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Bond validation hearing set for Monday

By Staff | Oct 3, 2013

The bond validation hearing for the City of Cape Coral’s controversial fire service assessment is scheduled for Monday at 3:30 p.m. at the Lee County Courthouse in Judge Keith R. Kyle’s courtroom J-4.

In that courtroom on Oct. 7, the legality of the “ready-to-serve” methodology the city will use for the assessment will be discussed.

Whether it’s simply a validation hearing on a relatively new fire assessment methodology or the city “suing its residents with taxpayer money” is in the eye of the beholder. Regardless, the issue is one of the most pressing the Cape is facing, and it’s one that could have lasting ramifications either way.

If validated, city taxpayers will have to pay a new tax that will shift 38 percent of the city’s Fire Department’s operational costs from the General Fund into the new revenue line.

To the average property owner, that means $110 of the $150 increase the city says it needs to fund capital improvements.

Other elements of the new, three-pronged tax plan include a 7 percent tax on electric bills and a .75 mill decrease in property taxes.

The city tentatively plans to shift up to 64 percent of fire operation costs in budget year 2015.

If validated, the bill will be sent out shortly after a decision is reached.

If the validation fails, it will leave the city with a small fraction of the $20 million City Manager John Szerlag said it needs to make capital improvements.

Roads will not be paved as quickly and police cars and other equipment will only be replaced upon failure, Szerlag has said.

What is the FSA?

The “ready-to-serve” Fire Service Assessment methodology is the expectation that wherever you live, you should expect a quick, equal response for whatever medical or fire emergency comes about.

The methodology cost is two-tiered. It first sets a flat fee on the unimproved property, regardless of size, to all property owners, which is $104.38.

It then also sets a fee on the improved structure; the greater the assessment on the structure, the higher the fee. The tier 2 assessment is $2.46 per each $5,000 of building value.

In other words, a Wal-Mart would pay more than someone who owns a single-family home, who in turn would pay more than someone with an empty lot, who would pay nothing on the second tier.

This will replace the current “call-for-service” method, in which an analysis is done over a certain time frame of where the calls came from (residential, commercial) and to assess according to where the calls are going.

“The problem is you are predicting the cost of service in the future on calls from the past,” said Chris Roe, of Bryant Miller Olive, the bond counsel representing the city. “That’s difficult to maintain on a local level because you engage consultants to analyze the data over time,” which could run into lots of money.

Opponents have issues

Opponents said there are a myriad of problems with the FSA, particularly the tier taxing function, such as not providing equal benefit.

“Someone who owns an unimproved lot worth $5,000 or a large commercial property with salt-water access worth millions will pay the same,” said former council member Bill Deile. “They also make the illogical assumption that the benefit you receive is the ad-valorem value of the structure. Some structures get a great benefit while others do not, such as a hospital.”

Deile said Lee Memorial Health System would be exempt from the assessment.

Others say that it could have negative impact on the city’s paramedics and EMTs. Councilmember Chris Chulakes-Leetz said that by law, a government agency may not provide certain services under state statutes, and that the FSA would be in conflict with those statutes.

“Should the assessment pass, it could result in the withdrawal of advanced life-support services,” Chulakes-Leetz said. “That would be a detriment to our firefighter paramedics and EMTs and to the people who receive the personal services.”

Deile said it may not mean the loss of jobs for EMTs, but perhaps the extra pay they get as support.

“They are trained as firefighters as well as paramedics, and they could not use those people or equipment under the assessment to provide those services,” Deile said.

Ambulance calls, which represent most of the emergency calls, are what work into the model conflict.

“The fire department is a hybrid, in that 80 percent of the calls are for medical service, not for fire suppression, so it’s not assessed for personal benefit,” Deile said.

Councilmember Kevin McGrail disagrees, saying it was again the hopes of those who want to see this fail.

“My frustration is that when we moved these ideas forward, there’s the same group that has opposed any progress the city has attempted,” McGrail said. “I find it galling that Mr. Leetz, who opposes this, his district is getting paved near the golf course ahead of the north Cape.”

McGrail added that the money would also go toward fire safety, such as to possibly replace Fire Station No. 10 near Gator Circle, which he called a glorified house.

“It’s a house with a semi-functional fire truck in the driveway. It is not a fire station,” McGrail said. “The people should expect a fully staffed fire station and that’s what ready-to-serve is.”

Suing the taxpayers?

Chulakes-Leetz has never been a proponent of the fire assessment, or a proponent of the public services tax on electric bills.

Chulakes-Leetz is calling this validation process a case of “the corporate entity of the city government suing its residents and property owners,” and as such he hopes to be able to speak to the judge as a defendant.

“They are using citizen money to sue the citizens for the right to add an additional tax so they can use it as they see fit. They are looking for one judicial official to give his/her stamp of legal approval,” Chulakes-Leetz said. “The suit was filed against the city as defendants. There are 155,000 defendants effectively.”

