Lets Give Voters The Facts About Countys Huge Bonding Effort
Written by Michael Lewis on October 14, 2004
By Michael Lewis
The only thing larger than the proposed Miami-Dade County bond issue is the amount of confusion it generates.
When Carmen sat me down at our dining table and asked me to explain exactly how it would work, I couldn’t.
Then a banker who favors the bonding told us that the way to pass it is to explain as little as possible. Not lie, of course – just gloss over facts and hope that bonanzas for favored projects will attract "yes" voters on a long Nov. 2 ballot.
If that’s the game plan, it’s being played well. Misinformation abounds.
But that bothers voters like Carmen who want to choose rationally. Before looking at who would get what from the eight questions in the package, thoughtful voters need vital facts.
First, how much is at stake?
County Manager George Burgess originally sought to borrow $1.6 billion to $1.8 billion using bonds to finance a broad range of county infrastructure. As more and more projects were tossed into the pot, the total rose. It’s widely reported at $2.9 billion – but, in fact, it’s $2.925 billion.
That’s how much the plan seeks for 334 projects. But $2.925 billion isn’t the total cost. Taxpayers will probably pay $7 billion or more – Mr. Burgess says the county hasn’t tallied how much – to pay off the bonds, including interest.
Next, how long do we pay?
Talk has been of 30-year bonding for infrastructure. In fact, some would be 40-year bonds, Mr. Burgess says, issued over a 13-year period. That means taxpayers could still be paying off the debt in 2058 if bonds issued in 2018 are the 40-year variety – a decision yet to be made.
We’re told that the bonds would replace the 30-year Decade of Progress issue approved in 1972, which is the reason our tax rate wouldn’t rise – because we’re already being taxed enough to pay off new bonds when the old ones expire. The Herald reported last week that the old bonds will be paid off next year.
In fact, Mr. Burgess says, the Decade of Progress bonds won’t be paid off for five more years and we’d probably finance the first years of a new program with commercial paper while we kept paying off the 1972 program.
The program, called Building Better Communities, is being sold by telling us our taxes won’t rise as a result.
"Program was built to require no increase in the tax rate millage," says a county summary of the program.
That’s true – but misleading. And it’s certainly not the same as saying taxes wouldn’t rise.
We were paying 0.39 mil to retire the Decade of Progress bonds. That’s 39 cents in taxes per $1,000 in taxable property value – not a big bite, because a person with Homestead Exemption whose property is valued at $1.025 million was paying just $390 a year to retire those bonds. Countywide, taxpayers were paying just 1.6% to 1.8% of their tax bills to retire the bonds.
But those bonds now require less and less from taxpayers. Now we pay just 28.5 cents per $1,000 to retire them.
But the county didn’t cut the 0.39 mil – it just shifted 10.5 cents per $1,000 to build a contingency fund that now totals $11 million to $12 million.
So we’re paying only 0.285 mil now for debt service. If we pass all eight ballot questions, we’d pay 0.39 mil again for debt service. We wouldn’t be paying a higher millage, but our debt-service payments would rise.
And we certainly wouldn’t pay the same total in dollars. As property values increase, we’ll pay more even at the same tax rate.
Property values are soaring.
Only those with homesteaded property have a cap on annual increases, 3%. For commercial property owners and others, actual payments could soar. Indeed, the county assumes a 5% increase in tax receipts annually for the life of the bond issue as tax rolls grow, including new construction.
Homeowners’ 3% cap might someday be revoked. But even if it remains, a 3% annual increase, which seems so small, means actual outlays for debt repayment would be 4.8 times as great at the end of the bond issue as they would the first year. That $390 a year would balloon to $1,885.
The county assumes we’d be just as well off at $1,885 then as at $390 today because the value of the dollar would decline about as much as taxes would rise, leaving the real cost constant. That’s a 53-year assumption that inflation will do what it has done in the past. But history may not be an indicator of economics in the unsettled world of the 21st century.
Homeowners are protected by the 3% cap only if they don’t move. Buy a new home at the same value as the one you’ve lived in for a decade, and your taxes will skyrocket. So will your costs of bond repayment.
Then again, there is no guarantee that our taxes would not be increased above 0.39 mil to repay bonds.
Mr. Burgess says he doesn’t intend to raise rates and that the county commission concurs. But he says it wouldn’t be responsible to guarantee no increase because tax rolls could decline, we could suffer a major disaster or the homestead exemption might be doubled, a change attempted just this year. Any of those would necessitate an increase – and all are very possible in a 53-year span.
So when the county says the program was built to require no increase in rate, it doesn’t mean there wouldn’t be one – and it’s certain that your annual tax bill for this program would keep rising.
And when the Herald wrote last week that "the program would not increase taxes beyond current levels," it was dead wrong. A nice selling point, but untrue.
Proponents may think that cash would flow to the 334 target uses once bonding passes.
In fact, bonds would be issued over 13 years, so some programs would be financed far ahead of others. The county staff right now is developing a phasing plan, targeting which would be started right after bonding was approved.
But a political element lurks. The county commission would approve each bond sale and what it would fund.
"We want them involved in the game plan for the program and its strategy," Mr. Burgess said.
That means that the same kind of jockeying that slipped key items into the bonding package at the last minute would take place in deciding whether to fund project A or B or C now or in 13 years.
And remember, the projects now listed are called "recommended projects." When you go to the polls, the bond questions – numbered 187 to 211 on a long ballot – don’t detail what you’re buying. You can bet that over 13 years, things we today call necessities would be supplanted by greater needs, as determined by whoever is then on the county commission.
This bonding is not all or nothing. In 1972, only eight of the 10 ballot questions that made up the Decade of Progress passed.
But a failure of any one doesn’t mean we would never see projects in that package built. Failures at the polls can be brought back again, either as a large package or individually. Not only can they, but you can be sure that they would.
So when some call this a once-in-a-lifetime chance at vital infrastructure, it’s just part of the story. It’s the opportunity to add infrastructure without necessarily increasing the tax rate, but it’s not the only way – just the easiest. If one item of the eight fails, your tax rate for repayment would have to be cut – but only until new bonding passed to raise it again.
Those are the facts.
They don’t speak to what should or shouldn’t be in the spending packages or whether there is adequate protection of plans from commissioners or whether we can trust county government to do the right thing with $2.925 billion or who would get what contracts – all legitimate questions, but all subject to opinion.
Nor do they speak to the element of need; or the economic multiplier of one project or another; or the reputation of a community based on what infrastructure it has; or the fairness of distribution of funds among geographic, ethnic and other divisions in this complex county – again, legitimate matters subject to opinion.
Nor do they speak to the equity of future generations paying more for the infrastructure than current taxpayers would, based on the theory that it’s the future users who would get the most benefits and so should pay the most.
But now that we’ve resolved the dinner-table questions of fact, we can debate rationally about how we’ll vote. Top Front Page About Miami Today Put Your Message in Miami Today Contact Miami Today © Copyright 2004 Miami Today designed and produced by Green Dot Advertising and Marketing