Martin County’s governments are about to enter an extended period of difficult financial problems. Florida’s property tax reform legislation, the effects of past spending excesses and other trends in County demographics look to be providing a perfect storm of financial challenge lasting several years – or more if not properly managed.

Early next year voters will be asked to approve a constitutional amendment that, if approved, will give homesteaded property owners an option for a one-time super exemption, or continue under the present system. Since there is virtually no down side, voters will almost certainly pass the amendment. Most media coverage has acknowledged this reality and revolved around how residents determine which option will be best. Less discussed is the immediate decrease in property tax revenue that will result, and other provisions of the legislation that have large implications for local governments. Under the new provisions Ad Valorem income will not be allowed to grow faster than the personal income of County property taxpayers, except to accommodate new development. Martin County prides itself on having one of the lowest growth rates in all of Florida, averaging only about 2% per year for at least ten years. Last year it dropped to 1.38% and looks to dip below 1% this year, essentially negative growth. In short, relying on new development will not be an option.

Growth in personal income is therefore the only approved method to justify increasing government income from property taxes, but that is also a problem for Martin County. Unemployment has crept up as construction slowed, and the County has been steadily losing high paying private industry jobs for years. Major companies such as Northrop Grumman, Vought, Pratt and Whitney and their supporting businesses have down sized, left the area or folded. Those jobs have been replaced by ones in lower paying service oriented businesses. Of the remaining higher paying occupations, most are in various government or government supported employment. In fact, the largest employer in Martin County is our school system, followed closely by County Government and Government supported medical care. Their salaries are dependent on the very taxes being raised, and have already been increasing faster than the civilian sector. Further raising their income obviously does not work

Apparently there is also a problem looming in the collection of sales taxes. It is reported that recent collections are down and a major new mall is being planned for the Tradition development. This could move a large segment of Stuart/Jensen Beach/Treasure Coast Mall shoppers, and their large tax receipts, from Martin to St. Lucie County.

To counter these trends the County’s governments are now scrambling for other sources of income in an effort to maintain levels of service. A wide variety of new user fees have been instituted and numerous others proposed. Some, such as increasing user fees for fire and ambulance service, will be paid by insurance companies and may help, but will still cost local policyholders. Others, such as higher fees for mandatory evaluation of construction plans and new increases in impact fees will further drive up the cost of new housing and businesses. This could further chill the quest for new, higher paying jobs, not mention efforts to build affordable housing. A more immediate problem is the drastic slowdown in new building permits since the realty market cooled. The projected increases in fees appear to be more than wiped out by the decreasing numbers.

SO WHAT TO DO? There is only one answer, the same one you would use if your family’s income dropped precipitously – cut your spending. Unfortunately, there are few places to cut costs without cutting personnel and, most likely, levels of service. This is because salaries and benefits account for approximately 85 % of Administration, 87% of School and Sheriff, and as much as 93% of EMS’s operational budgets. This is the result of automatic yearly “longevity” pay increases plus inordinately generous raises and benefits packages enacted by our Commissioners during years of plenty. These budget-busting actions are going to be very difficult to rectify since they have become ingrained in the County’s government culture and, more importantly, union contracts.

The County Administrator has led an unpopular, but relatively effective effort to trim the 2008 budget to State mandated levels, while adhering to the Commission’s guidance. This will be even harder going forward, requiring major changes in personnel policies. We hope these efforts to improve efficiency and cut costs are not overcome by political posturing of those that caused the problem.