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Property tax money fuels big spending
 

MIAMI-DADE – March 26, 2007 – Large or small, rich or poor, South Florida’s cities and counties embarked on a multibillion-dollar spending spree fueled by seven years of property-tax collections that grew disproportionately compared to inflation, population, citizens’ salaries and even the budgets of the governments themselves.

Only government-paid insurance and retirement benefits spiraled upward at comparable rates. Yet they yet couldn’t match the sheer scale of property-tax growth everywhere, according to a Miami Herald review of 14 local-government budgets for the past seven years.

The property-tax revenue increases since 2000 have been immense: 178 percent for Miami-Dade County, 123 percent for Fort Lauderdale, 82 percent for Broward County and 108 percent for Miami.

Government income from other sources – building permits, fees for such day-to-day services as solid-waste and wastewater departments – grew with far more moderation.

The loads of property-tax money allowed governments to buy nearly everything: more emergency and parks workers everywhere. Faster hurricane recovery and landscaping for Davie. Financial stability in once-struggling Homestead as its population grew 57 percent. Bigger salaries in Miami-Dade, where the county’s 30,000 employees received an average salary increase of 29 percent between 2000 and last year – while the inflation rate rose about 18 percent.

Was any of the spending wasteful? And if so, who was responsible? There are no easy answers. But almost everyone bears some responsibility for local governments spending lots more.

Cities and counties beefed up pensions, salaries and expenses that will cost them for years to come. State lawmakers cut major state taxes and slashed aid to local governments. Hurricanes drove up fuel and insurance costs. The Sept. 11, 2001, attacks forced every government to spend much more on security. And citizens demanded more parks and libraries, and nicer roads.

Heeding the cries of heavily taxed businesses and owners of second homes, Florida House Speaker Marco Rubio and other state lawmakers are pressing ahead in this legislative session with plans to cut and cap property taxes for everyone and even eliminate a portion of them for homestead owners. Also, voters could opt to hike sales taxes to help local government gain back some – but not all – of the lost tax money.

“We have never looked at this from government’s perspective. This is about what people can afford to pay for government,” said Rubio, a West Miami Republican. “The frustration is people feel we’re paying a lot more in taxes, but we’re not getting it back in service. We don’t feel like we’re getting $13,000 in services for $13,000 in taxes.”

Doom and gloom

Outraged and nervous local politicians predict doom and gloom. Property taxes account for the lion’s share of their so-called “general funds” that pay for many government services.

Cut property taxes and you cut emergency help, parks or libraries, said Broward County Commissioner Kristin Jacobs, a Democrat.

“It is a fallacy, a lie, that counties have reaped huge windfalls through property taxes,” said Jacobs, who blames the Republican-run Legislature for shifting $63 million in state costs to Broward County even as the county shoulders high fuel, insurance and pension costs.

Although the cost-shift numbers are disputable, no one can deny the cost of pensions and health benefits, workers’ compensation and property insurance. If added together, they gobble up 19 percent of Aventura’s general-fund budget. Miramar’s hit: 24 percent.

Miramar doesn’t participate in the state’s large, well-managed retirement system, so it has been hit hard by pension cost increases: 403 percent since 2000. Hialeah is at the extreme end: a 13-fold jump in seven years.

Miami Beach also reeled from pension increases, yet reaped enough in property taxes to authorize $200 checks for homesteaded property owners in 2005 and $300 checks last year.

Disparities

Governments’ overall tax increases went largely unnoticed by homeowners, chiefly because state law caps increases in the assessed value of homes, for tax purposes, at 3 percent a year. But the owners of other kinds of real estate that have no tax cap – rentals, second homes, commercial property – were hit with large assessments as property values soared during the state’s dramatic real-estate boom.

The tax disparities became clear when homeowners – particularly in South Florida – wanted to cash in. They found that if they moved to another home, they lost their tax savings and faced far higher tax bills, even for smaller homes.

Soon, lawmakers everywhere heard the slogan that people were “trapped in their own homes.” Local officials’ response: We’ve repeatedly trimmed the tax rate. True. But not the tax amount or tax revenue.