Roe said that’s true, but because statutorily there needs to be a defendant.

“That statute requires the city bring the suit against the folks responsible for paying the bond off. It doesn’t the mean they have to show up or file paperwork,” Roe said. “The state of Florida is a defendant as well. The state attorney’s office will represent the state”

Deile said their argument is two-fold, procedural and legal.

“There are many defects in the paperwork, beginning with the first notice on Aug. 5 through the final assessment notice on Aug 29,” Deile said. “Also, this is not an assessment, it’s a tax, clothed as an assessment and goes against statutory law and the Florida Constitution.”

McGrail disagrees, saying while there’s a plaintiff and defendant in every case.

“The point is to validate the assessment, which has been done in three other smaller communities,” McGrail said. “We hired Bryant Miller & Olive who represented the three other successful validations and are the experts of this methodology. We expect success in this.”

McGrail said he expects the CapCapeTaxes group to make its presence felt during the hearing, but that they’re working counter to what is moving the city forward.

“It’s like the UEP, there was a crowd who didn’t want that, but there was also a crowd that wants to see it happen,” McGrail said. “There are two visions for this city, and I want to see it continue to grow.”

What to expect

At this hearing, the city will be expected to explain to the court what it has done to authorize the issuance of a note, to finance the purchase of a fire truck. The city will ask the judge to validate it’s authority to enter into the loan, Roe said.

“When a city enters into a loan like this, it tells the lender how they will pay it off and a pledge of a revenue stream,” Roe said. “The city is using a special assessment, so it will ask the judge to OK the revenue stream.”

The state attorney on behalf of the state will explain its case, and the public will be allowed to speak and provide their case and the judge will be asked to make a ruling.

Roe did say that public comments must be limited to legalities, not to those who simply want to vent as they did during the Aug. 26 meeting regarding the FSA.

“This hearing is not about policy or a forum to voice their concerns. They’ve already had that,” Roe said. “This is about the legal authority to issue a note to buy a fire truck.”

As for the expectations for a result or a timeframe for a decision, Roe said he didn’t know, since everything has gone so quickly there is an element of the unknown.

“The lawyers feel pretty good about their case, so you don’t really know what comes up at the hearing until you get there,” Roe said. “I can’t tell whether this will be wrapped up or if there will be additional proceedings.”

What if it fails?

Validation of the ready-to-serve method has been approved on three occasions. However, it has not been challenged in a lawsuit.

Chulakes-Leetz said that the method has not been tested under the current proposal and not in comparison of its model to those in other cities that have had the method approved.

“It has not been vetted on an apples-for-apples basis,” Chulakes-Leetz said. “We are not an orange, so we have to get it right for our citizens and paramedics.”

Chulakes-Leetz said he hopes the validation fails, since he said it would mean the city will likely earn much more than the $20 million it is seeking for capital improvements.

“Recent data from Lee County Electric shows we should garner between $12 million and $13 million from the new electric tax as opposed to the misstatements of $6.7 million,” Chulakes-Leetz said. “It’s not that we must have the revenue, it’s that we want more money. There’s a difference between wants and needs.”

McGrail said Chulakes-Leetz numbers are incorrect and said if the validation fails, the city has not budgeted anything but the public service tax.

“It’s based on what we have taken in and what we anticipate taking in from the various tax streams,” McGrail said. “It looks to be about $7 million because we gave the quarter-point mill decrease up front.”

If validation does fail, it would mean the city would have to fall back on a reduced paving plan and only replace its vehicles upon failure, an option McGrail said is no option having put those on the back burner for years.

“We would have to fall back on as-need replacements, such as when a vehicle is totally irreparable,” McGrail said. “It is not the way to manage a fleet. We’ll be chasing the bad guys on skateboards.”

How we got here

The diversification process has been complicated

The original plan to raise $20 million more in revenue had a 64 percent assessment for fire services in tandem with a 1 mill tax decrease and a 7 percent public service tax (lowered from 10 percent) on electric bills, passed in June.

The PST passed without a hitch, but things changed as summer grew. First came the call for a bond validation, which has delayed the approval of the fire assessment.

On Aug. 12, Bryant Miller Olive, said it wouldn’t support a one mill decrease to go with the fire assessment. Two weeks later, the city council arrived at the 38 percent FSA with the quarter-point millage decrease with a 5-3 vote.

Those numbers became official by a 6-2 vote on Sept. 19, with Szerlag saying he would seek a budget amendment sometime early next year for the true fire assessment, when and if the bond validation succeeds.

The average amount this will cost a household with a $150,000 home with a $100,000 taxable valuation will be $150, a number Szerlag has said will be accomplished through the “three-legged stool” approach and best practices.