Miami is Broke But That Doesn't Stop Public Sector Unions from Demanding Increases in Taxes and Fees

Miami imposed $76.9 million of salary, health-insurance and pension cuts on city employees to address a budget deficit that led to reductions in its credit rating. Commissioners at a special meeting voted unanimously today to accept Mayor Tomas Regalado’s plan to cut base salaries as much as 12 percent, raise health-insurance deductibles and co-payments, and reduce pension payouts. Miami mandated the actions through a “financial urgency” declared in April under a state statute. Miami, seat of Florida’s most-populous county, will spend almost 75 percent of its $514 million budget, or 87 percent of its recurring revenue, on employee costs in the fiscal year ending Sept. 30, including about 18 percent on pension contributions, according its annual budget book.

Cops Turn Victims, Sue the City of Miami

Fraternal Order of Police the first to file lawsuit against the city of Miami

September 1, 2010

NBC Miami - When the boys in blue make a promise to break out the big guns for a fight, you better believe they mean it.

Miami's police union followed through on a threat Wednesday, filing a lawsuit against the city commission for trying to cut cops' pensions and salaries.

The lawsuit claims the city acted illegally when it voted unanimously Tuesday to cut pay, effectively ending labor negotiations and reneging on already negotiated points in the union contract.

Mayor Tomas Regalado made waves earlier this week when he revealed that his plan to solve Miami's $110 million budget crisis was to break all of the union contracts -- general employee, fire and police -- in order to bridge the budget gap.

He reasoned with angry employees that without the drastic measure, the city would either go bankrupt or have to lay off 1,300 workers.

None of the choices are enviable, but officials were warned by union heads that altering contracts would eventually end all sides in court.

Under the new city strategy, any employee making more than $39,000 can expect to see a five to 12 percent cut in pay. Pension benefits would also be reduced to a cap of $100,000, with spouses of deceased employees only receiving benefits for a maximum of 10 years.

Bankrupt Miami in Fiscal Emergency, Breaks Employee Contracts, Hikes Property Taxes

August 31, 2010

Business Insider - Miami is bankrupt. Unfortunately the city refuses to admit it.

In an enormously foolhardy attempt to make ends meet, in spite of the fact that Miami home prices have been hammered and 1-in-8 are unemployed, the County keeps pouring on the painful tax and fee increases.

As you recoil from your tax warning notice today, ponder this: those multiple tax hikes aren't the only charges set to rise. Besides Miami-Dade County's plan to raise every taxpayer's rates 12.2% for operations and an incredible 56% for capital spending on undisclosed projects, it also plans to raise retail water and wastewater rates 5%.

And though County Manager George Burgess proposed the 5% water and wastewater hikes, that's not because water and sewer are running in the red. They're already quite profitable. But by raising rates, the county can dip into water and sewer cash and add $25 million to its operating spending cache while claiming it's keeping our cost down. And for that $25 million slice the county would be right — unless you happen to drink water or flush a toilet.

"If you keep taking money it just goes to reason you're going to be charging more so all the residents are paying more," Commissioner Carlos Gimenez told us. "It's actually a hidden tax. You're just hiding it in water and sewer."

One Miami-Dade worker in eight can't get a job and commissioners don't seem to notice. Instead, as the economy strangles the public and values of homes fall, the county plans double-digit tax hikes on every dollar of remaining value. Before the commission finally clamps the screws on taxpayers or, as it should, relieves pressure by backing off its massive increases, it will hold budget hearings at 5 p.m. Sept. 13 and 23.

What can we do?

One suggestion: Let your commissioner know you'll be taking names of those who vote to raise tax rates even a penny in today's economy. Remind them that the purpose of government is not to remain bloated.
Another suggestion: Wear a red "Cut Tax Rate" T-shirt to the hearings. Have your friends do the same. Remember, commissioners only count the hundreds of votes in the room, not the hundreds of thousands of suffering taxpayers back home fighting foreclosure.

Miami Breaks Employee Contracts

Inquiring minds are reading Broke City Breaking Employee Contracts:

The city of Miami is so broke it's forcing employees to take pay cuts, even though they're under contract. Mayor Tomas Regalado said he's never seen a financial mess like this before, and his options are grim.

“It's either that or we layoff 1,000 employees or we raise taxes to the max, and we're not raising taxes to the max,” the mayor said.

Mike "Mish" Shedlock Comment: If you are looking for one of the most disingenuous comments in history, there you have it. The only reason it is not a blatant lie is the ending phrase "to the max." Regalado is clearly incompetent and needs to be removed.

The city is operating under a state of "fiscal urgency," declared earlier this summer. The budget deficit for next fiscal year is about $110 million. The proposed cuts in salary, pension contributions, and health insurance costs amounts to about $86 million in savings for the city.

That fiscal urgency declaration allows city commissioners to impose salary cuts on employees, despite their contracts.

