Finance scandal: City of Miami never learns


The city of Miami’s financial mismanagement that prompted current charges by the Securities and Exchange Commission is inexcusable. Questionable also is the apparent absence of appropriate City Commission oversight, including serious questions that should be answered by the city’s external auditors.

In late 1996, as pro bono city manager of Miami, we uncovered a $68 million shortfall in a recommended, once approved 1996/97 city budget. As illegal as that was, I felt that the city’s December 1995 $73 million revenue bond issue for the pension system, which seriously understated the city’s poor financial condition, was even more egregious.

Some of the proceeds ($25 million) from that bond issue were posted in the 1994/95 budget after (!) the fiscal year ended, and $35 million more was recorded as pension revenue in the then current 1995/96 budget. There were few bond funds left, yet another $35 million in revenue was shown in the proposed budget, an early indication that the proposed budget was based on smoke and mirrors.

Afterwards, the actual budget deficit rose very quickly to $68 million and we were forced to totally reconstruct the proposed budget. As a matter of prudent fiscal policy, spending long-term revenue bond funds to meet annual pension fund requirements only serves to dig a deeper financial hole, with compounded bond interest, in the city’s future.

That 1995 bond issue was the basis for the SEC’s 2003 “cease and desist” order following extensive hearings during which I was a witness. When I took the stand at that hearing, I was surprised to see the attorney defending the city because, with commission authorization, I had hired him to sue the city’s external auditors, which we had previously fired.

While in office I also accepted the city internal auditor’s resignation. To their credit, the fact that former Finance Director Diana Gomez and former Internal Auditor Victor Igwe raised red flags, in writing, over the questionable transfer of capital funds to shore up general fund operating deficiencies, serves to bring responsible players into the picture depending on who received those memos. The fiscally irresponsible practice that they objected to was a standard financial practice for the city of Miami in 1995/96 and before.

Unfortunately, the 1996 “City of Miami Financial Recovery Plan” that I formally presented to the mayor and City Commission on my last day as interim manager, when Ed Marquez was appointed city manager, never received the wide public discussion and recognition it should have.

About an inch thick, the report set forth, in some detail, all the reasons why the city faced potential bankruptcy including serious management deficiencies. In addition to my recommendations, it also included specific recommendations from 43 pro bono corporate leaders and career public servants who were assigned to 12 separate task forces that embraced all aspects of the city’s operations.

Unfortunately, the level of mismanagement in the city extended far beyond fiscal matters, so the Miami Financial Oversight Board appointed by Gov. Lawton Chiles used the “Recovery Plan” as a road map to force members of the City Commission to face up to their basic fiscal responsibilities. Task force members did a truly outstanding job over a period of 60 days and it is an insult to all that hard work to learn that some critically important lessons have since been ignored.

City Commissioners Willy Gort and Tomás Regalado (now mayor) were on that 1996 Commission; however, I’ve suggested many times that all Miami elected officials, managers, and department directors should read that Recovery Plan and evaluate what has and what still remains to be corrected.

An independent, objective and publicly disclosed operational and financial analysis, with comparisons, should be called for, particularly in view of the current SEC charges.

Former Miami City Manager Merrett R. Stierheim also served twice as manager of Miami-Dade County. He is also a former superintendent of the Miami-Dade County school district.

Read more Other Views stories from the Miami Herald



    Jeff Bauman: All I want is a normal day

    It is a weekend for working around the house. My fiancée, Erin, and I have the baby’s room to paint and some IKEA furniture to assemble. I roll out of bed early — 10:30 — and get into my wheelchair. Erin is already making coffee in the kitchen.



    More lax gun laws coming our way

    In December 1983, Middlesex County, N.J., discontinued a policy that allowed police officers to fire warning shots at fleeing or aggressive suspects. The county was the only one in the state of New Jersey, and one of the last in the country, to permit such firearm discharges, which are considered too potentially dangerous to third parties to allow law officers to use.

 <span class="cutline_leadin">REBELS</span>: Ivan Marquez, left, heads the FARC delegation to the peace talks with the Colombian government in Havana. Jesus Santrich of the FARC stands next to him.


    Myths and realities about the Colombian peace process

    Some opponents of the peace process between the government of Colombia and insurgents have been circulating false versions about the talks underway in Havana and unbelievable myths about its actual scope. We will clarify the main legends right now.

Miami Herald

Join the

The Miami Herald is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere on the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

The Miami Herald uses Facebook's commenting system. You need to log in with a Facebook account in order to comment. If you have questions about commenting with your Facebook account, click here.

Have a news tip? You can send it anonymously. Click here to send us your tip - or - consider joining the Public Insight Network and become a source for The Miami Herald and el Nuevo Herald.

Hide Comments

This affects comments on all stories.

Cancel OK

  • Marketplace

Today's Circulars

  • Quick Job Search

Enter Keyword(s) Enter City Select a State Select a Category