Council Reviews Revenue Shortfalls

Marco Island City Council held a budget workshop to discuss revenue shortfalls, rising costs, long-deferred fee increases, and possible new revenue sources on May 18.

City Manager Dr. Casey Lucius said the meeting was unusual because it focused specifically on revenue rather than broader budget policy. Budget Manager Melissa Hinton reviewed projections showing that some city revenues are coming in below expectations. One example was interest income, with the city having received only about 23% of the interest revenue it had budgeted, largely because of lower rates.

Lucius said she has asked every department to look for possible 5% cuts to help address the shortfall. However, she cautioned that Marco Island has a relatively small staff, a limited operating budget, and significant capital needs, which limit how much can be cut without affecting services.

One of the most significant ideas discussed was a possible fire services assessment. Fire Chief Chris Byrne said the city approved an ordinance allowing such an assessment years ago, but council never adopted the rate resolution needed to put it into effect. If adopted, the assessment would appear as a separate line item on property tax bills and would fund fire-rescue services.

Byrne said many Florida communities use fire assessments because they provide a more stable funding source for fire services and are not tied as directly to property values as traditional property taxes. Marco Island’s fire budget is about $9.3 million.

Lucius said council could reduce the city’s millage rate if a fire assessment is adopted. However, the amount of that reduction would depend on other budget needs. That means residents could see a lower millage rate while also seeing a new, separate fire services charge on their tax bills. The change would not necessarily be an equal trade-off and could result in residents paying more overall.

The proposal drew support from several council members, though Chair Darrin Palumbo expressed skepticism and warned that residents may view the assessment as a tax increase by another name. A consultant study, estimated to cost about $65,000, would be needed to develop the program and recommend assessment rates. Final adoption would likely not occur until July 2027.

Council also discussed the city’s police pension fund, which staff said is about $2.5 million underfunded. Lucius said the city is currently out of compliance with a 2019 ordinance requiring the police and fire pension funds to be funded at 100%. While the fire pension is overfunded, the police pension is only funded at 90%. Council members questioned how the shortfall developed and why it had not been addressed earlier.

Other revenue options were also reviewed. One idea was increasing the communications services tax on cable and phone bills from 2.1% to 5.1%, the maximum allowed by state law. Staff said the increase could generate about $500,000 annually and could potentially help address the police pension shortfall.

Council also discussed a possible local business tax. That option would require the creation of an equity study commission and likely would not generate revenue until fiscal year 2028.

Several departments proposed fee increases, many of which have not been updated in 10 years or more. These included code enforcement magistrate hearing fees, fire prevention service fees, fees for site development plan reviews, and other services connected with construction, redevelopment, and property improvements. Staff and council members noted that when these fees do not cover the city’s actual costs, taxpayers end up subsidizing services that primarily benefit individual applicants or projects.

Several speakers emphasized that the city should begin budgeting differently and should review fee schedules annually so they do not fall far behind inflation.

The workshop highlighted the city’s financial pressures, weaker-than-expected revenue, rising operating costs, deferred fee updates, major capital needs, and an underfunded police pension obligation. The main theme was that Marco Island may need to make a series of difficult financial adjustments, including budget cuts, fee increases, and possible new assessments, to keep city finances in balance while continuing to fund essential services.