A plan takes shape to fix Miami-Dade’s CRAs

By William Gjebre, FloridaBulldog.org 

FAU professor Frank Schnidman and Miami-Dade Commissioner Daniella L. Cava

FAU professor Frank Schnidman and Miami-Dade Commissioner Daniella L. Cava

Miami-Dade commissioners would take greater control of community redevelopment agencies under a proposal that would tighten oversight and reduce funding, yet also require many CRAs to set aside dollars for much-needed affordable housing they have yet to provide.

FloridaBulldog.org has obtained a copy of a resolution that’s making its way through county agencies. It is to be presented to Miami-Dade’s Economic Prosperity Committee on April 14 and to commissioners in May. Many of its remedies follow recommendations contained in February’s Miami-Dade Grand Jury report that found operating deficiencies among the 14 CRAS operating in the county, including little effort to develop affordable housing.

The proposal, however, is drawing criticism from a local CRA expert.

“It’s a step in the right direction, but it doesn’t go far enough,” said Frank Schnidman, a Florida Atlantic University professor with extensive knowledge of CRAs and how they should operate.

If adopted, the measures would apply to both new CRAs and existing ones that seek to extend or amend their 30-year terms.

Schnidman is opposed to the county granting CRAs any extensions unless they can demonstrate that they’ve been effective in their state-mandated mission of ridding “slum and blight” from within their limited boundaries. He also believes that newly approved CRAs should not receive county tax-increment funding. TIF funds, as they are known, are property tax dollars earmarked to some CRAs from increases in assessed land values within their designated district.

Extending the life of CRAs to finance new or existing projects transforms them into “economic development agencies,” whose purpose is other than eliminating slum and blight, said Schnidman. And CRAs already have demonstrated they have no desire to create much-needed affordable housing for poorer residents, he added.

Nevertheless, discussions are under way to extend the terms of two Miami CRAs – Omni, which hasn’t built any affordable housing, and Southeast Overtown Park West, which has – in order to back both proposed and existing projects.

If extended, the proposed Miami Marriott Marquis Hotel and Expo Center, the Miami Streetcar and Baylink could expect to receive CRA funding for debt service and/or operating and capital expenses. The Patricia and Phillip Frost Museum of Science, the Perez Art Museum Miami and the Adrienne Arsht Performing Arts Center stand to receive CRA dollars to cover similar expenses.

Most of those projects are “for the rich,” said Schnidman.

‘No real teeth’

The proposed county resolution would “have some effect but it has no real teeth,” Schnidman said. He noted, for instance, that while it seeks to address affordable housing, it would not require existing CRAs without a housing plan to adopt one. He was also critical because the proposal would continue to allow CRAs to issue bonds to support projects without voter approval.

Miami-Dade Commissioner Daniella L. Cava proffered the resolution.

“I have created a proposal to deal with slum and blight and not just for developers,” she said. “We can’t do anything that is in violation of state law…state law does not require housing.

Cava noted that her resolution provides that there be a finding of “necessity” for approval of new CRAs, added she was interested in Schnidman’s suggestion that CRAs should have to show they have addressed slum and blight before they can get an extension or amendment to their term.

The Miami-Dade Grand Jury issued a scathing report in February about the operations of 14 CRAs that exist under an agreement with the County Commission. The grand jury said CRAs skirted the law’s intent with “overly broad interpretations” of definitions and requirements, by paying for inappropriate things like “fairs, carnivals and community entertainment;” and squandering “… large amounts of taxpayer dollars on what appeared to be pet projects of the elected officials.” Likewise, CRAS allocated a significant amount of funds “on salaries, benefits and other administrative costs.”

But the grand jury’s harshest criticism was aimed at the failure of CRAS to provide affordable housing in the blighted areas they were supposed to assist.

“Our investigation uncovered large scale spending on projects that did not address slum, blight or affordable housing … Evidence presented to us indicates that affordable housing is not a priority for many of the existing CRAs … (and) is almost non-existent.”

County leverage

The proposed resolution would declare the county’s intention to include the new provisions as a condition for approval for any new CRAs and for existing ones seeking extensions. The county has considerable leverage because it provides nearly half the tax-increment funds collected by the 14 CRAs: this year, $32 million in all.

