My Three-Year-Old Comments on the Budget: Could Work Again for 2010

I still have the same opinion about budget management for the City of Coral Gables–face economic reality, look years ahead, think about the taxpayers, cut salaries, benefits and staff including police and firefighters, reorganize the government and reduce the number of managers and supervisors.

September 25, 2007

Coral Gables Commission Budget Hearing
Mayor Slesnick, Vice Mayor Kerdyk, Commissioners Anderson, Cabrera, and Withers, Mr. Brown and Staff:

THANK YOU FOR THE OPPORTUNITY TO COMMENT ON THE 2007-2008 BUDGET AND THE IMPENDING PROPERTY TAX RATE AND BUDGET DECISIONS.

THE CITY GOVERNMENT AND THE COMMUNITY OF CORAL GABLES, ALL OF US, HAVE BEEN LIVING IN THE FANTASY WORLD OF AN 8 YEAR OLD REAL ESTATE BUBBLE WITH UNPRECEDENTED INCREASES IN COMMERCIAL AND RESIDENTIAL PROPERTY VALUES AND CITY TAX REVENUES.  THIS HAS PRODUCED EUPHORIA ABOUT THE CITY’S REVENUES.

DURING THE YEAR 2006 TO 2007, TOTAL PROPERTY VALUES IN CORAL GABLES HAVE  REGISTERED AN INCREASE OF ABOUT 20  PERCENT, I REPEAT, 20%.  THIS IS A GIANT INCREASE IN WHAT ARE NOW UNCERTAIN PROPERTY VALUES ON WHICH YOU ARE BASING OUR TAXES.  WE KNOW THAT THESE INCREASES ARE  TEMPORARY AND WILL BEGIN TO FALL IN THE NEAR FUTURE.

ALSO, IT IS UNDERSTOOD THAT IF  IT WERE NOT FOR THE STATE OF FLORIDA [RESTRICTIONS ]THE CITY MIGHT HAVE INCREASED PROPERTY TAX REVENUES BY ANOTHER 10 OR 12 PERCENT THIS YEAR.  FORTUNATELY FOR OUR BUSINESSES AND CITIZENS THIS HAS NOT HAPPENED.

NOW THERE IS AN OPPORTUNITY FOR THE CITY TO REDUCE  ITS TAXES IN 2007 AND IN THE FUTURE.  ALMOST CERTAINLY THERE WILL BE NEW REQUIREMENTS FROM THE STATE OF FLORIDA IN 2008 TO CUT BACK ON LOCAL TAXES AND SPENDING– THE CITY GOVERNMENT SHOULD GET READY FOR THAT EVENTUALITY.

DURING THE REAL ESTATE BUBBLE SOME GOVERNMENTS, INCLUDING THE CITY OF CORAL GABLES, HAVE INCREASED THEIR TAX MILLAGE RATES, WHILE OTHER CITIES HAVE DECREASED THEIR TAX MILLAGE RATES.  THOSE CITIES WHO REDUCED THEIR RATES MADE A GOOD DECISION.

SOME CITIES HAVE USED THE WINDFALL TAX MONIES TO LARGLEY IMPROVE THEIR COMMUNITIES,  INCREASING INVESTMENTS, RAISING RESERVES, UNDERTAKING COMMUNITY DEVELOPMENT PROGRAMS AND SERVICES.

CORAL GABLES SEEMS TO HAVE TREATED THE EVER INCREASING WINDFALL REVENUES FROM PROPERTY VALUES AS STABLE, CERTAIN AND SUSTAINABLE.  UNFORTUNATELY, OUR CITY GOVERNMENT HAS USED ITS NEW MONIES MAINLY TO INCREASE STAFF, PAY HIGHER SALARIES AND BENEFITS AND PAYOFF UNFUNDED RETIREMENT LIABLILITIES.  WE SURELY MISSED AN OPPORTUNITY TO STABALIZE THE MILLAGE RATES OVER THE YEARS, RAISE GOVERNMENT PRODUCTIVITY, INCREASE RESERVES AND FUND CAPITAL INVESTMENTS.

AS THE OLD EXPRESSION GOES, THE CHICKENS HAVE COME HOME TO ROOST.

I CONCLUDE THAT THE ONLY ALTERNATIVE TO MORE TAXING AND SPENDING IS TO REDUCE GOVERNMENT STAFF AND BENEFITS ON AN URGENT BASIS THIS YEAR AND IN THE COMING YEARS.

I RESPECTFULLY SUGGEST THAT IT WILL BE A SERIOUS CHALLENGE FOR THE CITY GOVERNMENT TO LIVE WITHIN A REALISTIC BUDGET IN THE FACE OF DECLINING PROPERTY VALUES AND CITIZENS WHO ARE TIRED OF SEEING PROPERTY TAXES INCREASE WITHOUT CONTROL.

