Javier Baños
Baños is the Editor of Gables Insider
(I will do my darndest not to illustrate my excitement for this process, a natural condition for all CPAs.)
It is budget season in Coral Gables, and as you may expect, some important decisions are in the works that will shape the fiscal future of our city for the upcoming fiscal year, starting on October 1, 2024. However, what is typically a fairly dull process was jolted to life on July 10, 2024, during the budget workshop when Vice Mayor Anderson unexpectedly proposed a cut to the millage rate, effectively suggesting lowering the budget by roughly $2.65 million.
Background on City Finances
Despite common perceptions, the financial management of small governments like Coral Gables operates much like a mid-sized private firm, with the key difference being that they are service-driven rather than profit-driven. The city’s revenue streams include franchise fees from local utilities, parking charges, permit fees, and property taxes, divided into residential and commercial sectors. Similar to a small business, there are fixed costs such as pension contributions, police, fire, and employee union benefits, which are essentially on autopilot due to contractual obligations. Variable costs range from sponsoring the 4th of July celebration to capital improvements to buildings and infrastructure and replacing the fleet of vehicles. The city has also maintained roughly $50 million in reserves for hurricanes and other disasters. This conservative figure exceeds legal requirements but has contributed to the city’s financial health and excellent bond rating over the years.
Coral Gables has a general operating budget of roughly $265 million, with an additional $18 million from specially purposed funds, such as the art in public places fund. By law, expenditures must not exceed revenue.
Revenue Breakdown
Of the $265 million in expected revenue, roughly $129 million (48%) comes from property taxes. That is a $10 million year (2023) over year (2024) increase in revenue from this sector. Of that, approximately $60 million comes from homesteaded property taxes (46%). Voting taxpayers, or those claiming Coral Gables as their homestead residence and presumably eligible to vote, account for roughly 22% of the overall budget. The remaining portion is divided between commercial taxpayers ($35 million) and non-homestead property (investment, foreign-owned, and rentals) at an additional $35 million. Renters are eligible voters and indirectly pay for their landlords’ taxes, but this emphasizes the tax burden on residents most considered by the Commission.
The Proposal and Reaction
Anderson’s proposal, supported enthusiastically by Mayor Lago and met with cautious wariness by her remaining colleagues, aimed to reduce the community’s financial burden. The other members of the commission were receptive but puzzled by the suggestion, given Anderson’s actions a month earlier. Residents may have noticed a marked decrease in their garbage fee of roughly $300 this year, down to a flat fee of $550 per household. The commission, after endorsements from Fernandez, Lago, and Anderson, voted in June to reduce the garbage fee for residents, costing the city roughly $2.5 million in revenue. This required some budgetary adjustments. The Assistant Finance Director, clearly exasperated and surprised, was not expecting an additional cut, nor was the rest of the commission. Anderson’s additional $2.65 million reduction was not discussed openly before the July 10 workshop, despite previous meetings in June and on July 9.
The Debate
Who could be against a tax cut? Certainly not taxpayers burdened with increasing costs, including wild swings in the property insurance market. All commissioners agreed, as they all pay property taxes in the city. However, there is a real cause for a measured approach. The objections from Fernandez, Castro, and Menendez had little to do with the tax-cutting aspect of the proposal. They were receptive but concerned about how it would achieve Anderson’s stated goals.
The issue is that the $129 million paid by taxpayers is uneven, with some paying much higher effective rates than others. Because the 2% rate reduction is on the rate rather than any targeted cut to any taxpayer-paid fee, multimillion-dollar projects like the Plaza would get a $37,000 reduction in their tax payment, while long-time homesteaded residents would mostly see a reduction of mere cents or tens of dollars. The question for them was really about the best way to use those dollars to truly give residents the best number of services and savings, if any.
Political Dynamics
As has been the case lately, there is a political component to the debate. The July 10, 2024 denial and deferral of Anderson’s proposal to a meeting next week prompted the Mayor to send out a text message calling out his colleagues for being against the tax cuts. However, placing politics aside, this is one of the few instances where brinkmanship actually works to the advantage of the minority duo on the commission. Setting the millage rate, which has been 5.559% since 2016, requires a 4/5 vote. Failing to set it reverts to the rollback rate, costing the city about $10 million, or potentially $3.2 million if the commission splits 3/2. Anderson’s proposal challenges this, forcing a strategic decision on who will concede first.
Fernandez, Menendez, and Castro wanted to find a way that would primarily benefit residents, like the June reduction of the garbage fee. Additionally, with increasing union employment costs and the need to hire more police officers, they worry about the long-term impact on the city’s budget.
Management was concerned about the potential of leaving positions unfilled in the police department, or the unlikely possibility of layoffs.