Among the resolutions key provisions is a requirement that new and some existing CRAs have a housing component and a budget that annually includes funds for low, moderate and workforce housing. Existing CRAs without housing provisions in their plans may be able to circumvent the requirement, according to Schnidman.

In a measure aimed at widening CRA oversight, the county commission would appoint two members or designees to each CRA board. The county Inspector General’s Office would be given extensive authority to review all transactions of the CRAs, including actions that allegedly involve “fraud and/or corruption.”

CRAs also would be obliged to demonstrate the benefit of projects by holding a public hearing to consider how they will primarily benefit residents and business owners within the redevelopment area.

On the financial side, CRAs would be subject to a cap on administrative costs of 20 percent and new CRAs would not receive more than 50 percent of tax-increment collections unless commissioners approve a higher amount by a two-thirds vote.

CRA grants of $200,000 or more to community groups would have to primarily benefit residents in the redevelopment area. That would include hiring the labor force from workers within the redevelopment boundaries and allowing the county to recover funds not used for their intended purposes.

Likewise, CRAs would also be required to provide relocation assistance to individuals, families and businesses displaced by its projects. CRAs would also have to provide “one-for-one” replacement of affordable housing units they demolish, with those displaced having the right of first refusal to move back into affordable units.

Fort Lauderdale to use “poor people’s money” to subsidize transit for affluent?

By William Gjebre, FloridaBulldog.org 

A rendering of Fort Lauderdale's proposed WAVE streetcar. Will tax dollars intended to eliminate slums be used to pay for it?

A rendering of Fort Lauderdale’s proposed WAVE streetcar. Will tax dollars intended to eliminate slums be used to pay for it?

Fort Lauderdale’s recent approval of a no-bid contract to update the plan for the troubled Northwest-Progresso-Flagler Heights Community Redevelopment Agency has raised concerns about a lack of public input amid a rush to add projects not in the current plan at the expense of community needs.

Scott Strawbridge, who serves on the CRA’s 14-member advisory board, has called for outside review of the agency after he and his colleagues were informed that City Manager Lee Feldman signed a $24,500 contract with a private firm in August to amend the current CRA plan, last updated in 2001.

Pompano Beach-based Redevelopment Management Associates LLC has already begun the first phase of the work. Under city code, the city manager has authority to enter into contracts up to $25,000, without seeking approval from the CRA board.

“The city is trying to push through a short term process that should take a longer review,” said Strawbridge, adding there needs to be more data to support any proposed changes. “I think it would be healthy for the public to understand what has been spent…There should be accountability.”

Except for one informational hearing on Sept. 23 about the Redevelopment Management firm’s study, there has been little public notice and input, Strawbridge added.

Frank Schnidman, a Florida Atlantic University professor recognized as an expert on legal issues regarding CRAs law, said state statute makes “clear if projects are not in the plan then it’s inappropriate to use tax increment” CRA funds to pay for them.

By law, the mission of CRAs is to clean up slum and blight. Schnidman said the Northeast Progresso-Flagler Heights CRA apparently is considering funding transportation projects not currently in the plan. But even if they met the legal requirements for CRA funding “they would not alleviate slum and blight…They would be using poor people’s money to subsidize transit for people living in more affluent areas.”

“This would be another manipulation of tax money,” Schnidman said, adding the funds would be better used for “affordable housing, where there is a crisis. Poor people would be left out in favor of politically favored projects, like the Wave,” a proposed streetcar system primarily servicing the downtown area.

Fort Lauderdale City Manager Lee Feldman

Fort Lauderdale City Manager Lee Feldman

City Manager Feldman, who also serves as executive director of the CRA, and Jeremy Earle, deputy director, of the city’s Sustainable Development Office, did not respond to requests for comment.

However, city spokesman Matt Little noted in an e-mail response that the CRA budget includes funding for the WAVE, “as approved by the CRA Board.” He also said the budget may include “a line item” subsidy for the existing Sun Trolley system, if the project is contained in the Plan, but did not clarify if that was the case or not.

