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New levy on electric bills proposed: Council to consider public service tax Monday

By Staff | Apr 26, 2013

Cape Coral City Council is expected to vote Monday on a proposed tax on electric bills.

The 10 percent public service tax has already drawn fire and, with no three-minute time limit for public comment, the meeting is expected to draw an assembly line of the same angry taxpayers

On top of the 10 percent public service tax, council will consider a fire services assessment fee to recover 60 percent of the cost for fire services (to come this summer), and also will look at reducing the property tax rate by 12.5 percent or 1 mil, once the first two tax proposals are determined.

The goal is to keep the additional cost to the average homeowner at about $150.

But what does it mean for the citizens if the tax passes? What if it doesn’t?

And if it doesn’t, how will the city raise the funds it needs to fix roads, buy new police cars, and make other capital improvements?

Still other options?

Mayor John Sullivan hopes for a long meeting, so that maybe council will hear the call of the taxpayers and reject the public service tax.

“If we weren’t in for a long night, I’d be disappointed. I still don’t think we’ve done enough to cut spending,” Sullivan said. “We’re squeezing the trigger too soon. I think we’ll see a spike in property values that will bring in more revenue.”

Sullivan also believes that purchasing slightly used equipment and rebuilding its own machinery right now is most prudent.

Councilmember Chris Chulakes-Leetz believes City Manager John Szerlag missed an opportunity to use state statutes to help get Cape Coral out of the financial woods.

“If (we) would invoke the statute regarding financial urgency, we can fix 10 years of what’s been broken,” Chulakes-Leetz said. “It takes backbone to do that and it’s not my first choice, but it beats what we’re doing to citizens.”

Councilmember Kevin McGrail doesn’t want to go down those routes when there’s so much else wrong.

He also believes Monday will be a long evening, since he expects many residents to vent.

“If we have a repeat from last Monday when people just want to dump their load of anger, I’m sure it will be long since there’s no time limit,” McGrail said. “We may want to hold them to the fire for new information instead of just ‘We hate it.’ We get it.”

During public input, some taxpayers said they would be happy just being assessed an additional $150 on their taxes every year, knowing the money is earmarked for capital improvements.

Others said to simply raise the millage rate to cover the nearly $20 million the city needs annually to cover these costs. That would raise the rate to roughly 10.5 mills, and while this may seem great with property values on the rise again, the millage cap is 10 percent without voter approval.

It’s also a similar same strategy that used when property values collapsed in 2008-09.

The future if council does nothing

During last week’s meeting, Szerlag and the heads of city departments gave a gloomy outlook for the future of Cape Coral should the city do nothing to raise revenues.

“I have to match the revenue line and define that we’re going to have declining revenue and therefore dismantle the organizational part to match that line,” Szerlag said.

Szerlag said he would have to send layoff notices to about 750 people effective Oct. 1 so the city could live within its means.

Parks & Rec. Director Steve Pohlman said a worst-case scenario includes eliminating all subsidized recreational programs such as special populations, the Yacht Club, and Sun Splash. Also, athletic programs such as Little League and Pop Warner would see severe price increases.

Public Works Director Steve Neff said 3,000 lane miles of roads and 139 bridges and sidewalks wouldn’t be maintained, and striping of roads and median trimming would be history.

Police Chief Jay Murphy said 46 fulltime positions would be cut next year, along with the community resource center, citizen’s academy, Do The Right Thing, park rangers, public service aides, community outreach, planning and research and evidence clerk.

New Fire Chief Tim Hayes said response times would increase because he would have to close two stations and several rescue stations.

“That’s the rest of the story. That’s the future of Cape Coral we have facing us,” McGrail said Monday. “I choose not to live in that city.”

All in one basket

This is not an easy vote for many council members. Some came into office with an open mind about revenue diversification, while others had to be swayed.

Councilmember Lenny Nesta said he had no position on diversification, as his main platform was the utilities expansion.

Having spent 10 years on the pension board, Nesta said he knows what diversification is about, and that’s why he’s for it, even if most residents don’t want to hear it.

“The city needs to diversify; like your personal portfolio, all our eggs are in one basket. It’s like having a million dollars and putting it all in one fund,”Nesta said. “If something happens, you’re wiped out. So it’s the smartest thing to do. People don’t want to hear the taxes, but look at the other cities in the state that has the PST or fire service taxes. We’re the only ones that don’t.”

Councilmember Rana Erbrick needed a little more persuasion.

She said she had a different perspective, having spent three years on the financial advisory committee, and therefore had a more realistic view on what might happen this year.

“I have become a convert. We have gone through this downturn and what it does to revenues,” Erbrick said. “You’re not going to have everything in porkbellies, you diversify so if one section goes down, the others protect it. We’re a little late coming to the table, but we need to do this.”

Erbrick said with the homesteading and Save Our Homes, it’s as if Tallahassee wants to get the state out of its heavy reliance on ad valorem.

“It’s difficult to run anything just on the ad valorem. We need to bring that down as quickly as possible,” Erbrick said.

The formula

LCEC stated it was against using electric bills to generate funds for the city during Monday’s meeting.

“We understand the pressures the city is under. If this tax is implemented we will collect the taxes as required by Florida law,” said Frank Kane of LCEC. “We are concerned some may think it’s a rate increase, so we will take steps to educate the people that it’s a tax increase.”

LCEC may have a more difficult time explaining the arithmetic as to how the monthly tax will be calculated, for it isn’t as straight forward as adding 10 percent.

The first 500 kilowatthours are exempt as are certain charges on the bill.

With those things taken into account, the public service tax levy on an average bill for a user of 1200 KWh would be $7.74, according to the city.

Rate payers can compute the projection on their own usage by visiting the city’s Web site, capecoral.net , where a calculator can be found.

LCEC spokesperson Karen Ryan could not be reached for comment.

Cape Coral businessman Larry St. Amand believes this tax discriminates against small business and that it could either drive them out of town or out of business.

“If you live and work in the Cape, you’re going to pay twice. You hear the city manager say ‘We only need $90 from each person’ and it’s not true,” St. Amand said.

St. Amand put a business exemption form on the overhead projector during Monday’s meeting, saying he only wants a concession, but isn’t getting anywhere, not even from the Chamber of Commerce, where he is a member.

He also believes the city has a hidden agenda.

“You go to a restaurant, and it’s going to cost them $100 to $150 a month because they use a lot of electricity,” St. Amand said. “I don’t think they’ve talked about business because I believe it’s their secret windfall.”