Miami-Dade’s finances getting worse as port faces debt crunch

A $285 million deficit in 2013 dings the county’s balance sheet as Moody’s warns of a debt squeeze from the new port tunnel.

05/02/2014 6:39 PM

05/02/2014 6:56 PM

Miami-Dade County’s finances continue to weaken as it faces a looming budget gap, a credit downgrade for its port and mounting debt expenses.

Deficit spending and a nearly $17 billion debt load lowered the county’s overall “net position” in 2013, according to a new financial report. The equivalent of a person’s net worth, the county’s $6.3 billion net position measures the difference between assets and liabilities.

The difference narrowed by more than $300 million last year — meaning the county’s net worth declined by 5 percent. The main cause was Miami-Dade’s spending $285 million more than it took in during the 12-month stretch that ended Sept. 30.

“If you take this report and compare it to prior years, we are a weaker government,” said Ed Marquez, deputy mayor for finance. “Our expenditures are exceeding revenues, and our [net worth is] going down.”

The detailed accounting of the dollars moving in and out of Florida’s largest government came the same week as Moody’s, a credit rating firm, issued a glum summary of PortMiami’s finances.

Citing the financial strain from funding the new port tunnel and other upgrades, the agency lowered the county seaport’s credit rating to a “moderate” risk. It was the second Moody’s downgrade for the port in less than a year.

Miami-Dade commissioners recently voted to let PortMiami use general tax revenue as a backstop for the planned debt, so the Moody’s action caused a stir Friday as it became public.

“I have a call in to see what the heck is going on,” said Commissioner Lynda Bell. “It’s a big deal. I don’t think anybody should downplay it”

Bell said that if commissioners had known a downgrade was possible before the April 8 vote, “the reaction would have been: wait, hold it, table this.”

After successfully enacting a property-tax cut in 2011, Mayor Carlos Gimenez has spent three years reducing the county’s payroll expenses and juggling the political hazards of a revenue squeeze. He backed off an attempted tax increase last year and has pledged this year not to endorse a tax increase without sending it to voters first.

The county’s library system faces a $20 million shortfall that could result in mass layoffs, and the parks department is trying to close a $34 million gap caused in part by the loss of surplus hotel taxes used in prior years. Gimenez’s finance team predicts a shortfall of about $200 million for the fiscal year that begins Oct. 1.

“The consequences of that tax cut being essentially made permanent have left the government with insufficient funds,” said Terry Murphy, a consultant who helps county unions with budget analysis. “There was a dramatic tax cut to the community in the depths of the recession and no subsequent adjustments.”

When the fiscal year ended, Miami-Dade’s net position stood at $6.3 billion, down $314 million from 2012’s $6.6 billion.

The reduction mostly came from a $285 million gap between Miami-Dade’s $7.36 billion in expenses and the $7.07 billion it recorded in revenue. A $29 million payment for the tunnel project added to the gap, according to the report.

Overall spending increased 2.1 percent to about $20 million a day, while revenue was virtually flat. Property taxes dipped 2.5 percent to $1.26 billion, while sales tax, utility fees and gas tax all rose by between 5 percent and 7 percent. Long-term obligations grew by $670 million to $16.65 billion. Interest payments on that debt totaled $185 million.

The 2013 report showed a sharper decline in net position than in 2012. That year, the county’s net position shrank by just $129 million amid a real estate crash and lower tax revenue. Both marked literal changes in fortune from the boom years of Florida’s housing industry. In 2006, Miami-Dade’s net position surged by about $500 million over 12 months to $7.6 billion.

While Miami-Dade’s audited financial statements offer a detailed look at the past year’s finances, the port’s credit situation offers a more immediate challenge. Lower credit ratings make it more expensive to borrow money on Wall Street, and PortMiami plans to sell about $200 million worth of bonds this year and another $220 million in the coming years, according to Moody’s.

The New York-based ratings firm first cut the port’s debt by a notch in September, then followed up with another notch downgrade Thursday to Baa1. The two-tier reduction took the port from being considered a “low credit risk” to a “moderate credit risk.”

The port’s debt is poised to cross the $1 billion mark in 2014, and Miami-Dade needs about $180 million in the coming months to fund the remaining installment of its $309 million share of the tunnel’s construction cost.

Maria Matesanz, a Moody’s analyst, said the agency considers the port’s growth projections to be “somewhat optimistic” while the debt load continues to sap revenue.

“Their liquidity is not as strong as it for a lot of other ports,” she said, using a term that basically measures how much cash a port has to spend. “The more debt you have, obviously, the more payments you have.”

Join the Discussion

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.

Terms of Service