Last week I wrote about how the City of El Paso was forced to move monies around on its budget and postpone certain services in order to shore up its budget deficits. The deficit is the result of lower than budgeted sales taxes and other revenues. After that we found out that home foreclosures doubled in February from the same period last year.
Texas foreclosure filings declined by about 12% while foreclosures in the rest of the nation also declined by an average of 27%. El Paso, on the other hand, saw its foreclosure filings doubling for the same period last year.
According to the Federal Reserve Bank of Dallas’s report of February 2014, El Paso’s unemployment remained around 8.6% in December. Texas, on the other hand has a 6% unemployment rate. Job losses were concentrated in information, construction and professional services.
These latest economic indicators are important to the taxpayers because of the ballpark fiasco bonds that were sold by the city last year. As you remember the city had to increase the interest rate it will pay for the ballpark bonds in order to sell them.
In my article; “What Happens if the City is Unable to Pay the Stadium Bonds” I explained that although the city is not obligated to use property taxes as a source to pay off the stadium debt, in fact it cannot legally do so, the problem lies in that the city cannot afford to file for bankruptcy. Keep in mind that the HOT taxes, which are the bond’s payment sources, require a robust economy in order to meet the bond payment requirements.
We already know that the foreclosure rates are going up meaning that El Paso property owners are under financial stress. We also know that job losses are occurring in the jobs that cannot afford higher property taxes. More importantly we know that the city was forced to move monies around on its budget in order to meet its obligations.
With all those indicators it is becoming even clearer that the city’s strategy for funding the ballpark fiasco is the failure that many have been predicting for months. In my previous blog post I pointed out that the city can make budget adjustments to meet its obligations. I also pointed out that the city is unlikely to default on the ballpark bonds.
So what will the city do?
Last week the city clearly showed us what it intends to do, monkey with the city budget in order to make the payments. Therefore, although the city cannot use property taxes to pay off the ballpark debt nothing is stopping it from using funds from the general accounts or other budget line items. Once those funds are depleted, the city would simply raise property taxes to meet the shortfalls. Keep in mind that the city is obligated to pay for the general obligation bonds because they are backed by the taxpayers.
Therefore, if the city were to transfer monies from those accounts to pay off the stadium fiasco the taxpayers have no choice but to pony up the difference via property taxes. Likewise, when the fire trucks breakdown or the police department’s manpower drops below sustainability the first thing the city will do is demand that the property owners pay up to fix the problems.
The raising of the parking meter fees and the raising of other fees are also indicators that the city is desperately trying to further postpone the reality that is the next tax increase.
If you are still wondering about how the ballpark fiasco is going to play out just keep an eye on the El Paso Children’s Hospital $59 million deficit. Remember when the politicians kept telling everyone that El Paso deserved a children’s hospital and that it would be self-sustaining because of the federal government handouts? They didn’t count on ObamaCare and how it would affect reimbursements. Although the news focuses on the children’s hospital owing the University Medical Center (UMC) money, the reality is that the children’s hospital owes the taxpayers the money. UMC is a taxpayer funded entity. In the end it will be the taxpayers that will bail out the children’s hospital.
The first pitch hasn’t even been pitched and the city is already facing the reality of increasing property taxes. The economic indicators clearly show this, so be ready for the tax increase that is surely coming your way.