Naples City Council supports property tax increase for 2024 to offset higher operating costs

Naples residents will likely pay higher property taxes next year.

By a majority vote, City Council tentatively approved the increase at a public hearing Sept. 5.

The final hearings on the city's budgets and 2023-24 property tax – or millage – rates are scheduled for Sept. 20.

Millage rates must be adopted prior to the approval of next year's budgets.

The city is looking to increase its aggregate millage rate to about 1.18 mils (including its East Naples Bay and Moorings Bay taxing districts). That's up from a rate of roughly 1.16 this year.

As a result, property owners with higher values will see an increase in their tax bills, unless they can qualify for any exemptions, or caps they didn't have this year. One mill equates to $1 for every $1,000 worth of a property's assessed, or taxable, value (after adjustments, such as the homestead exemption for primary residents).

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According to Zillow, the average home value in Naples is nearly $600,000. Using that as the assessed value, an owner would pay $12 more in taxes a year with the proposed increase.

For its general fund, or main operating budget, the city has proposed a tax increase from 1.15 to 1.17 mills. That rate has been at 1.15 since 2020, dropping from 1.18 in 2019.

Tax increase to support salary increases

The purpose of next year's increase is to "meet operational costs and maintain sufficient reserves," while preserving the high level of service residents have come to expect in Naples, explained Gary Young, the city's chief financial officer and finance director, in a memo to City Council.

In a detailed presentation to Council at Tuesday's first public hearing, Young said the higher tax rate would generate more than $4.8 million in additional revenue, which would mostly be used to support salary increases, street paving and more investments in risk management and technology services.

He noted the cost of doing business has risen across the board, due to inflation, and he stressed that's not sustainable over the long-term without a tax increase, unless there are budget cuts, especially as the city faces higher prices for capital improvements and maintenance of its assets, from roads to parks.

Next year's tentative budget includes a 9.4% increase in funding for personnel services to combat inflation and address staff shortages – and worker shortages in general in the city and across Southwest Florida.

The city has budgeted more than $197.1 million in expenditures next year. That's $18.7 million less than this year, due primarily to the expectation of lower non-operating costs, including capital expenses.

The budget includes increases of $5.98 million in personnel expense and $7.44 million in operatingexpenses, with a decrease of $32.12 million in capital expenses. It sets aside almost $5.5 million in emergency reserves, up from nearly $5 million this year.

Other highlights:

• Investing $51.57 million into the community, including water, sewer, utility and stormwater systems, affordable housing and roads
• Adding more than a dozen full-time positions

Budget relies heavily on property taxes

Property taxes are the biggest revenue generator for the city.

To collect the same amount of property taxes as it did this year, the city could lower or roll back its aggregate millage rate to 1.0473. The proposed rate is more than 13% higher than the rolled-back rate, which represents no tax increase (not including new construction).

A homeowner with an assessed value of $1 million would pay $1,032 in taxes if the city rolled back its rate, compared to $1,170 under the recommended levy.

The Collier County Property Appraiser calculated a more than 12% increase in taxable values for next year in Naples, despite Hurrican Ian's wrath last year. The 2023-24 taxable value is estimated at $34.97 billion, up from about $31.21 billion this year.

Property taxes are used to pay for many of the primary services the city provides, from police protection and fire service to park maintenance and city planning.

Two on council oppose a tax increase

City Council voted 5-2 in favor of the general fund tax increase. Councilors Ted Blankenship and Terry Hutchison opposed it.

Before casting his no vote, Blankenship said he appreciated all the hard work city staff put into the budget but couldn't support a higher tax rate. While many of the city's residents are wealthy, he pointed out that plenty of others are living on fixed incomes and struggling to recover from Hurricane Ian, while dealing with the same inflation that is "biting everybody."

"I really feel for them," he said. "And the concern that they have."

With so much money already in reserves, he didn't see the need to supplement them anymore, with plenty of cushion in his eyes, including expected refunds from the Federal Emergency Management Agency for the city's Ian-related costs.

Councilman Christman defended the increase, saying he had a "different view." He said he saw it as necessary to deal with the city's rising costs, and potential risks from natural disasters, including the possibility of another major hurricane.

While the city currently has unrestricted reserves of more than $15.3 million, he pointed out that fund has fallen by about 25% since 2021, when it sat at more than $20 million, and argued the set aside is "hardly excessive."

Further, he emphasized the need to continue providing the high level of services Naples residents expect, while protecting both the unrestricted and emergency reserves.

Even with the proposed increase next year, the city would still have one of the lowest tax rates in the state.