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Tax rate for taxing times?

By Staff | Jul 21, 2022

Cape Coral City Council got a look at five budget scenarios Wednesday, each based on a tax rate that ranged from the current 6.25 mills to the rollback rate of 5.3694.

Leaving the tax rate the same — which would bring in more money because taxable property valuations have increased again, this year by 23 percent — would allow for an “exceptional” level of service, according to the city staff presentation.

Funding the city’s operational budget at the rollback rate — the red side of staff’s traffic-light colored rainbow where the tax impact on existing homeowners would be nominal–would provide a “core-level” of services and only would “minimally fund” the city’s strategic plan and recommended projects.

In between was staff’s recommended option of 5.5568 mills that more or less splits the difference and provides for what staff says would be a “sustainable” budget.

Council split 4-4 between the rollback and City Manager Rob Hernandez’s recommendation of 5.5568.

The rate at the rollback of 5.3694 mills is approximately $5.37 per $1,000 of taxable assessed valuation or $537 per $100,000. That should be close to what a homeowner is paying now.

The rate at 5.5568 mills is approximately $5.56 per $1,000 of taxable assessed valuation or $556 per $100,000. That’s a difference of $19 and change per $100,000.

Those in support of Mr. Hernandez’ recommended rate point out that’s not much of a bump per property and the city has project and personnel proposals both needed and desired. This additional revenue tallied up city wide is $11.1 million more and can make those things happen.

Those in favor of the rollback say increased valuations driven by new construction still will bring the city more than $7 million in additional property tax revenue and the city should budget accordingly, not just present a spending plan that red flags deficits and dwindling reserves if existing property owners don’t kick in a little more.

Is the difference between these two tax rates “much?”

Presented as is, the answer is no.

But taken in context, yes, these dollars do add up, not only in terms of the city’s get but in terms of taxpayers’ give.

For the millage rate under discussion is just one — albeit major — component of the city’s tax levy on property owners and residents.

In addition to that tax on real property, the city levies a second ad valorem tax to pay back the $60 million General Obligation Bond voters approved to fund the city’s Parks Master plan. That’s another .0471 mills, as proposed.

Then there is the city’s tax on electric bills.

Last October, Cape Coral City Council unanimously approved an “expansion” of the city’s public service tax to subsidize the city’s charter school system.

Council repealed the 500 kilowatthour exemption for residential electricity and expanded the city’s 7 percent public service tax to include metered natural gas, liquefied petroleum gas, and manufactured gas.

The “expansion” — i.e. tax increase — was projected then to bring in an additional $2.6 million for the school system. The average impact on residents was projected to be about $26.76 per meter annually. That was before the current spike in utility bills due to significant increases in the cost of providing power. And yes, the additional Power Cost Adjustment portion of your electric bill, necessitated by a 300% increase in natural gas, is taxed. By the city.

That 7 percent is on top of the city’s 3 percent franchise fee levy also tacked onto electric bills.

The city also levies a fire services assessment to fund 62 percent of the costs of its fire department operations.

This two-tiered tax requires all properties to participate at a flat rate, currently $157.16, and then adds additional cost for developed properties based on building cost value and extra features. Presently that’s $2.54 per equivalent building unit, or EBU.

Both these taxes were approved in 2015 to “stabilize” the city’s tax-based revenue stream which then city manager John Szerlag said relied too heavily on property taxes.

The first year out, the two new taxes would impact residents and would be a tax increase, officials said, but after that, the public service tax and fire assessment would help balance and maintain the tax flow. They were not — ahem — intended as “additional taxes” per se.

Which, of course, they have come to be.

Consider:

The millage rate in 2007, following 2006 record valuation increase was 4.9414 mills, reduced to 4.8325 for 2008 and 2009.

Yet now, in the midst of another building boom and new record increases in taxable valuation, the city increased the public services tax although the millage rate is higher.

There has been no serious discussion on any reduction in the fire assessment which is at its maximum and likely to stay there, yes, we’ll say it, forever.

Let us point out there has been no discussion on reducing the actual amount of property taxes paid — the only debate on the table is whether to reduce the millage rate to the level at which existing property owners who are homesteaded won’t see an increase because the paper value of their home has increased or whether to reduce the rate so the amount paid is less that the increase they’re looking at at the current rate, which is 6.25 mills.

(Thank goodness, and Ken Wilkinson, the father of the Save Our Homes homestead exemption, here.)

A couple of things.

As pointed out by Mayor John Gunter and the three council members who want to see a rollback-rate budget, Jennifer Nelson, Dan Sheppard and Keith Long, the property valuation runup may have peaked.

A “correction” in home prices appears to be under way and there is talk of a recession.

Now may not be the time for the city to tell residents it’s “reducing the tax rate” when it’s really positioning them to pay more.

For as we learned the last time Southwest Florida rode the real estate valuations roller coaster, the downturns are much less pleasant than the climbs.

A relatively minor drop might make for a rough ride even if the plethora of proposed projects, programs and personnel hires can be justified by the city’s vision for “exceptional city services & high-quality amenities.”

The cost of housing, groceries, gas and utilities are now at the forefront for the folks who fund the city budget.

Costs are cumulative.

Always.

With that in mind, Council’s approach to the tax rate boils down to one question: Should the city continue to ask for more with the money pouring in?

–Breeze editorial