This email transmits two memoranda containing projections from the Office of Management and Budget:

     •     FY 2019-20 End-of-Year Projections based on February Revenues and Expenditures

     •     FY 2019-20 End-of-Year Projections based on January Revenues and Expenditures

The two memoranda were written a month apart. The first is current and is informed with financial information associated with the COVID-19 pandemic. The second was written before such impacts had occurred, but was not sent at that time.

FY 2019-20 End-of-Year Projections based on February Revenues and Expenditures

To state that we are in an unprecedented financial situation and uncertain times seems both trite and understated. Yet, the twin medical and financial crises facing the City of Miami and the whole world are nonetheless unique.

The general ledger for the fifth month of the fiscal year, February (41 ⅔ percent), closed on March 10, 2020. Under normal circumstances, it would be early for meaningful projections; the pandemic has made this even more uncertain. The Office of Management and Budget (OMB) has completed a thorough analysis of revenues and expenses and produced the attached detailed reports. This analysis is the topic of the “BU.1” Budget Updates at certain City Commission meetings.

This projection presumes that the City will remain in a similar situation to the current State of Emergency with recommendations to shelter at home and a mandatory curfew for a total of two months, and thereby will experience two months of lost revenues (non-Property Tax Revenues) and increased spending associated with the preparation for or response to the Coronavirus (COVID-19).

As such, OMB projects a net end-of-year deficit of $21.0 million (with a deficit of $26.6 million in the General Fund, and a surplus of $5.6 million in the Internal Service Fund). This is clearly not in accordance with the Financial Integrity Principles contained in Chapter 18 of the City Code of Ordinances. This projection includes revenues that are $43.7 million less than had been projected in the previous month.

While the Federal Government has passed several relief bills associated with the current pandemic, most (if not all) are in place to assist our residents and businesses or to pay for services that the City would not otherwise provide if it were not for the current incident. They are unclear or silent on the topics of: filling gaps in revenues, when or if funds will be made available to cities, and providing such assistance as municipal financial stabilization.

As such, the administration is preparing a plan to address the revenue shortfalls primarily through expenditure reductions. Because approximately three quarters of the City’s General Fund Budget is dedicated to personnel expenses, it is highly unlikely that the financial challenges can be met without some kind of reduction of overall personnel expenses. This reduction can take many forms, and all are being explored. Likewise, revenue increases and other options will be studied in the near future.

Overall actual revenues received year-to-date in the General Fund through February 2020 ($499.2 million), were $24.5 million higher than through the same period last year ($474.7 million). This represents approximately 61.7 percent of General Fund budgeted revenues collected already this year, with the majority of the year’s Property Taxes already collected.

Overall actual expenditures year-to-date in the General Fund through February 2020 ($415.4 million) were $25.4 million higher than through the same period last year ($390.0million). This represents approximately 51.4 percent of General Fund budgeted expenditures spent already this year.

The Mid-Year Budget Amendment is being developed. The amendments that will be proposed will generally be fixes to the current year budget, likely not include new services, and will be reactive to the COVID-19 pandemic. The City Commission has been advised of many of these amendments during previous “BU.1” Budget Updates. Likewise, development of the FY 2020‑21 Proposed Operating and Capital Budgets is underway with more than 25 Departmental Budget Meetings conducted when this memorandum was drafted.

In conclusion, presuming a two-month heightened COVID-19 situation, the City of Miami is currently projected to have a net end-of-year deficit of $21.0 million (with a deficit of $26.6 million in the General Fund, and a surplus of $5.6 million in the Internal Service Fund).

FY 2019-20 End-of-Year Projections based on February Revenues and Expenditures

The general ledger for the month of January closed on February 11, 2020, marking the end of the fourth month of the fiscal year; therefore, if revenues and expenditures were to be evenly spread throughout the year (which is not normally the case), we would expect to see about 33⅓ percent of the budgeted expenditures spent and 33⅓ percent of budgeted revenues achieved for the first four months of operation. Even though it is early for making meaningful projections, the Office of Management and Budget (OMB) has completed a thorough analysis of revenues and expenses and produced the attached detailed reports. This analysis is the topic of the “BU.1” Budget Updates at the second City Commission meeting of each month. It is important to note that these projections do not include any increased spending or loss of revenues associated with the preparation or response to the Coronavirus (COVID-19).

