Friday, January 21, 2011

Crunch Time for Palm Bay

The biggest test for our City Council Members is about to face them, and their decision can mean more money in our wallets or more money out of our wallets.

It’s no secret that our national economy is the worst it’s ever been since the great depression and with more real estate foreclosures on the horizon, oil set to rise well over $100 per barrel (with some analysts conservatively predicting almost $200 by the end of the year), and China’s tyrannical dictator Hu Jintao calling for the end of the Dollar and its replacement of the Chinese Yuan as the new world’s trading currency reserve, it’s only a matter of time until hyperinflation hits the store shelves and gasoline pumps.

Although our national woes are great and inevitable, there is a double-whammy when considering the local woes. First there are the massive pension problems in the State of Florida as well as “… cities paying close to 70 percent of their overall budget on pensions” in many of Florida’s crippling municipalities Many City Council Members are forced to come face-to-face with this reality, as our own Mayor John Mazziotti said, ". . . All employees, union and non-union, and all citizens, owners and renters, must understand that these are different and difficult times, that we are entering a period that will be known as the 'new normal,' and that we must be willing to restructure how we provide services, how we pay for those services and how we compensate our employees."

We are not alone, as many states are facing the same problems. But behind the declining government revenues, there lies another looming problem: The Municipal Bond Problem! Let’s face it, like Governor Chris Christie from New Jersey said, “We are not the federal government, we can not print money out of thin air.” With China and the rest of the world threatening to dump the dollar at the first chance they get, the U.S. Congress has suddenly become more fiscally conscience about spending and raising the debt ceiling in order to keep the dollar attractive in the international trading market. Of course, less money from Washington will soon leave us with only two alternatives here at our municipality: cut government spending or tax the people more.

As I mentioned in a previous article we are the second highest taxed municipality in all of Brevard County. We also have the second highest unemployment rate in the county, as well. Palm Bay is also depopulating. I have spoken with some Palm Bay residents either at the last garage sale I had, or neighbors of friends and families, who are moving either to the next town over from Palm Bay or a nearby county to avoid paying a few dollars in their millage rate. I mean what’s a few dollars, right? Well, a few dollars per one thousand dollars can mean a few hundred dollars more in your wallet every year (even a couple of thousand dollars more depending on the assessed value of your home). Nevertheless, in this economy, a few hundred dollars more a year can mean the difference between food on the table or a few hungry nights; just barely paying the mortgage or being behind on mortgage payments; having enough gas to drive to work or calling out of work because there is no money for transportation. Those of us dealing with this economic depression know what it means to have to cut our own spending habits. After all, we don’t have the police power of government to force others to pay us from the fruit of their labors. However, does our local government understand our plight? Will they raise taxes or lower taxes?

Let’s suppose our City Council Members unanimously vote to stay the millage rate or even decrease the millage rate, then that means they have one other alternative: to cut spending. This may sound easy. Some of you may already have some solutions off the top of your heads: 30% cut across the board, or cut this department spending or cut that department spending. I am sure many of us won’t miss a lot of government services if they were hardly functioning or not functioning, at all. A recent poll revealed that nearly 60% of all Americans wouldn’t mind if some essential government services were not provided for a few days out of the week or not provided, at all. But when you’re talking about cutting government spending, what exactly do you cut? What would you consider an essential government service? How much is enough for those services that “We The People” are willing to pay out of our wallets?

There is an interesting way of looking at this situation. Palm Bay has two investors: Tax-Paying Residents and Municipal Bond Investors. As previously stated, we can not print money out of thin air. So, that means, tax revenue and debt will be the only bread and butter of local governments such as ours. We’ve already establish that if we raise taxes (or even leave them where they’re at) we risk putting more pressure on hard-working families (i.e. our primary investors) and further suppressing the local real estate market. That leaves us with the secondary investors, and unlike our primary investors, those secondary investors are not obligated to pay into our local government system. All they have to do is take one good look at our financial statements for the past five years, and they will find two facts that can mean purchasing millions of dollars of municipal bonds or considering them worthless:

1.Palm Bay has been operating in the red for the past four years

2.Palm Bay’s special interest bonds have spiked significantly from approximately 5% of our total outstanding bonds in 2005, to almost 20% of our total outstanding bonds in 2009.

