Our View: The city's days of reckoning

 

Our View: The city's days of reckoning

 

Date: May 30, 2013
by: Observer Staff

 
 

 

 

 

Page 1 headline: City budget — $6 million deficit.

Welcome to Sarasota, Mr. Tom Barwin. Good luck in your new job as city manager.

Same to you, Shannon Snyder, new Sarasota mayor. Good luck.

The days of reckoning are here.

And the options are not pleasant. Perhaps that is why Commissioner Terry Turner decided to move on. He left some tough decisions for his replacement, Susan Chapman, and her commission colleagues.

Like their counterparts in Washington, D.C., Sarasota city commissioners over the past decade and a half have kicked the proverbial entitlement can down the road. In the city’s case, the entitlement can includes all of the city-employee pension costs, which at last count in 2012 totaled $173 million in unfunded liabilities. That’s $173 million that city taxpayers eventually must pay.

Oh, and that $173 million doesn’t include the $122,948,014 in unfunded liabilities for employees’ post-retirement health-insurance plans.

Altogether, city employees’ unfunded pension and insurance liabilities total $295.9 million, which is 11 times greater than the $26.6 million the city collects each year in property taxes. To make the picture even gloomier: In the past fiscal year, the unfunded liabilities increased 21.2%, or by $30.3 million.

More angst for city taxpayers: According to the city’s 2012 Comprehensive Annual Financial Report, which reveals all of the city’s ugly financial truths, city taxpayers in 2011-2012 paid $23.4 million in cash to cover the city’s annual contributions to the employees’ pension plans. County taxpayers even contributed. They paid some of the $3.6 million toward the general employees’ pension cost and $4.6 million toward the city’s fire-department pension obligations.

Of that $23.4 million in pension costs, the largest amount — $4.8 million — went to the police pensions.
Think about this for perspective, too: As noted above, the city’s property-tax collections totaled $26.6 million; but pension costs, theoretically, swallowed 88% of the city’s property-tax revenues.

More piling on: Add another $9.5 million in cash that is required each year to cover the city’s long-term debt payments.

Altogether, then, pensions and current debt payments consume $32.9 million — 66.4% of the annual general fund budget of $49.48 million.

Do you get the picture? Debt and pensions are sucking the city dry.

The point is obvious: The city needs and must increase its annual revenues. And while some pension cuts and other expense cutting must occur, cutting expenses is never a complete or satisfactory strategy to be a thriving, successful enterprise.

It’s going to be a long, hot, intense summer at City Hall.

 

+ Tax incentives in Manatee
Last week on this page, we addressed the first question on Manatee County’s June 18 ballot — whether to adopt a half-cent sales tax dedicated to paying for indigent care.

Our conclusion: The underlying ramifications and plans to tie this tax to property-tax relief needed more vetting. Good ideas, but it is fraught with problems.

This week, we address the second question on the ballot: whether to allow county commissioners to grant property-tax abatements to new or expanding businesses.

Manatee County business leaders won’t like how we state this, but here are a few other ways to view the second question:

• Should the County Commission be allowed to give special property-tax breaks to new or expanding businesses — if the businesses create or add jobs?
• Or, put another way, should the commissioners be allowed to subsidize new or expanding businesses, via property-tax breaks, at the expense of everyone else — so long as the businesses create or add new jobs?
• Or, to put it still another way, should commissioners be allowed to pick winners and losers?

Our guess is most voters’ instinct is likely to answer “no” to these questions. Americans have a strong disdain for special interests. And yet, we create them all of the time.

Here are the arguments you hear in support of giving the commissioners this “tax-abatement” authority:
Manatee commissioners need this authority so the county can be competitive in the national and state economic-development arenas — that includes being competitive with Sarasota County as well. As the county’s economic development and chamber of commerce officials will tell you, Manatee is the only county in the Greater Tampa Bay region that does not have this economic-development “tool” available to recruit and help expanding businesses. And as a result, the county loses out to companies and businesses considering relocating or expanding. This is hurting Manatee’s economic attractiveness.

Proponents also argue that granting these “tax-abatement tools” produces a justifiable return on investment. They say the economic multipliers far outweigh the cost of the property-tax subsidies.

Instinctively, this sounds right: What’s a small tax break if it means a particular business will hire 10 or 20 more employees that it otherwise might not? Those new employees buy homes, cars, groceries, insurance, medical services and on and on, fueling still more growth in the local economy. And as the size and value of that subsidized company grows, when its tax break ends, it will be paying more taxes than it otherwise would have been if it didn’t receive the tax abatement to help it grow.

What’s more, the argument goes, tax-abatements are a fact of life in economic development circles.

Everybody does it. Manatee, the argument goes, must stay competitive.

To paraphrase the late eminent economist, Milton Friedman, seldom is the other side of this coin considered. As Friedman explained many years ago to Forbes magazine, when governments give tax breaks and subsidies to businesses, government officials are assuming the new jobs that those subsidized businesses promise would never be created by anyone else.

To the contrary, Friedman said. Who is to say Manatee County’s other businesses and taxpayers would not create the same number or more jobs than the subsidized business if existing taxpayers were able to use the money that is taken from them to subsidize the new business?

In a perfect world, which, of course, is a dream, all cities, counties and states would discontinue their corporate subsidy (welfare) programs. Instead, they would compete on what they should really focus, which is creating the right economic climate — low taxes and low regulation. Get out of the business of creating special interests; it fosters community backlash.

While this newspaper has always been a strong proponent of business and economic growth, we have likewise opposed business tax breaks in the name of economic development. We still oppose them.

Nonetheless, it won’t be catastrophic if Manatee voters give commissioners the authority to offer businesses tax breaks. But here’s the catch: Any business that is awarded a break must be held accountable.


MANATEE BALLOT QUESTION #2
2) ECONOMIC DEVELOPMENT AD VALOREM TAX EXEMPTIONS
Shall the Board of County Commissioners of Manatee County be authorized to grant, pursuant to Section 3, Article VII of the State Constitution, property tax exemptions to new businesses and expansions of existing businesses that are expected to create new, full-time jobs in the county?


WHO’S THE ‘L’?
About 7:30 a.m. Wednesday, May 15, the morning after Sarasota City Commission candidate Richard Dorfman lost the election for a seat on the commission, Dorfman saw an email awaiting him from outgoing Commissioner Terry Turner.

Dorfman opened the email, and there it was.

Surely you recognize the symbol.

Turner’s email explains a lot about the current state of the city of Sarasota and those who control City Hall.

 

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