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The case for increasing the Cape Coral millage rate vs. imposing a tax on electricity consumption

April 26, 2013
Cape Coral Daily Breeze

To the editor:

After listening to the arguments concerning the establishment of a "Public Service Tax" (read electric bill tax) at the Cape Coral City Council meeting of April 22, I have the following observations.

The results of no increase in revenue are evident, but they will not be as serious as the parade of department heads stated. I have been in similar situations before, where I or my department were asked what cutting a certain percentage meant. Since we did not want a cut, we painted the bleakest scenario possible, knowing full well that we were overstating our case. For my last National Science Foundation grant, I asked for $410,000 at a time when it was very difficult to get any grant funded. They said they would give me $360,000 and asked me if I could do the work for that. I hemmed and hawed about what I would have to cut and then said "hell yes, gimme the money." And I did what I needed to do with that money. So the city likely does need more money, but I would bet that if they get $16 million instead of $20 million, they will take it.

The city manager talked as if there are only two extremes-we become a wonder city or a blighted city. We all know that there is a large range of other scenarios between the two.

We are moving too soon. We don't know exactly how much we need because we don't know what the assessments for 2013 will be. There are new houses being built, and property values and home sale prices are going up. It is unfair to compare city income to the peaks of 2005-6, because we all know those were greatly inflated assessments that amounted to a windfall for the city, even with reduced millage rates. To have acted as if this inflated increase in property values was not headed for a death spiral was a failure of past councils. Most real estate people feel that Cape Coral is poised for a period of moderate but steady growth, which means moderate but steady increases in city income, when paired with the increases in assessments with already-developed properties.

There is something unethical about the city collecting a tax on electricity. All of the other taxes are on services delivered by the city and/or county. The city does not generate electricity, nor does it transmit it or provide any other service associated with it. But it wants to charge a tax on a service with which it has nothing to do. This is just a matter of looking around for something to tax. Why not tax the air we breathe, if one is going to use that rationale? The fire service proposal at least addresses a true service from the city; taxing electricity most certainly does not.

A tax on electricity unfairly punishes year-around residents. To then reduce the millage rate becomes a tax break for speculators who own the thousands of vacant lots in the Cape, as they will pay no electricity tax. Thus residents are subsidizing speculators. It was suggested that anyone on the council who owns vacant lots should recuse themselves from voting on this proposal, as they would be voting themselves a tax break that would amount to more than they would paying with a tax on their electricity usage. This is not a strong argument, but it does have validity.

Businesses would be disproportionally hurt by this tax. This problem could be alleviated by placing a cap on the amount collected from businesses, but that may not be legally possible.

It should be made clear whether LCEC will charge the city for their efforts in tax collection. If so, this is lost money.

The majority of the public speakers at the council meeting were not opposed to an increase in revenue; they were opposed to how it was going to collected. The "education" of the public endorsed by council really means the "indoctrination" of the public. They want to spend money to convince the public that the city needs more money and that it should be done in the manner they propose. The bulk of the public wants an increase in the millage rate rather than a tax on electricity, which would spread the cost among all property owners, which makes sense since all property owners will benefit. If the city goes to a 10 mill tax rate, which they say will raise slightly more than $16 million, it is likely that increases in the property values will generate enough additional money that they will have close to the $20 million they say they need. Further increases in future years should keep pace with increased needs of the city. Should this maxing of millage rate really hurt the city's bond rating? The statement that it would sounded rather ambiguous, especially since maxing the millage rate does not mean the city will have exhausted its ability to raise money. There is always a public service tax and/or fire services tax to fall back on if necessary.

There is no rush to make a decision on this very important matter at the next council meeting. Let's look a bit deeper into the matter, and instead of the council trying to convince the public to welcome what the council seems intent on doing anyway, let's see if we can change some of the council member's minds about what means will be used to reach the ends we all agree on.

Gordon R. Ultsch, Ph.D.

Cape Coral



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