Article Courtesy of The Miami Herald
By Kyra Gurney
Published August 7, 2018
The years after the recession were good for Miami Beach's bank account.
With property values on the rise and new buildings going up, money was
streaming into city coffers. Miami Beach was able to hire new employees,
create new programs and offer raises.
But now the growth appears to be slowing.
A lack of new development saw the taxable value of new construction plummet
from nearly $859 million last year to $186 million this year — down from
more than $1.1 billion in 2016.
The years after the recession were good for Miami Beach's
bank account.
With property values on the rise and new buildings going
up, money was streaming into city coffers. Miami Beach was able to hire new
employees, create new programs and offer raises.
But now the growth appears to be slowing.
A lack of new development saw the taxable value of new construction plummet
from nearly $859 million last year to $186 million this year — down from
more than $1.1 billion in 2016.
"We went through a good amount of development over the last few years and
that's diminished somewhat so there's not a whole lot of new development
coming online," said Mayor Dan Gelber.
|
|
Miami Beach's City Hall building
|
And it's not just a lack of new construction. The overall
taxable value of the island's property increased by double digits in 2015
and 2016, but this year the growth slowed to 4 percent, according to figures
the county property appraiser released last week. That's compared to 6.5
percent growth countywide, although in other pricey coastal areas, including
Sunny Isles and Bal Harbour, the real estate market also appears to be
cooling off.
In Miami Beach, the city's projected spending exceeds the increase in
property values, so officials must trim $5.5 million from the budget for the
next fiscal year, which begins in October. Although the city still expects
to see $6.8 million more in property tax revenue than last year, that's not
enough to maintain the current level of services.
"These have been gravy years for Miami Beach. Property values have gone up.
The budget has been healthy," said Commissioner Michael Góngora. "But I
think we're all going to have to tighten our belts and realize if the
money's not there we can't continue this practice."
Although the city also gets money from resort taxes, which are levied on
hotel stays and restaurant tabs, these funds are volatile and can only be
used for tourism-related expenses. Property taxes contribute more than half
of the money the city uses to pay for services like the police and fire
departments, emergency management and park maintenance.
Cutting $5.5 million isn't an insurmountable problem in the city's primary
operating budget of $330 million. But the plateauing property values come as
the city faces rising security costs, including roughly $1 million to place
Miami Beach police officers at local schools. The city has also seen a
growing number of crowded tourist weekends, which can be expensive to
police.
Miami Beach also hopes to create an inspector general's office, subject to
voter approval in November, which would cost the city $484,000 during its
first partial year of operation. Miami Beach may add a surcharge to
contracts to help cover the costs, but it would likely be several years
before the surcharge paid for the new office, said John Woodruff, the city's
chief finance officer.
All of this is bad news for City Hall employees, whose raises are now on the
chopping block. The increased costs in next year's projected budget largely
come from personnel costs. That's where the city will likely have to start
making cuts, Woodruff said.
The budget shortfall could also affect residents and people who do business
in Miami Beach. Although Woodruff said the city doesn't anticipate having to
cut programs to balance the budget, officials are looking at how they can
increase the city's revenue, which includes fees for services such as
building permits and business licenses.
In addition, the city will look at eliminating unfilled positions, rather
than searching for new candidates, Woodruff said.
"All of this works this year. That works once," he said. But if expenses
continue to outpace the rise in property values, "Then the next year you've
got to make real, potentially meaningful reductions to programs and
services," he said.
A slow year or a trend?
City officials are hoping 2018 has just been a slow year.
"We're not troubled by a single year projection because we'll just do an
expense haircut and make modest cuts like not fill positions," Gelber said.
"We have to be thoughtful about our budget. We can't be spendthrifts."
But, he added, "We are going to look at whether this is part of a longer
trendline going forward." Projections from the city's budget office show the
taxable value of the island's real estate plateauing over the coming years.
Philip Freedman, managing director of Compass Development in Florida, has a
more optimistic outlook. Numerous buildings currently in the works will be
completed in the near future, he said, and he expects property values to
grow at a higher rate in the next few years.
High real estate prices also contributed to the slower growth of property
values this year, he said. The value of a home is reassessed when it's
purchased by a new owner, which can boost taxable property values. "Because
Miami Beach is a little more expensive than the rest of the Miami area, it's
slower for people to turn around" properties, Freedman said. "There's a lot
of inventory."
Commissioner Ricky Arriola said there are steps Miami Beach could take to
boost property tax revenue. He blamed the city's requirements to secure
approval for new developments and renovations, which he described as lengthy
and expensive, for the lack of new construction.
"We make it incredibly hard to develop any property whether it's the
renovation and restoration of an existing single-family home or any new
development," he said.
"This affects the quality of service," Arriola added. "This affects projects
that the community wants because we just don’t have the revenue growth we
need in order to meet the needs of the community."
Arriola said he wants the city to "streamline" the approval process without
relaxing its standards.
In the meantime, city officials will look at possible cuts during upcoming
meetings as they shape next year's budget.
Even if Miami Beach has to largely scrap pay increases for its employees,
however, a few people at City Hall might still get a raise.
Last month, commissioners voted to ask residents to increase their annual
compensation from $6,000 to $45,000 in an Aug. 28 special election.
Commission salaries were set at $6,000 in 1966 and haven't been raised
since, although elected officials do get other perks including a $6,000 a
year car allowance and $2,250 a month for other expenses.
Góngora, who proposed the raises, said he thinks a higher salary
would enable more Miami Beach residents to run for public office.
But in a year in which city employees may not get a salary bump,
commissioners could have a hard time convincing voters to raise their pay. |