Global Economy Doubts Affect Future Of Coral Gables

This article categorizes the risks in the growth of the global economy.

As a major center of international and regional companies, the economy of Coral Gables is no doubt directly correlated with these risks.

The risks come from the Middle East and Japan, Europe, the future of the housing market in the US, and the uncertainty about managing the US budget.

The global economy is expanding much less than it should be at this point, and the possible double dip in housing in the US will directly affect consumers and housing values in the US and, of course, in Coral Gables.

Thus there will be continuing and serious risks in the budget, spending and taxes of the city of Coral Gables with the need to make serious and permanent reductions in operating costs of the city through pension reform, the Biltmore lease renegotiations and the city’s internal organization and staffing.

First, and foremost, the world as a whole has yet to deal fully with the economic consequences of unrest in the Middle East and the tragedies in Japan. While ongoing for weeks or months, these events have not yet produced their full disruptive impact on the global economy. It is not often that the world finds itself facing the stagflationary risk of lower demand and lower supply at the same time. And it is even more unusual to have two distinct developments leading to such an outcome. Yet such is the case today.

The Middle Eastern uprisings have pushed oil prices higher, eating up consumer purchasing power while raising input prices for many producers. At the same time, Japan’s trifecta of calamities – the massive earthquake, devastating tsunami, and paralyzing nuclear disaster – have gutted consumer confidence and disrupted cross-border production chains (especially in technology and car factories).

The second big global risk comes from Europe, where Germany’s strong performance is coinciding with a debt crisis on the European Union’s periphery. Last week, Portugal joined Greece and Ireland in seeking an official bailout to avoid a default that would undermine Europe’s banking system. In exchange for emergency loans, all three countries have embarked on massive austerity. Yet, despite the tremendous social pain, this approach will make no dent in their large and rising debt overhang.

Meanwhile, housing in the United States is weakening again – the third large global risk. Even though home prices have already fallen sharply, there has been no meaningful rebound. Indeed, in some areas, prices are again under downward pressure, which could worsen if mortgage finance becomes less readily available and more expensive, as is possible.

With housing being such a critical driver of consumer behavior, any further substantial fall in home prices will sap confidence and lower spending. It will also make relocating even more difficult for Americans in certain parts of the country, aggravating the long-term-unemployment problem.

Finally, there is the increasingly visible fiscal predicament in the US, the world’s largest economy – and the one that provides the “global public goods” that are so critical to the healthy functioning of the world economy. Having used fiscal spending aggressively to avoid a depression, the US must now commit to a credible medium-term path of fiscal consolidation. This will involve difficult choices, delicate execution, and uncertain outcomes for both the federal government and the US Federal Reserve.

via How Risky is the Global Economy? by Mohamed A. El-Erian – Project Syndicate.

(Repeated) A City Agenda For Coral Gables

This is the list of issues, problems and ideas that might form part of an Agenda for the City of Coral Gables.

  • Prepare and discuss an overall NEW AGENDA for the City of Coral Gables to face the major pending problems, such as unfunded benefits, taxation, staffing and organization;
  • City Manager should routinely report to taxpayers progress on the budget and organizational changes;
  • The city needs a new Code of Ethics;
  • Change the election dates for Coral Gables to coincide with national and state elections.
  • Prepare and publicly discussion a long-range financial plan for the City of Coral Gables
  • Target a freeze and/or reduce actual amount of taxes paid by citizens (not millage rates) during the next three years;
  • Accelerate a plan of reducing pensions and health benefits, especially for firefighters and police;
  • Prepare a plan and publicly discuss how to reduce unfunded pension liabilities during the next five years;
  • Have a community town hall meeting at least twice a year to discuss the budget and other current issues;
  • Develop a realistic and flexible agreement with the Biltmore that protects the taxpayers not just now, but in the coming years;
  • Undertake a review of financial mechanisms and the defective EDEN system to establish a modern, functional accounting of spending and revenues.

A Code Of Ethics For City Of Coral Gables

I few weeks back I proposed that the city of Coral Gables have a Code of Ethics. The following post suggests some ideas that would go into a code of ethics for Miami-Dade County, so please read this post by EYE ON MIAMI.

Let’s get the new Coral Gables’ Commission to develop a Code of Ethics that would be discussed and analyzed by the community.

