserve Fund and used during the latter years of the Current Term to pay for anticipated growth rate expenditures in costs based upon information provided by the City to the consultant and the County that were known and assessable when the Third Term Rate Study was finalized and adopted by the City and the County in 2023 and are designed to avoid rate increases during the Current Term. Accordingly, appropriations to the Fire Services Fund are restricted to the growth rates in expenditures identified in the Third Term Rate Study. Any deviation from these growth rates must be approved by the Administrative Management Committee (AMC), namely the County Administrator and City Manager, and ratified by the City Commission.
If an annual shortfall occurs in the Fire Services Fund the AMC is required to determine whether monies in the Fire Services Reserve Fund should be released to address the deficiency. If the AMC determines that such monies are not adequate, the AMC may make a recommendation on how to address the shortfall to the City and the County and may authorize a new rate study be undertaken. Until such time as the City and the County amend the Interlocal Agreement and incorporate a new rate study with new rate calculations, the rates agreed to by the City and County must be imposed; neither of the parties may unilaterally change the fire rescue services rates.
In 2023, the City asserted and declared that the fire rescue services costs provided in the Third Term Rate Study were a reasonable estimation of the five-year average annual costs of providing fire rescue services, facilities, and programs to all parcels of improved property during the Current Term. Notwithstanding these representations in 2023, in January 2025 the City asserted to the County that the current rates are not expected to be sufficient for the remaining three years of the Current Term and at that time attributed the need to adjust the rates to non-payment for services by Leon County Schools and the adoption of new collective bargaining agreements for firefighters. The City proposed engaging a consultant to begin a financial review of the Fire Services Fund and initiating a study to identify increased rates to fund fire rescue services for the remainder of the Current Term. County staff immediately engaged the County Attorney’s Office and scheduled meetings with City counterparts to gather additional information and assess the need for a rate study and potential use of the Fire Services Reserve Fund.
Approximately one week prior to the City Commission’s budget workshop on February 12, 2025, the City’s published agenda materials prematurely advised the City Commission that the City had already contracted with a consultant “to conduct a formal review of the current rates.” In response, the County Attorney sent a letter to the City Attorney advising that the consent of the AMC is required to conduct a new fire assessment study. At that time, County and City staff were still conducting due diligence on the projected revenues and expenditures related to fire rescue services and exploring options to delay or mitigate rate increases.
The internal review of the City’s planned expenditure increases, described further in the Analysis section, are well beyond the typical inflationary costs projected in the Current Term and include new costs that were not contemplated in the Third Term Rate Study. The City projected the need to increase the fire assessment by an estimated 20-25% in FY 2026, which will be the third year of the Current Term. Given the significant financial impact of the estimated increase to residents, the County tasked the professional consultant with conducting a financial review of Tallahassee Fire Department’s (TFD’s) recent and out-year budgets including whether an increase in the rates is warranted. The objective of the review was to align fire rescue services revenues with planned expenditures, identify costs that should not be paid from the fire rescue services assessments and fees, and identify any new expenditures which were not contemplated in the Current Term. And finally, the County tasked the consultant with providing an analysis of available Fire Service Reserve Funds that could be utilized to offset any potential rate increases.
Based on the cost and expenditure information provided to the consultant by the City and the monies in the Fire Services Reserve Fund, the consultant review determined that increasing the rates is necessary by approximately 22%.
At its May 27, 2025 special meeting, the Board offered a compromise rate increase for the City’s consideration (Attachment #2). The City Commission rejected the Board’s offer at its June 11, 2025 Budget Workshop, and instead voted to increase rates at the full amount of 22%-23%, effective October 1, 2025 (FY 2026) (Attachment #3). Per Board direction during the May 27, 2025 special meeting, the County then initiated the dispute resolution process provided in the Interlocal Agreement. Given that the Board and City Commission had taken divergent positions and direction to their respective staff regarding a proposed rate increase, City and County staff agreed to waive the intermediate dispute resolution processes of staff discussions and mediation and proceed directly to the binding arbitration process in an effort to resolve the rate increase dispute prior to the County’s obligation to adopt the fire rescue services rates for FY 2026 no later than September 15, 2025.
