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A tale of two subsidies

By Staff | Oct 21, 2021

The city of Cape Coral on Wednesday entered into a public-private partnership for the operation of Sun Splash Family Waterpark, the city’s decades-old venture into the attractions industry

City Council’s decision to lease the park to an outside vendor rather than continue as owner-operator of the facility the city opened with high hopes in 1992, came down to money, specifically whether the city should continue its subsidy of the 14-acre park that draws about 120,000 visitors during its March-September season or whether it should stop the drain and actually, well, make money.

In this case — we’ll come back to that later — they chose to end the subsidy.

According to a financial analysis conducted to determine the benefits, if any, of leasing the facility, the city was projected to spend another $9.2 million over the next 30 years to keep the park afloat. If it entered into the lease arrangement proposed by ProParks, the 30-year revenue potential would be approximately $14.6 million.

The city will receive a guaranteed minimum lease payment, will receive 15 percent above all gross receipts of $2.1 million annually, and the taxes to now to be paid on the facility.

The city will save $500,000 immediately as PPW Cape Coral LLC, the contractual lessee, will pick up the cost of necessary improvements to the park’s Lazy River attraction and will be responsible for repairs and attraction upgrades.

Twenty-five cabanas will be added with more improvements to come as the lease requires 4 percent of gross sales be invested in capital improvements. Within the next three years, the child’s Pirate Cove play area will be refurbished and upgraded.

The city retains the parking lot and so events, such as the city’s annual CocoFest, will not be affected. The park’s regular, non-contract, employees have already accepted positions elsewhere within the city’s parks department.

Officials on both side of the lease — city and ProParks — say the benefit to residents and visitors alike is going to be a better attraction that will be open longer, have improved amenities, and “best offer ever” season passes for residents.

They are calling the lease win-win.

It very well could be and we wish the park’s new operators every success.

Also at Wednesday’s Council meeting, the elected board took a decidedly different tack on a subsidy of a different sort.

Also via a unanimous vote, Council expanded the city’s public service tax on electric bills, eliminating its exemption of the first 500 kilowatt hours for residential use and imposing the 7 percent levy on metered and bottled natural and manufactured gas.

City officials say this won’t affect residents much — another $26.76 per meter per year — but it’s still a new multi-million dollar levy — an estimated $2,609,060 collectively from residential electric bills and another $200,000 from newly taxed consumers of the gas products affected.

The money, then, will be “dedicated toward,” the city’s municipal four-school system which already is being subsidized by city taxpayers. Taxpayers who pay twice as all property owners also pay taxes for the operations of the School District of Lee County.

Why? Well, a reason, if not the reason, may be found in the lease arrangement penned for the operations at Sun Splash: The city’s operational costs are likely higher — much higher — than may be found in the private sector. Or even the public school system, which here in Florida operates on much the same funding sources as does the city’s charter school system, less capital revenue sources.

Included in the city vs. vendor expense analysis using numbers projected for FY2025 after the city retires its debt service at Sun Splash, the city estimated total expenditures at $2,893,725. The vendor operations total came in at $1,988,985, or about $904,000 less. The city personnel cost was $677,700 higher, the operational costs, $226,900 more.

That’s a significant difference in operations costs and should be a wakeup call to Council: Why a much higher estimated cost under city operation than via a private sector vendor, who must make a profit to stay in business?

These numbers also provide an answer: Personnel costs, which are more than wages — especially in the public sector — are always a significant cost of operations.

And here in the Cape they are a driver behind both the need to subsidize city-operated “businesses” — such as Sun Splash, Coral Oaks Golf Course and the, yes, we do agree, excellent, Oasis Charter Schools — taxpayers were told would be self supporting as well as a growing General Fund Budget replete with legacy costs that have already have impacted the city’s bond rating.

But we suspect Council and the city’s administration know this.

They may, however, have missed the irony of touting the savings of the $9.2 million projected subsidy over 30 years at Sun Splash while, at the same meeting, approving one of $2.6 million per year — at least $78 million if we want to roll it out over the next three decades for the sake of apples to apples — for the municipal school system whose costs it also cannot control.

— Breeze editorial