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Miami faces possible $56M shortfall after state regulators say budget vote was invalid

The city of Miami has been operating for two months without a valid budget and tax rate, according to state regulators, and an emergency vote is necessary to avoid forfeiting more than $56 million in tax revenue.

On Monday, the Florida Department of Revenue issued a notice to City Manager Art Noriega advising that the City Commission’s Sept. 28 vote on the property tax rate to fund the $1 billion budget was not valid because only four of five commissioners participated in the vote — a result of the arrest and suspension of former Commissioner Alex Díaz de la Portilla, who was charged with bribery, money laundering and other alleged crimes two weeks before the final budget hearing.

The state said if the commission does not properly approve the proposed tax rate at an upcoming meeting, Miami will forfeit its share of the half-penny sales tax distribution for 12 months, a penalty for noncompliance that would cost an estimated $56 million, according to Noriega.

The situation has rankled newly elected commissioners and could set the stage for an effort to oust City Attorney Victoria Méndez, who ignored warnings from the state officials about the city’s plans to pass a budget without the unanimous five-person vote required by Florida law to approve the proposed property tax rate.

On Thursday, Assistant City Manager Larry Spring insisted the city had a “valid and properly approved and appropriated budget,” despite the state’s determination that the final vote was invalid and could cost the city of tens of millions of dollars if not rectified with a new vote.

Noriega informed the mayor and commissioners of the problem in a memo Thursday that recommends the commission meet at 5:05 p.m. on Dec. 11 to hold a new budget vote. The situation will force two new commissioners, Miguel Gabela and Damian Pardo, who will be sworn in Saturday, to vote in favor of a budget they’ve had no chance to deliberate, in order to avoid a significant negative financial impact to the city.

The state gave the city a Dec. 11 deadline to notify it of a remedy.

Pardo, who is a certified financial planner and the commissioner-elect for District 2, said the situation raised “red flags,” especially because the city received a warning ahead of time that there could be problems.

“In general, I would be concerned,” Pardo told the Miami Herald. “Especially if there was a different opinion in advance.”

Pardo said he plans to make a motion at the budget hearing for the city manager to solicit bids for an outside independent auditor to conduct a comprehensive review of the city budget. He also suggested a potential stopgap measure until the end of the first quarter in March, so that he and Gabela have time to study the budget and to give the public an opportunity to comment.

“I feel like I have a very strong mandate from my district to make sure that these types of issues stop in the city of Miami and that there is transparency,” he said.

State warned the city

The four sitting commissioners approved the budget on Sept. 28, following a legal opinion from Méndez that the vote would count, according Noriega.

Méndez’s advice directly contradicted an opinion issued by the Florida Department of Revenue in response to the city’s request for legal clarification regarding its options. The request was made in anticipation of only having four commissioners at the time of the final budget vote, following the Sept. 15 suspension of Díaz de la Portilla.

“There are no easy solutions,” a department official responded in an email to the city on Sept. 26. He suggested the city either fill the vacancy or lower the property tax rate to a level requiring fewer votes to pass. If the city chose to continue with the higher tax rate which requires a full commission vote, the city could be found in violation of Florida laws, he warned.

Department staff reiterated the options and warnings when they met with city officials on Sept. 27 and 28, wrote Rene Lewis, program director of property tax oversight, in his recent letter informing the city of non-compliance.

Gabela, who won his seat in a November run-off against the incumbent Díaz de la Portilla, called the situation “typical” for the city plagued with corruption scandals. He blamed Méndez, saying she has a pattern of soliciting and then ignoring legal advice to the detriment of the city.

“The first order of business that I’m going to do is, I am going to call for the termination of the city attorney,” Gabela said. “It’s either incompetence here, or there’s malfeasance.”

Either way, he said, “I think we need a clean start.” Gabela said city officials called Thursday to inform him that he has little choice but to vote in favor of the budget set by the previous commission or expose the city to serious shortfalls.

“I wish that I would have had time to look at this budget. If I’m going to be voting on it, I want to know what I’m voting on,” he said. “I’m going to do my darnedest to get up to speed.”