June 2012
When the real-estate market cratered in 2008, South Florida was one of the most affected areas in the country. According to real-estate website Zillow, home values in the Miami-Fort Lauderdale Metro area have seen average home values fall from a peak of $310k to a current level of a little under $150K. Along with the fall in home values, many jobs related to real-estate development were also lost.
If you are like me, you are probably thinking that this would have caused financial problems for cities in south Florida to the point where many of the area cities credit ratings would be below investment grade. When researching this article however, I was surprised to learn that Broward and Palm Beach Counties had the highest possible rating from Moody’s, Aaa. Miami-Dade County is rated Aa2, only two notches below the highest rating.
How could this be? I thought that falling real-estate values would have a detrimental impact on county revenues. With real-estate prices falling, I assumed the county’s property tax collections would also plumet. That was a wrong assumption. The counties were able to offset declining property values by raising property tax rates. Counties in South Florida can raise property taxes without state approval, with a couple caveats. The dollar amount cannot exceed the previous years and the total tax rates has to be 1.0% or less. As a result of increasing the tax rate, the revenues of the counties remained stable. However, the counties cannot keep raising the property tax rates. So an uptick in property values, is a positive.
This is noted Moody’s Weekly Credit Outlook (June 11, 2012) under the headline, “Taxable Property Values Rise In Some South Florida Counties, A Credit Positive”. As Palm Beach and Broward counties already have the highest credit rating, this good news cannot lead to …