THE CITIZENS AND BUSINESSES IN CORAL GABLES WILL CERTAINLY ADAPT TO THEIR OWN TIGHTER BUDGETS, A SLOWING ECONOMY AND FALLING PROPERTY VALUES.  IT IS TIME FOR CITY AUTHORITIES TO JOIN WITH ITS CITIZENS AND BUSINESSES IN ADOPTING SERIOUS, SUSTAINABLE SPENDING CUTS AND GOVERNMENT REFORMS THAT MAKE A DIFFERENCE IN PROPERTY TAXES FOR THE FUTURE.

I HAVE A FEW BRIEF COMMENTS ON THE BUDGET:

  • 75% OF THE BUDGET GOES FOR SALARIES AND BENEFITS.  NATIONAL AND INTERNATIONAL STANDARDS FOR SUCH A WEALTHY CITY SUGGEST THAT THIS PERCENTAGE IS WAY TOO HIGH.
  • THE CITY SPENDS MORE ON SALARIES, BENEFITS  AND RETIREMENT THAN IT RECEIVES IN PROPERTY TAX REVENUES.
  • THE CURRENT PRACTICE OF REDUCING STAFF BY ELIMINATING LOW LEVEL POSITIONS MISSES THE MARK—BETTER TO ELIMINATE EXCESS MIDDLE MANAGEMENT AND UPPER LEVEL POSITIONS.
  • THE CITY HAS HUGE UNFUNDED RETIREMENT LIABILITIES THAT WILL ONLY GET WORSE UNLESS THE NUMBER OF STAFF AND BENEFITS ARE CUT.
  • THE CITY GOVERNMENT IS MAKING MINIMIAL CAPITAL INVESTMENTS.
  • THE CITY HAS MINIMAL RESERVES FOR A RAINY DAY.
  • THERE MAY BE TOO MANY PROGRAMS THAT SUBSIDIZE AND BENEFIT JUST A FEW PEOPLE  WHOSE FINANCING SHOULD BE EVALUATED. (GOLF COURSES, THE COUNTRY CLUB, AND THE TROLLEY ARE POSSIBLE EXAMPLES)

I RESPECTFULLY RECOMMEND THAT THE COMMISSION UNDERTAKE THE FOLLOWING URGENT MEASURES

  • APPROVE A MILLAGE RATE OF 5.000.
  • INSTRUCT MANAGEMENT TO PREPARE AND IMPLEMENT AN URGENT PLAN TO CONSOLIDATE DEPARTMENTS AND UNITS, REDUCE STAFF NUMBERS, HOLD THE LINE ON SALARIES AND BENEFITS AND REORGANIZE CRITICAL DEPARTMENTS SUCH AS BUILDING AND ZONING.
  • THE COMMISSION SHOULD CONDUCT INDEPTH QUARTERLY PUBLIC WORKSHOPS AND HEARINGS ON THE BUDGET EXECUTION BASED ON WELL DEFINED BENCHMARKS FOR  MANAGEMENT.
  • START NOW TO CREATE A CLEAR VISION FOR NEXT YEAR’S BUDGET SO THAT FURTHER REDUCTIONS CAN BE MADE A YEAR FROM NOW WITHOUT FURTHER DELAY.

WE TOGETHER–CITY GOVERNMENT, RESIDENTS,AND BUSINESSES–WILL BE FACING “YEARS OF SCARCITY” AND IT IS URGENT THAT THE COMMISSION AND MANAGEMENT TAKE STEPS TO SUBSTANTIALLY CUT CURRENT AND FUTURE CITY SPENDING.  THIS WILL SEND A MESSAGE TO OUR CITIZENS, BUSINESSES AND CITY GOVERNMENT STAFF THAT THE TIME OF TAXING AND SPENDING IS OVER. NOW IS THE TIME TO CHANGE THE CULTURE OF SPENDING AND TAXING IN OUR CITY GOVERNMENT.

WE HAVE HEARD AN APPEAL TO PROTECT THE “QUALITY OF LIFE” IN CORAL GABLES AND THIS IS A RESPECTABLE GOAL.  HOPEFULLY,  IT IS NOT A METPHOR FOR MORE GOVERNMENT SPENDING.  A BETTER METAPHOR FOR QUALITY OF LIFE WOULD BE A “PROGRAM FOR TIMES OF SCARCITY” THAT BENEFITS US ALL.

WHAT WE NEED IS A BUDGET THAT FITS THESE “TIMES OF SCARCITY” AND NOT “TIMES OF ABUNDANCE”.

THANK YOU FOR YOUR ATTENTION. Stephen E. McGaughey


About Stephen E. McGaughey
International consultant in financing development programs and projects

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