Florida Weekly asks the experts
Obviously, with our recessing economy, it is becoming clear that the traditionally expected revenue streams for all entities, including government, may be challenged for a few years. In normal times, those who budget face the difficulty of predicting exactly what their revenues maybe 12 to 18 months in the future. Today, given our difficult economy, budgeting is even more opaque and hazy.
Clearly, much of our economy in Southwest Florida has been sparked by sunshine but has rested in the past three decades on net immigration and the importation of passive wealth — pensions, stocks, retirement funds, and so on. With the exception of tourism and agriculture, most of the local economy has been a service economy (development, banking, health, retail). All of those drivers of our local economy are now threatened. And, much of what we have known or depended upon in the past, may not now be dependable to the same degree.
It is unlikely that in the short term, development, construction, engineering, planning, architecture, and other (vocations) will be robust. Indeed, most data suggests it will be awhile before those business clusters abound.
Collier County's general-purpose government — the board of commissioners — has essentially and understandably rested on property taxes, impact fees and other fees. Four years ago, a countycommissioned study facilitated by the county's Economic Development Council was conducted by the Anderson Group.
The bottom line in the study suggested that Collier's commissioners, given the five-fold population growth over the past 30 years, depended on impact fees to fund part of County government. The Anderson consultants, however, also said that Collier County may have been (too dependent) on "growth paying for growth" or impact fees... and that a decline in growth would cause difficulties in funding County government. The Anderson Group did not anticipate — nor did anyone — that our national economy would go into a deep recession.
So, now that we face a few more years, I suppose, of us coming out of this recession, we can expect that impact fee revenue will be less than desired.
Clearly, the decisions involved will be stressful and will necessitate balanced, mature dialogue and deliberation in which the chamber and other business and civic groups will engage with government officials….
The word balance is important. There is no silver bullet here.
To maintain what we have — and I'm sure some savings can be achieved — there will have to be some adjustments, new revenue or revenue shifting. You either raise currencies and fees or taxes, or you come up with another tax brand that's new, which would take a referendum. That takes time. Or you cut services. Or you do all of the above.
Most people won't argue for cutting services. Collier has one of the lowest crime rates of any county, and arguably one of the top 26 police departments in the country. There's a reason — you pay for that. We have top-flight veterans. And we have a great love for our (public) greenness and horticulture — a lot of people don't want to touch that. And on it goes.
The legal system is a key role for government — (rules) that call for the enforcement of contracts and a mechanism for settling disputes.
Governments may intervene in markets to correct problems caused by lack of competition; by external factors such as zoning, pollution, or other spill-over effects; to provide public goods such as national defense; and to correct for poor market information so consumers can make better decisions.
The current recession is the longest and deepest since the Great Depression and has hit our region very hard, since our economic growth was driven by population increases, tourism, and construction. Recently, a study from the University of Florida showed that both the state and our region had 'out' migration (more people departing than arriving).
Population forecasts (see Florida's Economic Development Research forecast at http://edr. state.fl.us/population.htm ) predict that population growth will return to Florida and our region, but the next couple of years we will see slow population growth. The national forecasts (see www.fgcu.edu/ cob/reri for our latest monthly economic newsletter and regional indicator report) show a very gradual increase in economic activity. (But) employment will lag behind the economic activity, so we will see high unemployment rates for a couple of years.
The housing market has been very important to the region, and (now) the higher credit requirements, financial issues and uncertainty about housing prices and inventory will take a few years to work through.
Government funding has fallen with the value of homes (property taxes) and lack of building (impact fees). Households have been hit hard by the fall in the stock market, the declining value of their homes, and the high unemployment rates, and have cut back on their purchases. This has resulted in lower sales tax collections and property tax collections. (Meanwhile), the lack of growth and building has reduced impact fee collections.
So we are seeing local governments that are cutting projects and costs and also raising tax rates. Some governments are increasing user fees as a way to increase government funding. The business cycle demands that households, businesses and government plan for recession periods as well as boom periods. Local governments will have to make some hard choices given the expected reductions in tax revenues. (Leaders in Collier) should consider the long-term implications of their actions to balance the budget since they are competing with the surrounding counties and regions for households and businesses….
Collier County has nice amenities. When you see all this growth, and you're preparing for this growth — you're spending now for when it comes — then when the economy slows down you have the capital projects in place.
That's what Collier has done. So they shouldn't need to have a lot of additional expenditures.
But our region has been hit hard, and until we start seeing the growth engine pick up, it will be lean times.
I have to agree with the tenor of what Mike Reagan (president of the Greater Naples Chamber of Commerce) says — if you're looking at a one or two-year deal, you can freeze wages or take some other money-saving steps. But in the long range, get some pros in here to analyze this. The Anderson Group, they came in and did a professional study of the county, and as things turned out, they were right.
I was on a Naples Blue Ribbon committee to analyze the current situation. We did some work on the things I mentioned — but those are one-or two-year deals: Cut back on employees, cut back on this or that, prioritize your capital improvements.