The Counterpoint
The counterpoint is that a millage rate cut, as opposed to a reduction in expenses or fees to taxpayers, is far more permanent. It tends to have a multiplier effect over the years and directly affects tax calculations, regardless of property valuation changes. It is a hatchet, not a scalpel, so the cut is deeper and more long-lasting, which may be Anderson’s true goal. Like every hatchet job, the cut will be very uneven, benefiting developers along with residents, but it accumulates over the years, which slows down the rate of growth of taxes.
Next Steps
Commissioner Castro has organized a town hall on the issue and wants to present all the facts to residents, then vote based on their stated preference. The meeting is set for July 30th at 6:30 PM at the new headquarters of the fire and police department, 2151 Salzedo Street.
Although the commission is our representative body, like most politicians, they don’t want to be seen doing anything unpopular. So we must show up and figure out what is in the city’s best interest. Despite what you may think of her, Rhonda Anderson tends to study the issues in depth and will not let the ship burn down, so there will likely be a compromise. We just need to do our part and help them along.
Last night was a scare tactic. The proposed budget “cuts” if the millage rate is reduced is a “rollback” of the proposed, yet-to-be approved budget for 2024-2025. Most of these “cuts” are phantom cuts to positions or items that don’t exist today. For example, I am a city department with 50 current positions and a $100k supply budget. I submit two budget proposals – one with the current millage rate and another with the 2% reduction. With the current millage rate I propose 5 additional positions and an additional $10K in supplies. With the reduction I ask for 4 positions and $7K in additional supplies. I then go to the town hall meeting on Tuesday and try to fool you and say that i will “lose” 1 position and “lose” $3k in supplies. Really???
I’m watching Castro’s town hall right now and am appalled. Beyond her sheer incompetence and “erm”s, the display of scare tactics, parade of inflated staff members, and lack of public input is saddening and misleading. She has no idea what she’s doing.
Don’t get me wrong- Anderson waltzing in late and then whining like child that this wasn’t cleared on her calendar isn’t what we need either. We’re one of the most well off communities in the county, state, and country – let’s get it together.
2% at this time is just a political stunt. He could have voted and then ask it to be 5 or 10% later. L’Ego is doing political theater instead of working towards bettering this city. Stop your foot-stomping already and do your job.
In 2008, the Great Recession, mortgage crisis, most people financially underwater, my property taxes did NOT go down.
In 2012, 4 years later, Miami-Dade County decided to give people a break on their RE tax bill.
We need to be wise, fiscally conservative. Only if we had Traffic Light Cameras/ Ticket Revenue $$$ would dropping the millage rate be a sane decision. Too many people cutting through Coral Gables causing gridlock, accidents, pollution. Tax these nonresidents with speeding tickets, especially on Granada & Alhambra. We need politicians with balls, not raisinets.
Thanks for useful presentation of the facts. I look forward to Comm Castro Townhall July 30. For now I support current millage.
Also support annexation of Little Gables
to smooth out city boundary and control commercial development on 8th Street.
Thanks for useful presentation of the facts. I look forward to Comm Castro Townhall July 30. For now I support current millage.
Also support annexation of Little Gables
to smooth out city boundary and control commercial development on 8th Street.
I did the math.
Based on my 2023 taxes, the reduced tax rate of 5.559 down to 5,448 gives my homestead condo property a $18.57 yearly savings. With an estimated 2024 8% increase in my property valuation the savings would be a $25.66 yearly savings. I vote for the current tax mileage rate, i.e., no tax mileage rate cut to provide for added public safety officers and capital improvements.
It costs more to live in the City Beautiful and it’s worth it!
great analysis. thanks for highlighting the meager (and illusory) savings to the homesteader contingent versus the commercial developers who stress the infrastructure increasing the costs of government services.
$31.4 M in “Retirement” a/k/a “Pensions” is outrageous!
Many cities, and mostly all private companies, have eliminated pensions altogether and have 401k plans instead, which employees pay into. The only “Pensions” our city should have is for ESSENTIAL PERSONNEL! Not the Mayor, Vice Mayor, Commissioners and Non-Essential personnel! Why do we keep allowing this?! I want this question answered in the next Commission meeting!! Why are Pensions NOT being eliminated! No NEW employee should have the option! Period!
Vote no to Little Gable’s annexation. Little Gable’s annexation comes with a high cost to Gables residents.
Vote NO to annexation of little gables with C G absorbing some $24M over 5 yrs also remember this vote is non-binding.
There some C G commish with serious conflicts of interest wanting this to go thru.
I have cut thru little gables for several yrs look at all the complete demolitions on going with new home constructions & remodeling @ gables pricing. To me it’s a 100% statement of owners profiting beforehand w insider info that annexation will go thru.
