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Collier County, Florida 1% sales tax may come up short

The 1% sales tax, also known as the 1-cent tax or the penny tax, was sunset on Dec. 31, having raised more than $500 million in revenue years faster than projected. But Collier County finance experts say it still may not be enough to complete the entire project list voters approved in 2018. 

The funds raised by the tax are being used by the county and its municipalities to fund roadway extensions, to lessen traffic woes and ensure emergency crews can respond faster to 911 calls, to begin building a mental health facility, and to fund outfall improvements to lessen flooding on Naples’ roadways.  

Indeed, the tax brought in so much money that the city of Marco was able to cut property tax rates, one city councilman said. 

As project managers keep coming back to Collier’s commissioners to increase the price tag on penny-tax-funded buildings, roadways and parks, it’s not clear if the money will accomplish everything voters had hoped for. Supply chain issues and inflated costs of labor and equipment have driven up the price of each project and eaten away at the penny tax fund, county finance experts say.

Experts also say the longer the projects take to complete, the more likely it is that they’ll cost more than the initial projection as inflation continues to climb. 

While the tax raised more than anticipated, in December, Clerk of Courts Crystal Kinzel officially predicted a handful of budget shortfalls, including a deficit of $11 million for bridges in Golden Gate and another $10 million for hurricane resilience projects.  

And there may be more to come.  

“The estimates for the individualized project are under, now that we’ve seen the escalating costs (inflation has wrought),” Kinzel said. “So (the county commissioners) will have to remedy that with an additional funding source.” 

The tax was put forth to voters five years ago and passed by a margin of fewer than 2,500 votes, with 51% in favor. Initially, the money raised by the tax was supposed to be spent on just 18 projects, including new roads and bridges, a mental health facility to relieve an overburdened jail, and a workforce technical training center.  

Five earlier versions of the sales surtax on the ballot since 1974 did not pass. Strategy and ops executive for the Clerk of Courts Mike Smykowski chalked the voter interest up to a wide variety of priorities ranging from improving traffic flow to workforce housing to the proposed mental health facility.  

“You had pent up demand for some capital projects,” Smykowski said.  

Too, the Greater Naples Chamber of Commerce pushed hard for the tax, spending roughly $90,000 on advertising, signs, a website, and more.  

However, the original fund likely won’t cover the full cost of all intended projects and works, as many of the original budgets were too low to begin with. 

“I don’t know what the plan to close (that gap) is, and given that these are all 2018 numbers, it might be bigger now,” said Collier County Director of Finance Derek Johnssen. 

Proponents of the tax “were on the speaker circuit going around in the community talking to groups about the sales tax and the project list was (written) 18 months before the vote ever took place,” Smykowski said. “So your estimates (were made two years) even before the vote.” 

Already, the project managers of the proposed mental health facility attached to the David Lawrence Centers has come back to the commissioners to request an increase in funding, despite designers cutting costs through cheaper materials and by trimming back square footage. 

But today, the 87-bed facility, which was a driving force behind the approval of the penny tax, stands to cost taxpayers $44 million dollars. It was originally budgeted at $25 million.  

And the center may yet need to request an additional $6 million or so in funds, said David Lawrence Centers CEO Scott Burgess. 

“Just like everything, projects are more expensive” to complete, Burgess said. “That (increase) is within range with what the county has experienced with basically every project, whether it’s kind of under the sales tax initiative, or other projects.” 

If the mental health facility is a bellwether, then many of the penny tax-funded projects remaining could approximately double in cost.  

It’s not the only project that has shot up in costs: While Big Corkscrew Island Regional Park is currently funded at a little below $60 million, it started at $40 million, and there is potential for it to climb even higher, one expert said. Experts familiar with the park say it is in part due to enhancements to the project in addition to inflation and increased cost of labor and materials.  

Facilities and capital replacements – such as roof replacements or security system upgrades – increased in cost by roughly $6 million between the initial proposal and 2024. The planned VA nursing home increased by $10 million, as well. 

Even a stormwater system the city of Naples paid for partly with its own share of the revenue cost exponentially more to complete, thanks to skyrocketing building costs. 

While the county commissioners are currently brainstorming how to pay for the remaining projects should the funding run out too quickly, they have yet to find a solution. They decided not to put the tax forth to voters for renewal, with County Commissioner Bill McDaniel saying there wasn’t a “flavor” for doing so, despite the city of Marco, Everglades City and numerous other local leaders supporting putting the tax up for a renewal vote. 

According to chamber board member Julie Schmelzle, the chamber also did not pursue a renewal campaign for the tax but might do so in the future. 

Tourists, snowbirds major contributors to Collier County, Florida penny tax 

The surtax, which went into effect January 2019 and applied only to purchases under $5,000 was projected to take seven years to raise the funds, at an estimated $70 million a year. However, it surpassed everyone’s expectations, raising $490 million by September of 2023, and roughly $550 million total by its sunset on Dec. 31 of the same year. 

The surtax excluded necessities like groceries and gasoline. And, unlike property taxes, tourists and other visitors pay into the tax – and their dollars drove the tax’s income to new heights. 

Between July and October, when primarily funded by year-round residents, the tax averaged roughly $6.5 million a month, according to calculations by Naples Daily News / The News-Press.  

The city of Marco was able to use the monies from the 1% sales tax to decrease millage rates, said Marco city councilman and chairman Jared Grifoni. 

