The analysis was presented at last week’s City Commission FY 2022 Budget Retreat where Commissioners began to grapple with the impact of COVID and the preliminary property value numbers from the Miami-Dade County Property Appraiser which showed a 0.2% decline in values citywide during 2020.
With property taxes comprising 60% of the City’s annual revenues, the slowing growth has created pressure on the City’s budget since 2018. That year, the City initially needed a 7% increase in property values to balance its FY 2018-2019 budget at current service levels but after 2017 values came in at 3.4%, the City combined budget “efficiencies” with increased fees and advertising revenues to close an initial $5.4 million gap. The City is required by law to have a balanced budget each year.
The following year, balancing the budget at current service levels required a 5.6% increase in property values which preliminarily came in at 3%. In June 2019, then City Manager Jimmy Morales froze all non-essential expenditures in anticipation of a $5-6M budget shortfall for FY 2019-2020. Ultimately, values increased 3.1% and with various cuts including 28 fewer full-time positions and revenue enhancements, the budget was balanced.
In 2020, the City faced what City CFO John Woodruff called a “double whammy” of low growth in property values and the impact of COVID-19. The 2019 property values used to set the following year's budget were anticipated to grow 3.5% when 4-5% growth was needed. Final values came in at 4.1% providing a small boost, though the pandemic devastated revenues and forced the City to dip into its reserves and necessitated a scaled-back budget for FY 2020-2021.
In order to maintain the City’s current service level in FY 2022 which runs from October 1, 2021 to September 30, 2022, the City needed a 3.1% increase in property values. Final property values are available on July 1 but, generally, do not change much from the preliminary figures. While the preliminary numbers show a 0.2% decline, Woodruff noted the City's budget is built on the previous year’s values, in this case 2020. The anecdotal reports of increasing prices as buyers relocated here from other areas of the country as a result of the pandemic won’t show up in real data until next year, causing Woodruff to urge caution as Commissioner’s set the budget for the coming year.
ICF’s Trend Analysis looked at Miami Beach residential and commercial property values considering more than 30 property characteristics including year built, luxury status, neighborhood amenities, environmental factors, and parcel and road elevation. The analysis reviewed Miami Beach trends only and did not compare them across Miami-Dade County.
Property types in Miami Beach by value
Condos make up the largest portion of overall property values.
Key Findings of the Property Trend Analysis
According to ICF, the 8-year trend (2012-2019) shows residential values up 5.5%, but when viewed within the 2016-2019 timeframe, values were up only 0.1%.
Similarly, commercial property values grew 5.0% between 2012-2019, but only 1.9% between 2016 and 2019.
Of all neighborhoods and property types, the following areas contracted from 2016-2019:
- South Pointe residential properties
- West Avenue residential and commercial properties
- North Shore entertainment-related properties
- Flamingo Lummus condos
- City Center entertainment-related properties and condos
The analysis notes, “Most impactful negative changes to total assessed value were in South Pointe residential, and most impactful positive changes were in City Center retail and other commercial [properties].”
Two of the factors ICF noted in the slower growth rates citywide: “Luxury property values declined in most neighborhoods, relative to non-luxury” and “Citywide, residential properties subject to nuisance and King Tide flooding grew more slowly than other properties, as did properties with lower elevation roads. The trend varied by neighborhood.”
Luxury property values vs. non-luxury
The trends indicate luxury residential property values declined 1% versus non-luxury residential which increased 1% during the four-year period from 2016 to 2019. During the same period, luxury commercial property saw 0% growth, while non-luxury commercial, grew 3%.
Impact of Road and Parcel Elevation on Values
As noted in an earlier evaluation by ICF, “Residential properties subject to nuisance and King Tide flooding grew more slowly than other properties. Both properties and roads subject to King Tide flooding depreciated relative to other properties.”According to the latest trend analysis, from 2016 through 2019, parcels subject to flooding declined .1%, while those not subject to flooding grew .2%. Properties located on roads subject to flooding declined 2.9% in value while those on roads not subject to flooding increased 0.2%.
Photo: Scott Diffenderfer
Slides: ICF
