As COVID-19 rages on, this Miami-Dade city continues to fight for its financial life
Last Thursday was a long day of virtual meetings for city officials in Opa-locka. First, they heard a presentation from an outside financial auditor. Then they voted to approve his audit, the fourth the city has completed in 18 months as it scrambles to catch up on long overdue paperwork. After that, they reconvened to talk about the city’s response to COVID-19.
There’s no rest for the weary in a city that has been in a state of financial emergency for almost four years, with a state oversight board still monitoring its spending. Late last year, Florida lawmakers drafted a bill that would have compelled Opa-locka residents to vote on whether to dissolve the city and become an unincorporated part of Miami-Dade County, suggesting it was too plagued by corruption and financial instability to serve its residents and pay the bills. The legislation didn’t move quickly enough to pass through the committee stage.
Now, under first-term mayor Matthew Pigatt and City Manager John Pate, who left a job outside Chicago last August to take on the new role, the city is pushing to get its operations in order. It has one audit left to complete — for the fiscal year ending in September 2019 — before it can submit a five-year financial plan to the state. Cities are typically required to turn in annual financial reports, including audits, within nine months after the fiscal year ends.
In August, the state oversight board rejected Opa-locka’s first proposed five-year plan, which was already two years overdue, citing the unfinished audits. The state’s Joint Legislative Auditing Committee said it would withhold funds from the city if it didn’t submit the plan by Feb. 1.
But Pigatt said city officials have been communicating with the state to extend that deadline, most recently because of the challenges of addressing the COVID-19 pandemic. The city met a May 15 deadline to turn in its audit for the 2017-18 fiscal year, and its leaders are now working out a new deadline for the five-year plan with the state, Pigatt said.
“Getting this [2019] audit done is the number one priority of the city,” said Pigatt, who was elected in 2018 along with three new commissioners. “We have to know where our money is first before we can project out what we’re going to do with our finances over the next few years.”
Financial picture slowly improving
Opa-locka, a majority-black community with around 18,000 residents, was in “deteriorating financial condition” as of the 2015-16 fiscal year, according to a scathing report released last July by Florida’s auditor general that laid out 99 issues of government mismanagement. In 2016, then-Gov. Rick Scott declared a state of emergency in the city as it teetered on the brink of bankruptcy.
The picture presented in the latest completed audit, which covers 2017-18, wasn’t exactly rosy. Revenues in the city’s general fund dipped by $2.4 million from the year before, and the unassigned fund balance, an indicator of how much money a government has available to spend at the end of a fiscal year, was negative $4.5 million.
But Miami-based accountant Anthony Brunson, whose firm has conducted each of the city’s last four audits, said the city’s ability to continue operating is not in jeopardy. The overall picture is improving, he said.
“Significant progress has been made,” Brunson told city commissioners. “We think the city is in a much better state versus where it may have been in 2014.”
The drop in revenues, he said, was related to funds that the state had been withholding from the city. Until last year, the state was withholding grants and other revenue sharing as punishment for the city not completing its audits on time. That changed after Opa-locka turned in three years’ worth of audits between December 2018 and October 2019.
Pigatt also said Opa-locka’s bank, City National Bank, has agreed to release $2 million out of $4 million it had previously been withholding. That “dramatically” changed the city’s position, Pigatt said, including by allowing it to allocate $1 million in reserves.
“We’re financially soluble and we’re gonna be around for a while,” Vice Mayor Chris Davis said during last Thursday’s meeting. “We’re pretty liquid and continuing in an upward trend to ensure we have enough cash on hand to pay our bills.”
At the very least, Pigatt said, cash balances are up, though he acknowledged that without an audit finished yet for the most recent fiscal year, the city’s exact financial state is hard to pin down.
Frank Rollason, the director of emergency management for Miami-Dade County and a member of the state’s financial oversight board for Opa-locka, said he read the latest audit report and believes the city still has a long way to go.
“I read the findings and noted many improvements are needed going forward to get Opa-locka financially solvent and actuarially sound,” Rollason said in a statement, though he acknowledged that the 2017-18 audit period was under a previous City Commission. “The Oversight Board is hopeful progress is being made and we look forward to subsequent audits.”
Working through 99 findings
Miami-Dade County has provided substantial help to the city in the past few years, including by negotiating a plan for the city to pay off debts for water and sewer services and helping it hire a consultant to replace faulty meters. Opa-locka’s water and sewer system has been plagued by corruption, overbilling and poor infrastructure.
County and state officials have previously said the county would likely resist taking over the city’s operations entirely. Melinda Miguel, the state’s chief inspector general, said last year that the county might be willing to take over some additional services, but that it would be a “significant financial hit” to assume all operations.
But the new crop of Opa-locka leaders wants to ultimately return the city to financial independence. Pate and his administration are working their way through Miguel’s July 2019 review, overhauling city operations to address each of her 99 findings.
As of May 15, the city reported that 35 of those findings had been addressed with documented fixes. The changes include new protocols for procedures like screening for new hires, employee performance reviews, lobbyist registration and competitive bidding processes, among others. Another 24 reforms have been implemented but not yet documented, according to a city document tracking the changes. The city is targeting July to address all 99 findings.
Miguel, who leads the state oversight board, couldn’t immediately be reached for comment on the city’s progress.
Changes to city operations
Brunson pointed to changes the city has made to protect against the type of fraud and malfeasance that has haunted it in the past. Between 2016 and 2018, seven people associated with Opa-locka’s government were convicted after an FBI-led corruption investigation.
In 2015, Brunson said, the city’s accounting staff could enter financial transactions without any prior approval. Today, he said, that system includes checks to prevent “one of the best ways to commit fraud.”
There are still plenty of weak spots. Brunson’s entire audit report was classified as “qualified,” meaning the city provided insufficient information, because the city has yet to complete an updated, exhaustive inventory of its physical assets. Pate said he hopes to bring in a third-party company to do the job.
Internal controls over payroll and personnel files have improved, Brunson said, but there’s still “quite a bit of improvement that could be done.” He also noted that there were “really large differences” in 2018 between the amount of money recorded on the city’s books versus the amount held in its banks — discrepancies that weren’t reconciled until this year.
“That’s one of the major internal control issues in the city,” he said.
An uncertain future
Opa-locka is dealing with three crises at once, Pigatt said. There’s the city’s financial state. There’s the novel coronavirus. And there’s a flooding emergency that the city declared last year due to its crippled infrastructure.
Pate, the city manager, said the city has not had to furlough or lay off any workers amid the pandemic. But the economic downturn will ultimately affect Opa-locka’s tax revenues, said Pigatt, a concern shared by cities across South Florida.
“Right now, we’re just being very conservative with what we do to make sure we maintain fiscal stability and liquidity,” Pigatt said.
After the city commission voted unanimously Thursday to approve the 2017-18 audit, Pate said his team was at a “pause and reset moment” to get its daily operations in order before moving on to the next audit. But Pigatt, noting that the city has already been granted multiple extensions to submit its five-year plan, said he doesn’t want to wait long.
“I want to make sure they see the progress we’re making,” he said.
