General Lee Cautions City Council On Hurricane (Spending) Season

Citizen budget hawk John Marshall Lee issues a storm warning to the City Council in his latest address to the budget-making body Monday night.

We are in the hurricane season where the storms roar up the Atlantic Coast. Combined days of rain, with high tides and wind-borne waves can damage low-lying properties and harm residents physically and financially.

I comment on municipal financial topics and not on the weather, but there are connections. When you hear the word “underwater” in a conversation today, what comes to mind? Is it a house, auto or other property that has been overrun by river or seawater? Or is it a residential property originally purchased at market value and financed with little or no down payment and a large mortgage? Today, with market values reduced, is the debt larger than the property is worth?

Underwater property is understood in Bridgeport. Too much debt financing in the last real estate bubble has caused debtors to walk away from their homes today as there is no equity left. If the owner likes the property and can wait for values to rise in the future he may continue to pay principal, interest, taxes and insurance, despite the current “underwater” condition. Then the banker is happy. However, many of the properties become vacant, less well maintained, and find their values reduced and in turn reduce values in their neighborhoods, generally. Why worry?

The Council knows the City-approved operating budget is about $520 Million annually including public schools. When additional grants are added to the City and BOE, another $150 Million of appropriations are spent annually. From the total of $670 Million, local property taxpayers contribute only $290 Million towards annual City revenues. Do the math, please. $670 Million of expense less $290 Million of local tax revenue leaves the City depending on other sources for $380 Million or more annually to meet City spending. The State of CT or the Federal Government provides 60% of our City operating revenue. We live on the kindness of others. We cannot pay our way and have not been able to do so for years. Why worry?

Well, let’s look at the recent maneuvers at City Hall to keep secret the revaluation results from the taxpayer. Property Values as of October 1, 2008 had decreased by October 1, 2013, but they did not do so uniformly. So some in Bridgeport are paying too much and some too little when we use the 2008 rather than the 2013 numbers for our tax payments this year. Is this just or fair? No, but the Mayor and later the State have made it possible. With assessments down 30, 40 or even 50%, the City mil rate would need to rise to compensate for the tax dollars necessary to meet the budget, but if the budget were level, the total tax revenues would stay the same despite the higher mil rate. The mil rate is not voodoo, but a rising mil rate is not a good sign to taxpayers or folks looking to put their capital into economic development. Is it a reason to worry? Or a matter of justice?

City assets like land, buildings, and buildings in construction amount to nearly One Billion dollars. The external audit for 2013 tells us we have $7 Billion of taxable grand list assets, based on the 2008 assessment. Other non-taxpayers also are on the Gross Grand List, even though they pay no taxes. If 2013 showed a 30-40 % average decrease in City land and building values, perhaps the City assets on the balance sheet reduce to $600-700 Million. Is that enough to wipe out all recorded net worth in the City? Why worry you say? As long as Federal and State programs continue and people pay their taxes, who cares about the City net worth, I have been told. But what happens when one or both does not happen? Are we looking at a Detroit situation? Land and buildings not intended for sale currently are pushed onto the market and fetch what they can. The Detroit Museum of Art is an example. Ultimately the balance sheet is of concern. And a shrinking balance sheet is a ‘telltale’ for a bad trend. Reason to worry?

Why does the Council not request the results of the revaluation? It is important to the City and to taxpayers. What will the balance sheet look like when revaluation assessments are applied? And how long can we operate with such little planning and fiscal oversight before “underwater” and decreasing government revenues leave us without a paddle or enough water taxis? Why worry about it today? Why not do something about it? Time will tell.