The CRA’s plan is being updated because it hasn’t been amended for 11 years, and changes could allow for the enhancement of transportation, provide support for community events and give the CRA Board flexibility to consider other proposals that may be presented, the spokesman said.

The concerns follow a problematic city auditor’s report in May that castigated the Northwest Progresso-Flagler Heights CRA for its poor oversight of a taxpayer-financed office and retail complex, Sixth Street Plaza, which filed for bankruptcy last spring.

“The project lacked fundamental project discipline, from risk assessment and establishing proper governance to detailed accounting of funds disbursement,” City Auditor John Herbst wrote in a cover memo to the city commission, which also sits as the CRA’s board of directors.

The city commission requested the report after FloridaBulldog.org reported in February that taxpayer loans were in jeopardy due to the forced sale of the plaza.

Strawbridge, an official with the Fort Lauderdale Housing Authority, stopped short of naming the agency that should look into NPF’s spending practices. But the Broward Inspector General’s Office has kept close tabs of municipal CRAs in recent years.

Last year, for example, the Inspector General found the Margate CRA deliberately mishandled $2.7 million in funds by rolling the money over for several years without specific purposes. In 2013, it determined that the Hallandale Beach CRA had $2.2 million in questionable expenditures.

Two years ago, the Florida Auditor General cited the Hollywood Beach CRA for failing to report $36.2 million in unspent year-end funds from 2009-2010 and $34.2 million from 2010-2011. The city is now considering options that would redirect funds intended for the CRA to the city.

The proposed route of Fort Lauderdale's WAVE streetcar

The proposed route of Fort Lauderdale’s WAVE streetcar

Strawbridge said the Northwest Progresso-Flagler Heights CRA is seeking to revise the existing plan to add projects for funding consideration that are not included in its existing plan, even as the new fiscal year began Oct. 1.

According to city documents, CRA officials expect Redevelopment Management Associates to present an outline of proposed changes at the end of November, and to city commissioners for approval in December. The company, formed in 2009 and run by redevelopment consultants Kim Briesemeister and Chris Brown, pitches itself as a way to help cities “reinvent” themselves to attract businesses, jobs and revenue.

The CRA budget for the new fiscal year of 2015-2016 will likely include funds for transportation projects not in the existing plan, Strawbridge said.

He cited two memos from Feldman to commissioners. One outlined an extension of the proposed $50 million WAVE streetcar to a portion of the Northwest Progresso-Flagler Heights area at a cost of $7.5 million. The CRA would make an anticipated annual payment of $870,000, for up to 11 years.

The other memo called for the CRA to pay $197,000 to offset operational expenses for the existing Sun Trolley system in the CRA area.

In the past, the CRA has also funded neighborhood street parties, giving one group up to $142,000, Strawbridge said. He questioned whether that was a proper expenditure under a previous opinion by the Florida Attorney General’s Office, which opined that CRA funds should be used for “bricks and mortar” projects.

Hollywood Beach CRA the target of moves to cut its funding, or kill it

By William Gjebre, FloridaBulldog.org 

Rendering of Margaritaville Hollywood Beach Resort. Photo: City of Hollywood

Rendering of Margaritaville Hollywood Beach Resort. Photo: City of Hollywood

Hollywood City Commissioner Peter Hernandez says the Beach Community Redevelopment Agency should be abolished because it has had increasing property tax funds for its use — at times exceeding its needs — while the “rest of the city is starving” to pay for operations and needed improvements.

While his proposal has yet to gain support from his colleagues, Hernandez and other city commissioners, who also serve as directors of the CRA, have directed the city’s staff to explore options that would redirect the Hollywood Beach CRA funds left over at the end of the year to the city. Such a revenue give back would mark a first for a CRA in Broward.

In the past, the Hollywood Beach CRA has been accused in a state audit of circumventing state law by rolling over end-of-the-year funds to the next year, a large part of which in recent years has backed the $147 million Margaritaville hotel-entertainment complex in the redevelopment area. The complex is expected to open in October.

In suggesting that the Beach CRA should be abolished, Hernandez said the district — which encompasses less than a square half-mile at 293 acres — “is not really blighted and a slum.’’ Those conditions, he said, are to be met to qualify for redevelopment funds under state law.