Overview

The OMB is currently projecting a net end-of-year surplus of $25.9 million (with a surplus of $20.2 in the General Fund, and a surplus of $5.7 million in the Internal Service Fund). As noted above, it remains early in the current fiscal year to completely rely on these projections for the full year. These projections are in line with what we would expect to see at this stage, as the City is required to carry certain reserves throughout the year according to the Financial Integrity Principles contained in Chapter 18 of the City Code of Ordinances; and the City has committed to carrying other reserves throughout the year to assist in increasing the unrestricted General Fund Balance in the current year.

These reserves are comprised of the Transportation Reserve ($1.984 million), the Reserve for Uncollectable Revenues ($5.779 million), the Contingency Reserve ($5.000 million), the Reserve to Build Back the Unrestricted General Fund Balance ($2.000 million), and the Building Reserves ($6.410 million). These total $21.173 million with each reserved for a different purpose and reason. The Administration recommends that the City continue to hold these funds in reserve, as the year continues. That is to say, the City should end the year with a surplus near the current projection of $20.2 million in the General Fund.

There are also reserves that are intended to be spent during the year, as noted in the Non-Departmental section of the budget. There are several of these specified in the Adopted Budget: the Reserve for Employee One-Time Payouts ($8.025 million), the Reserve for Internal Service Functions ($180,000), the two for grant matches ($162,000), the reserve for a salary study of engineering positions ($587,000), and the City Manager’s Reserve ($125,000). These total $9.079 million with each budgeted as a reserve in the Non-Departmental Accounts rather than in Departments with the expectation that they be spent at some point during the current fiscal year.

Revenues

Overall actual revenues received year-to-date in the General Fund through January 2020 ($452.3 million), were $28.1 million higher than through the same period last year ($424.2 million). This represents approximately 55.9 percent of General Fund budgeted revenues collected already this year. This is generally as expected with the majority of the property taxes for the year having been received in November and December 2019.

Building Revenues (a combination of permits and inspections) are on a current pace to be $3.8 million higher than budgeted. Please note that the Building funds are restricted inside the General Fund and cannot be expended on other operations. Similarly, Resilience and Public Works permits, and other revenues are trending toward being $1.8 million higher than budgeted and Zoning revenues are on a pace to exceed the budgeted amount by $206,000. Planning Revenues are trending to be right on budget in the current year.

Solid Waste charges for service, which are primarily comprised of the Household Waste Collection Fee, are trending toward ending the year $767,000 lower than budgeted due to a lower rate of collection in the current year when compared to the collection rate in the same time period last fiscal year.

Fire-Rescue charges for service, which are primarily comprised of transport fees, are projected to end the year $2.0 million higher than budgeted due to the Emergency Medical Services Transport Fee revenue trending at the same pace as FY 2018-19 combined with an increase in the new Public Emergency Medical Transport revenue that will be $1.474 million higher than budgeted in accord with the legislation passed by the City Commission this past fall.

Police revenues are on a pace to be $2.7 million higher than budgeted which is a combination of an increase in the collections of judgments and fines, an increase of charges for services, and a reduction of $500,000 in other miscellaneous revenues.

Real Estate and Asset Management charges for service, which are primarily comprised of revenues from City owned marinas, are trending toward ending the year $880,000 lower than budgeted due to fewer slips available than anticipated at the Dinner Key Marina.

General Government revenues collected by the Finance Department are above and below budget in different line items. Property Taxes overall are projected to be $12.1 million under budget due to historical rate of collection at 97%. Franchise fees and other taxes are projected to be $2.2 million higher than budgeted due to historical data and 95% budgeted. Interest earnings are projected to be $1.7 million higher than budgeted due to year to date collection. Inter-governmental Revenues are expected to be $2.7 million higher than budgeted due to prior year collections and budgeted at 95%. Other revenues are trending toward being $451,000 lower than budgeted due to year to date collection. Lastly, Charges for Service is expected to be $941,000 million higher than budgeted due to year to date collection.

Expenditures

Overall actual expenditures year-to-date in the General Fund through January 2020 ($367.8 million) were $9.5 million higher than through the same period last year ($358.3 million). This represents approximately 45.6 percent of General Fund budgeted expenditures spent already this year. The OMB is tracking each Department’s expenditures and has alerted departments that are spending at an increased pace. Some Departments are projected to end the year over budget. Some of these projections are due to reasons stated in the Mid-Year Budget Amendment section of this memorandum as described below. Other considerations in certain departments are as follows.

The Code Compliance Department is currently projected to go over budget by $117,000 due to less attrition savings and faster hiring than expected in the current year and increased overtime expenditures.

The Finance Department is currently projected to go over budget by $151,000 due to less attrition and faster hiring than expected in the current year.

