Miami Beach City Manager Jimmy Morales presented a preliminary plan for balancing the City’s budget in the wake of the coronavirus shutdown. In addition to outlining budget savings and proposed cuts, it also gives us a look into what the Administration is thinking with respect to large events this summer. Spoiler alert: Expect none.
In his memo to the Finance Committee which met on Friday to hear the details, Morales reiterated that due to the closures of all non-essential businesses and public facilities including hotels and beaches, there will be “significant impacts to the City’s finances,” with revenue losses pegged at approximately $3.6 million per week.
In a “likely” scenario based on an “expectation of three months of very low economic activity and three months of slow growth,” the total hit to the City’s budget is estimated to be $87 million, with a range of $65 million (“optimistic” scenario) to $105 million (“conservative” scenario). The overall FY 2020 operating budget is $669.3 million.
Morales reminded Commissioners the City has “strong reserves in place that will help us navigate this crisis.” Those reserves include $80.6 million in reserves in the General Fund and $15.2 million in the Resort Tax Fund which, he noted, constitute “a higher reserve level than in most communities.”
“The key to creating plans to balance the remainder of the FY 2020 budget is to (1) aggressively reduce costs as much as possible to mitigate the projected revenue loss and (2) judiciously use reserves to make up the difference,” he wrote. The FY 2020 budget year ends September 30.
In addition to an earlier hiring and non-essential expenditure freeze, all city-related travel has been cancelled, overtime has been eliminated for all but the Police and Fire Departments, contractual services have been suspended, and 32 full-time, 208 part-time, and 64 temporary employees have been furloughed. In addition, the City Manager, City Attorney, City Clerk, and Inspector General will take 10 unpaid furlough days, all members of the management team will take 5 unpaid furlough days and there will be no merit pay. There will be no COLAs this year for unclassified employees. Morales added, “[M]eetings with all unions will take place in the very near future to discuss possible concessions.”
To balance the budget which includes the General Fund as well as the Resort Tax and Parking Funds, Morales is proposing continuing the furloughs of 275 part-time and 11 temporary positions through the end of the fiscal year along with a continued freeze on certain expenditures such as travel, training, and overtime. He would also freeze hiring of 87 vacant full-time positions funded by the General Fund for the remainder of the fiscal year.
Not included in the freeze on vacant positions are the Director of Economic Development and Director of Tourism and Culture, both of which have been unfilled since resignations earlier this year.
"The Economic Development Department is going to be even more critical coming out of the pandemic," Assistant City Manager Eric Carpenter told RE:MiamiBeach. "The team in place has been doing a great job during this difficult time, but they were fully tasked before the Director left and this crisis hit. I feel strongly that we need to give this Department the resources to help the Business community rebound and place the City in a position to respond to the new and different economy following Covid-19."
"Once we begin to normalize, we will definitely look into filling the Tourism & Culture Director position," Morales' Chief of Staff Marcia Monserrat said. "This position plays an integral role with our cultural anchors, special events and hotels, which will be an important piece of our city’s recovery."
For a look into what a post-quarantine period looks like, the preliminary proposal eliminates spending on enhanced police services during high impact periods. The reduction of nearly $1.7 million “assumes no expenditures on remaining Police high impact periods for FY 2020, including Memorial Day and July 4th,” according to the chart detailing the proposed cuts. In a line item notation proposing elimination of a $100,000 event sponsorship, the Fourth of July event is listed as “likely to cancelled.” This past week, the organizers of the National Salute to America’s Heroes Air & Sea Show announced the annual Memorial Day Weekend event has been cancelled.
The reduced budget also contemplates suspending trolley operations for the remainder of the fiscal year. If trolley operations were to be reactivated “additional funding will likely be needed,” according to the budget chart.
Other proposed cuts include:
- Eliminating remaining payments to the Greater Miami Convention and Visitors Bureau of approximately $1.97 million out of $7.127 million budgeted. The City will also attempt to negotiate the return of a portion of funding already paid in FY 2020.
- Reduce the Miami Beach Visitor and Convention Authority (VCA) Contribution ($1 million) as well as trying to negotiate the return of a portion of funding already paid in FY 2020.
- Among the sponsorships proposed for elimination, Miami City Ballet ($120,000) and the International Tennis Federation event ($100,000).
Deferred capital projects and use of some reserve funds would close the rest of the gap.
“The proposed use of $8.6 million of the General Fund Reserve would preserve approximately 90% of the reserve for hurricane season, provide flexibility for the FY 2021 budget process, and help us maintain our bond ratings,” Morales wrote. “The use of $5.0 million (one month) of the Resort Tax Reserve would leave $10.2 million or two months of reserves, which is minimum best practice. The current reserve levels have been built up over time so the use of reserves should be evaluated carefully as it could be very difficult to increase them in the near term. Finally, if the revenue losses are worse than projected, we may need to use more of the reserves than we anticipate at this time.”
“We are absolutely committed to paying the City’s debt and other vendor obligations,” he emphasized. “Like many cities across the country, we will be requesting an infusion of funding from the State and Federal government to help offset revenue losses that are critical to providing continued service during this time.”
“Our approach has been to do whatever it takes to balance our budget and not rely on the possibility of federal or state relief programs," the memo states. "That said, we will certainly be requesting an infusion of funding from the Federal and State governments to help offset the revenue losses from COVID-19. However, even if we receive these types of funds, it is likely that the process could take a long time. We also want to be clear that we prioritized meeting all of our debt service and vendor obligations in the creation of the budget balancing plans.”
Finance Committee Meeting FeedbackAt Friday's meeting of the Finance and Economic Resiliency Committee, Mayor Dan Gelber and all Commissioners participated for some or part of the meeting.
Their feedback, continue to "dig deeper" for cuts within the departments. Commissioner David Richardson pointed to a 90% revenue loss within the Parking Department but four senior managers making over $150,000 either still working within the department or repurposed into other roles while lower level employees were furloughed. "I am very worried that we are sending a bad message that we kept all of the top management in a department that, basically, has lost all of its revenue and I don’t think that’s fair to the rank and file," he said.
The Committee's Chair, Commissioner Ricky Arriola, said, "Before we go to our unions and our rank and file, we have to show some real serious cuts." Calling it "a serious problem" perpetuated "by continuing to roll over a very top heavy City Hall year after year," he said the City now needs to "dig deeper" within the departments.
Citing the old saying "Never let a good crisis go to waste," he urged the Administration to "identity opportunities to permanently trim some fat."
Commissioner Michael Góngora said he didn't want to "pick on one department or micromanage a department like Parking," but added, "I agree that all departments need to be reviewed and, in my opinion, probably we’re going to find that all departments have gotten fat over the last five years."
"We completely agree the goal should be cutting costs and not using reserves," Morales said. "We’re not done yet identifying, hopefully, costs and other savings."
The Committee will meet again Friday, April 24 to review the proposal further and any new information with regard to the economic impact of the coronavirus.