Economics of the Coral Gables Budget: Expect the Worst!

The financial and economic factors affecting current and future budgets of Coral Gables are either under the direct influence of the Commission and the City Manager or outside of their control. Obviously, the main economic variables are completely out of local, regional or state control.

There are several factors under the control of management. The factors included: the number of staff; the salaries of the staff; the pension and health benefits of the staff; the organization of the government in different units; negotiations with labor unions; the hiring and firing of senior management; the timing and size of capital investments; work priorities for the government and staff; the fixing of relevant fees; operation and maintenance of vehicles and other equipment; and the assignment of different subsidized or free services to the community.

Irrespective of what happens in the local, state, national and world economy in the future, the city should proceed with the most conservative assumptions about the future economy.

To be fully responsible the Commission and management should assume the worst economic scenario in deciding on 2009-10 budget and taxes:

1) the economy is expected grow quite slowly for several years or have a double dip recession;

2) the State of Florida will lag the rebound of the national economy because of its dependence on real estate and tourism (this has been reported by several national and state analysts);

3) local businesses and employment will lag national economic recovery and, thus, local business and sales taxes will not recover quickly;

4) property values cannot be expected to grow and, indeed, will likely decline for two more years and will remain stable or slow growing after that; and

5) construction and property value expansion will not save the city from dealing with staffing and pension problems and rising debt.

This leads us all to realize that an increase in taxes and fees will almost certainly lead to increases in following years unless the Commission bites the bullet this year and reduces operating and capital spending. A serious reorganization of city government to reduce staff positions should be affected during this budget cycle.

About Stephen E. McGaughey
Resident of the City of Coral Gables

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