The one to 10 scaled rating, with a high of 10, is based on the City of Miami's June 30, 2017, financial statements for the fiscal year.
MIAMI – The City of Miami received a drop in the overall Performeter rating by Crawford & Associates for Fiscal Year 2017 due to $9.9 million in bond debt for the Red Robertson Stadium project. The City of Miami received a Performeter rating of 7.7 for 2016.
Crawford & Associates' Brenda Wright presented the Performeter report created and compiled by the agency to give an easy to understand, comprehensive financial analysis and performance evaluation.
“There's only one reason for that drop, and it's not a bad reason. You refinanced your bond anticipation notes, which were the notes that you issued to build that stadium out there,” Wright said. “That original issue and the assets related to that issue are in your MCFA, but when you refinanced that debt because it came to maturity, it was short-term finance and you had to refinance it. The way you restructured it, that debt is now into your governmental activity. Where your debt is and where your asset is, are two different places and that's the only reason for your drop.”
The one to 10 scaled rating, with a high of 10, is based on the City of Miami's June 30, 2017, financial statements for the fiscal year. The overall reading is a barometer of the City's financial health and performance.
“Compared to other cities we do this for, you guys look good,” Wright said.
The analysis scored three categories; Financial Position, Financial Performance and Financial Capability covering several aspects and looking at all current assets and liabilities of the City's. The report allows for comparison and tracking from past years.
This year the level of Unrestricted Net Position or rainy day funds to fund emergencies, dropped to a negative 7 percent, and Miami has a deficit of $2.2 million or 6.6 percent of total revenues, again due to the $9.9 million bond debt, according to Wright.
“It's kind of an odd situation. It's nothing that throws up a red flag to us,” Wright said.
Prior to the refinancing and restructuring of the bond, the debt for the Stadium was within the MCFA's debt, and now with financing from sales tax paying back bonds issued for the project, the debt falls under governmental activity.
Wright said to keep the debt with MCFA funds would cause an “accounting nightmare,” with a need to transfer funds back and forth to service the debt.
“We discussed moving the asset, but decided not to because that asset is tied to a long-term lease with a state agency," Wright said.
Wright explained, lack of sufficient revenue to help self-fund the Red Robertson Stadium project called for the restructuring of the bond issue for repayment of the debt.
Mayor Rudy Schultz said he understood the sales tax's purpose but did not realize the bond anticipation notes were issued under the MCFA.
“They did at the time because the way that was structured it was hopeful there would be revenue to help pay off everything, and there's not enough revenue to pay off the amount of debt that equals to that, as you know, off that facility,” Wright said.
The level of unassigned Fund Balance dropped from 17 percent to 13 percent for FY 2017, with 10 percent being the average target.
“What’s causing this is you’re using your reserves to help balance your budget, and you’ve been trying to reduce the amount of transfer from the MSUA,” Wright said. “… If you want to see this number go up, you’re going to have to cut expenses.”
The City’s Capital Asset Condition of 29 percent indicates the City’s capital assets have less than one-third of their usual lives remaining.
“This isn’t a surprise to you, when you’re buying something, you’re using it for much longer than you’re anticipating. I know you have projects on the horizon for electric, water, sewer that will cause this to come up some,” Wright said.
The Asset to Debt ratio is less than two thirds or 63 percent of the City’s $70 million of total assets.
“You’re up a little bit this year because of the debt you took on,” Wright said.
The current ration measuring the ability of the City to pay short-term obligations sits at 3.36 to 1, which indicate the City had nearly four times the amount of current assets needed to pay liabilities.
“That’s a good number, and you’ve stayed pretty consistent over the 10-year history of us doing this,” Wright said
City of Miami’s non-uniformed employee pension plan is currently funded at 65 percent.
When all financial assets and liabilities are calculated what is left is the Net Position’s change.
“This year your change in Net Position went down $9.9 million,” Wright said. “And again how much was the debt you issued, $9.8 million, so it’s all directly related to that.”
Interperiod Equity measures who pays the costs of the current year’s services.
“This year your current services only paid for 78 percent of your current year expenses,” Wright said.
The Business Type Activities Self-Sufficiency measures whether the City’s business-type activities, such as utilities pay for operations. The City of Miami’s utility and other business-type activities were 119 percent self-sufficient.
Debt Service Coverage was rated at 5.36 indicating the City generates a little over five times the amount of cash necessary to pay debt service requirements.
"That’s a great percentage, there’s no doubt that you can’t make your payments,” Wright said.
Sales tax growth for FY 2017 took a 0.7 decrease. Controllable City revenues are at 75 percent, and with a debt service load of 5 percent.
The City of Miami’s Performeter ratings has ranged from a high of 8 in FY 2015, to the low of this FY 2017 year’s 6.0 rating.
“I am happy that we were able to report an overall stable and positive financial condition for the city. While some rating areas dropped due to the long-term debt in MCFA, those are short-term issues which will recover as that debt is retired,” Miami City Manager Dean Kruithof said later.
In other business Schultz read a proclamation declaring the week of April 15 to 21 as Community Crisis Center Volunteer Appreciation Week and recognized outgoing Councilman Neal Johnson’s two years of service.
Melinda Stotts is the associate editor of the Miami News-Record. She can be emailed at firstname.lastname@example.org or followed on Twitter @MelindaStotts1.