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Need is there, how to fund it is the issue

April 26, 2013
Cape Coral Daily Breeze

Cape Coral City Council will consider the first phase of a tax increment program on Monday.

City Manager John Szerlag and staff, working in conjunction with the consulting firm of Burton & Associates, has done a good job in outlining not only the reasons the city believes it needs $20 million a year more in tax revenues but in telling council - and the taxpayers - where the money will go if the increase is improved.

Mr. Szerlag is to be commended for both the comprehensiveness of the report and in the bluntness with which he has couched his request.

We agree: The city has subsisted on the cutbacks/no-capital-projects/supplement-with-reserves hump to the near breaking point and a do-nothing approach is not an option.

Where the discussion lies is not need but in how - and when - to meet it and it is here we urge council to concentrate its efforts Monday.

The process undertaken thus far has been good.

The bad?

Mr. Szerlag, as did his predecessor a few years back, has starkly outlined a do-nothing - i.e. no tax increase - future that is bleak, indeed. What is the city looking at next fiscal year?

- The issuance of 749 pink slips on Oct. 1 putting 232 full-time workers and 517 contract employees out of work.

- Shuttering Special Pops, displacing more than 180 adults and children with developmental and physical disabilities.

- Closing the Yacht Club and its pool.

- Closing Four Freedoms.

- Closing the Tony Rotino Center.

- Closing the Art Studio.

- Closing Sun Splash.

- Closing the Lake Kennedy Senior Center.

- Ending the mini-bus services.

- Closing the Youth Center, the Skate Park and either shuttering athletic programs for kids and seniors or raising user fees $100 per participant, per program and ..., well, you get the picture.

While we appreciate the worst-case scenario outlook, the likelihood of all these things happening, frankly, is slim to none.

Even the council made up largely of the no-tax-increase contract signers faced with a similar "do-nothing" nuclear hot-button last go around did what they had to do. That was increase the property tax rate to at least sustain core services and programs.

The question then, as now, simply came down to how much, from where, and for what.

The previous councils bumped the property tax rate for operations but slashed capital expenditures and maintenance down to near zero. They also tapped reserves, an option this council doesn't have.

This elected board does have, however, a number of other options, some on the table, some not.

And herein lies the rub: Is the combination of a new 10 percent tax on Cape electric bills and a new fire services "assessment" the best way to both fund an in-the-red operational budget and re-start a capital plan that has gone unfunded since 2007?

Both staff and the consultant team believe so. Strongly.

The consultant prepared options that recommend using a "three-legged stool" comprised of various proportional shares of the new public service tax and the annual fire assessment to enhance property taxes, the primary source of operation funds now.

After a number of workshops, they and council prioritized one.

That option would impose the 10 percent tax on electric bills - the maximum rate allowed by law and would impose a fire services assessment that would shift 60 percent of that department's cost into the new revenue fund. It also would reduce the millage rate by 1 mill, or $1 for every $1,000 of taxable value.

Taken together, officials say it provides the best, progressive "spread" of taxes, benefitting those at the lower end of the financial scale a bit better than those at the higher end.

The 10 percent public service tax would not be on the entire bill. Some components of the bill, such as state charges, are not taxable. Others, such as the 3 percent franchise tax - excuse us, "fee" - that ratepayers are already paying the city are optional. The city, which would also exempt the first 500 kWh, maintains that the actual rate on the total bill will be 5.8 percent, or $7.74 for the "average" ratepayer using 1200 kWh per month.

This option also would implement a separate tax earmarked for fire services. The amount and methodology have yet to be determined but the city anticipates $11 million per year from the public service tax, and $17 million per year from the fire services assessment. That's $28 million, $8 million more than the city says it needs, so property taxes, collectively, would be cut that much.

This would stabilize the general fund and would allow 90 percent funding of essential capital improvements such as vehicle and equipment replacement and road paving, beginning next year, with full funding to follow in three years.

Factoring in the proposed break in the tax rate, the amount the average homeowner - one who owns a home with an assessed valuation of $150,000 and a taxable valuation of $100,000 -would pay $150 more per year.

Staff maintains the city really needs a $250-per bump but by continuing its cost-cutting measures, renegotiating additional pension reform and more, it can cut $2 million, bringing both the impact on residents and the need down to about $3 per week, what one official liked to giving up a latt.

That's where things get ugly.

Let us be blunt here. It's a $20 million tax hike and that's projected on top of minimal rising property valuations. It's $150 per "average" homeowner with some, particularly businesses, paying much more.

And it's not sacrificing a latt - right now that $150 is more likely being spent on tuna noodle casserole because despite the improved economy, workers are making less.

A lot less.

So while we get why the city is returning to the till - and make no mistake, all talk about tax "diversification" aside, in the proposal tendered, it's the same till - don't trivialize the issue by telling taxpayers and ratepayers it's a matter of giving up a small luxury or two when many are in the same boat as the city - not enough inflow and too much outgo.

Which brings us back to our primary premise: It's not the need, it's how we get there that is at issue.

And driving the "economic sustainability" argument with the maximum tax allowed on electric bills is rightfully going to be a hard sell on Monday.

One city council member, a candidate when a proposal to impose a 3 percent tax on electric bills was rejected a couple of years back said it well: ... "It is an underhanded way to get more taxes from the same taxpayer base. While a public service tax seems an effective way to increase, stabilize and diversify the revenue stream, in reality it is just another tax on the same citizens. In fact, it makes full-time residents pay a higher share than part-time residents, and absentee landowners pay nothing."

We agree it's not a best-choice option. It's a tax on an essential service; it will hit the owners of the lowest value homes the hardest as older homes are often less energy efficient and consequently have electric bills that are higher than larger, newer houses; it will impact businesses and other larger-than-average users substantially more; and it's simply coming in too high.

Ten percent? On top of the 3 percent franchise fee already paid by consumers?

What we are hearing from our officials is that "we have to do something." Again, we agree. But the "we have to do something" argument as a reason to do anything is the flip side of the "I won't do anything because I promised not to raise taxes" coin. Neither require much thought.

We suggest council look at other options.

Among them?

Leaving the property tax rate at 7.9570 mills and re-addressing the public service tax. That's not the $11 million sought but it's not a new tax that still can creep should future councils go back and decide to tax the "optional" areas left on the table or in a few years jack the franchise fee up to its maximum of 6 percent.

Look at the fire assessment alone, which leaves the city $3 million shy of its goal - or not, depending on where the city lands with the assessment, which, by the way, is also going to hit businesses substantially.

Consider expanding the existing storm water fee to encompass roads and drainage as the city of North Port does, which would have a double benefit of moving some operational funds out of the general fund while also addressing a specific need.

Look at the proposed funding phase-in for capital. Is that the only option - or the ideal one?

Give less weight to the buzz words and revenue ideology and more weight to how the residents want to freight the city's future.

That is key.

Because no one - no one - wants closed parks, closed facilities, closed fire stations for which they have already paid, even if it means digging a little deeper.

And few think capital improvements can be postponed any longer.

Taxpayers just want any increase to be palatable, and fair and they want assurance that it will all be spent - to the penny - on needs rather than wants.

We urge council, including its "do-nothing" anti-tax proponents, to diversify its thinking Monday.

The option preferred is not the only one out there, ticking clock or not.

Let's look at the options one more time. This decision has to be the right one. There is simply too much at stake.

- Breeze editorial



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