But in the aftermath of a sordid civic corruption scandal that saw the city manager arrested on bribery and corruption charges, local and state officials have uncovered a massive financial mess. The city, which has an annual budget of about $200 million, projects a deficit of at least $68 million in the fiscal year that ends next September. Money may run out as early as February. The city's once-strong bond rating has sunk to junk status.
Some activists have gathered enough signatures to force a special election on whether the city should disincorporate and become just a part of Dade County.
The mess has been thrown into the lap of Gov. Lawton Chiles (D), who aides say is likely to declare a state takeover of Miami in the next few days. Chiles has been forced to act because local efforts to boost revenues and reduce spending have failed. The city could soon be under a financial control board or it might file for bankruptcy protection.
How did it happen? Although corruption appears to have played a role, many of the underlying reasons are similar to those that have caused financial problems in other cities: an unwillingness to reduce city services in the face of falling revenues; a declining downtown real estate market; difficulties in raising revenues; and ineffective oversight by elected politicians.
"This is a classic story for the history books of what mismanagement and corruption will do to a city," said Mayor Joe Carollo, who was elected in July following the death of his predecessor. "Before it's over, it will be a classic story that should be told to every municipal administrator so this will never happen again."
Miami is a city of about 350,000 people, two-thirds of them Hispanic, many of them poor. It sits in the midst of affluent Dade County, which has almost 2 million residents. Those expensive condominiums full of affluent retirees are outside its city limits.
Despite the cluster of tall flashy office buildings downtown and a few wealthy waterfront neighborhoods, Miamians overall are the fourth-poorest city dwellers in the nation. Affluent Hispanic families have followed their white counterparts to the suburbs. The city has been left largely to the poorest Hispanics -the elderly and recent immigrants - and to native and immigrant blacks, who often are even poorer.
But until recently, the city government was painting a rosy budget picture. "During the past 11 years, my foremost challenge as city manager has been to provide quality services to city residents while containing costs," then-manager Cesar Odio boasted in July. His goals for the year, he wrote in a summary in the city budget, were to "maintain fiscal soundness and improve city reserves" and "maintain or improve the city's current A credit rating."
But in September, after Odio was arrested by the FBI for theft, embezzlement and fraud as part of a sting dubbed "Operation Greenpalm," the city's financial realities were exposed: Miami was broke.
Miami's fiscal problems are truly grave. The roughly $200 million it needs to cover this year's projected deficit.
and replenish the reserve funds that were raided is about twice what Miami raises in property taxes each year.
Thomas Tew, a lawyer and municipal fiscal specialist hired as special counsel to the city, noted that Florida law caps property tax rates, restricting the primary source of revenue for Miami. Even though the residential tax base was shrinking in the 1980s, Miami prospered because commercial real estate development was robust. But commercial development too has collapsed in recent years.
Said Tew, "We have a struggling downtown with stagnant development ... and a very poor populace made up largely of elderly, minority and immigrant groups." Still, he said, "We continued to maintain a high level of services."
Numerous observers said the commissioners have always seemed more concerned with placating constituents who demand city jobs and city services than in overseeing the budget. The mayor and four other city commissioners are part-time politicians who earn $6,000 per year.
"The executive authority has always rested with the full-time city manager," said political consultant Robert Joffee, and in such a situation "if you've got a crooked city manager" he can cause a lot of harm.
Still, Stierheim's numbers show that the city's problems have been mounting for years. Why is it that no one noticed? The city's auditors didn't flag the problem; neither did the state's.
"That's a very good question," said Carollo. "These are the questions that have to be answered honestly if we're going to regain the faith and trust of anyone who cares."
The Stierheim report proposed tax increases and spending cuts that to some might not sound overly austere. For instance, police officers would no longer each be able to drive cruisers home every night; a city-backed boatyard and beach would be closed. But the cruisers would still have gas and there are plenty of free beaches in Dade County.
School spending is not even an issue; Dade County is responsible for education.
But when it came to what both Stierheim and Wall Street have characterized as the first big test of political will to solve the crisis, the city commissioners backed down.
Miami, like other Florida cities, collects a garbage fee from residents. In Miami, that fee is $160 a year per household, which officials estimate 30 percent of the households dodge. Stierheim recommended doubling it to $320 per year to raise an additional $10 million annually. Even though residents of unincorporated Dade County pay $349 a year, the commission balked, saying it would be too much of a burden on residents.
That set off a rebellion in the police union, the city's largest. (About 80 percent of city employees are unionized.) The unions had tentatively agreed to concession packages, but considered tax increases part of the deal to show a good-faith effort on all sides.
Said Carollo, who opposed the increase, "This has been made into do or die by some. It's neither one - it's not the thing that will save Miami or the thing that will sink Miami."
New York bond rating agencies, who effectively control the city's access to credit, are skeptical of Miami's resolve.
Standard & Poor's wrote last week that it "believes the city has the capacity to address its fiscal crisis, but the willingness of city officials is highly questionable at this time," citing the vote on the garbage fee. S&P lowered the city's bond rating to single-B from triple-B. That's a junk rating. As recently as July Miami had a solid A rating. Moody's, the other major rating agency, rates Miami just above junk level.
Ratings that low so discourage lenders that the city is essentially prevented from borrowing its way out of the problem.
The simmering crisis came to a boil last Tuesday when Carollo told Chiles at a meeting in Tallahassee that the city met the legal qualifications for a state of "financial emergency."
It's now up to the governor to decide whether to declare an emergency, a declaration that would give him the power to appoint a strong financial control board. It would be the first time the state has exercised its takeover power.
If Chiles declares such an emergency, the governor would have the final say over whether the city could declare bankruptcy. Municipal bankruptcies, which can allow localities to nullify union contracts and restructure their finances under court supervision, are rare. Carollo has raised the possibility, but said the city would only take such a step with the governor's consent.
On Monday and Tuesday, state officials are due in Miami to review the situation. According to April Herrle, Chiles's spokeswoman, the governor may make a decision as early as Tuesday or Wednesday.