There's a word floating around — a 'restart.' It means we take a brand new look to see what's going on. We've been doing the same old things, and we've been lucky at it, but we have to say, 'Look, there might be another way.'
I'm working on getting the Chicago Cubs here — I'm vice chair of the Tourist Development Council. That would bring in big things to the county.
There's a new owner for the Cubs, he's been approved and it would take a month or two for him to take over, and we plan on having the mayor and the governor invite him into Naples. We'll show him our beautiful city and if he gives us a commitment, then we'll go to work. What we don't want to do is get a committee together and get land and find out they're not interested. Mesa, Ariz. has had them for years, and they're in trouble so we think we have an opportunity.
When we tried to get a team five or six years ago, everybody had their hands in everybody else's pocket and it didn't work. It's amazing to me, they're all for it now that all these fancy businesses on Fifth Avenue are closing up.
This is what I call the reset.
I'm also working on luring tourists. That would help as well. There's a recession all over the place, many of our businesses are closing, so there's a subcommittee of the TDC looking to different parts of the country and the world to bring in tourists.
If Cuba is ever opened up, then we could be in real trouble, because many of the people who would come here might go to Cuba. Why? Because everyone is in there buying land, getting in there cheap, and it's a beautiful island. It would compete with us. Many people from South America and all over the world would go there.
As for the future here in Collier, I don't think we're ever going to reach the growth we had in the last five or six years.
We lived on agriculture, on tourism, on construction. We didn't get the high tech industry here — we're trying — but everything takes time. We can raise the sales tax by one penny and raise millions, and I think there are figures that show that the locals don't pay that much. Outsiders pay a lot of it, then you build up the fund.
Since impact fees are not what they should be, the county has to service all the bonds taken out for road construction.
So I'm saying we need a fundamental change in the process going forward. That can be scary, but if you have good leadership and confidence, you can do it.
Maybe we become a focal point for high-tech medical research. That's how you build your economy, how you build employment… I'm just a neophyte here thinking out loud.
(Note: The President's Council is an association of homeowner and condominium associations in Collier County that studies issues affecting homeowners. It's the largest entity of its kind in the county.)
Because we've seen a dramatic slowdown in growth in this county, that automatically ratchets our capital program down substantially.
So the short answer is, we dramatically scale back our capital program in response to the slowdown in growth — in the short term, we have less of a need for impact fee revenues.
The problem and challenge we face is, prior to the recession and wall we slammed into, we had doubledigit growth for 10 to 15 years. That put us in a catch-up mode for our capital improvements. So, even though our impact fees were the highest in the state for years, they were still not sufficient to build what we needed on what I call a pay-as-you-go basis.
To catch up with the level of service required in our growth management plan for everything, we had to take our impact fee dollars and do long-term borrowing to make the improvements, either bonding them or taking out commercial paper loans. Now, like a mortgage on a home, we have a long-term obligation to repay for capital improvements.
As impact-fee revenue dwindles, that creates pressure to find another source to meet our debt payments until our long-term loans are paid off. But as property values decline, that becomes a challenge — we have to divert those monies away from other programs and services. And that puts pressure on us to cut our costs without reducing frontline needs to the public.
So what do we do? A sales tax is an option available under Florida law to the county for some time. Back in about 2000 we actually went to voters with an initiative for a half-penny of sales tax increase to eliminate road congestion built up over years of non building. The mantra in the '90s had been, 'if you don't build it they won't come.' But they came anyway. Since the public voted no in the referendum, we had to do some borrowing and use impact fee and ad valorem funding to get us through debt payments on construction.
That's still available to the board of commissioners and there's some interest. The fire departments are looking at approaching the board for a referendum for a 1-cent tax to fund fire rescue services in town and that could offset their property tax mill rate — that's also available to the board, for capital improvements. It would have to go to the voters for a referendum, too.
I've been with the county for over 20 years and it's been a fairly conservative county in terms of its view on taxation. The commission always worked hard to keep the millage rate down, year after year.
Having said that, there have been cases, when the case was made to the public, when the public chose to raise their taxes (the county purchased land for conservation as part of Conservation Collier and voters elected to preserve the Naples Zoo by buying the land it sits on, for example).
You have to make your case clearly and succinctly to the public. It's been my experience that they don't like a tax increase that is open-ended. If you go with a program of improvements that are specific, with a specific duration, they're more apt to give that serious consideration.
We've relied historically on three or four revenue sources for our capital program: property taxes, gas taxes, state sales taxes and impact fees. But there are other options. Perhaps a real estate transfer tax on real estate sales to offset impact fees and finance capital transactions in the future. That way, anyone who finances a real estate transaction would help pay for the impacts of new people.
There's a discretionary sales tax. And a discussion of tolls for new roads. We're trying hard to get our fair share of state and federal grants, too.
There's also an electric utility franchise fee. They've considered that in the past and decided against it for good reason, but as we come under increasing pressure with the loss of impact fees and ad valorem taxes, it may be a way.