Now, from the municipal bond investor’s point of view, it would make more sense to invest in municipal bonds that pertain to essential services like utilities and public works. Most of these municipal bonds are solid and are looked at favorably by most institutional investors since infrastructure is essential to maintaining a viable City. Not so for pension-backed municipal bonds. If you knocked on the door of every occupied home in Palm Bay, I am pretty sure that 9 out of every 10 home owner will have no problem paying for those essential services, but will be appalled at paying more for pensions – especially during these tough economic times.

You see… the secondary investors know this about the primary investors. And when the federal hand-outs are finally exhausted and the pension fund is running dry, the only people left to buy the special interest bonds, which fund pensions, are tax-payers and municipal bond investors. This is where the rubber meets the road, and all eyes are on City Council.

Care to know what’s in store for municipal workers and municipalities in the United States, Palm Bay included? Take a good look at Greece, France, Great Britain, Tunisia or a little closer, here, at California. Government services will be forced to shut down for days or indefinitely, government programs face imminent shut downs, as well; pensions in jeopardy of being unfunded and retirees living on fixed income are looking at checks with less amounts or no checks in the mail, at all, for an indefinite period of time.

The financial plague bankrupting California is sure to come to the east. As well as the financial plague causing massive riots and government shut-downs over the "pond" will soon make its way on to our beautiful, sunny, beaches. And the real question we must ask of our elected public servants is, what are we doing to bring back solvency to our municipality without hurting our residents or our credit? Its crunch time, and all eyes and ears are on Palm Bay City Council.


  1. When and where do we meet to handle this problem?

  2. Who are the dumb-asses that continue to go along with Predatory trickle-around never down wealth economics? Or that the top 20% income earners have 85% of the nations wealth leaving scraps for the other 80% who are in the money and not mentioning the million totally left out. Because the past 40 years jobs & manufactoring have been exported plus the Federal govt has been subsidizing "legal immigration" to treasonously supply business with a conforming indefinite cheap labor force.

    Stagnating worker wages,reducing several generational american organized labor. The attacks from Govt & business in the fleecing of American citizens is starting to meet resistance. I and many other don't need to be told to suck-it up, tighten the belt or any other garbage from any Kleptocrat that's been part of the problem and fails to acknowledge or act on proper solutions for the citizens.

    Simple put the abuse,corruption,fraud,deception colaborated by business & govt with an agenda of "profits for the few only OVER financial security for the citizens" must come to an end in USA and the state of Florida. Acknowledge this point, Business or govt enties in the state of Florida will smile & gladly take peoples money when they are willingly or no so willingly patronizing their products or service. Then the smile changes when the patron wants or needs a job! This to must change in-fact who has rule & control or ownership over what must change in USA. The citizens need legal rule & control over money,business & govt just for their own interest and financial security.

    That would be a true direct daily Democracy without any representative govt who are embedded with bribes from the wealthy puppet-masters. I'm in my mid fifthies and totally feed-up with our form of Capitalism & phony representative govt whom i view as Kleptocrats running a Kleptocracy regardless of party affilliation name.

  3. The obvious answer is the same here in PB as it is all levels of Govt as well as in every household- cut discresionary spending. Every dollar our City spends needs to be reviewed with a fine tooth comb to verify wether it is essesntial and/or Constitutionl. Many programs within our City need to be drastically scaled back or removed completely. This process will also place responsiblity back into the hands of the Citizenry who have regretably become comfortable with the cradle to grave, nanny state mentality of an over reaching, ever growing, and intrusive Government sense of entitlement.
    Our previously City retirees entered into a binding agreement with the City & need to be paid in full, deservedly so. The retirement programs of the current workforce will require serious review and will necessarily require significant modification. We cannot afford to be straddled with a continuation of the fiscal situation we are currently in due to these ridiculous "golden" retirement plans paid for with IOU's and higher taxes.
    I personally, have no faith in the current City Council to take the drastic measures required to bring us into sound financial footing. We need to request and demand open budget workshops where the Citizens can be more involved in, and have a more open say into the budget decision making proccess.
    Anything short will simply be an extension of our current tax & spend policies that have led to miles & miles of unpaved roads & more parks sitting idle.
    I have my pitchfork & torch- when & where?

  4. Peter and Dave the both of you are on point, we need to get involve in our local muncipalities, and restore the Republic one level of government at a time.

    The Hammonds, we will meet on Saturday, February 5, 2011 at 12 p.m. at Bob Evans - most likely. I'll let you know in about a week.

    In Liberty!