Cape Coral Financial Services Director Mark Mason painted a good news-bad news scenario to city council members this week in summarizing the city’s financial status in the 2008 fiscal year.
According to Mason’s report, the city’s near-term financing is sound, with revenues exceeding expenditures. Several negative local economic trends, however, indicate a dire future of Cape Coral’s financial shape.
The city’s population is stagnant or decreasing, unemployment is rising and currently stands at 12 percent in Lee County, vacancy rates in Cape Coral have risen from 8 percent two years ago to more than 20 percent today, the city’s bond ratings are on negative watch as a result of the bursting of the housing market, property values are declining and with them, the city’s main revenue stream.
Mayor Jim Burch doubts the current economic situation will last for several years. He acknowledged the city will have a difficult year in forming its budget but said a turnaround will come sooner rather than later.
“After this coming year I think we’re going to see improvement. It’s not going to be a huge boom, but it will start to improve,” Burch said.
Councilmember Pete Brandt is more concerned about the city’s current financial status. The annual financial report covers the city’s finances through Sept. 30, the end of the 2008 fiscal year. Brandt said the city’s fiscal situation has gotten worse since then.
“(The financial report) is a snapshot as of Sept. 30. I’m not sure that’s a fair assessment of where we are right now,” Brandt said.
Projections of revenues for the budget for the 2010 fiscal year came in lower than expected, Brandt said. That has left the city scrambling for solutions to make ends meet.
At a budget workshop in December city staffers projected a 35 percent decrease in property values for the next year. For Cape Coral, where 65 percent of its revenue comes from property taxes, budget cuts are inevitable. To that end, the city set a $116.4 million target for its operating budget next year, down from this year’s figure of $127 million.
Florida Gulf Coast University economics professor Gary Jackson said Cape Coral is not alone in contending with reduced revenues.
“A lot of counties and cities are in a position where their revenues are way down,” Jackson said.
Jackson said he was not familiar with the specifics of Cape Coral’s budget and finances, but added that communities all over the region are coping with the economic fallout after a recent population and housing boom.
“In southwest Florida we’re basically absorbing all that growth from the last few years,” Jackson said.
In Cape Coral that means contracting an operating budget that grew from $99 million in 2005 to $148.8 in 2007.
The city instituted an employee buyout program last year but Brandt would like to see further reductions in the size of government.
“Why can’t we go back to ’05 spending levels to satisfy our needs?” Brandt said.
Council members have also looked at implementing a public service fee on electric and natural gas services. Burch said that step to even out the city’s reliance on property taxes for revenues may not be needed — this year.
“I don’t see it (the public service fees) as something that has to happen this year, but it is something we need to consider,” Burch said.
Despite the negative trends and indicators, Burch is bullish on Cape Coral’s future. Specifically, he sees the 20 percent vacancy rate as the city being half-full.
“In six, eight, or 10 months from now, we’ll be going in the other direction. We might be crawling, but we’ll be going in the other direction,” Burch said.