More on the Coral Gables Budget: Property Taxes as an ATM Machine

August 13, 2010 Leave a comment

It is interesting to look at the historical budget and tax revenue data supplied by the city in the latest Estimated Budget, 2010-2011.

  • City property tax revenues rose from $29.5 million in 2000 to $66.4 million in 2009.  Let’s say that these property taxes had risen just by the inflation rate from 2000 to 2009.  How much would it have increased?  It would have increased from $29.5 million to $36.8 million in 2009, not $66.4 million.  In other words, property tax revenues have increased by more than 80% above the inflation rate.
  • Assessed values increased from $5.5 billion in 2000 to $13.0 billion in 2009.  The equivalent inflation rate would have seen values increasing from $5.5 billion to $6.85 billion.  Thus assessed values increased by 90% more than the inflation rate level.  That was the abnormal real estate value.
  • We can conclude that Coral Gables increased taxes as fast assessed values increased.
  • Like many families in Coral Gables, the city used its property taxes as an ATM machine–spending as fast as the money came in thinking that assessed values would keep rising.  Unfortunately, even today the city keeps increasing taxes as if property values were increasing just like the good old days instead of adjusting to the economic realities that may continue for years.

Filed under Budget, Coral Gables, Finance, Property Values, Taxes and Fees

Future US Economic Policy Could Hurt Coral Gables

August 13, 2010 Leave a comment

There is a lot of talk about resolving the fiscal crisis in the US by having higher taxes (letting the Bush tax cut expire for the wealthy) and slowing the growth and reducing spending on social security, medicare and medicare.

This will hurt Coral Gables in several ways.

  • Reduced spending will hit the State of Florida’s budget and cut transfers to local government and  education spending (putting more pressure on property taxes);
  • Reduced spending will not be helpful in getting the economy back on track and this will hit consumer spending;
  • There will be less money available to carry out needed infrastructure investments locally;
  • Unemployment will continue to have bad effects since there is pressure to cut compensation for people who are unemployed for long time periods;
  • Retail sales and spending will remain sluggish;
  • It very hard to imagine that there will be a willingness to set up national disaster insurance and relief; and
  • There will be no relief in sight to help cover the costs of excessive local salaries and pensions.

This gives greater urgency to keep property taxes and fees down,  and to do something about salaries and pensions in Coral Gables and build up local reserves.

Filed under Coral Gables, Economy, Finance

US Taxes, Spending and Deficits: Big Consequences for Coral Gables

August 7, 2010 Leave a comment

A recent statement of Simon Johnson clarifies the taxing and spending options of the US now and in years ahead.

In summary…

Most of the discussion of federal budget issues today is misdirected.  The shorter run issues are dominated by the likelihood of another financial crisis – and the implications that would have for the budget deficit – but no “fiscal hawks” even want to acknowledge the issue.  It is very hard to take anyone seriously if they refuse to look at these (uncontroversial) numbers.  Medium term, we obviously need tax reform.  The good news, in a sense, is that the US has an antiquated and inefficient tax system; it would not be hard to improve how this operates, raising revenue and actually reducing distortion.  Longer term, Medicare is obviously a tough problem with no easy solutions yet in sight.  But the argument “just cut entitlements” cannot be taken seriously. [underlines added]

He raises what are important facts and risks for the US economy, and indeed for the future of the City’s budget, spending, taxes and economy.  Coral Gables authorities and leaders should not be too optimistic about the future of the US economy.  Stagnation is more likely than a happy growth even for a premier city like Coral Gables.

Filed under Budget, Business and Commerce, Coral Gables, Finance

Urgent News for the Commissioners: Home Prices To Decline Into Next Year

August 6, 2010 Leave a comment

An important item to be considered in the forthcoming estimated budget discussion by the City Commission.

Home prices will decline into next year, Fannie Mae said Thursday, reversing earlier projections that the housing market would stabilize this year.

Former Federal Reserve Chairman Alan Greenspan said Sunday on NBC’s “Meet the Press” that a so-called double-dip recession was possible “if home prices go down.”

via Fannie Mae: Home Prices To Decline Into Next Year.

Filed under Budget, Coral Gables, Finance, Government

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