The Week in Public Finance: Florida Migrants, Taxes in Carolina and a Downgrade in Dallas
A roundup of money (and other) news governments can use.
For previous editions of The Week in Public Finance column, click here.
So Long, West Side Story
One government’s loss is another one’s gain. A new report this week shows how two Florida counties have benefitted from Puerto Ricans leaving their troubled island for better opportunities in the states. Orange County (home to Orlando) and Hillsborough County (home to Tampa) are experiencing positive effects from Puerto Rico’s out-migration, as the increase in the labor force supports their expanding economies, Moody’s Investors Service said. The report, “Puerto Rico's Pain is Orange County's Gain” noted that the employed Puerto Rican population has increased in five years by nearly one-fifth in Orange County and nearly one-third in Hillsborough County. The surge helped Florida surpass New York as the primary location for Puerto Rican settlement in the mainland U.S.
“Orange County heavily relies on property, sales and tourist development taxes, all of which have increased since 2012 and are contributing to the county’s credit strength,” Moody’s Associate Analyst Nisha Rajan said. “This economic expansion has increased demand for goods and services, augmented sales tax and other county revenues, and also bolstered the local housing markets.”
Puerto Ricans now comprise about 12 percent of the Orange County workforce and 8 percent in Hillsborough. Their bilingual capabilities put them at an advantage in heavily Spanish-speaking Florida. They now make up 15 percent of employees in Orange County’s transportation and warehousing sector and 14 percent of the county’s education and health services workers. One pressure point, however, in in schools -- Orange County has increased school funding 3.3 percent this year to accommodate the rise in enrollment.
Keeping It Simple
A new interactive report by the Tax Foundation dissects North Carolina’s tax reform of recent years as a way of showing how the cuts have made it a low-tax state, compared with the rest of the country. The reforms the state put in place were massive, but simply put, they lowered the personal and corporate income tax rates while eliminating some deductions and credits for both. The reforms also applied the sales tax to a few previously untaxed items like auto mechanics and intallation and service contracts.
As such, the Tax Foundation bumped the state up from 46th in its overall tax climate rankings to 16th in the country. Its most impressive leap was in its corporate tax ranking, which went from 30th to 4th. The report included examples of how low-income earners and high-income earners were affected. In most cases, lower-earning families saved a few hundred dollars in annual taxes. The family earning more than $311,000 in a year paid several hundred more in taxes. The couple earning $1.8 million annually saved $13,000.
In the foundation’s view, North Carolina’s next tax frontier should be in expanding the sales tax to more services. While it has “moved in the right direction” with the recent changes, “there’s still plenty of work to do to expand the sales tax to many common consumer purchases, like landscaping, parking, and gym memberships,” the report said.
Down in Dallas
Standard & Poor's downgraded Dallas' credit rating from to AA from AA+ for its “rising pension liabilities and lack of a sufficient plan to address them in the near term.” The S&P downgrade follows a similar downgrade by Moody’s last week.
A double-A rating is still a good one and with the reduced activity in the municipal market this year, the downgrade may not actually make it more expensive for Dallas to borrow money in the near-term. But it’s still a big warning to a city that has gotten nothing but bad news from its Police and Fire Pension Fund lately. In recent years, the fund has come under scrutiny over lavish expenditures and several risky investments. FBI agents have even questioned some pension staff and board members. Earlier this year, a consultant said the system could run out of money within 25 years. And more recently, the system released its annual report which followed new government accounting standards for reporting pension liabilities. As a result, the system’s unfunded liability ballooned from about $1 billion to nearly $5 billion and it is now less than 40 percent funded.