BRADENTON, Fla. — The Fraternal Order of Police has filed a suit against Miami asking a judge to invoke a process that would essentially place the city’s finances under state control once again.
The union also is asking the judge to strike down a Florida law that allows local governments to declare that a “financial urgency” exists in order to reopen union-contract negotiations.
“We are very confident the city will prevail,” Mayor Tomas Regalado said Friday in response to the police union’s suit.
The suit is another blow to Miami, which is under investigation by the Securities and Exchange Commission for not disclosing its financial situation to bondholders. The 10-page union complaint was filed a day after the Miami City Commission made major cuts and changes to wages, pension, and health benefits for city employees, firefighters, and police to help with an estimated $105 million budget deficit in the coming fiscal year.
Firefighters filed suit in May shortly after the city initially invoked the state law to declare that a financial urgency existed to bring unions back to the bargaining table. At the same time, the city hired PFM Group to examine wages and benefits that now consume about 90% of the recurring costs in Miami’s operating budget.
Consultants reviewed the earnings of a number of city employees, firefighters, and police officers. They found one firefighter, age 55 with 36 years of service, had retired earning $135,000 a year and receiving a pension benefit of $133,000 a year. Because of other options available under the current pension plan the firefighter also retired with a lump-sum payment of $984,000.
Total pension costs in the current fiscal year are $84.5 million. Next year, those costs will rise to $107 million, and by 2014 they will reach $145.8 million.
Consultants have repeatedly said such benefits are not fiscally sustainable. They also painted a bleak picture of Miami’s economy, which is suffering from 13.5% unemployment and severely depressed revenues that are now back to 2005 levels because of sinking property values.
Commissioners, who refused to increase property taxes in the upcoming budget, were faced with laying off more than 1,000 workers or making major cuts in wages and benefits to begin tackling the deficit.
“Either we make a decision today or we are faced with being taken over by a state oversight board,” Commissioner Richard Dunn said last week to a packed chamber of disgruntled police and firefighters who clapped and cheered at the possibility of state oversight once again.
In the 1990’s, Miami had to declare a financial emergency that enabled Florida’s governor to appoint an oversight board to handle the city’s finances for several years. That financial meltdown led the SEC in 2003 to find that Miami violated federal securities laws when it hid financial problems from investors in bond documents. The city was ordered not to violate disclosure laws again.
In July, Miami’s ratings were downgraded because of deteriorating financials. Fitch Ratings dropped its general obligation rating to A from AA-minus, Moody’s Investors Service went to A1 from Aa3, and Standard & Poor’s went to A-minus from A-plus.