Will your property taxes increase in ’21? County prepping for a budget squeeze

Miami-Dade County headed into the coronavirus emergency with property-tax rates as low as they’ve been in 13 years. Now 2021 will test if those rates can survive the crisis intact without cuts in county services.

As much as this year brought an economic calamity to South Florida, it’s 2021 where local governments could take an even bigger hit as federal relief programs expire and property-tax bills

The coronavirus pandemic sent sales taxes plunging in Miami-Dade but not residential property values. The county may face a budget squeeze in 2021 with flat property-tax rates.

reflect the COVID-19 impact for the first time. County budget forecasts are counting on a significant rebound in consumer spending and Miami tourism, increasing the local stakes for a healthier

U.S. and global economy in 2021.

“This board is going to have to raise taxes in September. We’re going to be the first board in 14 years to raise millage rates,” Commissioner

Joe Martinez said earlier this month in arguing for MiamiDade to conserve federal CARES Act dollars to plug looming budget holes. “We either raise taxes to cover it, or defund the police.”

After Martinez’s Dec. 7 comments, incoming commission chairman Jose “Pepe” Diaz issued an indirect rebuke when he warned against “creating havoc” with comments about raising taxes. The county’s new mayor, Daniella Levine Cava, said during the 2020 election she wouldn’t raise property-tax rates. This week, she said higher rates aren’t on the horizon for a budget fix. “That’s not what we’re talking about,” she said.

The skirmish over tax talk captures how Miami-Dade’s 2021 budget process could be the most strained in years.

State data show a 7% drop in taxable sales through September in Miami-Dade. Hotel taxes continued their plummet, down 51% through the

fall. A recent state economic forecast predicts a 6% decline in values for Miami-Dade commercial properties, though residential real estate has been a bright spot in the COVID-19 economy as people seek roomier homes and pursue climates more conducive to outdoor lifestyles.

A TALE OF TWO MIAMI REAL ESTATE MARKETS

“What we’re seeing is strong, healthy growth in the single-family sector,” said Lazaro Solis, deputy property appraiser in Miami-Dade.

The office will spend the first part of 2021 calculating the real estate values that determine how much money flat property-tax rates will generate for local governments across Miami-Dade. While home sales are showing strength, Solis said the commercial side looks weak as stores close and tenants don’t pay rent during an eviction freeze.

“If you have a percentage of your tenants not paying rent, or you’re getting a fraction of what you used to get, that’s going to bring down your valuation,” he said.

A recent batch of countylevel economic forecasts from Florida’s Revenue Estimating Conference offers some optimistic news. The state analysts were more bullish on real estate values than they were in an August report, and predicted MiamiDade’s property values would probably increase just under 2% next year. That matches MiamiDade’s forecast. The better news comes in 2022, when the state forecast predicts a 4% increase, slightly better than the 3% growth in the county’s long-term outlook.

Valentina Gomez, a Moody’s analyst who tracks government finances in the Southeast, said property taxes have proven to be some of the most durable revenue sources during the coronavirus downturn, with sales taxes and income taxes taking quicker hits from higher unemployment rates. With no income tax in Florida, Miami-Dade counts on property taxes for about 50 cents of every dollar of operational expense. “That’s a strength at this point,” she said.

Moody’s does not predict severe financial stress for Miami-Dade’s government from COVID, Gomez said, pointing to a $50 million rainy-day fund, stable values for residential properties and the county’s track record of keeping spending under control. “They have had great budget management,” she said, “and continually outperform their forecasts.”

But that doesn’t mean Miami-Dade won’t have to cut expenses if revenues fall short when commissioners take their final budget votes in September. “We certainly don’t expect them to have any issues paying their debt,” she said. “If they have revenue declines and need to make cuts in order to keep their financial positions in tact, that’s something we always expect any local government” to do.

TAX RATES WERE LAST LOWER IN 2008

The last mayor to push through a tax-rate increase was Carlos Alvarez, whose 2011 budget raised rates in the midst of a plunge in real estate values during a real estate crash. Voters ousted him months later in a recall and elected Carlos Gimenez to replace him. Gimenez reversed the rate increase in his debut budget.

That 2012 rate of $480 for every $100,000 of taxable value ended up the highest of Gimenez’s tenure. Commissioners approved a slight dip in 2014 to $467 to compensate for an increase in the county’s library tax, and that 2014 countywide rate remains in place today. The last time the county’s tax rate was lower than it is now was in 2008, when it cost $458 per $100,000 of taxable value.

Gimenez’s final budget, approved in September with eight Yes votes, including one by then-commissioner Levine Cava, showed the flat-tax rate and the COVID-19 downturn would start causing budget headaches this summer.

The forecast shows a countywide revenue shortfall of $33 million for the 2022 budget, which the mayor submits in July for preliminary commission tax votes. The deficit grows to more than $100 million in 2023, and then higher after the county burns through about $55 million in unspent “carryover” cash from prior years.

That forecast assumes the county’s property values rising less than 2% by Jan. 1, about half the rate of growth predicted in the county’s pre-COVID forecasts and a slowdown from prior years. Should the real estate market perform better in the valuations calculated by the county’s office of the Property Appraiser, budget pressures would be less. Should values grow by less or even drop, the deficit would be worse.

Miami-Dade commissioners don’t set the 2022 tax rates until the summer, but major decisions on county finances loom in the coming weeks. Levine Cava is weighing when to end free rides on county trains and buses, after 10 months of suspending fares as a way to keep passengers separated from drivers and slow the coronavirus spread.

WHEN WILL BUS AND METRORAIL FARES RETURN?

Originally scheduled to end Dec. 31, the Levine Cava administration plans to extend the current 10month fare suspension through January as it prepares to ready the public for an end to the free rides, two sources said. The return of fare revenue would arrive as the half-percent sales tax that funds some transportation expenses is starting to beat some county estimates of a steeper downturn. “It’s impacted, but not as much as was originally forecast,” Transportation Director Alice Bravo said.

Commissioners are pressing the Levine Cava administration to extend the emergency food-delivery service for older residents that was costing $4 million a week during the summer surge in COVID infections. While administered by Miami-Dade, the service uses federal dollars that expire Dec. 31.

The tab so far has been $153 million, according to a December report from the county’s chief finance officer, Ed Marquez. That’s mostly paid by the Federal Emergency Management Agency under a special COVID-19 program set to expire Dec. 31, with about $28 million allocated for senior meals from MiamiDade’s $474 million CARES Act allotment.

The CARES Act dollars are only eligible for 2020 expenses, and Marquez told commissioners in his Dec. 7 memo that the county’s senior meal program cannot “be maintained into the new year without additional Federal funding...or the County accessing its emergency reserves” or taking from other departmental budgets.

On Thursday, Marquez said he thinks FEMA may let Miami-Dade continue with the program after Jan. 1 without the county having to cover the full costs. “FEMA has said they are open to extending until March,” he said.