City’s budget discussions begin with first summer workshop
Editor’s note: This report covers the beginning of Cape Coral City Council’s Thursday’s workshop which was wrapping up at press time. This story has updated here online at capecoralbreeze.com.
With the property tax reform proposal going before voters in November, Cape Coral City Council spent hours going over the impact it might have on the budget during the first day of the summer budget workshop Thursday.
“This year it’s important to unpack the entire general fund,” City Manager Michael Ilczyczyn said. “I want you to keep in the back of your mind the property tax reform proposal and be mindful of where we might wind up in order to see that there is really no way to trim to a number that large. It is going to take wholesale eliminations to get to that number, or fast forward to the end of the discussion, a whole new way of thinking about funding local government.”
He said there is a way to keep doing what the city has been doing, but it will take new mindset and thought processes moving forward.
The discussion began with the proposed fiscal year 2027 budget — an all-funds requested budget of $1,504,837,279, and a general fund requested budget of $279,115,077, both of which do not include program modifications from departments.
The budget also includes a millage rate of 5.1471 for general operations, fire service assessment revenue at 81% cost recovery, 11% increase in water and sewer rates, 4.49% increase in stormwater rates, and 5% increase in solid waste rates. The program modifications include $53,725,025 for total general fund and $180,872,958 for total all funds.
The proposed budget includes 28.73 FTE — two park rangers and 5.93 contract positions for site leader, center attendant and counselor/instructor for parks and recreation; 10 facilities positions for public works, two heavy equipment operators, two service workers III, one crew coordinator and one service worker I; one administrative assistant for solid waste and one business service manager, one utilities field supervisor, one service worker II and one service worker III for utilities.
There were also 97 positions that were requested and not included in the proposed budget.
Deputy Financial Services Director Nicole Reitler went through a general fund expenditures review by category and explained that they are forecasting on only the needs of the departments.
She said the largest portion of the general fund is ad valorem taxes which constitute 59.70% of the revenue.
“There is a significant reliance on property tax revenue,” Reitler said.
She said the June 1 property appraisal values had a deficit of $3,067,604 compared to the 2027 requested budget.
“Departments were able to work in existing budgets to account for any increases we are seeing across the board in the upcoming fiscal 2027 year,” Reitler said.
As the presentation continued, Ilczyczyn stopped with many points about the magnitude the proposal would have on the city. He said the city would be responsible for any revenue replacement.
“The what if, or how we are going to solve portion of the equation, is on us,” Ilczyczyn said.
There was a lot of discussion around the parks and recreation department as, if the proposed state charter amendment that would increase homestead exemptions en route to eliminating property taxes on owner-occupied homes is passed by voters in November, it can no longer be funded by the general fund.
“If you follow the statute (as proposed)- strictly parks and recreation quality of lift is not allowed to be funded by the general fund. We can wipe out the entire parks and rec department and still be another $12 million short,” he said.
The presentation went into explanations of discretionary verse nondiscretionary to give council an understanding of examples for both. The nondiscretionary are expenditures that the city is legally, contractually or operationally required, such as debt payments, public safety minimum operations, contractual salaries and benefits, pension obligations, insurance premiums and utility bills.
“I want to be delicate about this. Every employee does not believe their job is a discretionary job. This analysis is based on contracts and state law, not the value we put on the employee, or positions,” Ilczyczyn said. “There is a $128 million spread across all different accounts, and, so now run the analysis, if you have to get to $47 million you see how far you have to go. It’s disjointed. To get access to that level, you are going in and rendering programs useless.”
Assistant City Manager Mark Mason dived deeper into the tax reform – what the State Legislature approved on Tuesday, stating that it creates a restriction associated with what the city can use property taxes for and what it cannot be used for.
“In walking through these, when you look at this it is probably one of the more comprehensive changes to ad valorem taxation since Save our Homes in 1994. It’s the first burden shift associated with taxes. It will shift the burden to a smaller group to taxpayers, in this case non-homesteaded and businesses. You further erode the ability and the amount that will be funding the operation of government,” Mason said.
The proposed changes, which would not apply to school taxes, is an increase in homestead exemption on first $150,000 of assessed taxable value on Jan. 1, 2027, and then increase the homestead exemption on the first $250,000 of assessed taxable value on Jan. 1, 2028.
In 2029, and each year thereafter, the increase would be by CPI only.
Mason said there is also a five-year path for full homestead exemption for property owners that are not permanent residents by Dec. 31, 2026
There is also a reduction for non-homesteaded property assessment annual increase from 10% to 5% per year.
Mason said it would also restrict the use of ad valorem revenue to areas including public safety, which includes law enforcement, fire service and emergency medical service, funding for education — public schools and charter schools, finance or refinance infrastructure, and debt service.
“There are specific items associated with the constitution, writing laws that will further define what it all means. There is speculation. I don’t think anybody saw this coming,” Mason said. “There is a lot missing of what the explanation are for what these are.”
Mason went over some potential funding changes to recover the full impact of the constitutional changes – the fiscal year requested deficit of $37,140,664.
“This part of the discussion, let’s shift to the other side, not solving by expenses, solve by revenue,” Ilczyczyn said. “If we reset, this law is intending to reset the way millage is done and what it can fund. Using that in the purest sense what you would do each year is you would run what expenses to use ad valorem millage on and build up from zero.”
Some of those potential funding changes include public service tax increase of 3%, public service tax – charter school portion, revenue recognition 95% to 98%, increase program/recreation user fees, special assessment for parks and recreation, special assessment for lighting, special assessment for medians and city owned parking lots and street parking.
Councilmember Jennifer Nelson-Lastra said the idea is more families will have money in their pockets to be able to support their children to go and do all these things.
“These are going to be cost neutral, and they are going to pay for themselves. To me that is the type of innovative things we need to think about,” she said.
Ilczyszyn said they need to find a way to get out of ad valorem taxation, as there is only a matter of time before it is eliminated.
“We have to, if we are going to be sustainable, have local home rule options that we can control that the state does not govern,” he said. “We would have to have a parks and recreation district to have a special assessment for the things that it provides, to fund parks and recreation.”
Nelson-Lastra agreed that the city is ad valorem reliant and that needs to change.
Councilmember Keith Long said frankly a lot of the programs are going to cease to exist, as the private sector will take them on.
“If we can’t do it at a reasonable cost, let the private sector,” take over,” Long said.
Mason said they are not making a recommendation, as the current sitting council will most likely not be making any decisions associated with the tax reform.
Councilmember Rachel Kaduk said she fully supports the reform and what is happening at the state level because local governments need to focus on infrastructure and public safety. She said she thinks the reform happened because of Cape Coral.
The day-long meeting concluded at 5:45 p.m. Council canceled the scheduled second day of the session. There will be no workshop on Friday.
To reach MEGHAN BRADBURY, please email news@breezenewspapers.com