Still TBD: How to fund Spring Break policing (an earlier proposal put the dollar figure at $2.6 million above current budget) and a proposal supported by two Commissioners to increase the millage rate slightly to pay for maintenance of City assets on a “Pay-go” basis versus through long-term bond debt.
At their most recent budget briefings, Commissioners again heard it will be a tight budget year. CFO John Woodruff said the final property appraisals came in slightly higher than the preliminary numbers released in June with the final increase in property values at 3.1% (versus the 3.0% projected earlier).
The City needed double that increase to maintain its current service level and not continue borrowing from the parking fund for general operating expenses. Just days after the preliminary property values were known, Miami Beach City Manager Jimmy Morales froze all non-essential expenditures.
With the preliminary numbers, the City faced a shortfall of $4.9 million but with the slightly higher number, the gap was reduced to $4.4 million. Woodruff said the trend in property values is for more of the same.
Looking at the County and other municipalities, Woodruff said, “Although we led the way out of the recession, it looks as though now we’re lagging more of the middle-class type areas at this point in time.”
“I don’t have any reason to think it’s not going to be something similar for at least one or two more years,” he told Commissioners. “A takeaway from this process is we’re going to be challenged to just maintain a lot of the services and service levels that we have today.”
“I think there are a lot of fundamentals that lead us to want to be very conservative in our planning,” Commissioner Mark Samuelian said. “I think there is that distinction between the more middle class and luxury, strong dollar, weakened international demand, more requirements on cash buyers, heavy supply. There are a lot of factors that lead you to think that doesn’t change right away so we need to be very prudent in our planning.”
With regard to new Construction, Woodruff said he expected next year to be “very similar” to this year. While development projects in the pipeline are “encouraging,” he noted none of them “are right around the corner, in other words of moving the needle substantially.”
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The FY 2019 general operating millage rate and debt service totaled 5.888 and with the new debt service of 0.1333 on the General Obligation Bonds approved by voters, the total proposed millage rate is 6.0221. A couple of Commissioners want a slight increase beyond that to pay for regular maintenance of City assets rather than paying for them via long-term bond debt. That proposal will be debated further this week.
Woodruff has recommended several strategies to balance the budget which include a combination of additional revenue by indexing City fees to the Consumer Price Index (CPI) and reprojections of expected revenue along with expense reductions. The reductions include smaller increases in projected health insurance premiums; eliminating eight part-time positions, two filled full-time positions and seven vacant FT positions; and restructuring the grounds maintenance contract.
Also out, the City’s Road Ranger program which assists motorists with roadside repairs. City Manager Jimmy Morales told Commissioners the program was initially started when the City put “a real focus on throwing a lot of resources toward trying to keep our roads as open and flowing.” Since then, he noted there are more police reserve officers to help with traffic and other issues, contracts with vendors for towing services, and alternatives such as Triple A. With a head count of four plus benefits and pensions, Morales said, “We were providing a nice [to have] but not a need. Those are the kinds of decisions we’re going to be looking at going forward, things that might be nice to continue but in times where we’re looking to tighten… there are alternatives to that service.”
There are also some additional one-time expenditures proposed to come out of the current year’s fund balance (estimated to be $1.64 million). They include rewriting the City’s Land Development Regulations, a sea level rise impact study, an economic vitality strategic plan, and money for the South Pointe Park Cutwalk/Government Cut Erosion.
The City will continue to utilize $1.2 million from the Parking Fund, the same as this year and try to wean itself off of relying on that money in a future budget year.
Spring BreakIn addition to the millage rate to be discussed on Wednesday, another key conversation that will extend into next year is how to fund the policing needed around Memorial Day Weekend and Spring Break.
Woodruff said, “When we talk about Spring Break, right now there’s a lot that’s undefined.” Commissioners have proposed programming the month of March similar to the way Memorial Day Weekend has been programmed to give visitors something to do rather than hanging out on the beach drinking all day. City Tourism and Culture Director Matt Kenny said there isn’t enough time for event programmers to respond to a comprehensive Request for Proposals (RFP) for 2020 but he expects there could be some additional programming added next year with a full schedule of events in 2021.
Commissioners asked about the potential of de-escalating Memorial Day Weekend police expenses and using the money for Spring Break. Morales responded, “We began doing some de-escalation in light of the Air and Sea show, the cultural programming, etc.” He noted he would be having a conversation with Miami Beach Police leadership to discuss the issue. “There may be an opportunity to do that… carefully, but I do believe there probably is an opportunity to lower that number and move some of those dollars over to Spring Break.”