The city, Hernandez said, has been operating on “bare bones budgets” while the CRA has given $28 million in incentives to the private developer of Margaritaville. In addition, the city gave developer Lon Tabatchnick valuable, city-owned beachfront land for the project and endorsed construction of a $38 million parking garage project using bonds to be paid back with parking revenues over 30 years.

Peter Hernandez

Peter Hernandez

The CRA district was established in 1997. According to city documents, property values there have jumped since the initial assessment of $546 million. Property in the district is now assessed at about $2.7 billion, which will bring in about $27 million in tax revenue, according to the city’s new annual budget that starts Oct. 1.

Abolishing the Beach CRA and redirecting its tax revenues to the city, Hernandez said, could result in Hollywood being able to cut its citywide property tax rate, the highest among municipalities in Broward County, by 1.5 mills — or $1.50 for every $1,000 of assessed property value.

CRA executive director Jorge Camejo did not respond to repeated calls for comment.

With the city in need of funds for operations and other purposes, city officials, at the urging of some commissioners, have presented a variety of proposals aimed at shifting to the city a sizeable portion of an estimated $5 million in anticipated unused end-of-year CRA funds for the coming year.

The Beach CRA gets is revenue from tax increment funds levied on property within its redevelopment boundaries. The $5 million in anticipated unused funds are drawn from four sources: Hollywood, $2.7 million; Broward County, $2 million; Children’s Services Council, $179,000 and the South Broward Hospital District, $54,000.

Unless the city finds a way to shift the money, the funds must be spent on redevelopment within the CRA’s boundaries.

LOOKING AT OPTIONS

City officials are examining a variety of options to obtain the CRA funds – from having the CRA proportionally refund unused tax dollars as outlined above, with the city receiving only $2.7 million, to reducing the percentage of tax increment funds earmarked to the Beach CRA, resulting in the city receiving $4.7 million, or even abolishing the CRA.

Abolishing the Beach CRA, however, would endanger $116 million in projects in the CRA district, including installing underground utilities, the reconfiguration of the Hollywood Boulevard Bridge over the Intracoastal Waterway, and street flooding/drainage improvements, according to a city document.

Two other options require county approval: one calls for Broward to agree to give up its $2 million to the city, resulting in the city receiving a total of $4.7 million; the other calls for removing the Diplomat Hotel from the CRA, resulting in $3.3 million going to the city rather than the CRA.

Hernandez said he expects city officials to begin discussions with the county soon regarding about how best to proceed.

Ralph Stone, director of the Broward County Housing Finance and Community Development Division, said it “would be a first” should a CRA seek to return unused end-of-the year funds to its municipality for citywide uses.

About a year ago, the county said it planned to monitor and take action against CRAs that hoarded funds at the end of the year rather than spending on needed projects. Under state law, CRAs that have funds at the end of the year must spend that money on projects to be completed in three years or pay down debt. If not, CRAs must return the money to the agencies that contributed those public tax dollars.

The county’s concern followed findings by the Broward Inspector General Office that the Margate CRA deliberately mishandled $2.7 million in funds, rolling it over for several years without specific purposes. The Inspector General also found that the Hallandale Beach CRA had $2.2 million in questionable expenditures—an allegation denied by the agency.

In February 2013, the Florida Auditor General cited the Hollywood Beach CRA for failing to report $36.2 million in unspent year-end funds from year 2009-2010 and $34.2 million from 2010-2011.

The Beach CRA, Hernandez said, had “rolled over the funds for Margaritaville.”

Frank Schnidman is a community redevelopment expert/consultant and professor of urban and regional planning at Florida Atlantic University. In an interview, he said that over the years the Hollywood Beach CRA has complied “with the spirit of the law” in its use of end-of-year funds, but added it “has been rolling (funds) over and built up quite a bank account” that was a key funding tool for the city-backed Margaritaville project.

Schnidman said city officials seeking funds for citywide expenses and projects should also consider talking with the county about the option Hernandez has suggested: abolish the Hollywood Beach CRA.

