MARCO ISLAND — Lean government is a common goal. A death spiral is commonly avoided. Marco Island’s spending cap has been called both. Now city leaders and engaged residents are wondering how to keep the baby and throw out the bath water, so to speak.
As Marco’s charter review committee looks to update the city charter, the provision on the spending cap led to the question of if it should be amended and how.
Islanders had long been divided on whether to create their own city because many feared another layer of government and another layer of tax expense.
The spending cap is what tipped the scale, bringing Marco to city-hood more than 10 years ago because it’s the only way to control government spending, says Marco Island Taxpayer Association President Fay Biles.
Even Monte Lazarus, who calls the spending cap a “death spiral,” agrees it served its political purpose at that time.
“I think it has served the city well the last 10 years. I think to leave it alone will cause a lot of problems for the city. There are no provisions here for catch up and without such a provision, the city will be completely handicapped,” said Jose Granda, who serves on the charter committee.
Because of this cap, city spending may not increase from one year to the next by more than 3 percent plus COLA, or the cost of living adjustment.
Last year Marco City Council approved a budget $532,798 under the spending cap, confirmed City Finance Director Patricia Bliss. The adopted budget was $19,305,700, she added.
This was the first time in the history of the city that a budget under the maximum cap was ever approved. The reason was because it was the first year the millage rate had to increase significantly just to bring in the same amount as the year before due to declining real estate values.
This trend is likely to continue with declines from the Collier County Appraiser’s Office lagging one year behind, as set by taxing laws.
Lazarus, a member of the current and past charter review committees, is concerned about the years that follow.
Every year the city spends under the cap, the loss in potential revenue is compounded.
Among the solutions to the so-called “death spiral” are to get rid of the cap entirely by asking voters to approve such an amendment to the charter in the January 2010 election.
“If you eliminate the cap altogether you’ll get a council that goes on a spending spree. Maybe not this council, but we’ll get a council that makes Obama look like a cheap skate,” said Dave Rush, of the charter review committee.
Other options: City Council could amend the budget by the $532,798 to bring 2009 back up to the spending cap; keep the cap in place and significantly increase the tax rate while property values are relatively low and then potentially decrease the tax rate when property taxes are high again.
The charter review committee considered amending the charter to allow for make-up following a real estate decline or recession. However, a combination of previous Attorney General opinions and cases against caps of many kinds may indicate that such an amendment could fail if legally tested, warned city attorney Alan Gabriel during a meeting of the Ad Hoc Charter Review Committee Monday.
“The Attorney General’s opinion is just that, another attorney’s opinion. Granted it’s the highest attorney in the state, but it’s not a court.”
What concerned Gabriel a bit more were previous cases that show a history of courts ruling caps or any taxing controls beyond what is set by the state as being unconstitutional.
“The spending cap should be viewed only in relationship with expenditures. It is not a revenue cap,” Bliss says.
This may separate Marco’s situation from others. Marco’s specifics have not been tested in court.
The city charter and spending cap as originally written is protected because it was adopted by a special act of Legislature, Gabriel said.
“If you amended it, does that mean you would lose the protection of the special act of the Legislature? I believe that it would.”
In a follow-up interview with Gabriel, he said the amendments already made to the charter, which set out areas of government spending included in the cap versus those that aren’t, could be viewed as a clarification in how to carry out the spending cap and therefor not of equal concern legally.
“The problem is, I’m in favor of keeping (the cap). How do we have our proverbial cake and eat it too?” Granda asked.
The city currently has $11.7 million in total reserves. This includes approximately $2.1 million in non-designated surplus fund balance, $5.7 million designated for capital projects and $3.9 million designated for emergencies, Bliss reported.
The charter allows for Marco to spend above the cap in the case of an emergency. Is this “death spiral” in a down economy, a state of emergency?
The charter review committee voted to delay discussion of spending cap issues until later in the summer.
The Marco Eagle invites Islanders to share their thoughts in the mean time as council begins budget hearings this June.