Miami Beach Freezes Hiring, Non-essential Expenditures Due to Coronavirus

The City of Miami Beach Thursday declared a State of Emergency due to the coronavirus (COVID-19). The action gives City Manager Jimmy Morales the authority to exercise powers that could include the closure of clubs and other venues and implementing curfews.

In anticipation of a “significant financial impact to the City,” Morales also sent a memo to his team freezing hiring and non-essential expenditures. “To help mitigate the impact to the current year budget, I am ordering, effective immediately, a hiring freeze (including reclassifications) and a budget freeze for all non-essential, non-capital (construction) expenditures,” he wrote.

A special City Commission meeting has been called for Friday, March 13 to discuss the COVID-19 virus and the potential impact on the City. It will be held in City Hall, Commission Chambers at 1 pm. You can watch it on MBTV.

According to Morales’ directive, all expenditures over $5,000 will require prior approval of an oversight committee chaired by Assistant City Manager Mark Taxis and which includes City CFO John Woodruff, Procurement Director Alex Denis, and Budget Director Tameka Otto Stewart. “[A]ny expenditure over $5,000 that is incurred without prior approval of the committee will be reported directly to me,” Morales wrote.

The restrictions “do not apply to emergency purchases, including COVID-19 purchases, grants and capital projects with an existing project code,” he emphasized.

One of the key areas of the budget that will be impacted is resort tax revenues paid by businesses in the hospitality industry. The City collects a 4% tax on hotel rooms and 2% on total sales of food and beverages sold in restaurants, bars, or nightclubs.

In the announcement of the State of Emergency, Mayor Dan Gelber said, the City is “affirmatively trying to reduce the volume of visitors coming to our City for large gatherings. Across the globe, governments are encouraging social distance as a means to break this pandemic. I appreciate that this poses an incredible economic hardship to so many who have invested in our hospitality industry, but we are past the point where we can encourage or sponsor large crowds.”

“We are in constant communication with our county, state and federal partners. My hope is that we will diminish the impact of COVID-19 in our community. But optimism is not a plan, and neither is panic. We will take actions that are grounded in the best information and science available. And we will get through this,” Gelber concluded. 

Last week, CFO John Woodruff told RE:MiamiBeach, “[T]here are no meaningful preliminary observations to be drawn as of yet, other than the economic impact could be substantial.”

The City had contemplated purchasing insurance on its resort tax revenue a couple of years ago. “Through that analysis we discovered that our resort taxes are surprisingly resilient in that they recover fairly quickly from shocks and that the potential payouts didn’t justify the cost of the premiums,” Woodruff told us. “As a result, we created a higher reserve in our Resort Tax and for our General Fund in the past year.”

In January of last year, the City Commission approved increasing the resort tax reserve goal “from a minimum of two months of total revenue with a goal of three months, to a minimum of two months with a goal of six months,” he noted. Woodruff said the City currently has three months of reserves in the Resort Tax fund.  

Over the summer, the City Commission also approved increasing the General Fund Reserve goal “from two months (17%) to three months reserve (25%),” Woodruff added. “This was important given that 10% of the revenue in the General Fund is from Resort Taxes. We are currently at 20% reserve level in the General Fund.”
 
Ocean Drive Association Executive Director Ceci Velasco said, “It’s going to be a hard March, but it’s also going to be a hard April” for the hospitality industry.  She’s already heard from hotels that were close to full capacity being down to 30% capacity in April due to cancellations. And while those hotels may have "no cancellation, no refunds" policies, guests who booked through third-party sites such as Expedia, Bookings.com, and Hotels.com will get their money back due to Force Majeure clauses which are activated when there are circumstances beyond a venue's control. “It’s a huge hit,” she said.

Long-term, she said it will hurt the hospitality industry and resort taxes. “You’ll see in October when the City is dealing with its budget. It’s a broader trickle-down effect but, immediately, employees are going to be losing their jobs.”

“I don’t know where this is going to go for Memorial Day and May,” Velasco said, adding, “then you have June or July which is kind of our down time anyway so I don’t know when we’re going to be able to recover. It has a very broad reaching impact on tourism which is the backbone of our economy.”

The move comes as two critical positions remain vacant, the Director of Economic Development and Director of Tourism and Culture, as a result of two high level resignations last month.


Photo: Miami Beach City officials announce State of Emergency due to coronavirus. Left to right: Assistant City Manager Alina Tejeda Hudak, Fire Chief Virgil Fernandez, City Commmissioner Steven Meiner, City Manager Jimmy Morales, Mayor Dan Gelber, City Commissioner Mark Samuelian.