Loading...
HomeMy WebLinkAboutCC 1996-10-01 Discussion Item[A N CITY OF MIAMI, FLORIDA INTER -OFFICE MEMORANDUM To : Honorable Mayor & Members DATE : October 1, 1996 FILE of the City Commission SUBJECT Discussion Items City Commission Budget Workshop FROM : Merrett R. St' rl 'i REFERENCES: City Manag E IDSURES The following bullet items are presented to facilitate discussion and to solicit policy guidance from the City Commission. It is our intent to move expeditiously on those items supported by the Commission. POTENTIAL FUNDING SOLUTIONS UNDER CONSIDERATION ACTIONS ALREADY TAKEN • Implemented Citywide hiring freeze • Impounded all non -essential City vehicles assigned to non -union employees • Rescinded all non -essential take home vehicle assignments except those covered by collective bargaining and will review possibility of imposing a portal-to-portal use fee for approved take home assignments • Rescinded all City gas credit cards • Directed all department directors to identify all exempt or unclassified personnel hired for reasons other than merit so that appropriate management action can be taken • Rescinded all executive and non -executive cellular phone cash allowances and all cellular phones not essential to City operations ✓• Frozen all overtime unless approved by the City Manager r• Unless prohibited by collective bargaining agreement all existing and future vacancies have been frozen, as well as all pending promotions, salary adjustments, anniversary increases, and across-the- board cost -of -living increases �• Frozen hiring of contract, part-time, temporary, or temporary agency personnel • Tightened City purchasing procedures regarding emergency purchases • Directed departments to develop safety and training initiatives to reduce the City's self insurance liability exposure • Tightened City grant reimbursement procedures • Restricted all other non -essential purchases SOLUTIONS REQUIRING CITY COMMISSION POLICY DIRECTION • Tax Anticipation Notes • Increase solid waste fee to a level comparable with other jurisdictions • Meet with unions and pension boards to discuss pension reforms and revisions to annual City contribution to pension funds • Pension funds to absorb administrative costs • Audit current pension programs for savings opportunities A i • Commission to declare fiscal emergency and authorize City Manager to meet with union leaders to identify magnitude of concessions to help cope with emergency • Consider/negotiate deferral of the 4 percent January cost -of -living adjustment for all employees • Freeze or cancel 1996-97 merit increases to extent able • Institute across-the-board reductions in operations depending on service implications • Evaluate alternative early retirement/rehire programs • Stop portal-to-portal coverage for protective service employees • City Commission, City Clerk & City Attorney to evaluate their office expenses and establish future guidelines which are approved, public and part of formal City procedures • Close costly obsolete public facilities that are a drain on the treasury • Modify current level of solid waste service, including reducing trash service • Re-evaluate and restructure NET program to reduce costs • Reduce general fund supported community based organizations consistent with reductions to City ' operations • Reduce funding in special programs and accounts area (non -departmental allocations) • Tie cost containment and performance goals to compensation levels for City executives • Thoroughly analyze worker's compensation and general liability and other self insured liability programs to develop procedures and systems to contain and/or reduce costs • Assess feasibility of restructuring City debt • Increase marina, live -aboard and other public facility fees • Evaluate EMS fee levels and collection/billing rates and pursue payment from City residents • Reform code enforcement process and institute hearing examiners • Increase alarm, towing, certificate of use, certificate of use renewal and occupational license fee revenue i • Increase other user fees where feasible • Direct City Attorney to pursue legal action against former Finance Director i ADMINISTRATIVE ACTIONS FOR WHICH CITY COMMISSION CONCURRANCE IS SOUGHT • Re-establish parking ticket issuance to previous levels (particularly downtown) • Utilize 1996-97 Law Enforcement Trust Fund moneys for Police overtime •G- • Evaluate all City leases for opportunities to increase revenues I o� • Charge for all special event costs incurred by the City t 4...