Charlie Cox, who represents about 1,100 general service workers, said employees with valuable knowledge will retire or find work elsewhere. “We're going to have a ton of people leave the city and the institutional knowledge will be gone,” he said.

Mish Comment: Hello Charlie. Good luck in finding jobs with excessive benefits in this market. Hell, you don't need luck you need a miracle.

Good riddance, the sooner you leave the better Miami will be. Every position vacated will be a gain to the city.

Miami's police officers, firefighters and other union workers are all expected to choke down cuts. One police union official said the Fraternal Order of Police will sue the city if the cuts are imposed.

Mish Comment: It is the right of the FOP to file a lawsuit. I hope they do. The correct response for the city would be to immediately declare bankruptcy so the overpaid union clowns can see just what benefits they get in bankruptcy court, ideally nothing.

Hell, the correct response is for Miami to declare bankruptcy now, whether the FOP is stupid and arrogant enough to sue or not. Miami is bankrupt, and the sooner the mayor and city council admit it, the better.

Budget Hearing 5 p.m. September 13 and 23

If you live in Miami and you do not show up at the hearing you are part of the problem. You better show up because the union will, en masse; and they will pack the halls demanding still more tax increases so they can go on receiving huge wages and even bigger pension benefits.

The legacy of Miami’s political pensions

April 26, 2015

Miami Herald - In her eight years as Miami city commissioner — including two in which she was suspended from office — Michelle Spence-Jones never received more than $58,200 in salary. Yet, when she turns 55, she will receive a $127,000 yearly pension, heaped out in $10,600 monthly installments for the rest of her life.

Miami Mayor Tomás Regalado, her former colleague, leaves office in 2017 with a yearly $84,550 retirement benefit. His predecessor, Manny Diaz, receives $82,500 a year. And former City Commissioner Angel González began receiving $4,794.17 every month starting Nov. 16, 2009 — the day he resigned and pleaded guilty to exploiting his office. 

The pensions afforded Miami’s politicians were made possible by a once-modest retirement trust created in the 1990s and made far more valuable by tweaks and significant pay raises during the 2000s.

Commissioners closed the system in 2009 for political reasons, and when Marc Sarnoff steps down this November, his pension, worth more than $62,000 a year, will be the last benefit promised by the Miami Elected Officers’ Retirement Trust.

But the legacy of a trust created by commissioners for commissioners still weighs on politics and purse strings in Miami.

“Elected officials, if they’re really doing this for the greater good … they shouldn’t be receiving a pension,” said Lt. Javier Ortiz, president of the city’s police union. “That should be for first responders, not politicians.”

Commissioners first created the retirement trust in 1994, back when they and the mayor were paid a paltry $5,000 salary. The results were modest. Maurice Ferré, Miami’s longest-serving mayor, gets a pension worth just $326 a month.

But then the commission raised the mayor’s salary to $97,000 and later voted to allow themselves to earn a pension after seven years of service instead of the previous 10, after voters set eight-year term limits. In 2003, voters raised commissioners’ salaries to $58,200, and with elected officials’ pensions based on their W-2 tax form compensation — their total packages run around $103,000 today — that meant for some sizable retirement benefits.

“I guess I was mayor at the wrong time,” said Ferré.

And yet, unlike Miami’s cops, firefighters and general employees, Miami’s elected officials never paid a cent from their own pocket into their pension system. Taxpayers, meanwhile, are paying $840,000 to fund the system this year. The most recent actuarial report on the Elected Officers’ Retirement Trust states that cost of funding the overall value of Sarnoff’s pension alone would cost the city $109,000 in 2014.

“Public service was never intended to be a profession resulting in great personal wealth, and it certainly should not come at the expense of Miami's hardworking taxpayers,” said Dominic Calabro, president of fiscal watchdog group Florida Tax Watch.

Sarnoff and other current and former elected officials defend their pensions. Sarnoff said politicians who are elected to Miami City Hall are giving up private-sector compensation to become full-time servants, even though the job is considered part-time. Sarnoff said different elected officials are worth different amounts to the public.

“A good elected official is probably priceless,” he said.

And a “bad” commissioner is, in the case of Angel González, worth $57,530.04 a year.

That’s how much González receives, according to the pension fund. González resigned from office Nov. 16, 2009, after negotiating a deal with prosecutors and pleading guilty to a second-degree misdemeanor. He admitted to misusing his public position to land his daughter a no-show job with Delant Construction Co.

González did not return phone calls. Reached by text, he texted back “D.D.” and then “D.D. B I H.”
He declined to elaborate.

Former Commissioner Michelle Spence-Jones’ case is a little different. Spence-Jones was removed from office by the governor four days before González resigned, and charged with a single count of grand theft for allegedly redirecting $50,000 in county funds to a family business.

A jury found her not guilty in March of 2011, deciding she did nothing wrong in 2006 when she asked a developer for a charitable donation while he was awaiting a commission vote. She returned to office in August 2011 after being suspended for nearly two years.

