Four-letter words, for some reason, tend to be very powerful in the English language. You’ve got “love” and “hate,” to name just two. I’ll skip others you may be thinking of.
But in budget season, there’s another four-letter word that really gets a workout. That word would be “fair.”
Is astroturfing the leased St. Agnes playing field fair? What about hiring professional staff to run athletic programs, a source of tension due to high demand? Or $150,000 in police overtime? Or fixing up busted traffic circles?
These are some items on a $5 million ‘wish list’ that may — or may not — get axed tomorrow when the Key Biscayne Village Council meets. While the vote is technically reversible, once the “millage rate” is set, new spending can’t be added without cutting elsewhere as a practical matter.
In the budget process, the fairness question looms large. But because this annual drama happens in the middle of the summer, it can wind up excluding participation. That’s especially true when it comes to the groups most affected who are on vacation and who don’t get involved when the tax-versus-spend decisions come.
An uneven tax system – by design
In debating notions of fairness, few realize how lopsided the tax burden has become on Key Biscayne. The tax playing field is not level. And as the expression goes, that is a feature, not a bug.
Voters changed the Florida Constitution three decades ago with the “Save Our Homes” tax break for owners remaining in their homes. Thus, old-timers pay a lot less than newcomers. The disparity grows every year, even more so when there are big jumps in home values, officials say.
Winners and Losers
The big winners —even before any vote— are people who’ve long lived in Homesteaded homes, because no matter what number that is set as a budget starting point, they’re assured of getting a big tax break.
“It’s huge,” said Village CFO Benjamin Nussbaum. Last year, 444 homeowners out of 7,200 parcels had assessment reductions of $1 million or more. “I can’t emphasize that enough,” he said.
If one or two of Key Biscayne’s priciest homes were to sell, for example, the resulting recalculation of assessed value would noticeably lower the tax rate for everyone else in Key Biscayne, he said.
Some other points from Village data:
- At the stratospheric end of island home values, a waterfront property acquired in 1997, now worth $20 million, is only paying tax on $5 million.
- People with Homesteaded properties paid tax on only 57% of the market value of their homes, on average.
- Non-homesteaded residential property owners — people or corporations who for the most part are renting out homes — are paying almost two-thirds of the taxes in Key Biscayne.
- Just 16% of property owners are shouldering one-half of the Village tax burden. That number is mostly the big commercial properties (who pay 2% of the tax burden) and 549 non-homesteaded single family homes.
While it’s tempting to think landlords have seen huge increases in rental income and can easily shoulder most of the tax burden, the reality is that those rental costs are just passed on to consumers in the form of high rents or prices. Go to any Chamber of Commerce meeting and ask how hard it is to succeed with a retail business on Key Biscayne with its high rents.
In other words — be nice to a renter. They may be paying a heck of a lot more for Village services than you are, if you own a homesteaded home.
Perspective and Spin
It’s also important to really distinguish between tax rates and actual taxes. How does one set a rate? A property rate, after all, is a form of wealth tax. Coming up with a rate on a house is no easier than, say, deciding how to tax a billionaire’s stock holdings on what an accountant would call an unrealized gain.
For example, Manager Steve Williamson’s “baseline” budget actually cuts the tax rate 6% even though the actual tax bills would go up. The “wish list” budget up for discussion Tuesday increases the tax rate 4.9% from last year, but when added to the increase in property values, the increase in actual taxes is 14.6% – for non-homesteaded properties. For homesteaded properties, the increase in actual taxes would be 7.9%.
By way of comparison, the U.S. Labor Department says the Miami inflation rate was 6.9% for 12 months ending in June.
It’s also worth noting that when trying to judge what is “fair,” the wish list rate of 3.3 is actually much lower than it has been in the past, when Key Biscayne rates were often near 3.5.
The Village didn’t have direct statistics correlating taxes with age, but other data supports the view that after 30 years of Save Our Homes, local taxes often fall disproportionately on the young: people who are renting or those who recently bought a home here, especially if the home is their first. If these families with children are demanding services — they are the ones who often are paying the most.
So — just a note of caution when you hear the word “fair” in the millage debate Tuesday, even if all the numbers make your head spin.
After all, “spin” is also a four-letter word.
Tony Winton is the editor-in-chief of the Key Biscayne Independent and president of Miami Fourth Estate, Inc. He worked previously at The Associated Press for three decades winning multiple Edward R. Murrow awards. He was president of the News Media Guild, a journalism union, for 10 years. Born in Chicago, he is a graduate of Columbia University. His interests are photography and technology, sailing, cooking, and science fiction.