Tuesday night’s regular commission meeting was full of emotions in Coral Gables, one of the wealthiest towns in South Florida. Two commissioners, Maria Anderson and Ralph Cabrera, brought in their families at City Hall to say goodbye to the local government as their 12-year terms are scheduled to end on April 9. The farewell addresses were filled with memories, as if lives were about to be ended. In reality, Anderson is set to become a minister at a local church, while Cabrera will more than likely be chosen as the next Mayor of Coral Gables next month.
However, the Coral Gables meeting was not only about hugs and kisses. Minutes before the end of the meeting, officials from McGladrey Certified Public Accountants, a firm contracted by the City, revealed that the total amount of available reserves turned from $12 million to $21.1 million for the 2011-2012 fiscal year. In total, this amounts to 18% of the operating budget, which may return the city to an AAA rating from Moody’s.
“The ability to go from less than $200,000 in 2009… to $21 million in that period of time is truly remarkable,” City Manager Pat Salerno said. Indeed, the new finding is remarkable and gives an indirect slam to Mayor Jim Cason, who had previously stated that $12 million in reserves was not nearly enough to protect the financial health of the city in case of a catastrophe.
Anderson, however, was not pleased by the report. Instead of praising the city manager and his staff for managing to free up so many resources, she announced, “I hope in the future we could have a heart and give some of that money back instead of tax cuts. Give to the employees and services that are losing their homes and who lost their cars. You can talk about the big money all you want, but until you have a heart, we are not a city.”
This statement is worrying, especially coming from a potential minister. Maria Anderson is opposed to property tax cuts and wants more money to “be given back” to public employees. But for something to be given back, or returned, to someone, that person must have given in to begin with. However, property taxes are paid for by homeowners in the city, and public employees are only paid by this tax money, which some argue is nothing more than thieved money.
In other words, for money to be truly given back to the city, property tax cuts are the best way to go. The fact that Commissioner Anderson misunderstands the true origin of public money is one of the thousand reasons why governments are increasingly immoral.
There is room for criticism, however. Salerno might have managed to boost up resources dramatically, and this is better than running on a deficit, but it is clearly not the best approach. $21.1 million represents one third of the total property tax revenue. And it comes short by just $7 million of being twice as big as the total utilities service taxes and business tax revenues.
In real terms, this means that forgetting the available revenues can forgive all city business taxes, all utilities service taxes and a sixth of property tax rates for a whole year. It can also be used to end the business tax for six years. But even more importantly, the reserve fund can and should be used to pay back the city’s debts by a fifth. (The latest estimates put Coral Gables’ debts at $105 million.)
Click here to see Coral Gables’ 2012-2013 budget
But the reason why the current government won’t act to use the reserves is clear. Moody’s bond credit rating depends exclusively on the amount of reserves in the General Fund, and the better the rating, the more investors will purchase municipal bonds. Municipal bonds are a way for municipalities and other sub-state entities to receive cash payment quickly, in exchange of a promise of repayment with interest in the future. In other words, municipal bonds are the ultimate theft schemes used by local governments.
The principle is simple. Today’s city government receives easy revenues without increasing taxes or fees, and tomorrow’s homeowners are forced to pay for the interest with their own taxes.
If “giving back” is the real goal, as Commissioner Anderson wants to believe, then the real solution is to save future homeowners to be coerced into a system elaborated by this generation. In other words, assuming that the state ends its restrictions on local governments, Coral Gables should default on its future promises, use the reserves available to pay back current bond holders, and save future generations from tax increases.
There are plenty of steps that should be taken in order to both increase the living standards of the people of Coral Gables and lower spending rates drastically. Privatization is one such issue. Simply privatizing local avenues to business associations, such as Miracle Mile and Ponce de Leon Boulevard, can bring in a lot of revenue and save the city millions in the coming years. Reforming public salaries and pensions, which represent 41% of total expenditures in 2013 (the largest share of the budget) is another important step to be taken.
Mayor Cason and Pat Salerno, while they are to be praised for the good steps they have taken toward financial health, should also be blamed for ridiculing the debate over finances. They have allowed small property tax rate cuts to become enraged debates about the “future of Coral Gables,” even though revenues from this source are higher than at any point before 2008. Now, they are hurting the next generation by wanting to increase reserve funds even more –up to $25 million- in order to issue even more municipal bonds and put the city in debt.
Unfortunately, Ralph Cabrera is no better. While he says he doesn’t support tax increases, he is one of those elected officials that have attacked the recent tax cuts. He isn’t opposed to the reserve funds at all, but wants the Commission to be given more credit than Pat Salerno.
In many ways, Cabrera and Anderson leaving the Commission is a good aspect of Coral Gables. But the possibility of Ralph Cabrera becoming the next mayor and potentially more dangerous commissioners entering the government is even worse.