City Council reduces maximum millage rate

Marco Island homestead property owners can expect about the same tax bill for 2007.

In a special meeting on June 19, City Council voted unanimously to reduce the maximum millage rate at least 3 percent after learning that the island's taxable assessed valuations increased by 27 percent to just over $12 billion.

Reducing the rate from 1.387 mills to 1.346 mills will keep the tax bill at the 2006 levels.

Council approved the maximum rate unanimously, 6-0, with Councilman Ted Forcht absent from the meeting.

Council also asked staff to examine further reductions if $1 million was not transferred annually under its Five-Year Capital Improvement Program to defray a portion of the Septic Tank Replacement Program costs. The $1 million will come from the Water/Sewer Enterprise Fund.

The decrease in the millage rate was determined by expecting taxable values to increase at the rate of 7 percent annually, beginning in 2008.

The Collier County Tax Appraiser's Office determines the taxable assessed valuations then each taxing body, such as the city, county, schools and fire districts, determines what their millage rate will be for 2007.

Under Florida's Save Our Homes law, an increase in the taxable assessed value of a property under the homestead exemption cannot increase more than 3 percent, or the cost of living index, whichever is lowest.

By reducing the millage rate by 3 percent it cancels out the annual homestead increase.

Bill Harrison, city finance director, said reducing the millage rate from 1.3875 mills to 1.346 mills keeps the homestead tax bill the same.

However, only 25 percent of city properties qualify under homestead.

Harrison said that reducing the millage rate on all properties will have some benefit, but property owners not under homestead can expect an average increase of at least 35 percent.

With the council approving a maximum rate reported to the county by July 1, the city is committed to lowering the millage rate. By law, declaring the rate decrease means the city cannot change its mind unless it wants to go lower.

The county will send out preliminary tax notices that will include all taxing bodies in the county in August. Two public hearings will be held in September to verify the city's final rate, along with all other taxing bodies.

Council discussed three options provided by Harrison and his staff.

In each option the $1 million transfer from unrestricted funds was debated as to how it affected the city's spending cap when transferred to the water/sewer account.

Marco Island is the only city in Florida that limits expenditure increases to 3 percent plus cost-of-living adjustment. This year it is 4.1 percent, for a 7.1 percent total of fiscal 2007.

The first option is the 3 percent reduction, with the city transferring $1 million to the Enterprise Fund. Over five years the city will continue its 3 percent reduction, providing a 1.346 millage rate.

The second option involved a $31 million general obligation bond for parks and beautification that will keep the rate the same at 1.3875 mills over the five years.

Harrison reported that under this option the good news is that bonds may be issued for improvements and unrestricted reserves will continue to grow without the need for a tax increase. Under this option, the council voiced concern about violating the spending cap.

The third option suggested a 10 percent decrease in the millage rate for this fiscal year and a 3 percent deduction the remaining four years. Harrison reported that under this option the expenditures will continue under the constraints of the spending cap.

Council asked for further review by staff of the options to help determine if a further reduction is possible and how any additional action will affect the cap.