• Establish firm and challenging guidelines for the waiver of City fees • Expand revenue collection program for delinquent accounts ' i • Evaluate benefit packages for all employees — unionized and non -unionized Reduce managerial and i administrative positions h • Review recycling program • Define City Manager's discretionary authority to provide for disclosure and appropriate checks and balances including periodic auditing I ADMINISTRATIVE ACTIONS FOR WHICH CITY COMMISSION CONCURRANCE IS NOT SOUGHT • Use of internal pooled cash • City Manager to evaluate their office expenses and establish future guidelines which are approved, i public and part of formal City procedures • Increase use of volunteers and community groups at park facilities • Review all utility expenses • Aggressively pursue accelerated grant draw downs from state and federal governments • Aggressively pursue recovery of state and federal grant reimbursements 2 I I • Identify non -franchised or licensed businesses on City property • Evaluate all available prior year CDBG, HOME and other federal funds for potential reprogramming • Maximize all indirect charges to grant funds by controlling program costs under administrative cap • Establish a suggestion award program for all employees • Reduce managerial and administrative positions • Review all executive benefits • Evaluate all outstanding loans due the City from various loan programs and aggressively pursue repayment of all delinquent amounts • Aggressively seek all outstanding FEMA receivables • Work with FP&L to institute energy savings programs in all City facilities LONGER TERM INITIATIVES THAT STAFF WILL ANALYZE WITH CITY COMMISSION CONCURRANCE • Pursue leveraged leases (sale -leaseback) transactions for appropriate City facilities • Sell parking garages to Off -Street Parking Authority • Sell City assets such as land, buildings and assets • Raise property taxes to 10 mill level • Present extraordinary two year millage for voter consideration • Transfer fire service to County or establish a City non -ad valorem based special assessment district for fire service • Transfer E-91 1 service to County • Evaluate feasibility of transferring other services to Dade County • Pursue legislative proposals to enhance revenue — partial year assessments, payments -in -lieu -of -taxes for exempt land in City, etc. • Establish non -ad valorem based special assessment districts for street lighting and other services • Develop replacement program for City vehicles and equipment • Properly fund all self insurance trust funds and begin to build adequate reserves to help cover unfunded liabilities • Eliminate dependence on debt financing for operating purposes • Fund essential renewal and replacement on a pay-as-you-go basis • Pursue privatization opportunities as appropriate • Develop two-tier compensation program for new hires in all areas of City service • Reduce dependence on TANS • Pursue renegotiating agreements with MSEA and County regarding funding for debt and operations of public facilities eligible for convention development tax support • Restructure health insurance program to contain and/or reduce costs • Institute plan to make all City conference, convention and public facilities self sufficient with no general fund or utility tax support required i INITIATIVES THAT ARE NOT BEING PURSUED AT THIS TIME • Loans from other governments and quasi -City organizations • Loan from pension funds • Seek advance payments from utilities for franchise and utility taxes • Explore all new City hires joining State pension plan in lieu of existing City plans 10/1/96 3 TO: Honorable Mayor & City Commission DATE: September 26, 1996 FROM: Merrett R. Stie SUBJECT: CURRENT & City Manager PROPOSED BUDGET FISCAL ANALYSIS From every contact that I have had, the City of Miami is blessed with. a very dedicated group of employees and department directors. Because of that, and because of my former City employment and the affection I have for the City, this is a difficult report to make. While only thirteen days have passed since you appointed me as interim City Manager, my waking hours have been intensely focused on reviewing the proposed budget and the financial condition of the City. I want to acknowledge the tremendous support I have received from a small team of highly skilled professionals without whom this report would not have been possible in such a short time. They are: Roger Carlton, former City Manager of Miami Beach, on loan from Lockheed Martin Corporation, Bill Hampton, former City Manager of South Miami, on loan from Chief Judge J. Farina, and George Burgess, Metro Dade Deputy Budget Director, on loan from I County Manager Armando Vidal. All of these outstanding professionals who are here this evening are seining pro bono and have worked tirelessly in our review of both the budget and the financial affairs of the City. This past weekend we conducted almost 20 hours of budget meetings with all of the major City departments. Most of our department directors and their staff, as well as the collective bargaining representatives, participated in that process. In huidsight, I am sorry that I did not invite the City Commission and you, Mr. Mayor, to sit in and hear what I heard. From my observations, your