All the talk of cutting property taxes has gotten to Miami-Dade County’s government. Mayor Carlos Alvarez is readying a plan to cut some of the county’s $6.97 billion budget, of which $2.27 billion comes from property taxes.

Last week, four of the 13 county commissioners balked at spending $131 million on new furniture over the next five years. The expense normally wouldn’t have produced an eye blink.

“We’ve been fiscally conservative,” said Bruno Barreiro, chairman of the Miami-Dade County Commission. “We’ve put a lot of money away. We’ve built our reserves in three years to over $100 million for a rainy day.”

Barreiro said the debate over local taxation and spending is a matter of perspective. “It’s how you see it,” he said, pointing out that Miami-Dade is a unique, mini nation-state that meets the needs of people of 150 nationalities while running its own airport, seaport, election office and police department.

The county also has a high poverty rate and a large number of residents who have no health insurance – more than a quarter of its 2.3 million people. Since 2000, county government has increased health and human services spending by 68 percent – a bigger increase than for public safety, which remains the top expenditure.

Add to that unexpected costs: $1 billion more for Miami International Airport renovations, and 2½ times more to build the Carnival Center for the Performing Arts than its original $178 million estimate.

With a total bottom-line budget of $3.16 billion, Broward County government is smaller, has fewer departments, is more affluent and has more cities that tax citizens for services than Miami-Dade. Its staffing has increased about 9 percent, while department spending increased 16 percent. The costs of departments that get their money from the general fund, though, have increased 88 percent.

Monroe County, which lost population because of the high cost of living and housing, saw property-tax collections grow 64 percent, to $83.8 million, since 2001. Key West’s property-tax collections grew 51 percent in that span, as some longtime homeowners saw their real tax bills decline.

For governments, handing out big raises and generous benefits to their workers can make politicians popular. But they cause long-term pain to taxpayers.

Unions win

Political leaders frequently appease the popular and politically powerful police and fire unions. The unions, with years of bargaining experience and persuasive arguments about the danger and importance of their jobs, often lead the way in salary and benefit increases.

But raises mean future cost-of-living increases will cost taxpayers more in salaries and retirement benefits.

North Miami Mayor Kevin Burns said his city is now paying for past decisions. Pension payments have soared as property-tax collections grew 46 percent.

Burns, elected two years ago, said the city had a few employees who were allowed to bank so much vacation time that they could take 75 percent of the year off and collect a paycheck. And city rules gave workers an extra 5 percent of vacation hours every year.

“I ended that,” Burns said. “I can’t say I’m the most popular guy.”

In Davie, the council cut its budget 5 percent since last year, although its general fund has increased 115 percent since 2000. Mayor Tom Truex, a Republican, described the House plan to cut property taxes as “crazy talk.” “We have obligations we have to pay for, and it seems that every time you go to contract negotiations, you start where you left off,” Truex said. “And where you left off, you thought it was a time that you were about to go bankrupt.”

Hialeah Mayor Julio Robaina said his city “has a very attractive retirement system,” which went from costing taxpayers $117,000 in 2000 to $1.7 million the following year – and $15.8 million this year.

Robaina blames stock-market troubles as well as the lushness of the city’s retirement plan.

Groups benefit

Local politicians say the state Legislature has shifted many costs to local property-tax payers rather than use more of the state’s main revenue source, sales taxes. For example, in 1999, local property taxes accounted for 39 percent of the school-funding formula. Now it’s 46 percent.

Broward commissioners bristle at the fact that state law requires them to pay for some newly trained law-enforcement officers, new early-voting sites, health costs and some operating costs for state-controlled courthouses – all things that state lawmakers say locals should help pay for as well.

Broward County also calculates that a state change to the workers’ compensation claims favoring emergency workers cost the county $1.5 million.

In Miramar, property-tax revenues have soared since 2000. But city Commissioner John Moore said most of the money went to police, and that there is little fat to cut. “I’ve found some things that would have amounted to nickels and dimes,” Moore said.

House Speaker Rubio said the complaints from local governments are a good thing.

“The argument assumes someone has to make a sacrifice – either government or the taxpayer,” Rubio said. “That’s an easy choice.”
 

Copyright © 2007 Miami Herald. Marc Caputo and Breanne Gilpatrick. All rights reserved.