On July 7th our City Council will have a special meeting on just how high our tax-rates will go. Here are some examples:
Current Millage Rate 7.50 $19,432,409
Proposed Rate 9.00 $23,318,891
Roll-Back Rate 9.68 $25,072,731
Note: The word "Roll-Back" is a double-think speech designed to make you perceive that a higher tax rate in the face of declining home values is justified. (If you're willing to buy into this terminology, then I got some beach front property on Mars I'm selling if you're willing to pay into that, as well). It is simply an increase in our tax rates.
According to Brevard County Property Appraiser, our gross taxable value decreased by $744,004,478 (or 29%). I believe the real drop is much more than this because the decrease in residential properties is more than the decrease in commercial properties. This is illustrated on the Brevard County Appraiser's website. Property values in Brevard County has declined by 42% for all properties from 2008 to 2011.
Considering that Palm Bay's gross taxable value have decreased in one year by more than two-thirds of what Brevard County Total Properties' market value have lost in three years, I would say that Palm Bay residential properties are making a harder-than-usual decline.
When you take into consideration Palm Bay's plummeting home values along with 10.5 percent unemployment and Kennedy Space Center laying off 1,900 people by July 22nd of this year, I think the last thing we should be talking about is raising tax rates and adding fees.
In fact, if we raise tax rates alone, in spite of the lower property values, it will cause six things to happen in Palm Bay in the next few years:
(a) Property values will continue to decline and then stagnate at a certain low
(b) Homeowners will leave and the city will depopulate
(c) Investors will prefer to risk their capital in other cities with lower tax-rates and less or no fees
(d) The lack of capital and new home buyers will continue to erode the city's economy and go bankrupt
(e) Businesses will pack up and leave causing massive unemployment
(f) Crime will exponentially increase
In case you think I'm exaggerating, this has already happened to other cities around the United States. Economist Dr. Stephen J.K. Walters and Historian Louis Miserendino wrote a paper for the Maryland Journal called "How To Make Baltimore A Superstar City" where these two gentlemen researched, what they called, "THE GREAT EVACUATION OF BALTIMORE... between 1950 and 2008" In this great analysis they compare Baltimore to two other cities that also saw massive depopulation, as well: Boston and San Francisco.
In this paper they described how all three cities saw double digit declines in population, jobs, and exponential jump in crime. However, between the years 1980 and 2000, only San Francisco and Boston saw a major come-back in population, jobs, and falling crime, whereas Baltimore continued to do worse. The common denominator for San Francisco and Boston's success was lower tax rates. Baltimore raised tax rates, thinking that lower property values would compensate for the revenue-grabbing municipality. In fact, Dr. Walters make a great point, saying:
"Those who argue that property taxes “don’t matter much” frequently cite Baltimore’s
generally lower property values as an offset to the city’s higher tax rate. In a
world where property never decays, or where owners do not care about future returns
on their investments, this argument might have some merit; in the real world, it is nonsense."
It's actually quite simple: higher property values are a result of lower tax rates and lower property values are a result of higher tax rates. Now, add a fee to higher tax rates and you can kiss your "bedroom community" goodbye. As the declining property values erode home equity, so will renovations and upgrades diminish overtime. Real property equity is an integral part of an investor's credit establishment to further expand their operation - which in turn creates more jobs. Without the incentive of lower tax rates, the real job creators (i.e. private sector) will decide to take their capital elsewhere.
If City Council approves these higher property tax rates and added fees, then it will be a very, very long time before we'll ever see a real estate bounce in Palm Bay. Until then, we tax payers will get stuck with this heft bill.
Harry Santiago Jr.