Department Directors, exempt staff, and our City workforce and their representatives are all experiencing a great deal of pain and trauma over the City's fiscal crisis. There is also a lot of frustration and anger as to how this situation could have progressed so far without disclosure. Mr. Mayor, you and the Commission were absolutely right in requesting a thorough analysis of the budget and the City's financial affairs. Unfortunately, this should have happened a i long time ago because I don't think anyone really' had a feeling for the gravity of the situation. If anyone did, no one was forthcoming in the public's interest. I, have discussed with the Governor's Office, the Department of Revenue and the City i A.ttrney the most practical way to proceed with the adoption of the 96/97 proposed budget., I requested the City Attorney to prepare language for this evening that will acknowledge the need to balance the budget and set forth generically the City Commission desire to achieve this objective as soon as possible. I am recommending f that you adopt the -proposed millageand budget documents. ? Please recognize that -we cannot raise the millage at this point. It must be certified to the Tax Collector by October 8t' . i There have been many questions raised by bond rating agencies and other institutions as to the capacity of the City to meet its current and near -term debt obligations. Based upon a cash flow analysis presented`by staff, and the issuance of Tax Anticipation Notes in October (which has been a practice of the City for many years), there should be no concern over bond default or that bondholders are at risk. This presumes, however, that the Commission proceeds forthwith to take the necessary actions to balance the budget. You were promised that all issues and concerns over the fiscal affairs of the City would be publicly presented. This report is the first major component of that analysis. Please , understand that this report deals with the proposed operating budget. It does not include an analysis of the City's Capital Improvement Budget. That analysis has only recently started and we are finding serious problems there as well. A separate report will be submitted for capital projects and their funding. Contrary to the statements and figures provided within the proposed operating budget that you adopted on first reading on September 12' , the budget did not reflect the true financial picture of the City. Attached to this report in Schedule 1 are specific examples of overstated revenues, understated expenses and a far more accurate projection of current 95/96 year-end carryover which our analysis shows is actually a liability. Specifically, I regret to report that the City will experience a $19.4 million dollar shortfall which means that, as we close out the current fiscal year, the City will start the new fiscal year with a negative carryover balance. As you will note in the attachments, the situation worsens as we move into the analysis of the proposed budgets' 1996-97 revenue and expense projections. In addition to the 95/96 $19.4 million dollar shortfall, we must add another $19.5 million in 96/97 overbudgeted revenues and underbudgeted expenses (itemized in Schedule 1) making a total of $38.9 million that must be dealt with in order to balance next year's budget. We have also identified another $13.4 million in potential revenue and expenditure liabilities that we believe can be mitigated by prompt Commission action and diligent management actions. Even though the $13.4 million represents a further imbalance in the proposed budget, I have not combined the $38.9 and $13.4 million because the latter may be manageable while the $38.9 million is a hard figure that can only be - eliminated by reducing expenditures, increasing -,revenues, or a combination of both. i Attached in Schedule 2 are 76 separate actions that the City Commission and your R management staff should evaluate and prioritize in order to develop a strategy to f eliminate the identified shortfall. We have not had time to develop dollar projections on each of these suggestions. Mayor Carollo has suggested Commission workshops beginning next week for the Commission to discuss priorities and give direction to both the City Manager and City Attorney to bring selected proposals before them in public hearings as soon as possible. I fully concur with the Mayor's thinking. ttt 1 2 .n.i What Caused the Problem An Assessment In the process of reviewing; the proposed budget, prior budgets, and analyzing the financial and audit reports of the City, I think it appropriate to share my professional assessment of what contributed to this condition. Briefly stated, and not in any order of importance, these conditions are: 1. The questionable delegation of fundamental management responsibility 2. Inadequate and insufficient financial reporting 3. Inadequate