By Coral Gables Gazette staff

Even with the possibility of revenues taking major hits in the coming years, and city staff arguing that it will have plenty of challenges in maintaining city services at their current levels in the next year, the Coral Gables Budget/Audit Advisory Board refused to recommend that the City Commission not cut the city’s property tax rate during its September Budget Hearings.

Only three board members attended their Aug. 19 meeting, and two of them agreed with the sentiment that the city should not cut its tax rate – 5.559 mills, the same rate it has had for the past 11 years – but they decided not to make any formal recommendation to the commission anyway.

Two members favor keeping the tax rate unchanged

Chair John Holian acknowledged that “everything has gotten more expensive” and that from his perspective they shouldn’t entertain a tax cut. Still, he felt uneasy making a recommendation based on two votes. “I think it’s a big issue. (And it would be) three people making the decision,” he said, of making a recommendation to the commission.

While fellow Board Member Debra Register agreed with Holian, the third board member, Joseph Palmer, had a very different perspective. Palmer said he and at least two members of the city commission were open to cuts, and that he believed there were plenty of ways the city could make up for budget revenue shortfalls in the future.

Palmer points to reserves and pension payments

Palmer pointed to the city’s reserves and pension obligations as two areas where he believes Coral Gables could eventually find money without cutting services. The city’s current budget fully funds a reserve policy equal to 25% of the general fund, or about $64.1 million, according to city budget documents.

Palmer said he was not a fan of maintaining such a large reserve and suggested the city could potentially reduce it to between 17% and 18%, freeing millions of dollars. He also pointed to what he described as the city’s overfunding of its pension obligations.

Deputy Finance Director Paula Rodriguez acknowledged that the city’s pension payments exceed what actuaries require but said there is a reason for doing so: The faster the city pays down its pension debt, the sooner that debt disappears.

Palmer estimated that about $8 million of the city’s annual pension contribution could be considered discretionary. He argued that, combined with a reduction in reserves, the money could eventually be used to address revenue shortfalls or fund improvements.

Palmer volunteered that he believed Commissioner Ariel Fernandez and Melissa Castro were open to a tax cut because they represented residents, while Mayor Vince Lago, Vice Mayor Rhonda Anderson and Commissioner Richard Lara were more supportive of development. Palmer said he believed the commission’s makeup could change the discussion over how aggressively the city should preserve reserves and fund future obligations.

Rodriguez said Palmer’s broader fiscal discussion was valid, but it was largely a conversation about future budget years rather than the fiscal 2027 budget currently before the board. “The millage is this (upcoming) fiscal year,” Rodriguez said, while longer-term strategies would be addressed during subsequent budget processes.

Future revenue losses loom over the debate

That distinction is important because the city is already anticipating a major hit to property-tax revenue if a proposed statewide constitutional amendment expanding the homestead exemption is approved by voters in November. City projections estimate the change would reduce Coral Gables property-tax revenue by approximately $5.7 million in fiscal 2028 and $11.4 million in fiscal 2029 and beyond.

Rodriguez also explained that state rules recently changed how the commission can set the millage rate. Under the new system, four of the five commissioners are required to approve a rate above the rollback rate — the rate that would generate approximately the same property-tax revenue as the previous year. Three commissioners can approve the rollback rate.

The city has already set the proposed 5.559-mill rate for the coming budget cycle. The budget calls for property-tax revenue of about $146.46 million, with the unchanged rate producing roughly $8.9 million more than the current year because property values increased.

Rodriguez said the board needed to make a recommendation at its Aug. 19 meeting if it wanted that recommendation to reach commissioners before the Sept. 15 and Sept. 29 budget hearings.

It did not.

Board expansion could broaden the fiscal debate

Rodriguez also told the board that commissioners will consider two measures next week that could change the composition and role of the Budget/Audit Advisory Board.

Commissioner Richard Lara is sponsoring the appointment of Jose Riera to fill a fifth seat on the board. A separate resolution sponsored by Mayor Vince Lago would expand the board from five to seven members, adding one member appointed by the city manager and another appointed by the city attorney.

The resolution says the expansion is being proposed as the city faces the possibility of “significant property tax reform” and potentially substantial long-term fiscal and budgetary consequences. It says the additional members would bring greater depth and diversity of professional expertise to the board as the city considers future budget strategies and long-range financial planning.

Rodriguez said those broader discussions – including how the city could address future revenue losses and whether reserves, pension payments or other funding sources should be reconsidered – are the kinds of issues the expanded board could examine.