Proposed Tax Increase Accomplished with Lower Millage
Posted by Fred Scheibl on September 4, 2022 · Leave a Comment
The proposed 2023 PBG Budget raises about $7.8M in new taxes, up a 10.9% over last year’s adopted budget. See the Proposed Budget here.
With the millage at 5.32, down from the 5.55 it has been for the last 7 years, this is the eighth year that increases in property valuations and new construction have provided a painless increase in revenue. In 2015, the last year there was a millage reduction, ad-valorem revenue was $49M. This year’s $80M is a 62% increase over the seven years of flat millage.
Similar to last year, the 2023 budget needs to be thought of differently because excessive federal spending and money printing by the Federal Reserve has brought us a repeat of the inflationary environment of the ’70s. The Bureau of Labor Statistics tracks the “CONSUMER PRICE INDEX FOR ALL URBAN CONSUMERS (CPI-U)” monthly. In July of this year, that figure stands at 297 – up a whopping 8.8% over one year ago when it was 273. At that rate, we expect a 323 CPI in the middle of the 2023 fiscal year. As you will see in the TABOR comparison, the tax increase is justified in this environment with the Biden Administration continuing to print money like there is no tomorrow.
Projecting out the PBG population estimates from the Bureau of Economic and Business Research (BEBR at UFL), the Gardens population will be just shy of 61K in 2023, up about 1%. The TABOR multiple (Taxpayer Bill of Rights – inflation times population growth) is therefore about 9.8%.
TABOR
In 1992, the state of Colorado amended their constitution to restrict the growth of taxation. Under the “Taxpayer Bill of Rights” (TABOR), state and local governments could not raise tax rates without voter approval and could not spend revenues collected under existing tax rates without voter approval if revenues grow faster than the rate of inflation and population growth. The results of this Colorado experiment are mixed, and TABOR has its pros and cons. (For background on TABOR, see: Taxpayer Bill of Rights ) Population growth and inflation though, would seem to be a way of assessing the appropriateness of the growth of a city budget, at least as an initial benchmark.
Since 2005, the population of Palm Beach Gardens will have grown by about 45% (BEBR estimate – see below) to its estimated 2023 level of 61K. Inflation, measured by the consumer price index, will be about 66%. Taken together, TABOR would suggest a growth in city spending and taxation of about 140%. (see graph below).
Over the same period (2005-2023), ad-valorem taxes grew 126% and total expenditures (budget less capital and transfers) grew 111%. Spending closely follows the TABOR line, and ad-valorem taxes is not widely divergent suggesting spending and taxation appropriate to a growing city.
It should be noted that ad-valorem taxes fund only a part of city expenditures, the rest made up from impact fees, fees for services, other taxes, intergovernmental grants, etc. and have varied from 66% of the total in 2005 to about 70% now. That is why taxes and expenses do not track each other on the chart.
Another useful measurement is taxes per capita – Ad valorem taxes divided by population and then inflation adjusted. By this measure, in 2005 we paid $1,273 per person to our city and in 2022 it will be $1,200 (2022 dollars) – an actual decline. Tax per capita was as low as $1148 in 2014 after a millage reduction. It should be noted that as property owners, we pay taxes to other entities besides the city – county, schools, health care district, etc. In 2021 the Palm Beach Gardens portion of the amount on our TRIM statement is about 27% of the total.
The chart below shows an actual decline in per-capita taxation for two years in a row and then a flattening this year. However, there is reason to believe the BEBR population estimates have missed some of the city’s growth (see below). If the numbers were to be adjusted to match the growth in voter registrations since 2016 for example, the curve would be flatter since there are more people to pay the taxes.
So if you trust TABOR, or per-capita as measuring sticks, this modest growth in taxation (compared to inflation) for 2022 seems appropriate in our view. You be the judge.
A word about population estimates.
Estimates of the Gardens population vary. The numbers used in the preceding two charts are based on the University of Florida’s Bureau of Business and Economic Research (BEBR) data. By their measure, we have grown 42% to 2021 since 2005. The US Census has a slightly different set of numbers and they claim 41% over the same period. (Prior to the 2020 census results they were widely divergent.) BEBR says we had 59,755 residents in 2021. the Census said 59,549. Projecting to 2023 at the same rates would get approximately 60.9K and 60.2K respectively.
BEBR has been more reliable as the census numbers degrade over time. In 2017, the city annexed Osprey Isles and Carleton Oaks and in 2018 Bay Hill and Rustic Lakes. It did not appear that the census adjusts for annexations between decennials. Also, certain areas of the city are growing rapidly, such as Alton and Avenir. This will likely see a faster expansion than the current BEBR or Census trend line.