Updated to clean up the tables.

County Commissioner George Neugent said this in our correspondence about the Emergency Services Surtax (ESS) the other day:

There has been a tremendous transformation of Monroe County & municipalities. Going back to the 80s when I arrived here Key West was “strongly” in charge politically, even into the late 90s. It’s why Islamorada incorporated and to a great degree Marathon.

I can’t speak to the situation in the 80’s and 90’s.  To be honest, I don’t believe that history is terribly relevant to the this issue anyway.  But I find this comment significant for a number of reasons.

Your rank-and-file Key Wester is no better off than your typical Key Largoan.

In fact, I believe they have quite a lot in common.  Both are low-moderate income areas.  Their median household incomes are very, very similar.  They are also the two largest generators of the sales tax in the Keys.  If Key West is “advantaged” in any way your average local sure isn’t going to feel it.  That’s not how it works.

If one area is advantaged over another in any given situation, it is incidental.

It is true that large amounts of tax money do seem to flow to certain geographical areas.  Cudjoe Regional immediately springs to mind.  But lately I’ve formed the opinion that this is more about making sure that money flows into certain pockets than it is about advantaging certain geographical areas over others.

The City of Marathon, the Village of Islamorada, and Key Largo’s two special districts put the kibosh on a lot of that.  As compared to the county, they operate efficiently and keep costs down.  The county is constantly looking for work-arounds to scoop up any tax money they can to divert and squander.  This is why Key Largo taxpayers pay more for a sewer system that costs much less.  The county has full authority to decide how sales tax money is to be used in the unincorporated area.  They misused that authority when it came to the sewer projects.  I have every reason to think they will misuse it with the ESS as well.

This is more of that “divide and conquer” strategy the county enjoys so much.

The county just loves pitting one area against another.  In this case, Key West is being made out as the “bad guy” from the olden days.  When Rowell’s Marina was up for discussion, Key Largo was made out to be the “bad guy” to the folks in Cudjoe Regional.  It shifts depending on who the county is trying to manipulate at the moment.  Being aware of the big picture really blunts the effectiveness of this tactic.  Another reason for the blog.

I’ll be the first to admit, I’m very Key Largo-centric.  Lord knows, somebody needs to be.  Key Largo does not have a voice in county government and hasn’t since 2006.  That said, I also try to be fair.  There’s no question that Carruthers’s new sales tax, the Emergency Services Surtax (ESS) is grossly unfair to Key Largo and will further erode the economy in that area.  Even the county’s very flawed “analysis” alludes to that.  But I would argue that this is not so great for your average Key West citizen either.

Monroe County staff has presented the data in a way that obscures certain relevant facts when it comes to Key West, in particular.  I guess there are some things they don’t want people to realize.

Residential Properties Owned and Occupied by Locals:

You may have noticed that, for some reason, the county used the same assessed value for all areas – $350,000.  I did not.  I took the average taxable value of the homesteaded properties in each area, and based the tax reduction on that.  Homesteaded properties are going to have a slightly lower taxable value, and therefore will see less of a benefit from the property tax reduction.  The county’s method over-states the benefit to most local residential property owners.

As mentioned above, and many other times on the blog, the county is also using a number that grossly understates the additional contribution to the sales tax.  They claim it’s $125.  The math and other available data support a number of about $417.

By my calculations, this tax shift will be a wash for residential properties owned and occupied by locals in Key West overall.  What they save on property taxes, they’ll pay in sales taxes.  I worked it out for homesteaded properties in the various areas, using both my calculation for the property tax reduction and the county’s.  For Key West, the results were similar $30 to $43 per year.  Yippeee!  Don’t spend it all in one place.

By looking at just one county-wide average, the county is “flattening” the data.  There’s a lot that’s glossed over.  Especially in Key West!

I divided all the properties in Key West into five groups – from highest taxable property value to lowest.  You’ll notice that the vast majority (72%) of homesteaded properties are in the 5th group – the group with the lowest  taxable property value.  The average savings is around $288, but that will be offset by the additional $417 they will have to spend on sales tax.  So this “tax shift” seems to be a bust for most Key West residents who own their homes.  They will pay an additional $130 on average.

Notice the top 80 parcels though.  They will save an average of over $21,000 each.  Most of the very high-value properties in the Keys are concentrated in Key West.  And most are owned by out-of-county entities.

Renters in Key West:

Here’s where the going gets really tough for Key West locals.  Key West has a very high percentage of renters – far higher than the county average – 36% versus 21%.  In fact, renters in Key West make up almost half the renters county-wide – about 46%.  While Key West home owners make up  less than one-quarter of all home owners in the Keys – roughly 23%.  These numbers come from the American Fact Finder tool at the U.S. Census Bureau.  Links to downloaded reports are here and here.

These folks will see zero benefit from the property tax reduction.  Rents are demand driven.  Besides, your average rental property isn’t going to see enough of a benefit to pass along the savings.  The renters occupying these properties will, however, contribute an estimated $417 per year to Carruthers’s new sales tax.  That amounts to almost $2.2 million per year.

Isn’t the affordable housing debate about how to keep these people from moving away?  How does taxing them more achieve that goal?  Perhaps Key West voters ought to ask Carruthers to explain that one.

Conclusions and Caveats

Bottom line – if you’re a Key West local this tax is “shifting” all over you.  By my calculations, the typical Key West home owner will pay about $130 per year in additional sales tax.  The typical renter will kick in over $400 per year.  It’s the high value properties that benefit and most of those have out-of-county owners.  This shift will ensure that they pay $0 for fire protection.

Interestingly enough, this “tax shift” was proposed by Key West’s own county commissioner, Heather Carruthers.  Not only that, it’s been presented in a very misleading way.  As counter-intuitive as it may seem, there’s nothing new about BOCC members working against their constituents interests.  The only thing that will fix that is change.  There will be an opportunity for that this November.

This ESS is in the very early stages.  The county has provided some very vague, very shady numbers to support it.  There are lots of information gaps and lots of questions as to how this “shift” would actually work.  The picture is bound to change as more information becomes available and as the county adjusts its tactics.

Voters, citizens and taxpayers from all over the Keys need to be very skeptical and very aware.  This ESS is shaping up to be another money-grab.