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Town Council receives advice for revenue options

By Staff | Feb 10, 2009

The Fort Myers Beach Town Council and other city officials received sound advice in an hour-long presentation on identifying different revenue options for recessionary times at their first ever Management and Planning meeting Thursday, Feb. 5.

During the round table meeting, guest speaker Ken Small, financial analyst for the Florida League of Cities, focused on short-term versus long term solutions and made parallels to the country’s last recession from 1978 to 1982 by offering key insights on how other Florida cities are funded.

The council then discussed the town’s options later in their agenda.

Small said that prior to 1968, Florida followed a concept called the Dillon Rule which stated that legislations, regardless of what state, had the “god-like” opinion when it came to local government. But things changed soon after.

“Under the Dillon Rule, cities could only do what the constitution empowers them to do or state law empowers them to do,” Small said. “In 1968, by one vote, we got the Home Rule authority which states that a city can generally enact any law unless the constitution or state law specifically states you can’t do it.

“However, Home Rule authority did not extend to taxation.. So under taxation, we still operate under the Dillon rule.”

Small also mentioned four taxes that cities have available to them to gain revenue: 1) property tax, which makes up the largest portion; 2) municipality tax which is a public service utility tax; 3) communication or entertainment tax; and 4) occupational tax which was renamed local business tax two years ago.

Small spoke about certain options for revenue including special assessment fees, an annual charge on one’s tax bill for projects like street widening, storm water or fire service; impact fees; franchise fees, a charge on solid waste collection and gas; and a variety of user fees like water, sewer, garbage, parks and recreation, development and building permits.

“Most cities don’t even come close to charging the full cost of a user base service when they set their user fees,” Small said. “If you want your user base services to pay for themselves, then you need to set the full amount. If you don’t, then the property tax payer is basically subsidizing those services.”

Another special assessment fee could come through churches, nonprofit groups or people in low income status even if they are exempt.

“The city attorney of Gainesville, Marion Radison, made a very, very intriguing point to his council that really caught me by surprise,” said Small. “He said the case law states that ‘other then property deriving the benefit, (fees) must be fairly and evenly proportioned. If you don’t charge everybody that receives a benefit, you’re violating the fairly part.'”

Another revenue source is the Payment In Lieu of Taxes (PILOT), an entity exempt from taxes which benefits from services that are unpaid for and makes payments in lieu of taxes, according to Small. This type of organization chooses to be a good corporate citizen with a voluntary donation.

The speaker then discussed two state shared option revenues: municipal revenue and the half cent sales tax program. The latter program was created during the end of the country’s last recession period.

“Beginning in 1982, the state raised the sales tax from four to five percent which gave cities and counties a new penny to lower property taxes,” said Small. “But legislature took half the penny for compensation for the loss of the taxable value for the increase in homestead exemption from $5,000 to $25,000. Thus, the half cent sales tax for property relief was created. So the revenue that was being brought in from property tax was then shifted to an increase in sales tax thus benefiting the home owner.”

Mayor Larry Kiker thought the presentation, the second in two years by Small, struck a positive chord with the council.

“It’s obvious we have to take a strategic plan to fund projects that are mandated for the town to meet legal requirements,” said Kiker. “Between Mr. Small and Bill Peebles, a hired lobbyist for the town, we have heard many good ideas to do so. But we need to act quickly. Because we have such a low millage rate, we have to better position ourselves to ask for funding outside of the town.”

And Kiker knows that funding such large projects will be difficult on a limited budget.

“Our municipality does not allow us to incur debt greater than three years.” he said. “Replacing the water system alone is a project that will cost over $10 million. We need to ensure the future of the beach.”