Miami Beach Losing $3.6 Million Weekly in Tourism Revenue Due to Coronavirus Pandemic

Susan Askew
Susan Askew

Miami Beach Losing $3.6 Million Weekly in Tourism Revenue Due to Coronavirus Pandemic:

Impact will force “unpleasant” budget decisions, Commission Finance Chair Says

Miami Beach is facing a “horrific” budget gap as a result of the coronavirus pandemic, the City Commission’s Finance Committee Chair said Wednesday. Commissioner Ricky Arriola cited a weekly $3.6 million drop in City revenues during a special Commission meeting to consider relief for hospitality workers. Depending on how long the crisis continues, he said, “We’re looking at a $30-40 million fiscal hole in our budget. No amount of financial engineering is going to plug that hole. It’s going to be really ugly.”

The special meeting – the first ever telephonic Commission meeting in the City – was called to discuss a request by a non-profit organization in partnership with the local hospitality union for $200,000 in financial and training assistance. The request depended on other governments kicking in as well for a total of $2 million, the majority of which would have provided $400 per month to the 1,000 hardest hit people for four months. Though UNITE HERE Local 355 leader Wendi Walsh assured Commissioners that non-union members would be served as well, they cited the pending relief from the Federal government as a better answer to the cash needs of workers. The Commission opted to repurpose some City staff to provide assistance to all workers who need help navigating the various relief available to them, not just those in the hospitality industry.

The meeting, however, was a first glimpse into the impact the crisis is having at all levels, from workers to business owners to local governments. 
“As the Finance Chair, I’m not looking forward to that,” Arriola said referring to the looming budget discussions. “Cutbacks. Furloughs. All kinds of unpleasant things… horrific things we’re going to have to cut back on. I don’t want to spend money until we have a complete financial picture,” he said in explaining his “no” vote on the $200,000 request.

Arriola said the hospitality industry is “the first industry we need to target.” Recovery will take a while, he said, noting the hospitality industry has the “longest lead time… hotels take a longer time to fill.  People have to make travel plans. People are going to have less money to spend. Companies are going to be slow to spend. At some point in the future, I’m going to be very interested in helping the hospitality industry… There’s going to be a lot of people that need the help.”

“We are very dependent on our tourism industry,” Commissioner Micky Steinberg said. “Zika, red tides, hurricanes, now this virus. It really shows us our vulnerability.”

In making his recommendation to redirect City staff toward helping displaced workers in all industries, City Manager Jimmy Morales said, “It’s one thing if [the shutdown] goes on for a few weeks. We have reserves. If it goes on for several months, obviously, our capacity is greatly, greatly diminished," adding he would prefer "to keep our powder dry because we don’t know how long this war against COVID-19 is going to last.”

The City estimates it is losing $3.6 million per week from the hit to the tourism industry. The number breaks down as follows:
  • Resort tax revenues, which come from a 4% tax on hotel rooms and 2% on sales of food and beverages sold in restaurants, bars, or nightclubs, last year totaled $88 million. Weekly losses are $1.6 million. 
  • Parking revenues are down an estimated $756,000 per week. The City says tourists/visitors account for 80% of parking demand at city-owned lots and garages.
  • Water and sewer revenues are down about $670,000 per week. According to the City, hotels and commercial accounts represent approximately 32% of water consumption.
  • General Fund revenue losses are estimated to be $546,000 per week. Resort tax transfers to fund tourism-related expenses such as Police and Fire services make up 10% of the General Fund revenue. The General Fund will also see revenue losses due to reduced sales tax, beach concession, parks programs, and other revenue.

When we first asked Miami Beach CFO John Woodruff about the potential impact of the coronavirus in early March, he pointed out “the economic impact could be substantial” but noted the City’s recent implementation of a stronger reserve policy. At the time, he said the City had a three-month reserve in its Resort Tax Fund and was at a 20% reserve level in the General Fund.

Following the release of the estimated weekly losses, we checked back in with Woodruff on the numbers. “The General Fund has a reserve of $80.6 million. The Resort Tax Fund reserve is $15.2 million,” he said in an email. 
Asked when the reserves might run out, Woodruff replied, “Depends on how long the revenue losses continue over the upcoming weeks and months until the COVID-19 issue is behind us. To help mitigate the loss of revenue, the City is aggressively pursuing cost saving opportunities. If a particular fund runs low, we can use the General Fund reserve as the backstop. Let me be clear that we are committed to paying the City’s debt and other vendor obligations.”

One of the first things the City did was to implement a freeze on hiring and non-essential expenditures. In addition, the City released 192 part-time and temporary employees who would normally “fill in gaps to reduce overtime and things like that,” Morales told Commissioners. He cited part-time ocean rescue and parks workers as examples. “We have shut down… We don’t have work for them. Ideally, when the City reopens, we’ll bring those individuals back. Right now, there’s no work to give them,” Morales said.  

In a memo to Commissioners, Morales noted, he expected the weekly revenue losses “to continue over the upcoming weeks and months until the COVID-19 emergency is behind us. Like many cities across the country, we will be requesting an infusion of funding from the State and Federal Governments to help offset these dramatic revenue losses that are critical to providing continued services during this time. At this point, of course, there is no assurance if and when such funding will materialize.”

From Woodruff’s perspective, the City remains steady in its footing. “Our reserves, or rainy day funds, are in place to provide continuity of service during emergencies. The impact of COVID-19 will likely be very significant, but due to prudent financial planning, we have strong reserves in place that will help us navigate this crisis,” Woodruff said. “Ideally, the federal government would provide stabilization aid to local governments to replenish the reserves. Otherwise, we will have to rebuild our reserves over time.”
The City’s reserve funds and policies have played a role in its strong credit ratings, notable in the recent GOB bond offering. Asked how the current financial situation might impact future bond offerings, Woodruff replied, “The next GOB tranche is not scheduled until 2022, so no impact as of now. Water & Sewer bonds may be issued in 2021 or 2022 depending on the sequencing of stormwater projects. We have enough funding from the 2017 Water & Sewer bonds to continue to work on the critical maintenance projects for Water & Sewer that were identified by the Hazen & Sawyer study a few months ago.”
“We have no scheduled credit rating as of this time, but the credit rating agencies will likely be proactively reaching out to many local governments across the country in the near future,” he said. 
The City’s FY 2020 Operating Budget is $350 million. The Resort Tax Fund budget is $93.6 million. Other budgets include the Capital Budget ($86.6 million); Enterprise Funds (Sanitation, Water and Sewer, Storm Water, Parking and Convention Center Departments) totaling $229.3 million; and Internal Service Funds (Central Services, Fleet management, Information Technology, Risk Management, Medical and Dental, and Property Management) budgeted at $98.9 million this year.

Commissioners usually begin the budget planning process for the coming fiscal 

Message from Miami Beach Mayor Dan Gelber

Susan Askew
Susan Askew
“We are a community who is at its best when challenged the most”

Miami Beach Now Under “Stay at Home" Directive

Susan Askew
Susan Askew
“Safer at Home” effort to curb the spread of COVID-19