Tourists are “contributing into that that tax collection, so it reduces the burden on our full-time residents, and is more of an equal distribution across the board,” Grifoni said.  

The funds brought in during season eclipsed the rest of the year, with monthly averages increasing by at least a third compared to the off season – and at times, nearly doubling. During season in 2022 and 2023, the penny tax raked in upwards of $10 million a month.  

Only 2020, when the nascent COVID-19 pandemic shut down businesses and people sequestered themselves in their homes, saw a dip in revenue during season.  

The tax payments went to the state, and then were disbursed by the state to Collier County and its municipalities based on population size.  

As of February, documents provided by the office of the Collier County Clerk of Courts show that $504 million of the funds collected via the 1% tax went to Collier County.  

Another $28 million was paid out to the city of Naples, while the city of Marco and Everglades City received roughly $23.3 million and $500,000, respectively. 

Before it is paid out, the money is invested by the county and by the municipalities it belongs to, accruing about $12 million in interest in Collier alone that can also be put to use accomplishing the previously budgeted projects. 

Where has your money gone? To projects, less inflation and supply chain issues 

To date, $143 million has been spent by Collier County out of the penny tax fund. It’s been spent on roadway improvements and extensions, bridges, a new roof for the Museum of the Everglades, a renovation of the Collier County jail kitchen, jail security system upgrades and a new fire alarm system, new HVAC systems for the Naples Regional Library, the county-owned health building in Immokalee and the jail, improvements to EMS stations in Golden Gates and on Old 41, and more.  

But the majority of funds were paid out for just a handful of projects: the Big Corkscrew regional park, an extension of the Vanderbilt Beach Road between Collier Boulevard and 16th Street NE, and repairs to bridges and structures, costing the county a total of roughly $112 million. Most of these are ongoing, and may take years more to complete, further increasing costs, experts say. 

As of January, just $1.3 million had been spent on the mental health facility; the proposed veterans nursing home has yet to see a dime spent on it, per county finance documents. However, $30 million has been put in escrow for the anticipated project, and another $10 million was approved by the Board of County Commissioners in June 2023 to close the anticipated shortfall. However, said Johnssen, the projected $40 million cost from 2018 might still be too low.

That the funds needed to complete these projects may fall short is hardly surprising. 

According to a brief by the White House, pandemic-era supply chain disruptions as well as delays at port resulted in historically high import prices to the U.S.  

“At their highest point, spot shipping prices for containers coming from China to U.S. West Coast ports skyrocketed to more than 1,000% of 2019 levels,” the brief read. 

By June of 2022, inflation had soared to 9%; inflation has since dropped to roughly 3%, but penny-tax projects started during that time suffered. Today, costs remain higher than originally estimated by penny tax proponents. 

As a result of the higher cost of building, county-issued commercial building permits have dropped, as well. County data shows that in 2018, Collier County averaged 6.8 commercial building permits per month, according to calculations by the Naples Daily News.   

In both 2022 and 2023, the county averaged just 4.75 permits issued per month.  

Exploring new funding sources 

While the county commissioners have yet to reach a decision on how to fund any projects that might run out of monies provided by the tax, the county is exploring ways to decrease long-term maintenance costs, said McDaniel. 

For example, McDaniel said, a chunk of change went to “pretty and glitty” up the medians that are all around the county: putting in trees, ornamental grasses, and so on. But, he said, this could present a large maintenance cost as rainwater would wash away woodchips and dirt if the medians were constructed as normal – with a hump in the middle.  

Instead, the county is investigating avoiding millions a year in maintenance costs through material and construction design, he said. In the case of medians, re-imagining the design of medians, and by choosing to install native plants that didn’t need as much care could save the county a significant chunk of change over the years. 

Other projects have seen maintenance costs come from private donation – such as the purchase of furniture for a county facility being built by the tax funds.  

But there is only so much these mitigation efforts can do. The cost of project completion is climbing with every year that ticks by, thanks to inflation. 

Sales tax and infrastructure committee chairman Scott LePore has served on this committee for five years, and plans to see the 1% tax fund through to completion. However, he said, when he joined up he was surprised at the pace of payments. 

“If anything shocked me, it was how long it takes once a project has been validated to actually start construction,” LePore said. 

LePore added that enhancements – embellishments to projects – also drove completion costs up.  

“If you look at Big Corkscrew Island Regional Park, we funded them for $40 million,” LePore said. “If you go back through the history of that park, it was about a $40 million project that became a $60 million. … And the reason that project exploded so much in costs was not only time, but also enhancements.” 

“It’s a bifurcated project and there’s options for enhancement down the line,” said LePore. “I do believe at the end of the day we’ll have more enhancements to that.”

While Clerk of Courts Crystal Kinzel said no one had been talking of cutting projects in the event of serious cost overruns, there were alternate avenues of funding that had yet to be explored. 

“It could be grant funding, it could be increased ad valorem, which they don’t seem to really have an appetite for, hence the rollback rate,” Kinzel said. “So some of (the projects) may be on hold until such time as the economics of it are feasible.” 

Former Collier County government reporter Patrick Riley contributed to this article.  

Kate Cimini is the Florida Investigative Reporter for the USA TODAY-Network Florida, based at The News-Press and The Naples Daily News. Contact her at 239-207-9369 or [email protected].