Miami Beach Commissioners gave initial approval to the FY 2021 budget, a plan that attempts to preserve outward facing services as much as possible despite huge revenue losses due to COVID-19 closures. It also keeps the millage rate used to calculate property taxes the same though debt service payments increase slightly due to the recently approved General Obligation Bonds.
The City’s fiscal year starts on October 1. By law, Commissioners must approve a balanced budget before then. The FY 2021 Operating Budget totals $625.6 million, 6.5% lower than last year. Despite reductions, the budget requires using $2.8 million of reserves. Next year, a projected $8 million in reserves will be needed to balance the budget.
During the budget discussion this past week, City Manager Jimmy Morales cautioned, resort taxes are “not coming back as quickly" as anticipated following COVID shutdowns and they could be impacted further by the recent announcement of a scaled back college football championship game. The National Championship is still scheduled to be played in Hard Rock Stadium on January 11 but due to COVID-19, a number of events will not take place including the Playoff Fan Central at the Miami Beach Convention Center and concerts planned for the beach.
In June, Miami Beach CFO John Woodruff said hospitality industry professionals “feel it’s critical,” if it’s possible, “to host Art Basel and the National Championship.”
“If we aren’t able to host either one, they really feel like that’s going… to be a problem,” Woodruff said. Since then, Art Basel announced the cancellation of its in-person event here and the elimination of the fan events surrounding the national championship was announced.
Following the budget vote, we asked Woodruff about the resort tax numbers and his expectations. In an email, he wrote, “From April to August we projected that Resort Taxes would be down 75%. Those projections have been pretty accurate to date and we are still cumulatively $869,000 higher than our projection. However, we assumed that we would receive 50% of normal revenues in September and 60% for October through December. We will not have the September numbers until mid-October and we are waiting to see if we will be close to 50%. At that point we’ll have a better idea if we need to revise our original revenue projections. The County has started opening up businesses again and tourism is beginning to pick up so it is conceivable that our projections could still be close as long as the recovery continues and we don’t experience any significant setbacks.”
With regard to the elimination of the National Championship fan events, he responded, “Although the NCAA Championship will have less events, we may experience high hotel occupancy rates during that time. We will also have less costs for security, fee waivers, and cash sponsorships. At this point, it’s hard to tell what the net impact will be.”
In the middle of April, with the pandemic in its early stages here, Woodruff and Morales presented a preliminary plan to get through the current fiscal year with “optimistic”, “likely”, and “conservative” scenarios.
The “likely” scenario was based on an “expectation of three months of very low economic activity and three months of slow growth." With many businesses remaining closed or opening slower than anticipated, revenue numbers could be below initial expectations.
“If we have to revise our revenue projections, they will be adjusted downwards to the Conservative scenario from the current Likely scenario,” Woodruff said.
Woodruff continues to be mindful of the City’s credit rating as the City navigates through the crisis. “The two credit ratings at risk are Parking and Resort Tax,” two of the funds that are separate from the General Fund, Woodruff wrote. “At this point we have taken action to create budget balancing plans that have preserved our credit ratings to date. If we revise our revenue projections downward for Resort Taxes, we will likely identify offsetting savings to maintain the integrity of the budget balancing plans.”
The budget will be formally adopted on second reading on September 29.
As Commission Approves Scaled Back FY 2021 Budget, COVID Losses Could Get Bigger:
Resort taxes not bouncing back as quickly as hoped
Courts have ruled the fines illegal; legality of ban still unclear
Three additional months plus option to split payments