Moodys Investors Service said Wednesday it has enough fundamental concerns about Miamis finances to begin a broad review of the citys budget and its long-term financial stability.
The announcement comes on the heels of Moodys warning it may downgrade Miamis credit rating because of a U.S. Securities and Exchange Commission probe into city bond issues. Moodys now says it will widen its review to look at how Miamis rising pension and healthcare costs will impact the citys financial health.
Moodys believes these issues will impose annual recurring challenges that will be difficult to resolve given expected limited revenue growth, the private credit agency wrote in its report.
The credit agency also cited other concerns with the citys finances.
Among them: that Miami has just five weeks to close a $40-million revenue gap in an operating budget of $485 million.
Moodys also noted that a Miami-Dade circuit judge had quashed City Manager Johnny Martinezs attempt to declare financial urgency, a tool that would have enabled the City Commission to force employee concessions.
This is not an indication of financial health, Miami Commission Chairman Francis Suarez said. The ratings agencies are informed about the projected deficit and the financial urgency. They know the clock is ticking on our fiscal year.
Neither Martinez nor Miami Mayor Tomás Regalado returned calls seeking comment late Wednesday.
In an email to commissioners, Chief Financial Officer Janice Larned stressed that the communication from Moodys was not a downgrade in the citys credit rating for outstanding bonds, rather a continuation of a review.
The past week has been challenging for the citys top money managers.
Two key finance employees announced their resignations. Both said they were leaving for other opportunities, but observers say the departures point to problems in the department. Larned had threatened to leave, but decided to stay.
The Moodys report also expressed concerns for Miamis financial future.
The agency pointed out that pension and healthcare costs make up 23 percent of the budget. Those costs could end up eating one out of every $3 the city spends by 2017, Moodys said.
In the end, Moodys will decide whether to maintain Miamis current A3 credit rating or downgrade it a move that could increase the interest the city would need to pay when borrowing money.
That worries Suarez, the commission chairman.
Any debt issuance is tied to our credit rating, Suarez said. A downgrade would put a greater strain on our resources.
The review is linked to about $740 million worth of bonds the city has sold on Wall Street.
Moodys said Wednesday it was adding to its review $71 million worth of bonds tied to off-street parking revenue as part of its broader inquiry.