or non-existent checks and balances 4. Lack of adequate management accountability 5. Inadequate and questionable auditing practices, both internal and external 6. An absence of appropriate collective bargaining from the management perspective 7. The manipulation and commingling of funds that should be segregated 8. The depletion of necessary or required reserve accounts 9. The issuance of bonds to meet operating requirements 10. Inadequate or insufficient reporting to the City Commission on fund availability 11. The withholding of critical financial information that sheltered this crisis 12. The misuse of discretionary spending authority 13. A complete lack of fiscal planning 14. The approval of projects without identified funding sources for both capital and operating needs 15. The consistent withholding of important financial data from department directors 16. The abuse of executive benefit authority 17. Questionable authorization of compensation. 18. No comprehensive cash flow analyses for the past several years This list is not all-inclusive, but these conditions must be corrected immediately --- procedurally, organizationally, and operationally. I hope, with your support, to have the vast majority either corrected or corrective action in process before I leave. j E j i 3 ELEMENTS OF FISCAL YEAR 9995-96 AND 1996-97 FUNDING GAPS Fiscal Year 1995-96 Year -End Shortages t ® Combined general fund revenue shortfalls ($5.7 million) o Payroll costs overruns ($5.2 million) ® Operating expenditure overruns ($4.0 million) ® Unbudgeted Riverside Center operating costs ($1.3 million) , ® Unbudgeted Dupont Plaza rent extensions ($1.0 million) ® Self insurance fund claims payouts in excess of budget ($2.8 million) ® Health insurance claims payouts in excess of budget ($0.7 million) 0 Solid waste cost overruns ($2.6 million) M Fleet/motor pool costs over budget ($1.7 million) ® Public facility operating losses ($1.4 million) (e.g., Knight Center, Coconut Grove Exhibition Center) ® Net cost of Tax Anticipation Notes ($0.1 million) $26.5 million Less: 1995 Early Retirement Incentive/sick,vacation pay (bond revenue) $ 7.1 million TOTAL AMOUNT OF FY 1995-96 SHORTAGE ($19.4 million) Fiscal Year 1996-97 Proposed Budget Problems Revenue Shortfalls from FY 1996-97 Proposed Budget: f ® 1995-96 Carryover deficit ($19.4 million) ■ Property tax under -collection ($ 1.0 million) ® Interest earnings ($ .3 million) ® Overbudgeted utility tax revenue ($ 3.0 million) ® Overbudgeted solid waste fees ($ 1.0 million) ® Bedminster contract ($ 1.0 million) ® Recycling grant ($ 5 million) TOTAL AMOUNT OF FY 1996-97 RE4 VENUE SHORTFALLS ($26.2 million) 1 Ii ,r Projected FY 1996/97 Expenditure Overruns: ■ Solid waste costs $2.6 million ■ Riverside Center operating expense $0.5 million o Underbudgeted pension payments & interest $1.6 million ® Public official ICMA. deferred compensation rollover into City pension program $ .5 million ' ® Self insurance/group health costs $3.5 million ® Fleet costs $2.0 million ® Police overtime $2.0 million TOTAL AMOUNT OF FY 1996-97 EXPENDITURE, OVER -RUNS $12.7 million TOTAL AMOUNT OF FY 1996-97 PROBLEMS $38.9 million Additional Potential FY 1996-97 Budget Variances: Revenue Shortfalls: ® Uncertain 1997 Law Enforcement Block Grant ($ 3.0 million) ® EMS fees ($ .5 million) ® Parking tickets ($ .5 million) ® Certificate of Use renewal fees ($ .4 million) Self insurance trust fund bonds 5.0 mullion) ($ 9.4 million) Expenditure Over -runs*: ® Special events, contributions, donations, etc. $ 1.0 million 0 1996-97 cost if unable to convert FEMA loan to grant $ 2.5 million ® Unbudgeted pension administrative expense $ .5 million i $ 4.0 million i * Excludes potential unbudgeted cost for capital projects Schedule 1 9/26/96 11:50 a.m. 2 �G IA Potential Funding Solution Alternatives For Fiscal Year 1996-97 A) Short-term Loans, Cash Flow Enhancements 1. Internal pooled cash 2. Tax Anticipation Notes 3. Loans from other governments and quasi -City organizations 4. Loan from pension fiords 5. Seek advance payments from utilities for franchise and utility taxes B) New/Enhanced Revenues: 6. Increase EMS fees and billings and pursue payment from City residents 7. Re-establish parking ticket issuance to previous levels (particularly downtown) 8. Reform code enforcement process and institute hearing examiners 9. Utilize 1996-97 Law Enforcement Trust Fund moneys for Police overtime 10. Increase user fees where feasible 11. Increase solid waste fee to a level comparable with other jurisdictions 12. Increase marina, live -aboard and other public facility fees 13. Increase alarm, towing and certificate of use renewal fees 14. Pursue leveraged leases (sale -leaseback) transactions for appropriate City facilities 15. Sell parking garages to Off -Street Parking Authority 16, Sell City assets such as land, buildings and assets 17. Pension trust to absorb