Guest Opinion: Public Service Tax – A bad idea at the worst possible time
By Eric Feichthaler, former mayor of Cape Coral
Like many Florida cities, Cape Coral is facing a challenging budget year. Note I did not choose words like “hopeless,” “dire,” or “crisis” to describe the situation. Reducing the costs of government is all too often viewed as a painful exercise to be avoided, when in reality it should be viewed as an excellent opportunity to reduce the size and scope of city government, and show it can operate in an efficient manner.
The millage rate for Fiscal Year 2009, the last year I presided over the budget, was not increased even in the face of declining property values. No new taxes were added to reach this result. This tax rate was 19 percent lower than the rate in the last budget prior to my arrival in 2005. These reductions in spending did not result in a reduction in service. In fact, in my final year in office, I received no complaints that our city’s service had declined from the previous year. The key is to eliminate unnecessary spending, and that was my unending goal. When I exercised the line-item veto over the budget, it was met with strong objection from our current mayor and many council members. The veto was upheld, costs were reduced, and the city continues on.
City staff has supported diversification of revenue for at least five years, which in principle is a reasonable philosophy. However, for our city, taxing utility bills is simply poor policy. And in this economy, the effects of a public service tax could be long reaching. It shifts the burden of taxation from investors and places it squarely on the homeowner. Such a tax is highly regressive, in that it will disproportionately impact those on fixed incomes. The city currently collects property taxes from tens of thousands of vacant lot owners. The city receives this windfall every year, while providing limited services for those tax dollars. This is the primary reason we have a millage rate that is lower than Fort Myers and other similarly situated cities. I am thankful that those funds are available, but in my view, taxes received from vacant lots should be used in place of a public service tax, and should eliminate the need for a PST. Once a public service tax is implemented, what are the chances it will later be repealed?
The main argument for this new tax is to avoid the ups and downs of the real estate market. This simply does not hold water. The city does have guaranteed revenue from property taxes. However, if the city sees an exodus of families due to additional taxes and a worsening economy, the public service tax revenue based on water and electric bills will disappear. Property taxes are more certain, reliable, and tax deductible, unlike the PST being pushed by some members of council.
I believe most people agree that lowering taxes at any cost is not necessarily beneficial. Rather, they want responsible spending that leads to improving our community. Even though I presided over four budgets where the tax rate was never increased, I can accept this council making a reasonable increase in the millage rate in conjunction with intelligent cuts to the budget. What is not acceptable to me, and should not be to you, is to create new taxes and bring in more money, rather than engage in a thoughtful budget process and discussion to reduce spending. Almost every time I recommended a reduction in spending, I was met with opposition by council. This year, my hope is that council will work together, and work hard, to support a reasonable budget. Most importantly, I wish them the wisdom to know they govern only by the consent of the governed, and that your opinion is vitally important to their deliberations.