Governments Give A Red Light To Unproven Budget Stopgaps
Written by Michael Lewis on May 26, 2011
By Michael Lewis
Our governments soon must feel the pain of budgeting just as Miami-Dade’s total property value falls another 5% to 7%, reducing tax receipts.
You have to feel for those who make the hard choices. Do they raise taxes just after voters recalled a mayor who pushed through a huge hike as values fell even more, or do they cut already-tight spending?
Faced with the dilemma, expect some to budget for new revenue streams to meet laws requiring balanced budgets.
That’s the ideal solution, avoiding the pain of spending cuts or tax increases. It’s every official’s dream: money from nowhere.
Unfortunately, as Miami is painfully learning, it’s often just that, a dream. The city has to patch a big budget hole now because it bought into a nice, soft dream to avoid a hard budget reality.
The soft dream was to install 41 red-light cameras at 18 intersections, pay all costs with traffic fines and pocket $8 million profit in just nine months.
The reality is that in the first three months the city collected just $363,903 from the cameras, so Mayor Tomás Regalado says it’s cutting estimated camera revenues to $2 million to $3 million for nine months — although at the current pace it will collect just $1.09 million.
But even $1.09 million is illusory, because from proceeds the city must pay its camera vendor $1.665 million. While the vendor at year’s end won’t get more from any camera than the city’s share of fines there, the city must pay in full for each profitable camera. So Miami is on the road to lose on the deal, not make $8 million — or anything at all.
The good thing: cameras might save lives. They’re safety devices, not a waste.
The bad thing: they’re a cost, not a profit center for a cash-strapped city that was counting on $8 million from them.
Before buying into the cameras as a massive revenue generator, officials undoubtedly did the math, but did they tell commissioners?
The numbers are simple enough. The city must pay American Traffic Solutions Inc. about $185,000 per month for cameras at 18 intersections. The city gets $75 of each $158 ticket from the courts. To pay the bills plus pocket $8 million in nine months, the city would have had to collect for 14,319 red light tickets every single month.
Even that great leap of faith in the lawlessness of Miami drivers assumes every ticket is paid. But they aren’t. Well-advertised firms make a very good living beating traffic tickets for a fee.
And because of that, a large number of tickets go to court — and police with them. If officers aren’t there on overtime, they’re not on the streets working. Either way, the city pays trained officers expensive court time. If police don’t show up, the city doesn’t get paid — the ticket mills do.
Any assessment of the profitability of red-light cameras must subtract police time from a $75 city share of the fine. It also must include how many tickets finally go unpaid.
Surely the city did the math. Didn’t it?
Then, how in the name of political expediency did officials buy an $8 million profit in nine months? That assumes the city will collect in full for 128,867 tickets from just those 18 intersections at absolutely no cost. What were they thinking?
Assistant City Manager Johnny Martinez told commissioners last September the aim of the cameras was not revenues but lives saved: "You can only change behavior if there’s consequences. Our goal is to have zero revenues generated from this in the future" because streets will be safer.
If that’s the goal, the city has succeeded: certainly there is zero profit from the cameras right now — which would be perfect if the city hadn’t budgeted them at almost $1 million a month profit.
The problem isn’t the cameras but the grasping at straws: "The city needs money. Let’s say we can get $8 million in nine months from cameras. That makes it easier to budget. We can deal with reality down the line. Let’s not look at numbers at all."
And, because Miami isn’t likely to end up making a dime from the cameras and property tax rate hikes aren’t likely in our economy, as budgeting for the coming year wraps up expect other revenue-generating ploys geared to balance the budget. Later on, somebody will have to plug those budget holes too.
Miami isn’t alone in battling budget pressures. It won’t be alone in groping for new revenue streams, which is fine if they’re realistic.
But please, commissioners, before you buy into the next bonanza of newly found money that will help avoid painful spending cuts, get someone to do the math — and then see if it’s logical.
If it’s not, give those boondoggles the red light.