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.”
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