In the course of preparing for arbitration and as discussed in more detail in the Analysis section, research into case law has established that the arbitration panel does not have the authority to compel the County to implement a rate increase. The City and County must mutually agree to a rate increase, if any. Accordingly, staff recommends the Board authorize staff to rescind the dispute resolution notice related to any potential rate increase to be imposed for fire rescue services. Currently, the County must file a statement of claim in the arbitration proceeding by Wednesday, August 13, 2025, and the County must mail first class notices at least 20 days prior to the upcoming fire rescue services assessment public hearing to be held on September 15, 2025.
As required by section 197.3632(4)(a) and (b), F.S., the Board previously authorized staff to identify proposed fire rescue services rate increases in first-class mail notices to property owners in the unincorporated area of the County who pay the fire rescue services assessments annually. Since the City and the County have not been able to agree to any proposed rate increase for FY 2026, this item recommends that the Board direct staff to identify the current FY 2025 rates in notices to be mailed in advance of the September 15th public hearing.
While engaging in the dispute resolution process, County staff has identified additional areas that the Board may wish for staff to pursue related to potential underfunding of the Fire Services Fund and/or the Fire Services Reserve Fund and use of monies in such funds for unauthorized expenditures. Any such actions may have materially impacted the availability of funds available to pay for costs and expenditures contemplated in the Third Term Rate Study and any potential new costs the City has identified this year as the basis for requesting a mid-term rate increase. This item recommends that the Board direct staff to proceed with the dispute resolution process for all arbitrable issues related to the collection of fire rescue services assessments and fees and permissible expenditures to ensure the necessary resources are provided to fund fire rescue services.
Analysis:
Pending Arbitration
A panel of three former judges has been retained to serve as the arbitration panel to preside over the pending dispute. The arbitration hearing is scheduled for Friday, September 5, 2025, and Monday, September 8, 2025. Currently, the County must file a statement of claim in the arbitration proceeding by Wednesday, August 13, 2025.
In the course of preparing for arbitration, research into case law has established that the arbitration panel does not have the authority to compel the County to implement a rate increase because a decision whether to raise rates is a purely legislative function, and neither a court nor an arbitration panel has authority to make a specific policy determination or dictate what policy decision is made. Determining the special benefit to the properties from the service provided and fairly and reasonably apportioning the rate among the properties that receive the special benefit, in essence the imposition of the special assessment, is considered a legislative function. Sarasota Cnty. v. Sarasota Church of Christ, Inc., 667 So. 2d 180, 183 (Fla. 1995). The imposition of special assessments is a political question for the Board that is not determinable by a court or an arbitration panel due to separation of powers, so long as it is imposed legally. See Patridge v. St. Lucie County, 539 So.2d 472, 572-73 (Fla. 1989); and DeSantis v. Florida Educ. Ass'n, 306 So. 3d 1202, 1215 (Fla. 1st DCA 2020).
Additionally, the County Administrator, as a member of the AMC, must approve any deviation from the growth rates agreed to by the City and the County under the Third Term Rate Study, and the Board must consent to amend the Interlocal Agreement and incorporate a new rate study to impose different rates. The arbitration panel cannot effectively amend or modify these express terms of the Interlocal Agreement. See Wiregrass Metal Trades Council AFL-CIO v. Shaw Env’t & Infrastructure, Inc., 837 F.3d 1083, 1088 (11th Circ. 2016).
The City and County must mutually agree to a rate increase, and any adjustments to the rates must be reflected in an amendment to the Interlocal Agreement and a rate study incorporated into the Interlocal Agreement by reference. Accordingly, this item recommends that the County rescind the dispute resolution notice related to any potential rate increases to be imposed for fire rescue services.
First Class Mail Notices
Pursuant to section 197.3632(4)(a) and (b), F.S., a public hearing is required to levy the assessments utilizing the uniform method for the levy, collection, and enforcement of non-ad valorem assessments (the “Uniform Method”). Annually, the Board conducts public hearings to adopt the fire rescue services, stormwater, and solid waste disposal assessment rolls. These public hearings are typically conducted in July of each year, which allows for the non-ad valorem assessments to appear on the TRIM (Truth-In-Millage) notices sent to property owners in August. A public hearing to adopt the fire rescue services assessment roll will be presented for Board approval at the September 15, 2025 meeting.