administrative costs 18. Aggressively pursue accelerated grant drawdowns from state and federal governments 19. Aggressively pursue recovery of state and federal grant reimbursements 20. Identify non -franchised or licensed businesses on City property 21. Evaluate all City leases for opportunities to increase revenues 22. Charge for all special event costs incurred by the City 23. Evaluate all available prior year CDBG, HOME and other federal funds for potential' reprogranuning ' x 24. Maximize all indirect charges to grant funds by controlling program costs under administrative cap 25. Establish a suggestion award program for all employees 26. Establish firm and challenging guidelines for the waiver of City fees i 27. Expand revenue collection program for delinquent accounts ' 28. Explore all new City hires joining State pension plan in lieu of existing City plans. C) Expenditure Reductions 1. Institute across -the board reductions in operations depending on service implications 2. Reduce managerial and administrative positions 3. Review all executive benefits 4. Evaluate benefit packages for all employees - unionized and non -unionized 5. Re -open and re -negotiate all union contracts 6. Consider/negotiate deferral of the 4 percent January cost -of -living adjustment for all employees 4 7. Freeze or cancel 1996-97 merit increases 8. Reduce number of and charge monthly use fee for take home vehicles 9. Define City Manager's discretionary authority to provide for disclosure and appropriate chccks and balances including periodic auditing 10. Reduce cellular phones 11. Evaluate the growth in temporary and part-time positions 12. Immediately freeze all funded vacancies 13. Freeze all travel, memberships, and non -essential purchases 14. Stop portal-to-portal coverage for protective service employees + • i f i i 1 f l 15. City Commission, City Clerk, City Attorney & City Manager to evaluate their office expenses and establish future guidelines which are approved, public and part of formal City procedures 16. Increase use of volunteers and community groups at park facilities 17. Close costly obsolete public facilities that are a drain on the treasury 18. Modify current level of solid waste service, including reducing trash service 19. Review recycling program 20. Re-evaluate and restructure NET program to reduce costs 21. Reduce general fund supported community based organizations consistent with reductions to City operations 22. Reduce funding in special programs and accounts area (non -departmental allocations) 23. Review all utility expenses Potential Funding Solution Alternatives For Fiscal Year 1997-98 and Beyond 1. Raise property taxes to 10 mill level 2. Present extraordinary two year millage for voter consideration 3. Transfer fire service to County or establish a City non -ad valorem based special assessment district for fire service 4. Transfer E-911 service to County 5. Evaluate feasibility of transferring other services to Dade County 6. Pursue legislative proposals to enhance revenue - partial year assessments, payments -in -lieu -of -taxes for exempt land in City, etc. 7. Evaluate all outstanding loans due the City from various loan programs and aggressively pursue s repayment of all delinquent amounts 8. Establish non -ad valorem based special assessment districts for street lighting and other services 9. Restructure pension program and City contribution level, sharing programs; audit current programs for savings opportunities 10. Tie cost containment and performance goals to compensation levels for City executives 11. Develop replacement program for City vehicles and equipment ' 12. Properly fund all self insurance trust hinds and begin to build adequate reserves to help cover i unfunded liabilities 13. Thoroughly analyze worker's compensation and general liability and other self insured liability programs to develop procedures and systems to contain and/or reduce costs 14. Eliminate dependence on debt financing for operating purposes s 15. Fund essential renewal and replacement on a pay-as-you-go basis 16. Pursue privatization opportunities as appropriate 17. Develop two-tier compensation program for new hires in all areas of City service , 18. Assess feasibility of restructuring City debt 19. Reduce dependence on TANs 20. Pursue renegotiating agreements with MSEA and County regarding fiinding for debt and operations of public facilities eligible for convention development tax support 21. Aggressively seek all outstanding FEMA receivables - 22. Restructure health insurance program to contain and/or reduce costs 23. Institute plan to make all City conference, convention and public facilities self sufficient with no general fund or utility tax support equired 24. Work with FP&L to institute energy savings programs in all City facilities 25. Evaluate privatization of garbage and trash collection Schedule 2 9/26/96 i