Miami

Miami uncovers an unexpected $45 million surplus

 

Coincidentally, officials plan to issue a $45 million bond to finance the city’s contribution to the PortMiami tunnel dig.

kmcgrory@MiamiHerald.com

City of Miami finance officials announced Wednesday that they unexpectedly closed the fiscal year with a $45 million surplus — almost $37 million more than had been projected.

The news took some city leaders by surprise, both because of the size of the discrepancy and the timing. The announcement comes one day before the City Commission is being asked to sign off on a $45 million bond issue.

Miami is currently under investigation by the U.S. Securities and Exchange Commission for allegedly manipulating its books in advance of the 2007 and 2009 bond issues used to finance sidewalk and street repairs.

Commissioner Frank Carollo said he was puzzled by the latest development.

“I’d rather have a $45 million surplus than a $45 million deficit,” Carollo said. “But it’s a big difference from what they told us a month ago.”

City Budget Director Danny Alfonso explained the difference by saying he had been too conservative in his projections. Alfonso said he underestimated revenues coming into the city by about $12 million. “The thinking was that I didn’t know if the state was going to ask for the money back,” he said.

Additionally, Miami didn’t spend the more than $16 million it had stashed away in emergency reserves. And the police department finished the year about $4 million in the black.

“In hindsight, perhaps I should have said in August that we were in better shape,” Alfonso said. “It was my mistake.”

Still, City Commission Chairman Francis Suarez said the finance department should have been able to project revenues and expenses.

The explanation also failed to comfort union leaders, who blasted the city’s finance department for declaring financial urgency earlier this summer. The legal maneuver can be used to force union concessions during difficult budget years.

The city never had to force concessions; its four labor unions agreed to more than $40 million in benefit reductions.

“We worked hard to put together a union contract to save our city,” Fraternal Order of Police Vice President Javier Ortiz wrote in a letter to commissioners Wednesday. “Now that there is a $45 million surplus, I respectfully request that our benefits are restored.”

Firefighters union president Robert Suarez said he wasn’t sure he could trust the numbers.

“You have to wonder if this was done to put the commissioners at ease before voting on the bond issue,” he said.

Miami’s finance department has been rocked by turmoil in recent months.

Chief Financial Officer Janice Larned threatened to quit this summer, but was talked into staying. Treasury manager Mirtha Dziedzic left for personal reasons in August. Finance director Stephen Petty, who was hired last year without meeting the minimum job qualifications, tendered his resignation last month.

The latest challenge has been the bond issue, which is needed to pay off the short-term loan that financed the city’s share of the PortMiami tunnel dig. Commissioners are under pressure to approve the bond issue Thursday because the $45 million loan balance is due in January.

Although the surplus money could be used to pay off the loan, city finance officials plan to put it into reserves, Alfonso said. Miami has a financial integrity ordinance that requires 20 percent of its operating budget, or about $93 million, be set aside in a rainy-day fund.

“The manager has indicated that we will still proceed with the bond issue because we are not where we should be in reserves,” Alfonso said. “But if the tunnel loan fell apart, it’s a great windfall in the sense that we would have the money.”

Commissioners, however, were critical.

“I can’t wait to hear . . . the administration’s explanation of how we got here,” said Commissioner Michelle Spence-Jones, who was travelling back to Miami from Atlanta late Wednesday. “To me, this sends the wrong message to our city employees. How do you trust someone who tells you one thing and then switches it up?”

Commission Vice Chairman Marc Sarnoff said he was shocked by the savings generated by the police department.

“I don’t think there should be any revenue left over from the police,” he said. “I want them to spend their budget. I want them to have resources.”

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