Friday, July 29, 2011

Reining in the Budget

Today's post will not make much sense to you if you haven't read the Miami Herald article by Pamela Duque regarding Tuesday's meeting. You can access it here Commissioners Deadlock on a Host of Issues. Go read it now. I'll wait.

The article does a very good job of explaining what happened during the July 26 commission meeting. What I want to do here is talk about why it happened.

Two of the commission members sent a clear message "Enough. No more tax hikes." from the very beginning of the budget process.

The big issue the article reports is that the commission failed to pass a proposed cap of 5.9 percent on our millage rates. Esquijarosa and Rodriguez opposed it, Lim-Kreps favored raising the tax rate.

The major reason for the proposal is to give the city administration leverage to create different budget scenarios using different millage rates. It does not mean that they will set the millage rate to 5.9 but that they can work in a range between 0 and 5.9.

A millage rate is a tax rate. It is the taxable percentage expressed in thousands. Our current millage rate of 4.8 (I know, 4.7772 but I'm rounding because we have a decimalized currency in this country.) That means that for every $1000 of assessed value on your house, you pay the city $4.80. For simplicity's sakes, let's use a value of $200,000. This year you pay the city $960 for operating purposes.

Now there is a second point, the debt millage. It is currently (2011) at .50, meaning $.50 for every $1000. On this same house, that would be an additional $100.

For 2012, the debt millage is more than doubling. It is going to $1.24 For the same house, same value, ($200,000), regardless of the what the commission does, you are going to pay $228 more.

It is only the operating side that the commission can control and that's what the point on Tuesday was. Two of the commissioners, Esquijarosa and Rodriguez, wanted to send a clear message that the city cannot once again balance the budget by raising taxes. The city has to hold the line.

You'll notice in the article that the mayor pointed out various seemingly extravagant budget items for employee bonuses and wage increases. I don't know how your income is doing but mine is pretty flat. So are most cities.

The message here is that the city must find ways of balancing the budget without further raising taxes.

The residents cannot afford to subsidize expenditures as though nothing had happened. I can't and you can't. We can't bite any more bullets.

Now the city staff was flabbergasted by this. After trying to explain that it was a technical cap and not the final number, and failing since that point was well understood, the staff had no alternative to offer.

One thing the article mentions "City officials told commissioners that if they did not raise taxes, property owners would pay less in taxes than last year due to lower property values." was a half truth, really a 7% truth. The lower assessments only come into play for people who bought recently, during the insane run up of prices. The bulk of the homeowners, 63%, have been in their homes 10 years or more. That means that the assessed value is below market value, and with a 3% increase under Save Our Homes and a 146% increase under the debt millage (that's right, a 146%), if the rate stays the same, 63% are getting a tax increase if the millage (tax) rate stays the same.

Only a few revalued properties would benefit if the rate stays the same because most of the revaluation happened in last year's shock.

The net effect to the city if the millage rate does not increase is so trivial it could be a rounding error.

And that's the message.

Live within your means. We're residents. Not your generous uncle.

It was pretty appalling that neither the finance people, the interim city manager, and particularly the attorneys had even thought about what would happen if the rate cap failed to pass. They are so used to a rubber stamp commission that they didn't even think about what if.

What happens now is not clear. The attorneys were unable to provide any legal guidance. One belief is that the state may just set a trim rate at an absurd level of 7.9 or something. Another is that the city is obligated to work at the current rate of 4.8. I hope it's the latter.

One thing that is clear. The city staff needs to be prepared for the commissioners and the citizens to push back on any tax rate raise. We used to be a low tax, low service city. Now we're coming close to much higher service cities rates with no new services.

A special note. At one point, the mayor asked for the reserve number and no one could answer her. That's shocking.

If you've ever run a business, run a professional organization of any sort, run a household, you always need to know three things.

What cash do I have on hand?
How much of that is obligated?
What's left over? (The reserve)

It's that simple. And that our city manager does not see that figure every day is a huge problem. Not a new problem, but a huge one. Fix it.

There were other things that died.

The mayor laid out the average salaries of city managers in nearby cities and refused to support a package of $180,000 since the local average is $115,000. The Lim Kreps twins had no problem supporting that extravagant contract.

The mayor made a motion to fire the interim city manager for failure to maintain discipline in the city staff. It failed as the unruliness is the favored tactic of the twins.

Frank Rodriguez wanted to bring in a different interim manager and the Eddie half of the Lim Kreps twins responded with a sputtering tirade against Rodriguez and the proposed candidate, rather than a dignified no.

In retaliation for not getting free access to your pockets, the twins killed a simple proposal to formalize the streamlined procedures of the ocmmission meeting.

And lo and behold, the Connie half of the Lim Kreps twins once again withdrew the appointment of the charter review board as she does now at every meeting. She doesn't want the charter reviewed and she now pulls this trick at each meeting.

What happens next? Don't know. But I'm glad that Tuesday happened.

Kevin Vericker
July 29, 2011

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