Morales said in the case of large events, organizers often cover some of the security costs using the Miami Beach Pop Festival in November as one example. “Ideally in 2021, it would be a different number and I think that’s [Woodruff’s] point about treating this coming year as a one-timer because if, we’re successful in 2021, a lot of that might be covered by the events that are coming.”
New MBPD Chief Rick Clements added, “We obviously saw a difference in Memorial Day this year. We’re very happy with what we saw with Memorial Day and that invokes conversation, do we need to have the same budget or the same goals, if you will? I don’t think we can get away from staffing it up” though he noted he would look at options.
At the Budget retreat in May, Former Police Chief Dan Oates presented Commissioners with a proposal for two weeks of added policing during the busiest Spring Break period that would cost an additional $2.6 million over the current budget. The plan was requested after a difficult beginning to this year's Spring Break caused Commissioners to ask for additional emergency measures to staff up including sending officers in protective gear onto the beach.
“We provided you with a plan with nothing else in consideration other than what we experienced during Spring Break [this year],” Clements said. “We felt it needed to encompass two full weeks… hitting two full impact weekends.”
Regarding plans for programming the month, Clements told Commissioners, “We’re eager to see where this is going to go and what we can do, if we can, to modify the plan but, right now, from a public safety perspective, we’re planning it as if it was 2019 all over again.”
Woodruff said, “As that picture becomes clearer, we would probably come back with a mid-year amendment to cover it or we would let it happen and then come back and close the gap, whatever it is. We’re just trying to be flexible on that.”
Finance Committee Chair, Ricky Arriola said, “It’s going to be a big number so I’m just worried how we’re going to pay for it.”
“It would end up having to come out of the fund balance is really what would happen,” Woodruff said. He also noted “We might have a little infusion” with the Super Bowl here in 2020 “that could help us with that transition.”
Mayor Dan Gelber is not yet convinced on the Spring Break strategy. “This has obviously been a vexing area for us in a lot of ways,” he said. “While I like the programming during Memorial Day, I don’t think by any stretch it felt like it was easy job. It felt like an encampment” with “a pretty significant cost.”
With Memorial Day Weekend, he added, the City is able to look at the historical trajectory to make plans. “With Spring Break, you have no history other than bad history so you’ve got to assume a bad history… Even Memorial Day isn’t manageable without significant resources.”
Referring to the additional authority given to the City Manager for handling high impact periods, Gelber mused those emergency powers did not include the authority to have an earlier last call.
Morales said earlier last call has been used in other communities that have large Spring Break crowds including Panama City “which obviously reduces the strain on police.”
“If programming our way out of this comes with a crazy cost,” Gelber said, “then we may have to just contemplate at some point giving Jimmy the ability at these times to do an early last call, maybe over one of these weekends, maybe during Spring Break at certain times.”
Clements responded, “If people don’t have a place to go after a certain time – whatever that timeframe you determine is – they obviously are going to move off Ocean Drive if, again, they’re there for the consumption of alcohol. It makes it easier for us, sure.”
“The point is, our trajectory has been, let’s try to program our way out of it and maybe that’s fine,” Gelber said. “But I’m not convinced there’s anything yet and, at some point, we may have to consider adding to Jimmy’s ability on this particular weekend saying your last call is at 2 am or 1 am or whatever it is, with the idea that we’re signaling to people if you want to come here for something maybe this isn’t the place you want to come.”
“I think that’s a pretty significant rubicon to cross and I don’t think I would even say it lightly but I think it’s got to be part of the toolkit,” Gelber said. “We can’t pay our way out of this. We can’t arrest our way out of this and we’re not going to be able to enforce our way out of this. At some point we gotta change the behavior. We’re trying to. I’m not sure we’ve sufficiently done it yet.”
Additional Millage rate increase?
Commissioner Joy Malakoff, supported by Finance Chair Arriola, proposed an additional millage rate increase of 0.1529 to be dedicated to the City’s Pay-go fund (literally a pay-as-you-go fund) which she called “a shock absorber in bad times.”
The impact to homeowners on a median value basis would be $30 per year and $77 per year if average values are used. (Median is the mid-point of a value range; in using averages, results can be skewed by a smaller number of high value properties.)
The proposal would add an additional $5 million annually to the Pay-go fund which can be used for repair and replacement of City assets including sidewalks, roads, roofs, HVAC systems, etc.
The recent General Obligation Bond approved by voters included funds for streets and sidewalks, something Woodruff said is usually addressed by municipalities on an ongoing basis rather than by issuing debt.