Consistent with the Uniform Method, any increase in the assessment for property owners paying on their tax bill requires a first-class mail notice be sent to said property owners in the unincorporated area at least 20 days before the hearing to inform them of the proposed increase, and the date and time of the public hearing. The first-class mail notice is also required when property owners will be billed using the Uniform Method for the first time.
Since the City and the County have not been able to agree to any proposed rate increase for FY 2026, staff recommends that the Board direct staff to identify the current FY 2025 rates in notices to be mailed in advance of the September 15th public hearing.
Potential Matters for Dispute Resolution
While engaging in the dispute resolution process, County staff has identified additional areas that the Board may wish for staff to pursue related to potential underfunding of the Fire Services Fund and/or the Fire Services Reserve Fund and use of monies in such funds for unauthorized expenditures. Any such actions may have materially impacted the availability of funds available to pay for costs and expenditures contemplated in the Third Term Rate Study and any potential new costs the City has identified this year as the basis for requesting a mid-term rate increase. Staff recommends that the Board direct staff to proceed with the dispute resolution process for all arbitrable issues related to the collection of fire rescue services assessments and fees and permissible expenditures to ensure the necessary resources are provided to fund fire rescue services. A summary of known issues is provided below.
Based upon information received from the City, County staff has concluded that the City did not impose the correct fire rescue services rates in FY 23-24 and FY 24-25 that are required in the Third Term Rate Study. That study provides for flat, consistent rates to be imposed in each zone and by property category during each year of the Third Term. Instead, the City adopted rates based upon a percentage calculation each year through FY 27-28 according to City Resolution No. 23-R-19 and additional documentation subsequently produced by the City. This means the City has to-date underfunded the Fire Services Fund and Fire Services Reserve Fund inconsistent with the flat rate provided for in the Third Term Rate Study and stated intent in the Interlocal Agreement for a portion of the money collected in the early years of the Third Term to be held in the Fire Services Reserve Fund to pay for growth rates in anticipated expenditures in the latter years of the Third Term.
County staff has also identified another potential way in which the City has underfunded the Fire Service Fund and/or the Fire Services Reserve Fund. As the Board is aware, the City collects the fire rescue services assessments on the monthly utility bill of utility customers in the City and certain areas of the unincorporated area of the County. City Resolution No. 23-R-19, Article III, Section 2.(L), includes a determination that it is fair and reasonable to not charge the assessment to non-government property that is vacant as evidenced by the cessation of utility services. Moreover, the resolution states that the costs of administering and collecting the assessments from such vacant property exceed the anticipated assessments that could be collected from such property. Importantly, the provision obligates the City to “supplement the fire services budget from sources other than Fire Services Assessments with amounts necessary to provide fire services, facilities and programs to such property.” County staff has requested confirmation from City staff whether, in fact, the City has complied with its obligation to true-up monies that it has not collected on property with structures that are unoccupied or where utility services have been turned off for any period. As of the publication of this agenda item, the City has not provided a response or any supporting documentation. This may be an instance where the City has underfunded the Fire Services Fund and/or the Fire Services Reserve Fund.
Additionally, County staff has confirmed that the City has already incurred costs that were not included in the Third Term Rate or agreed to by the County, which has resulted in the impermissible use of monies from the Fire Services Fund and/or the Fire Services Reserve Fund. As the Board is aware, the current rates include $17 million to construct Fire Station 17. Without obtaining approval of the AMC, notification to or approval by the County, or the development of a new rate study to incorporate the additional costs into increased rates, in 2024 the City issued debt in the amount of $27 for the construction of Fire Station 17, which is $10 million more than was contemplated in the Third Term Rate Study. Based upon communications with City staff, the City has already used funds from the Fire Services Fund and/or the Fire Services Reserve Fund to pay the debt service on the additional $10 million in FY 24 and FY 25 and has proposed to include the continuing costs of the additional debt in a mid-term rate increase. It is unclear at this time whether there have been other instances of such conduct by the City. The impermissible use of monies from the Fire Services Fund and/or Fire Services Reserve Fund violates the Interlocal Agreement, and the County may seek to require that the City replenish the funds already expended and pay for any future unauthorized debt service out of funds other than the Fire Services Fund or the Fire Services Reserve Fund.
