Budgetary Vices in Miami Run Counter to City Trends

When Florida Gov. Lawton Chiles announced this week that the state is stepping in to provide advice on saving Miami from its vices, he put the national spotlight on a fiscal disaster unique to Florida.

Nationwide, most city managers have steered their cities out of the rocky shallows of the early 1990's recession. In fact, most American cities are ending their fiscal year with a surplus, says Michael Pagano at Miami University in Oxford, Ohio.

Each year, Professor Pagano surveys the nation's cities to evaluate their fiscal status. This past year, cities across the country averaged 14.6 percent surpluses. For cities of Miami's size, the surplus was about 8.4 percent.

There are cities, such as Detroit and Washington, that are struggling. But for the most part, even recession-ravaged cities in California, hit by defense downsizing and state budget problems, have largely recovered. Five years of economic expansion, twinned with strict management, have helped other cities - such as Bridgeport, Conn., which attempted to file for bankruptcy in 1991 - get back in the black again.

Dismal oversight

But here by the beaches of Biscayne Bay, a culture of alleged corruption and dismal oversight has left the city with a reported $68 million deficit, almost a quarter of Miami's $275 million budget. Adding to the city's woes, Moody's Investors Service lowered Miami's bond rating, making it more expensive to raise money in the future.

Given the unique nature of Miami's fall, says Pagano, it will be hard pressed to find other cities to pattern its recovery after. But Linda Lipnick, an analyst at Moody's in New York, says state and local officials are taking the proper initial steps for recovery by learning a principal tenet of city management. "There should be broader oversight in spending authority among several individuals, not just in the hands of one or two."

Governor Chiles resisted a state-sponsored bailout. Instead, he's dispatched a team of budget experts to work with city officials. "We're going to work through this together. This is not a state takeover," says Gail Sittig of the governor's office, who will help monitor Miami's fiscal recovery effort. "The state is very confident that at this point we are going to be able to develop an ... agreement that we all can live with."

Entrapment or kickback?

The fiscal shortfall was revealed in September after former city manager Cesar Odio resigned amid federal bribery charges. Mr. Odio is fighting the allegations. He says he was a victim of entrapment and that city auditors never raised any warning flags about a deficit.

Miami Mayor Joe Carollo laments past "management practices and principles" under Odio. "There was corruption, as we all know. That's something we can't hide under the rug."

Next week, Mayor Carollo and city commissioners will vote on a recovery plan presented last month by interim city manager Merrett Stierheim. The plan calls for spending cuts, layoffs, fee increases, and concessions by city workers. Three city employee unions have tentatively agreed to accept wage concessions if the city raises revenues by $14 million. About $10 million of that would be raised by doubling garbage fees, which at $160 yearly, are less than half what surrounding communities pay.

But the underlying management culture may be harder to solve. "Miami is a place that condemns corruption, but condones it at the same time," says Jerry Haar of the University of Miami. "They shrug their shoulders and say that's a shame, that's the way things are." Mr. Haar hopes state oversight will create an environment that cuts inefficiency and corruption. "The state is not going in without strings attached. They want assurances this will never happen again."

Staff writer Skip Thurman contributed to this article.