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Marco Island reveals $2.5 million police‑pension shortfall; council weighs revenue options
Summary
City staff told the City Council the police pension is funded at about 90%, leaving an estimated $2.5 million shortfall and a city policy requirement unmet. Councilors discussed dedicating recurring revenue (raising the communications‑services tax), starting a local business‑tax equity study, using one‑time balances and reassigning pension contributions; staff will meet with actuaries and return options.
City staff told the Marco Island City Council at a May 18 revenue workshop that the police pension fund is currently funded at about 90%, leaving roughly a $2.5 million gap to reach the 100% funding target set by city policy.
"We are at 90%," City Manager Casey Lucius said, noting the shortfall and the requirement in a 2019 ordinance that both pension funds be 100% funded. Lucius and staff laid out several possible responses: one‑time sources such as a $200,000 balance now held in a 401(a) forfeiture account, redirecting contributions from an overfunded fire pension, and identifying a consistent recurring revenue source to chip away at the gap.
The council focused on two recurring options staff had been asked to study: increasing the communications‑services tax and creating a local business tax. Staff said the city now charges about 2.1% on communications services (cable, phone); Florida law allows municipalities up to 5.1%. "If you would like to charge the 5.1%…that would generate an additional $500,000 in revenue," Lucius said. Staff proposed dedicating any chosen recurring revenue to the police pension rather than leaving it to general‑fund allocations.
Councilors probed the timing and impacts. Chair Palumbo asked how the shortfall had arisen and whether the city or prior administrations had missed steps; Lucius said the shortfall appears in the FY24 annual financial report and staff is working with the actuary to determine whether market returns, contribution rates or other factors explain the deficit. "We're trying to figure that out right now," Lucius said, adding the city will meet with the actuary next week.
Several councilors said they would prefer recurring revenue rather than one‑time fixes. Vice Chair Champagne and Councilor Grama raised concerns about how different revenue proposals would affect residents; Councilor Grama noted communications taxes fall to residents and urged caution. Lucius suggested a local business‑tax process would require creating an equity study commission of business owners under state law and would likely generate revenue beginning in FY28 if started in FY27.
No formal action was taken at the workshop. Council directed staff to return with more detailed options — including sensitivity tables, the effect of raising communications tax to partial or full allowed levels, the results of an actuary meeting, and the potential budget tradeoffs at the operating‑workshop in July — before any vote.
Next steps: staff will meet with the pension actuary, include potential revenue options and sensitivity analysis in upcoming budget materials, and present proposed resolutions or ballot measures in accordance with statutory and procedural requirements.