When she returned, she received credit earned toward her pension for the time she missed, as well as back-pay that inflated the value of her city W-2 tax form to $231,292. That became the base value for the formula used to calculate her benefit. Under the system, commissioners receive 50 percent of their highest year’s taxable earning, plus an extra 5 percent for every additional year served beyond their seventh.
Spence-Jones did not respond to multiple phone calls and a text message. Having technically served for eight years, she’ll begin receiving $127,210.66 when she turns 55 in 2022.

The only other analogous case to Spence-Jones in Miami is former Mayor Joe Carollo, who earned a pension worth $15,000 more than his mayor’s salary after he received back-pay one year due to being reinstated to office following the discovery of absentee ballot fraud. The commission responded by slashing his retirement benefit down to about $85,000 a year.

Then-Mayor Manny Diaz also passed legislation that reduced the mayor’s pensionable compensation to salary only — but then he received a $53,000 raise, allowing him to retire with an $82,500 pension. Diaz’s successor, Regalado, will be the last mayor to receive a pension under the plan. He noted that he earned his pension as a long-time commissioner, and hasn’t increased the value of his retirement benefit while mayor because of changes to the system in 2009.

He said he’ll make good on a 2009 pledge to donate a quarter of his annual pension to charity.

The pension changes made that year at the urging of then-Commissioner Joe Sanchez came during an oncoming financial crisis. Commissioners closed the pension system to newcomers, froze the benefits of officials who were already vested, and created a minimum retirement age of 55. Elected officials now have access to a defined contribution program.

But the pensions accrued by Spence-Jones and Sarnoff continued to grow because elected officials who’d served less than seven years were allowed to continue adding to the value of their benefit. That allowed Spence-Jones to earn a pension worth more than $100,000 a year — the cap now in place for police and firefighters.

Still, Sanchez said the legislation was good for the city, noting that because of his proposal he won’t get his own $75,000 pension until 2020.

“I could have walked away and I’d have already collected that money,” he said. “It was good legislation compared to what was there before.”

Florida’s public pensions still bleeding taxpayers

August 30, 2013

Watchdog.org - Florida’s taxpayer-funded public pension plans seem to be a pretty good deal as long as you’re not the one footing the bill.

The U.S. Census Bureau reports there are 303 so-called defined-benefit plans offered to Florida’s state and local government employees.

The plans dish out lifetime payments after vested public workers retire. The payments are guaranteed and based on salary and years of service.

In the event a plan goes underfunded, taxpayers are on the hook.

“Due to a drop in the stock market the last few years and pension holidays taken by the state of Florida, the state Legislature paid hundreds of millions of dollars this year over and beyond what was accrued by this year’s public employees,” said Robert Weissert, chief research officer at Florida TaxWatch, a Tallahassee-based economic research institute.

And that just applies to the state plan, the Florida Retirement System, which is estimated at 87 percent funded. Or, depending on how one views it, $18 billion short of fully funded. The FRS includes state workers, all but one of Florida’s 67 counties, and the state’s school districts. Duval County and municipalities around the state operate their own pension plans.

The U.S. Government Accountability Office says government pension plans at 80-percent funded or better are on sound footing, even if they’re expensive to maintain.

FLORIDA RETIREMENT SYSTEM: Actuarial liabilities for the state’s largest pension plan exceed the value of the plan’s assets.

Florida’s municipal pensions, which make up the vast majority of the state’s defined-benefit plans, are in much worse shape.

The Leroy Collins Institute, a state-policy organization located at Florida State University, reports that only 26 percent of the state’s 254 municipal pensions are funded above the 80 percent threshold. More than 60 plans are less than 60 percent funded.

The Collins Institute attributes the underfunding primarily to higher pension costs and insufficient contributions.

In its report Doing it Right, the organization recommends five ways to reverse the 10-year trend of Florida’s defined-benefit municipal pensions coming up short:

• Funding annual pension contributions at 100 percent, or more.
• Requiring that employees share in the cost of their pension plans.
• Limiting the size of cost-of-living adjustments.
• Limiting the ability of employees to engage in pension spiking, or artificially. inflating their pay right before they retirement.
• Setting realistic assumptions as to what a pension will earn.

But that’s assuming guaranteed public pensions are still worth having around.

Florida TaxWatch recommends shifting the FRS pension system, the state’s largest, to a 401(K)-style defined-contribution plan versus the defined-benefit system, which are based on a complicated formula of the number of years worked and other factors.

TaxWatch says a defined-contribution plan shifts a significant burden off the taxpayer, while offering benefits to workers that include compounding interest, choice of investment vehicles, the ability to transfer accrued retirement between jobs and predictable government budgeting.

House Speaker Will Weatherford championed a failed effort to reform the FRS system earlier this year, but momentum may be building for coming legislative session as taxpayers consider their own retirement options.

“There are very few private-sector employees that have access to defined-benefit plans,” Weissert said. “Taxpayers are funding public employees for a type of retirement plan that’s not even offered to them.”