Fort Lauderdale redevelopment project fails; $1 million in taxpayer funds at risk

By William Hladky, FloridaBulldog.org 

Fort Lauderdale's Sixth Street Plaza

Fort Lauderdale’s Sixth Street Plaza

Almost $1 million in taxpayer loans may never be repaid due to the forced sale of Sixth Street Plaza, centerpiece of Fort Lauderdale’s ambitious plans to revitalize the Sistrunk Boulevard corridor, at a public auction on May 5.

Broward County Circuit Court Judge Carlos Rodriguez ordered the sale of the troubled 22,825-square foot office and retail plaza at 900 NW Sixth St. in November at the request of Davie-based Regent Bank.

Regent Bank gave Sixth Street Plaza Inc. and its president Maria J. Freeman a nearly $2.3 million mortgage in 2005 to construct a “flagship” project as part of Fort Lauderdale’s efforts to revitalize the Sistrunk Boulevard corridor. The Sixth Street Plaza opened in 2010, but has never been successful in attracting more than a handful of long-term tenants.

Maria J. Freeman, president of the Sixth Street Plaza

Maria J. Freeman, president of the Sixth Street Plaza

Freeman, a general contractor, is vice chairman of the Fort Lauderdale Housing Authority.

At the same time in 2005, the South Florida Regional Planning Council loaned $300,000 to Sixth Street Plaza. In 2008, the Fort Lauderdale Community Redevelopment Agency (CRA) loaned the project an additional $447,990 and made a second loan a year later worth $250,000.

Unfortunately for taxpayers, the loans by the planning council and the CRA are “subordinate,” meaning that if the public auction does not raise more than the $2.1 million owed the bank, no monies will be left over to repay them. Zillow, an online real estate database, places the value of the Sixth Street Plaza building at 900 NW 6 St. at $905,275.

The South Florida Regional Planning Council is a quasi-governmental agency set up to address regional problems in growth, land development and transportation. The Fort Lauderdale CRA is one of nine city CRAs in Broward County that direct tax dollars to areas to clean up slum and blight. The Sistrunk corridor is called the Northwest-Progresso-Flagler Heights area. The city commission sits as the CRA board.

A WAY TO RECOUP?

The CRA may be able to recoup their investment if it buys the plaza at auction, said Frank Schnidman, Professor of Urban and Regional Planning at Florida Atlantic University.

Schnidman told FloridaBulldog.org that by owning the plaza, the CRA would both avoid the $9,513 a month in office rent it now pays to Sixth Street Plaza and control the balance of the property so it could find tenants to “put feet on the street.” Once the vacant tenant space was filled the CRA could sell the property to a private buyer, allowing the CRA to recover the purchase price and return the property to the roll, Schnidman said.

The CRA offices are located on the second floor of the Sixth Street Plaza.

Fort Lauderdale Mayor Jack Seiler said in an interview that the auction price of the Sixth Street Plaza will influence what the city does. He declined to say whether they city would consider bidding. The commission, sitting as the CRA board, will discuss the matter on Feb. 17.

Escalating costs plagued the Sixth Street Plaza project.

In November 2005, Regent initially loaned Sixth Street $1.45 million. Seven months later, the loan was modified and increased to $1.9 million. In December 2007, the loan was modified again and increased to almost $2.3 million.

The CRA made its first loan of nearly $450,000 to the project in June 2008. It had already had contributed $400,000 for infrastructure improvements. The $400,000 was a grant, not a loan.

According to the CRA minutes, then Fort Lauderdale Mayor Jim Naugle noted that the project had encountered “various problems” and wanted Freeman to personally signed the loan, saying that without it the CRA would be “guilty of malfeasance.”

A PERSONAL GUARANTEE

Freeman personally guaranteed the loan. The minutes did not elaborate on the problems.

Thirteen months later, on July 7, 2009, Freeman was back before the city commission asking for another $250,000 in CRA tax funds.

Al Battle, Director of the Northwest/Progresso/Flagler Heights CRA

Al Battle, Director of the Northwest/Progresso/Flagler Heights CRA

The money was needed primarily to pay off mechanic liens, but this time Freeman faced a different commission. Jack Seiler had replaced Naugle as mayor and Romney Rogers had joined the commission.

An audiotape of the meeting reveals that Seiler and Rogers grilled Freeman and Alfred Battle, CRA director for the Sistrunk corridor, for 90 minutes.