The Office of Capital Improvement is currently projected to go over budget by $157,000 due to system lag time and incomplete charges back to capital projects.

The Resilience and Public Works Department is currently projected to go over budget by $1.2 million due to less attrition and faster hiring than expected in the current year and overtime as explained below.

The Department of Planning is currently projected to go over budget by $308,000 due to less attrition and faster hiring than expected in the current year.

The Building Department is forecasted to go over budget by $1.4 million primarily due to the cost associated with outside consultants for permitting and inspection services. This is in line with the revenue increases noted above.

The Office of Equal Opportunity and Diversity Programs is currently projected to go over budget by $24,000 due a lump sum payment for restoration of a salary.

The Fire-Rescue Department is forecasted to go over budget by $5.9 million due primarily to increased overtime costs. There are multiple reasons for this, not the least of which is the implementation of a new labor contract with the International Association of Fire Fighters. The Fire-Rescue Department and the Office of Management and Budget are working together to determine the appropriate amount for overtime costs and opportunities

Attrition is the idea that not all positions in a department or office will be filled for the entire fiscal year. As such, the budget is proposed with an amount reduced for this phenomenon consistent with historic vacancies in each department. In some cases, the historic trend does not hold true into the new year and additional funds are then proposed to be added in the Mid-Year Budget Amendment to cover the difference.

Mid-Year Budget Amendment

There are, at this time, some items expected to be proposed during the Mid-Year Budget Amendment in April. The City Commission has been advised to most of these during previous “BU.1” Budget Updates. The City Commission directed the Administration to include $500,000 for the 2021 College Football Playoffs in the Mid-Year Budget Amendment and an additional $500,000 in the FY 2020-21 Proposed Budget. Emergency repairs at Merrie Christmas Park for environmental remediation have been required ($385,000). We have received a grant for Emergency Medical Services requiring a match of $38,000 since the budget was adopted. As previously communicated to the Commission, the Overtime budgets for the Resilience and Public Works Department and the Office of Code Compliance will likely need to be increased to accommodate the current workloads. Furthermore, the City Commission’s approval of the use of Special Masters will likely require an additional budget amendment for the Office of Code Compliance. There may be a need to increase consultant costs in the Zoning, Planning, and Public Works Departments to meet the proper turnaround times for permitting. Also, as previously communicated to the City Commission, a few positions have been preliminarily added to Departments and ratification of these positions will be proposed in the Mid-Year Budget Amendment, including a new Program Manager for the Miami Forever Bond Program in the Office of Capital Improvements and an additional Major position in the Police Department.

Preliminarily, as has previously been communicated to the City Commission, we are monitoring the cost of recycling services in the Solid Waste Department. The contractual costs of these services have risen greatly in recent months. We will need to take both operational and financial steps to address this issue. The City Commission will be kept abreast of all steps being taken as plans are developed.

In addition, the City Commission approved a Memorandum with the Miami-Dade County School Board to provide safety officers at schools in the City with the School Board reimbursing all costs, requiring a budget amendment of both revenues and expenditures of $1.196 million.

Lastly, the current projections for Super Bowl In-Kind Services is estimated to be $3.031 million, which is $31,000 higher than budgeted. City Police, Fire-Rescue, and other Departments have estimated these figures. Actual amounts are coming in from most Departments that were involved. Should the actual amounts be above the amount budgeted, they will be included in the Mid-Year Budget Amendment in April.

New Fiscal Year

Development of the FY 2020-21 Proposed Operating and Capital Budgets has begun with departments preparing their initial budget needs, revenues being forecast, and departmental meetings have been scheduled.

Conclusion

The City of Miami is currently projected to have a net end-of-year surplus of $25.9 million (with a surplus of $20.2 in the General Fund, and a surplus of $5.7 million in the Internal Service Fund) as would be normally expected at this time of year which is approximately the amount of surplus with which we should end the year. Development of the next year Proposed Budget has begun. Should you have any questions or concerns, please do not hesitate to direct them to me at 305-416-1500 or crose@miamigov.com.

Should you or your staff have any questions or concerns, please do not hesitate to direct them to me at 305-416-1500 or crose@miamigov.com.

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THE FINANCIAL HEALTH OF THE CITY OF MIAMI IS SOMETHING THAT FOLKS SHOULD START PAYING ATTENTION TO - HERE IS THE LATEST FINANCIAL ESTIMATES FROM THE CITY'S BUDGET DIRECTOR

NUMBER 98 - APRIL 10, 2020