When you don't have growth, the need for impact fees is diminished. Now we have a surplus of road capacity and water and sewer, and it does it give us a little leverage. So all options are open. The big question is, who pays for (the future)?
We're always looking for a guy behind the tree, someone else to pay. Impact fees, ad valorem revenue, sales taxes, taxes on utilities, tolls on roads, paying for services as you use them — they all have pluses and minuses.
A sales tax, in itself, is going to take one hell of a PR campaign to sell to the people of Collier. We got behind a half-cent increase, from 6 to 6.5 cents a few years ago, to come up with the money for roads. The premise was that instead of just homeowners paying, we could spread it out across the economy and get tourists to help pay. We thought it was great, but the thing failed miserably, with something like 70 percent voting against it.
Numerous proposals come up and they usually get killed either by the state legislative body or locally. To succeed (a tax increase of some kind) has to be a clear thing and a feel-good thing.
I'm pretty sure I'll never receive support on this — it's a Jim Colletta idea- —but I've come up with something I think can get people to move here and buy property and build on it. The idea is to come up with a limiting factor in the building permits you issue in any given year — not on an environmental basis or with environmental permits, but with an economic basis. You'd look at industry now, and ask, 'What would it take to sustain that in a given year?'
Suppose 6,000 units would stabilize the industry here now, and create a small growth. That would immediately create a demand. People would start placing orders years in advance to keep thing sustainable.
It's artificial, it goes against the grain. But all it would take is a buy-in from industry, a recognition that they want to protect what they've got — and if people are moving here to start new companies overnight, and you can adjust the number of permits on a yearly basis, local business interests, education, the contractors association, Realtors, they might all really fire up with it.
But meanwhile, in the last four years, over $100 million has been cut out of the budget, and we've cut 22 percent of our employees. So we're down to bare bones and we have the basic services that make things unique — parks and recreation, libraries — it's a unique part of the ambience of Collier County.
Unfortunately, what we just saw wasn't our worst year. Next year will be the worst year for us, since we're one year behind in our revenue stream. This coming year, as far as Collier government goes, will run contrary to what the markets are doing out there — we may have to dip into our reserves. But they're there for a good reason — if we get a hurricane, like the one that came through and cost us close to $100 million, we'll need that money in place.
We won't sacrifice emergency services, that won't happen. We made a commitment. If government stands for anything, it's health, safety and welfare. We may have to close some libraries or parks for a time — just for a time. And within the next six months we'll see the climbing of real estate values
Collier County's priorities are evolving with the realities of the national financial crisis and its impact on local communities all over the nation.
Five and 10 years ago, our community's priorities included the anticipation of continued population growth and how to fund infrastructure so we could build needed roads concurrently.
(But) Collier County's population growth rate has been trending down since 2003. Collier had a net population loss from 2007 to 2008 of about 1,000 residents. Over the past couple of years there is also a net loss of students in our county's schools. The infrastructure completed over the past five years by our county in new roadways, water and sewer treatment, parks, libraries, schools, jails, fire stations and emergency operation centers is exceptional. The federally and state-funded $500 million Interstate 75 six-lane expansion will be done shortly.
We have world-class infrastructure and considerable excess capacity for population growth as it slowly returns in a few years. The county can reduce and reallocate taxes to the priorities of the next five years, including economic diversification and job creation. (These are) measures that will help working families save their homes and increase the values of all of our homes. The Economic Development Council's Project Innovation and other efforts are well under way to help lead our very special county to renewed prosperity.
A Blue Ribbon committee process was very successful a year ago in helping the Collier school district lower overall taxes they charged while reallocating an extra $15 million to the priority of teaching our children.
There is talk of creating a Blue Ribbon committee to make recommendations on the best way for the commission to achieve greater fiscal stability and meet current priorities. Most leaders in the county believe we can accomplish even better services to our residents while lowering everyone's taxes — if we critically evaluate and reprioritize our county government spending.
The findings of the Blue Ribbon committee may include re-engaging an expert consulting group such as The Anderson Group, that was hired by our county commission back in 2004 to make recommendations on local government fiscal stability. In 2004, Anderson found that Collier County government is disproportionately dependant on residential property taxes we all pay and very high impact fees they predicted to decline.
Time has now proven that our county's revenue, taxation and fee structure is fiscally unstable and a deterrent to businesses investing and expanding in Collier County to bring the jobs and commercial tax base to enhance fiscal stability.
There is talk of lowering all county residents' property taxes and capping that lower millage rate for four years, in favor of a sales tax increase. A 1-cent sales tax increase would generate an estimated $55 million dollars annually (for four years) and approximately half of the sales tax collected would be paid by non-resident visitors. A sales tax increase would help diversify and stabilize Collier County's revenue stream while lowering all residents' property taxes and capping the lower millage rate, so property taxes can't be raised by the Commission for four years.
Collier County's leaders have chosen the positive path of teamwork and consensus building to lead us into the future. The mood in our county is one of opportunity to improve. The collaboration already under way with numerous civic organizations to come through these economically challenging times better than we were before is heartwarming and critical to our success.