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Budget workshops begin Monday and the first session will focus on funds that do not use property tax as a funding source. These funds are self-supporting and are not subject to the spending cap, which limits the amount the city can spend by 3 percent plus the cost of living adjustment which is 2.3 percent.

Monday’s budget hearing will include all budget items that may exceed this year’s 5.3 percent allowable increase in spending over last year.

Finance Director Bill Harrison said these funds will be discussed first because the full impacts caused by the reduced taxable property values will not be issued by the Collier County Property Appraiser until June 1.

Although the final numbers are not yet in, new City Manager Steve Thompson, who begins work Monday, believes the impact of decreased property values will be greater than the impact from Amendment 1.

Amendment 1, approved by voters in January, doubled the homestead exemption from $25,000 to $50,000, which Harrison estimated will reduce taxable property values on the island by $125,000 million. That impact is minimal compared to other Florida cities, but the decreased property values will have a significant impact, Thompson said.

“With property values falling, the city’s current estimate is that there will be a $1.7 million loss which is an even bigger hit to Marco Island than Amendment 1,” Thompson said.

As the city waits for the county’s final assessment, city staff began with items that do not rely on property taxes as an income source including building services, a new racquet center enterprise fund, the electric franchise fee to fund a new underground electric line pilot program as well as water and sewer utilities.

The largest portion of the utilities budget will be the expansion of the reuse water production facility from 3.5 million gallons per day to 5 million gallons per day capacity. The project is designed to accommodate the new customers hooking up to the central sewer system.

Utilities director Rony Joel said this is the “sixth consecutive year that there has been no rate increase to accommodate the operations” of utilities.

“Mr. Joel is very legitimately pointing out that he has not been in control of rate increases. Rate increases have been political decisions by the council,” Harrison said.

Utility rates have increased 16 percent due to three separate Council decisions.

“Citizen raised a good point that customers adding to sewer shouldn’t have to pay for the full upgrade of the system. They didn’t wear that plant out. So rate increases allowed for those expenses to be shared between new and existing customers,” Harrison explained.

Joel said that he is “running a very tight budget. There is very little in the contingency fund and several unknowns,” he said.

Those unknowns include fuel-based chemicals, transportation expenses with rising fuel costs, and no room for emergencies with some items “passed their anticipated lifespan,” he added.

The contingency fund is .3 percent of the utility budget or only $80,000 out of the $25 million operating budget. Joel said a 1-2 percent reserve fund would be minimal for most businesses.

“We have no latitude. There comes a point where you’ve maxed out your efficiencies,” he said.

Building Services is exclusively funded by building permit fees and the approximate $1.5 million building services budget anticipates increases to permit fees as building in Marco remains slow. The last increase to permit fees was in 2002. The budget includes at least one cost-cutting measure, which is to leave one staff position vacant through 2009.

The Parks and Recreation Department directed by Dana Souza is also looking to become increasingly self-sufficient. The council will be reviewing a request for a Racquet Center Enterprise Fund which will require the center to be funded internally, not rely on property taxes. If approved, the Racquet Center will no longer be subject to the city charter’s spending cap.

Many of the recreation programs are fully supported by user fees and Souza said he hopes to operate the Racquet Center using entirely its own funds generated by its programs fees, sponsorships and advertising.

Souza said with Florida Tax Reform, including a nine percent cut to taxes in the 2008 budget, staff was forced to rethink having all services provided by property taxes. The Racquet Center has a 2008-2009 budget of about $242,000.

“The Racquet Center is currently generating 60 to 70 percent of its own operating expenses. The final push will be how to raise enough to operate just on our own fees,” Souza said.

The electric franchise fee fund is provided by a five percent tax on customers’ bills from the Lee County Electric Co-operative. The franchise fee is used to provide street lights and pay for the undergrounding of electric wires. The council will be reviewing a proposal for the franchise fee to allow for an approximate $1 million underground electric pilot program in the Barbados area off North Barfield. The proposed area for the underground wires is 4.6 miles.

“This will provide a good controlled study,” Souza said, adding that the underground electric project will improve aesthetics and decrease storm damage.

Souza gave an example of an artist painting Collier Boulevard and the Jolley Bridge. “If an artist rendered it with overhead wires it would just have a completely different aesthetic. It’s an important characteristic as the entrance to Marco,” he said.

The special-called enterprise fund budget meeting is Monday morning and the regularly scheduled City Council meeting is later in the evening.

The regular Council meeting will include a request for a budget amendment to allow the special taxing district of Hideaway Beach to use $400,000 of their own tax generated funds to construct a stone revetment to protect a privately owned street within Hideaway Beach. Council must vote on the budget amendment because it exceeds $100,000, Souza said. The street, he added, is in danger due to severe erosion.

Another item is a return to the council agenda. Mariner Palm Harbor is requesting a 10-foot boat dock extension in order to construct five new boat slips at 908 Panama Court.

City planner Bryan Milk said staff recommends approving the extension because neighboring properties have similarly sized boat docks and the waterway has sufficient room for a 30-foot boat docking facility.

Some nearby residents have sent letters requesting denial.

“I think they may be out of town and don’t realize what they already have next door. There are already boat slips and protrusions 30-feet into the water,” Milk said.

Budget workshops begin Monday in the Community Meeting Room, Marco Island Police Department, 51 Bald Eagle Drive.

The regularly scheduled City Council meeting will be held in the same room at 5:30 p.m. Monday.