Published: May 04, 2010 3:44 AM EDT

CAPE CORAL, Fla. -  The city of Cape Coral insists it is not going broke.  But at Monday's council meeting, leaders agreed something needs to be done about the rising cost of retiree benefits.

Rumors of financial trouble started with an outside audit that claimed the city could be running in the red later this year; but city officials say the money woes aren't as bad as the audit report makes it sound.

"They kind of were the harbingers of doom," said council member Kevin McGrail.

City leaders say the issue of retiree benefits is a complicated calculation.  The outside audit found the city bleeding money for its retiree health and life insurance, and likely to run negative sometime this year.

Council members agree that is a problem.

"My understanding is we're going to have to come up with $13 million this year, and $13 million every year thereafter one way or another to make sure this is financed," said Mayor John Sullivan.

We have not been putting money aside to meet future obligations," said council member Bill Deile.

Deile says the city needs to create a fund for retiree benefits, much like how the city handles pensions.

"What we should be doing is setting aside money every year so it invested and you do retire there's a fund there to pay those things, because you're not working anymore for us," Deile said.

Cities in the deepest of financial trouble can have their money matters taken over by the governor; but council members say even the state agrees that extreme doesn't apply in this case.

"No, the sky is not falling in, the governor's not going to appoint a commission next week to come down here and take over the city," Deile said.  "But what we have to do is realize these obligations down the road have to be addressed today."

Any changes to the funding of retiree benefits could be discussed in upcoming labor and budget negotiations.