Marco OKs lower tax rate to offset sewer costs

Marco Island City Council members found it tough going to determine a legal way to use $1 million in reserves for each of the next five years to help sewer customers without violating the requirements of the spending cap.

But the council unanimously decided to set the maximum property tax rate for fiscal 2007 at 3 percent less than the 2006 rate of $1.39 per $1,000 taxable property value (1.3875 mills). The 3 percent reduction means that owners of homesteaded properties will not pay any more city taxes in fiscal 2007 than they did in fiscal 2006.

That's because homesteaded property owners benefit from the Save Our Homes provision in state law that limits the increase of taxable value each year to a maximum of 3 percent above last year's valuation.

For homesteaded property owners on Marco that could amount to a big savings, considering that the city's overall tax base increased in value by 27 percent to just over $12 billion.

The council voted 6-0 in a special session Monday to set the maximum property tax rate at $1.35 per $1,000 taxable property value (1.346 mills). Councilman Ted Forcht was absent.

The council can lower the maximum rate during final budget hearings in September, but by state law, cannot raise the rate.

At the $1.35 rate, the owner of a home valued at $500,000 minus the $25,000 homestead exemption would pay the city $641.25 in property taxes in fiscal 2007.

The council agreed in principle Monday to the first of three budget options offered by City Manager Bill Moss and city Finance Director Bill Harrison.

That option presumes that the city will lower the property tax rate by 3 percent for each of the next five years, and also provides that $1 million per year for five years will be transferred from reserves to the city's water/sewer enterprise account to help city sewer customers.

Council members debated whether to divide the $1 million among new sewer customers who are participating in the mandatory septic tank replacement program to offset their costs, or whether to also spread the $1 million among old sewer customers who are facing rate increases because of scheduled capital improvements to the wastewater treatment plant.

In each scenario, council members stumbled over the city's spending cap. Marco Island is the only city in Florida that, by city law, limits annual expenditure increases to 3 percent plus a cost-of-living adjustment, which this year is 4.1 percent. So the city can't increase spending by more than 7.1 percent in fiscal 2007.

While reserve revenues are not subject to the spending cap, the $1 million would become subject to the cap if transferred to the water/sewer account, some council members argued.

Council Vice Chairman Glenn Tucker noted the local political volatility of tinkering with any budget switch that might appear to local watchdogs to be a violation of the spending cap.

"As much as I deplore the (spending) cap," Tucker said, "I definitely don't think we should play a 'smoke and mirrors' game and transfer $1 million to an enterprise fund, and take the position that it doesn't violate the spending cap.

"The spending cap assumes that you can't elect people who have half a brain to figure out how to manage money," Tucker added. "But the reaction will be that we violated the cap."

Whether a transfer of reserve revenue to an enterprise account violates the spending cap depends on whom you ask, City Manager Bill Moss said. "If you ask our city attorney, he'll probably say this wouldn't violate the cap. But if you ask our bond counsel, they might say it does violate it. But this doesn't involve a bond issue, so it's probably OK."

Resident Bill McMullan offered a mild scolding to Moss for that explanation. "I don't like to hear the city manager say, 'depending on who you ask,'" McMullan said. "You shouldn't be trying to get around the spending cap."

Resident Sal Sciarrino took exception with McMullan's remarks.

"You just had (Collier) County Commissioner Tom Henning come here to tell you last week that the county is raising your taxes by 12 percent," Sciarrino said.

"This room was full. And not one person got up to protest that. I for one think the city is doing a great job."

Councilmen Mike Minozzi and Bill Trotter said they'd support using $1 million in reserves for sewer customers only if the money was divided among old sewer customers and new customers who will be connected to sewers during the next several years.

Old customers are facing rate hikes in monthly bills to pay for improvements to the wastewater treatment plant. New customers will pay approximately $4,000 to connect to new sewer lines, not counting construction costs that range from $12,000 to $21,000 per property, depending in which sewer district the property is located.

Council Chairwoman Terri DiSciullo asked Moss and Harrison to bring back legal ways to divide the $1 million at budget hearings later this summer.