If the Board directs staff to proceed with the dispute resolution process to resolve matters that are arbitrable and further explore and validate whether the City has under collected and/or underfunded the Fire Services Fund and/or the Fire Services Reserve Fund, the County Attorney’s Office will retain a financial consultant to work with County staff and conduct a review of records necessary to confirm whether such under collection and/or underfunding has occurred.
Conclusion and Next Steps
The provision of fire rescue services in the unincorporated area of the County is a paramount public purpose for the County. The County has previously determined that fire rescue services for the unincorporated area shall be provided by the TFD. Pursuant to the Interlocal Agreement, the County is obligated to pay for its share of the TFD budget in accordance with the Third Term Rate Study for the provision of fire rescue services in the unincorporated area at the current level of service.
The fire rescue services rates are developed as part of a joint study by a professional third-party consultant to be considered and adopted by the Board and City Commission. For the provision and continuity of high-quality fire rescue services supported by flat rates over a five-year study period, the City provides the consultant with out-year budget assumptions and projected expenditures for TFD. The Third Term Rate Study provides the basis for the current rates adopted by the Board for the five-year study period (FY 23-24 – FY 27-28). The fire rescue services assessments levied in the unincorporated area are collected, and except for a small portion of funding for the Volunteer Fire Departments and costs of collection, are required to be remitted to the City to pay for fire rescue services provided in the unincorporated area of the County.
While the Interlocal Agreement provides several processes for the County Administrator and City Manager, acting as the AMC, to address modest fluctuations in revenues and/or expenditures during the current five-year term, the Fire Services Reserve Fund is insufficient to support the millions of dollars in additional costs identified by the City. Based on the results of the consultant’s review and TFD expenditure data provided by the City, the City is demanding that the County agree to a 22% rate increase for all property categories, effective October 1, 2025, to align revenues with planned TFD expenditures for the remainder of the five-year assessment period through FY 2028. The County has proposed a smaller, alternative rate increase that has been rejected by the City. Though the Interlocal Agreement has a dispute resolution process, an arbitration panel does not have the authority to compel the County to increase rates or decide the amount of any rate increase. The City and the County will have to mutually agree to any such rate increase. Accordingly, staff recommends that the Board direct staff to rescind the dispute resolution notice related to any potential rate increase to be imposed for fire rescue services.
As required by state law, the Board previously authorized staff to identify proposed fire rescue services rate increases in first-class mail notices to property owners in the unincorporated area of the County who pay the fire rescue services assessments annually. Since the City and the County have not been able to agree to any proposed rate increase for FY 2026, staff recommends that the Board direct staff to identify the current FY 2025 rates in notices to be mailed in advance of the September 15th public hearing.
While engaging in the dispute resolution process, County staff has identified additional areas that the Board may wish for staff to pursue related to potential underfunding of the Fire Services Fund and/or the Fire Services Reserve Fund and use of monies in such funds for unauthorized expenditures. Any such actions may have materially impacted the availability of funds available to pay for costs and expenditures contemplated in the Third Term Rate Study and any potential new costs the City has identified this year as the basis for requesting a mid-term rate increase. Staff recommends that the Board direct staff to proceed with the dispute resolution process for all arbitrable issues related to the collection of fire rescue services assessments and fees and permissible expenditures to ensure the necessary resources are provided to fund fire rescue services. Such action will require the retention of a financial consultant to work with County staff and conduct a review of records necessary to confirm whether such under collection and/or underfunding has occurred.
Options:
Recommendation:
Options #1, #2, and #3.
Attachments:
1. Third Term Rate Study (2023)
2. County Letter to the City Proposing Compromise Rate Increase
3. City Letter Rejecting the County’s Compromise Rate Increase