Reduce the taxes as recommended by Vice Mayor Anderson. Many residents are hurting with the current inflation, double digit increases to property values since the pandemic and property insurance increases of more than 50%. The City has been receiving the benefits of huge yearly increases of property tax revenue since the pandemic due to the explosion of the population increase in turn producing the approval of multiple large development projects. Just look at the large projects currently under construction in the downtown area. Each of these projects pay the City very large impact fees as part of being approved. Another source of revenue to the City. This tax cut is really a drop in the bucket compared to what the City has been receiving and will continue to receive in increases in property tax revenue since the pandemic. Give many residents a fighting chance to stay in their home.
Thank you Mr. Banos for the easy to follow budget explanation. Question: WHERE IS THE LINE ITEM FOR HISTORIC PRESERVATION?
I strongly believe that in order to realistically fund ongoing and future preservation and maintenance issues of the city’s historic assets, there should be a percentage of the budget dedicated to this need. Let’s not continue to rob Peter to pay Paul.
The City’s close to $300 million dollar budget can surely support a reasonable percentage [for several years now, I have been advocating for a 1% of annual budget TO BE ALLOCATED to the historic preservation line item] as a recurring annual allocation in support of historic preservation and maintenance. It is a sad day anywhere when a place’s cultural heritage is not elevated to a priority, but especially in a city that has ‘historic’ in its DNA.
Historic assets NEED ATTENTION. The Alhambra Water Tower has been in need of repair since 2017 and it is deteriorating rapidly. Our historic City Hall has been marked for restoration for close to a decade. Our historic entrances are in dire need of maintenance, specifically, the Country Club Prado historic entrance [from SW 8th Street] has been in disrepair for more than a year. As we know, deferred maintenance and/or neglect can be catastrophic REMEMBER THE GONDOLA BUILDING?
Correction credit to Anderson, not Castro for reduction of garbage fees.
The ramifications of a 2% cut in the millage rate would result in a savings of pennies for most residents, enrich the pockets of the huge developments, but it would cut our services by millions of dollars. And it’s not a one time deal…it has far-reaching impacts into the future. The politicians who are pushing it want to make it look as if they are lowering our taxes, the reality is that they are reducing our services. As it states in the article, government is service-driven not profit-driven. It’s a bad proposition in every way.
Kudos to commish Fernandez, Lago & Castro for truly looking out for the citizens by reducing the garbage fee by $300 per unit.
Don’t forget the estimated $23,594,000 over five years that Coral Gables wants to spend on annexing Little Gables.
The annexation question is on this current August 20 ballot.
The last words of the annexation question says: “And absorbing ALL annexation costs.”
Spend your $23,594,000 on your current issues that need that huge amount of money.
Vote NO!
How many assistant city managers does CG a small municipal government need at high salaries?
How about it’s legal dept subbing out work @ outrageous per hour rates, what is the purpose of having a legal dept?
People expect more with less. That’s Not it works. You want More ? Pay for it. Period !!
How much would the city save by holding elections in November instead of April? We would save money and we would also have a larger percentage of the residents voting. One small step in the right direction…
Again and again we hear “Cut the fat from government” but those speaking the loudest never seem to be able to offer suggestions as to what constitutes “fat”. Let’s be honest one man’s fat is another’s necessity. Rather than simply use simplistic slogans perhaps suggestions as to what is the fat to be cut would help achieve the goal of the most efficient government. And if your “fat” gets cut don’t complain.
Very enlightening. Thank you for making it so digestible.
A tax cut would be nice but instead I would prefer you to keep our taxes stable and give a raise to our police officers. We need to keep them and also hire more at a better rate. With all the new overbuilt condo buildings and all the older homes being torn down to put up huge multi-million dollar homes, your tax roll should have gone up tremendously. With our society’s behavior changing and with climate change that could cripple our Community after a disaster, I think we need to invest in our safety. It appears our present Federal Government does not have our security and safety as a priority, so we need to position ourselves for the future. You may think this is out of the box and hopefully you will not recall these words in the future.
Garbage fee for me didn’t go down but doubled since my small home has had a separate “dwelling unit” on my property used as an office since we bought it 40 years ago. So let me get this straight, my small home on a 5000 square foot lot pays twice as much as a 10 bedroom mansion on a bigger lot? Who generated more trash and garbage my two person house on a small lot or the larger one? In fact, having an additional structure on the same lot generates less green waste since there’s less landscaping. Makes no sense
Thank you for publishing these charts.
Bring down the taxes as Mr Lago Recomendeds. People are hurting!! Governments are known for waste, cut the fat ! I have seen government workers taking time on side of the street just talking in groups others taking a long lunch…
Love Coral Gables but stop crazy salary increases when US the ones that pay all of you are hurting.
CUT THE FAT…be smart.