Falling property values, high fuel costs hurting Miami's budget
By Yudislaidy Fernandez
While Miami city staffers made little mention at a budget workshop Monday of where $35 million in cuts should come from, staff did detail the roots of the city's rising expenses.
In a review of spending in the past five years, 41% of the city's funds were spent in public safety, a total of $203.5 million, and 14% went to pensions, about $68.8 million. Another 11%, about $52.5 million, went to public works, according to figures presented by the office of Michael Boudreaux, director of strategic planning, budgeting and performance at the meeting.
He said the city began to see a shift in its budget starting last year when expenditures began surpassing revenues.
He said that the three biggest contributors to the city's budget challenges are rising fuel costs, energy expenses and the steep drop in taxable property values from fiscal 2007 to 2008.
In 2009, fuel expenses are projected to increase 40% from $5.1 million to $7.1 million, according to figures presented by Mr. Boudreaux.
With Florida Power & Light's pass-through fuel surcharge approval in July, Miami's utilities bill is set to increase 20%, rising from 8.6 cents per kilowatt hour in 2008 to the anticipated 10.1 cents in 2009.
He also noted the average homestead residential taxable value is down 6.2%, and the average residential market value is down 6.3%.
The city is seeing some relief in the overall gross taxable value which is up 4.7% from $39.1 billion to $40.9 billion due to new construction, which signified a $1.8-billion boost.
He said the city can also expect to feel the impact in fiscal 2009 from House Bill 1-B, Amendment 1 and Glitch Bill, and union contracts, among others.
For example, House Bill 1-B limits the city's increase of the rolled back millage rate from year to year. In October, the city was also removed from a list of municipalities under special financial concern, reducing the millage rate from 7.2999 to 6.6429 mills.
Amendment 1, passed in January, provided an added $25,000 exemption on homesteaded properties, reducing the city's taxable value $1.2 billion in 2009.
But the passage of the Glitch Bill has removed the effects of Amendment 1 from the Miami's rolled-back millage rate.
Mr. Boudreaux said the proposed tax rate of 7.674 mills is to save city property owners more than $9 million in the next fiscal year.
Staff salaries are also on the rise. Unionized employees' paychecks are expected to go up 3% to 5% Oct. 1, when the city's new budget year begins.
In wages alone, the city picks up an additional tab of $9.3 million toward its salary costs this upcoming year. Adding to the mix is a projected 14.2% increase in health plan costs.
Other impacts to the city are a 7.3% decrease in state revenue sharing half cent sales tax and an annual contribution to the city's other post-employment benefits, the city's cost of covering retirees, estimated at $20 million.
To reduce fuel expenses, City Manager Pete Hernandez said he wants to look at making the Miami Riverside Center, the city's main office building, and City Hall more energy efficient.
He also discussed a four-day work week, another costs-saving possibility the city is exploring, but he conceded the saving may not be significant.
Commissioners also made revenue-increasing suggestions to help balance the city's ailing budget.
Commissioner Angel Gonzalez said it's important to beef up the code enforcement department so it can collect more revenues, especially from issuing occupational licenses and certificates of use.
Commissioner Marc Sarnoff said the city should create an incentive to get more employees to drive hybrids and smart cars — he recently bought a smart fortwo. He suggested also advancing efforts for a car-pooling system for staffers who use city-owned vehicles. "There should be a mandate to get people to carpool in order to reduce fuel costs projected for next year," he said.
Mr. Sarnoff also noted the need to control overtime pay, as this is a "sign under staffing." He said the commission needs to be informed of how much of the city's needs are being filled with overtime pay and what attempts are under way to reduce it.
Mr. Hernandez agreed overtime needs to be addressed, adding that a department such as police spends $8 million to $10 million a year in time-and-a-half payments. He said the city's long-term plan is to control overtime but "it's a long process and it takes time."
Commissioner Tomás Regalado suggested tallying revenues coming in from thousands of new parking meters set up across the city.
Mr. Regalado also mentioned other new sources of revenue include building advertising mural permits, the parks' corporate sponsorship program, slot machines at Miami Jai-Alai and Flagler Dog Track and the renewal of the Rickenbacker Marina lease.
But Commission Chairman Joe Sanchez cautioned about counting on money the city may not yet have in hand. "The real test," he said, "comes in how we cut our expenses."
He agreed the city's plan to reduce bulk trash pickup to once a month can help save money and reduce wear and tear on the city's solid waste fleet.
Mr. Sanchez also suggested changing regular trash pickup from twice weekly to once a week, an idea that may not sit well with residents concerned with keeping neighborhoods and streets clean.
Commissioners also voiced their priorities for funding. The consensus was that areas such as the police and fire department, public works and the city's parks would be minimally injured by budget slashing.
In July, Mr. Boudreaux said the administration was asking more than 40 of its departments and programs to take proportional cuts to compensate for the $35-million deficit — an average 12.5% reduction each. The budget department was to meet with individual departments to discuss such reductions and their impact.
But seven-year Commissioner Gonzalez said, like in the past, he fears the final decision is going to fall to the commission. "Eventually we are going to have to make decisions on how much money is going to be cut because voluntarily departments are not going to cut their budgets."