We need a New Code of Ethics agreement with all County Employees, to be updated and signed annually. Lets not forget the MAYOR, COUNTY COMMISSIONERS, and All Elected Officials and County Managers with authority to buy assets or award contacts for materials or services to vendors and contractors in excess of $500,000.

via EYE ON MIAMI: What is wrong with the Miami-Dade County Government and How to Fix it. Guest Blog By Sergio.

Privatization is not such a great solution for the city of Coral Gables

There is a lot of bad experience with the privatization of municipal services in the US.

And there are many hidden costs to the city government of privatization or outsourcing.

There have been serious issues of maintaining the quality of services by the private operators.  The region of South Florida has a particularly bad history of incompetent outside contractors, weak state laws to be able to sue contractors for incomplete work, and there are high city costs of selecting and supervising the contractors.  Evidence is that the community can be very unhappy with the quality of privatized services.

In short, privatized costs do not save costs nor is quality of services sustained.  Greater effort should go into improving the efficiency of Coral Gables government operations.  That is the job of the city manager and the city commission.

He appeared more eager that the other aspirant to take on challenges that the city will face in the coming years, among them increasing privatization of services.

via Commission hires assistant county attorney.

Two Resignations Today: School Reformer Michelle Rhee (DC) and City Attorney Elizabeth Hernandez (Coral Gables)

Rhee made a serious attempt at reforming education in Washington, DC; and Hernandez is leaving a highly debatable legacy in Coral Gables.

Rhee’s goals – higher student achievement, better teachers and greater accountability for their classroom performance – were generally shared by Rhee’s predecessors. But with new powers putting the struggling school system under mayoral control, Rhee pursued the goals with an unprecedented zeal.

She closed more than two dozen schools, fired teachers by the hundreds and spent more than two years negotiating a labor contract that gives principals new control over teacher hiring while establishing a new performance-pay system that ties compensation to growth on student test scores.

via D.C. Schools Chancellor Michelle Rhee to announce resignation Wednesday.


Source re resignation of city attorney:  see George Volsky (article received via email), CITY ATTORNEY RESIGNS,  Oct. 12

What’s Next After the 2010-2011 Budget Approval

After the approval of the 2010-2011 City of Coral Gables Budget, we might ask what are major tasks the city manager and the city commissioners should undertake to avoid continuing property tax increases.

I would think the city needs the following:

  • Make further cuts in pensions, health benefits and salaries of all employees during the next year, especially for firefighters and police;
  • Reduce the number of firefighters and police, if they do not accept substantial salary and benefit reductions;
  • In light of the city manager’s recent comments about working for the future, the city should develop, discuss and publish a long-term financial plan, approved by the Commission and discussed by taxpayers in an open forum;
  • Continue evaluating senior and middle management and a process of “rightsizing” city government;  and
  • Delay major capital projects for three to five years, depending on the recuperation of the local economy.

What else do you suggest.

Some Random Thoughts on the Budget (re: the Commission’s Budget Meeting on Tuesday, September 14)

  • City authorities should accept that the City of Coral Gables is in a real long-term budget crisis that will only get worse unless significant cost cutting and a deep reorganization is performed by city management.
  • The budget should be based on a realistic and educated awareness of the economic, financial, community and business future of Coral Gables–city authorities may be way too optimistic about an early economic recovery.
  • The biggest danger to the financial future of the city is the huge unresolved pension and health care benefit liabilities–a recent step in reducing benefits for general employees needs to be followed with similar agreements with police and firefighters (the “golden employees” of Coral Gables).
  • Public security costs, which are more than 50% of the city’s budget, seem to be untouchable–these costs have to be reduced to solve the budget crisis.
  • The city has been too slow to make the internal organizational reforms to streamline services and reduce the number of middle and upper management staff that certainly would make it more efficient and help prioritize critical services to the citizens, businesses and visitors.  Someone (commissions or management) appears to resisting significant staff reductions at the middle and higher management levels.
  • The city authorities are greatly underestimating the negative impact of the economic recession and tax increases on individual taxpayers who have suffered huge losses in both their assets and incomes.  Many taxpayers are not able to sustain further property tax increases.
  • As far as the citizens know, the problem of Biltmore Hotel operator’s failure to pay its lease has been postponed until after the budget and taxes are approved.  This is concerning because we do not know if the future negotiation will lead to another favorable agreement with the Biltmore operator that in turn forgives significant debts to the city and loads the losses on taxpayers.