Not keeping up with maintenance, he said, ends up costing the City more money, either by having to issue debt when things get beyond repair or by having to do emergency repairs. “When we look at things like vehicles, we’ve already noted in our budget where we didn’t replace vehicles on time a few years ago and the maintenance has increased by about a million dollars in about five years.”
When Commissioners are asked to approve capital budget amendments for “emergency replacement of HVAC, emergency replacement of a roof, that’s a good sign that we’re probably not funded as well as we could be to maintain our assets properly,” Woodruff said.
“Thankfully for something like the streets and sidewalks, the GO Bond was passed and approved and that will kind of get us to a better place over the next five to ten years,” Woodruff said, “but if at some point we haven’t built up some funding somewhere along the line to then replace what the GO Bond has been doing for us in the shorter term, then we’re just going to be back where we were.”
Arriola said, “For me, this is fiscally responsible and prudent to do it. Nobody likes raising taxes but our job is to be good stewards of taxpayer money and taxpayer assets and if we don’t maintain our streets and sidewalks adequately, not only does it look bad, it becomes a safety hazard and when we have to go in and replace it, it’s more expensive.”
Commissioner Micky Steinberg said, “I hear what you’re saying, and I appreciate it and if it weren’t maybe for the GO Bond, I’d be more open to the discussion. The problem is, we did just pass the GO Bond and there are other incremental increases that are coming down the line very soon,” she said, noting Stormwater Fee increases in the coming year to pay for the costs of replacing the City’s aging infrastructure along with the resiliency program.
“It only raises the amount of the millage 0.1529,” Malakof responded. “It’s a minimal amount but it really does add up over the period of the year. It’s not that much… it’s a tiny little bit.
Commissioner John Alemán said she’s not opposed to looking at an increase but without knowing how much the stormwater program is going to cost pending a forthcoming analysis, she said, “I just don’t want to vote on a tax increase without understanding what the other tax increases are… I want to be able to vote on things with a complete understanding.”
“I’m not ready to support this at this time,” Commissioner Mark Samuelian said. “I think the need is real. I think we need to have those serious conversations and I think we need to recognize that the community anteed up already through the GO Bond, that they’ve already agreed for a sizable increase as part of that and I think it’s incumbent on us to make sure we are operating as fiscally responsible as possible in all manners before I would consider an increase. I would not support it today.”
Samuelian mentioned the potential of using funds from Convention Center naming rights as one alternative. Morales said those could be “$2 to 3 million a year.”
Budget Advisory Committee Chairman Ron Starkman said, “It’s only going to get harder to set aside this money going forward. If we just keep kicking the can down the road, all you’re doing is making a most impossible task for the future commissioners.”
After listening to the budget discussion, Starkman said, “Today I realized the operating budget is a political decision as to what services you’re going to offer… There doesn’t seem to be a lot of give on that right now… My main message is you’ve got to either cut the operating budget or you can’t keep kicking the can down the road on the maintenance, so I want to encourage you to do one of those two things and I think that’s essential.”
When Arriola asked Starkman if he supported a millage rate allocation dedicated to repair and replacement, he responded, “If you are unable to find the cuts in the operating budget – which I think you should still look at – then we shouldn’t just say ‘Okay that’s it.’ No. I think that tax has to come because you gotta do one or the other but not keep kicking the can down the road.”
“I don’t think any of us are arguing that it doesn’t make sense to plan for maintenance of our assets and to make sure that that’s well funded and we keep up with it,” Alemán said. “But we do have to be cognizant of all of our residents, many, many, many of whom are on fixed incomes… We know that there other tax increases that are out there looming that we haven’t really analyzed well enough to know when they’re coming so that’s really what I think we’re asking for is for a full understanding of when those things would come before we decide to approve a part of it.”
Steinberg added, “It is frustrating because we shouldn’t have to put off basic maintenance… I think we do need to be good stewards of our taxpayer dollars and we need to look at our spending first and foremost.”
“From a conservative financial perspective, you don’t want to be issuing long term debt to pay for your annual repairs,” Starkman added.
Arriola suggested Woodruff reach out to Commissioners to discuss the idea further before Wednesday’s meeting when the maximum millage rates need to be set prior to the public hearings in the fall.
“I think we all agree there’s a need to help Pay-go here,” Woodruff said. “It’s just more about how we do it. I would say that for navigating the process, one thing you could do is build in the higher rate when we send this out to the property appraiser July 31st so it’s included in the TRIM notices [of proposed property taxes], see what that reaction is, get folks at the public hearings, and then at that final public hearing, you can always reduce it.”
Slides: City of Miami Beach Finance Department
Aerial photo of Spring Break 2019: Miami Beach Police Department