City Of Miami Should Stay Out Of The Spending Candy Store
Written by Michael Lewis on April 18, 2013
By Michael Lewis
Though Miami has only about half the reserves required, city hall is about to fall farther out of compliance by spending a surplus before a surplus is even certain.
Commissioners, like kids in a candy store, last week asked for a menu of ways to spend the surplus even though they admit they won’t know its size for months.
They gave short shrift to a budget director who clearly stated that a surplus almost surely will disappear next year unless the city either cuts spending or raises taxes.
Barring a tax hike or other cuts, said Daniel Alfonso, the city can’t fund anything new but one-time giveaways this year.
That didn’t stop commissioners from talk of adding police whose pay would continue. It didn’t stop talk of restoring and then doubling extra pay for police for added education. It didn’t stop talk of a 3% of salary payout to all employees.
The only commission concern was not to touch last year’s surplus, which would require a formal waiver of the rule that city reserves equal 20% of the average general spending of the past three years.
Commissioners want to keep skirting the rule but not admit it Ð just worry about the future when it gets here.
But that’s the exact reason a 20% reserve ordinance exists.
The city 17 years ago suddenly "discoveredÓ it was going to fall $68 million short of funding costs. Facing bankruptcy, Gov. Lawton Chiles appointed an oversight board that could overrule city hall.
In 1998 the board did so when the city tried to slip through a budget with a razor-thin $68,000 margin that a light wind could have blown away. The oversight board put its foot down and the city backed down.
But city credit vanished, businesses wouldn’t move here and the entire county’s economy suffered. Blame for that city irresponsibility, not just in one year but cumulatively.
After the city in 2000 agreed to a 20% reserve, investment worries declined. In the past decade’s condo boom the city was awash with added tax income, and it lived high on the hog.
But that didn’t include keeping reserves high, as funds fell to $8 million though ordinance required over $100 million.
Fast forward to today. The reserve fund is at $58 million, about half of what’s now required. Money is again about to flow in taxes from a new construction boom.
What to do with that cash? Marc Sarnoff wants to add more and more police as he paints a picture of Miamians dogged by crime. Other commissioners aren’t sure all the surplus should go to policing.
But in debate last week over the surplus, nobody suggested putting it into reserve as ordinance requires for the rainy days that Miami has faced before, always unprepared.
Commissioners have no idea how big this year’s surplus will be. Mr. Alfonso expects $13 million Ð but a settlement with the fire and police retirement trust, he says, could soon erase $9.8 million of that.
That could leave $4.2 million Ð if estimates of the city’s Sept. 30 financial position are right.
One commissioner noted softly at the meeting that hurricane season is coming, with untold costs if the city took a major hit.
Anything could happen. That’s why 20% reserve is required Ð that and the fact that the governor wouldn’t remove outside oversight until the city finally grew up and started saving for a rainy or windy day.
The city promised to save Ð but like a kid with an allowance, it’s more fun to spend than save.
Besides, we probably won’t have a hurricane. And probably nothing else will happen. So spend it quick. After all, some of us will be out of office before bills come due.
Nobody said this. But that’s the impact.
Of course crime is a concern Ð always has been, almost everywhere. Of course the police chief wants more staff Ð almost every department head on earth does.
But talk about crime: nobody seems concerned that the city itself violates ordinance every day that it doesn’t have 20% of average general fund budget in reserve. The only way to get more in reserve is to put it in instead of spending every cent before the year ends.
Commissioners know this. "We can’t get drunk on spending,Ó Francis Suarez noted as he pushed to spend more rather than save it. "We’ve got to make sure that the numbers are tight.Ó
Mr. Suarez cited the need to comply with full reserves but said "I don’t know how you do that unless you fire half the city and you do more drastic cuts from what you did. You would have to sell non-core assets… and we’ve got plenty of those…Ó
Let’s try to be helpful: the way to cut less or raise taxes less or sell off fewer city properties Ð which, once sold, would leave future commissions in a pickle with nothing to sell Ð is to save more when saving is possible.
The city is likely to have anywhere from $4 million to $13 million left of a $905 million budget on Sept. 30 Ð if nothing at all goes wrong.