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Guest Opinion: Reliance on property taxes alone is not sustainable

April 13, 2013
Councilman Kevin McGrail - , Cape Coral Daily Breeze

How does a lifelong conservative get credited as "gladly" raising taxes in Cape Coral? It starts with having the courage to clearly state the problem. We are out of money at the City level and have been spending our capital improvement budgets for the past seven years in order to cover the 59 percent drop in property tax assessments that occurred. Florida laws granting a $50,000 homestead exemption and the "save our homes" residential limitation of a 3 percent maximum increase in property taxes per year pretty much slams the door on any quick fix from an economic recovery, if we rely solely on ad valorem taxes. To this point we have leaned on the cane of property taxes as our solitary source for a local revenue stream. When the economic downturn hit and knocked us down in 2008, we were unable to get up.

How is Cape Coral going to sustainably finance our City going forward? First, we must ALL agree that a clean and safe city with good infrastructure and a vibrant Parks and Recreation Department are worth retaining. These amenities (and great weather) brought us to Cape Coral in the first place. If we can't agree that we need to support this level of services, then the NO tax rhetoric of the last several years works. Council has now seen the City Manager's vision for that downsized Cape Coral, and it is NOT pretty. Oct.1, 2013 will see 749 employees laid off (232 full time and 517 contract employees). This will effectively shutter our Parks and Recreation Department. One hundred and eighty adults and children will be displaced from our Special Populations Center closing. The Yacht Club and pool will close as well as the Community Theater, Art Studio and Sunsplash. Our adult and youth sports programs will be cut, leaving 4700 youth sports activities cancelled or having the entire cost borne by families. Sports leagues at Koza- Saladino, Jason Verdow, Burton, Storm Football, Caloosa Football, the BMX bike track and youth soccer will all lose City financial support. Most sports will become so cost prohibitive that many families will not be able to afford to keep their children in them. Our elderly citizens will lose the Tony Rotino Center as well as the Lake Kennedy Center and the Cape Coral mini bus program. The neighborhood parks might make it until the 2015 round of budget cuts. In my opinion that does not describe a city I would choose to live in. I can only HOPE you agree.

Why doesn't Cape Coral just cut costs further to make the budget work? Since 2008, the City has: cut 442 full time positions, cut $18.4 million in yearly payroll costs, had hourly pay rates frozen for 5 years, and in 2012 saw employees give back 5 percent in pay cuts. All of these staff cuts have occurred as the City has grown in population and has seen a concurrent increase in calls for City services. We have been working with City employees to save "tens of millions" in future pension obligations. The City saves $700,000 per year on energy saving initiatives. We have made the cuts to be fiscally responsible and it STILL is not enough to fund the daily operations of Cape Coral and have enough left over to fund capital improvements on buildings, roads, and vehicles. That capital improvement (CIP) "deficit" is what drove our City Council and staff to even consider this tax increase proposal. In 2007 the City spent $30 million/year on CIP. In 2008 it was $13.7, 2009 $13.5 and in 2010 (when I took office) $1.5 million per year. The last 3 years have been $1 million/year. That is a 96 percent drop in the capital spending budget and can no longer continue unless we want to see our City literally fall apart. Our roads are crumbling, buildings and equipment cannot be maintained, and our aging vehicle fleet is becoming unreliable. The proverbial "day of reckoning" has arrived. Cape Council has wisely acknowledged this fact and has chosen to support a plan proposed to make the changes to our tax structure that will prevent our City from falling into disrepair and blight.

So how do we finance a sustainable City with the amenities and infrastructure we require? The target dollar value is $150 per year for the "average" homeowner. The next question is how do we FAIRLY apportion that amount to the residents of Cape Coral? City Council was presented a "3 legged" view of revenue, relying on property taxes, a fire service assessment, and a public service tax. While everyone is familiar with property taxes, nearly everyone quotes the entire amount on their "TRIM" notices as their "Cape Coral tax". That is incorrect. In reality, only 30 percent of your total property tax bill is actually obligated to Cape Coral. Lee County Public Schools comprises 49 percent of the total and Lee County government 17 percent. We as a City can only be held accountable for our 30 percent portion. The two new tax revenue proposals are the fire service assessment and the public service tax (PST). Let's look at each one separately.

Fire service assessments are used in many communities throughout Florida as a way to fund the costs directly attributable to the Fire and Rescue service. Cities such as Fort Lauderdale, Hollywood, Pembroke Pines and Miramar all utilize this assessment. Our Council is proposing this plan as a means to sustainably finance our Fire Department for decades to come. By law it must be based on the "value" to the property, hence developed properties will pay more than undeveloped ones. The formulas are being crafted before we can formally vote on this Ordinance. It is rare for communities to recover more than 50 percent of these actual costs through this assessment and our Council was in favor of holding to this generally accepted formula. The other advantage to this assessment is, it will allow us the option to readily finance emergency transport vehicles if the City decides to provide that service at some future date.

Public service taxes (PST) have been utilized by many Florida cities for decades. In fact, Cape Coral is the ONLY city in Florida with a population over 50,000 people, without a public service tax. This will be on the electric bills and will be paid in small amounts on a monthly basis. This tax does have a greater impact on full time residents, it is also a reflection of the fact that full time residents utilize MORE City services than a part time resident. This tax will also be equally shared by homeowners and renters.

The 3 legged stool versus the cane approach. The stronger base of the three revenue streams will allow future Councils to work with the citizens to continue to move Cape Coral forward into the future. It is much like the wisdom of a diversified investment portfolio. Our Council is committed to bringing these Ordinances forth and holding to the promise that the "average" Cape Coral homeowner (home valued at $100,000 after homestead exemption) will pay an additional $150 year. This number will raise an estimated $17 million per year in additional revenue. This will allow the CIP to be 100 percent funded with $6.5 M for roads, $4.4 M for vehicles, $4.1 M for equipment and $2.0 M for facilities maintenance. Any excess funds will be returned to the citizens by either lowering the millage rate or a public service tax percentage decrease. Thank you for taking the time to get the facts on this proposal. The Ordinances will be brought forth for public hearing and Council vote over the next few months. The public service tax will be brought before Council on April 29, and the fire assessment will come before Council on July 22.

Thank you.

Councilman Kevin McGrail

District 6



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