Rogers pointed out that Freeman’s project was $3.2 million in debt and the Six Street Plaza was appraised at $2.4 million. “So you’re underwater $800,000 at least…Has anyone really crunched the numbers?” Rogers asked. Battle admitted such an analysis had not been done.

Seiler asked, “If we don’t give this money, you’re essentially going to lose the property?”

Freeman didn’t answer the mayor’s question, but said, “The project has done what it is supposed to have done as far as its ability to attract tenants.”

Bobby DeBose, who also had joined the city commission, came to Freeman’s defense. “We need to commend her for jumping in,” he said, calling Sixth Street Plaza a “flagship” project that was needed to revitalize the “blighted,” predominately black Sistrunk Boulevard corridor.

“We know it is difficult,” he added.

Rogers said Battle and his staff “should be all over this thing and more involved…It shouldn’t have gotten this far…If it is a flagship you should treat it like a flagship.”

FREEMAN A ‘PIONEEER’

Turning to Freeman, Rogers said, “You’re a pioneer…I applaud you for that…but maybe you should have reached out (to the CRA)…quicker…I see a real problem coming down the pike…I’m sitting here looking at this package and I’m not feeling good about it because I don’t have enough information to make a prudent decision.”

Rogers nevertheless voted to approve the second CRA loan with the stipulation that Battle made sure Freeman settled the mechanic liens and paid any other outstanding bills. Only then Commissioner Charlotte Rodstrom voted against the loan.

Seiler told FloridaBulldog.org he voted for the second CRA loan to salvage the Sixth Street Plaza project. “If we did not assist with the loan, the property would not be able to survive,” the mayor said, adding that the loan shored up the project in the middle of the recession.

Freeman is well known to city hall and Broward political circles. In addition to her service on the Housing Authority, she has served on the CRA’s Northwest/Progresso/Flagler Heights Redevelopment Board, the city Marine Advisory Board, the city Planning and Zoning Board and the city Planned Unit Development Zoning District Advisory Committee.

Freeman is also active politically. The Sun-Sentinel reported that in August 2012 Freeman hosted a fundraiser for Dale Holness who later was elected to the Broward County Commission.

BANKRUPTCY FILINGS

The second CRA loan did not stabilize Freeman’s finances. She filed for Chapter 13 bankruptcy protection in April 2012, but her petition was soon dismissed due to her failure to file additional paperwork. She filed again nine months later as a reorganization bankruptcy under Chapter 11, claiming she “has experienced difficulties caused by the significant downturn in the real estate market.” That action is pending

Since September 2009, city CRA minutes reflect no further discussion about the Sixth Street Plaza.

Nevertheless, Seiler said that city staff kept him informed about Sixth Street Plaza’s financial difficulties and its pending foreclosure, although he did not know Freeman had filed for bankruptcy protection.

Sixth Street Plaza’s financial troubles came about from the lack of tenants, Seiler added.

Even with the plaza’s foreclosure and the pending public sale, the mayor believes the Sistrunk corridor will prosper. The property has increased in value and the improving economy may make the plaza a good investment for whoever takes it over, he said.

Cheryl Cook, South Florida Regional Planning Agency’s loan program director, said Freeman has not repaid the planning agency’s loan. “You know we will be paid last,” she said.

When contacted, Freeman said, “I am working with my bank.” She declined further comment.

Battle would not be interviewed, but issued a statement via city public affairs officer Petula Burks.

“We will have an agenda item dedicated to this issue on Feb. 17 during the CRA meeting. Our conversation with the CRA board/city commission is expected to include a discussion about the status of the foreclosure and our lease,” the statement said.

Broward to seek return of CRA tax dollars mishandled by cities; Millions at stake

By William Gjebre, BrowardBulldog.org 

Broward Administrator Bertha Henry and attorney and FAU professor Frank Schnidman

Broward Administrator Bertha Henry and attorney and FAU professor Frank Schnidman

Broward will seek the return of county property tax dollars from city community redevelopment agencies that hoarded that money instead of spending it on projects to fight slum and blight that are ready to get underway, according to County Administrator Bertha Henry.

The county’s toughened stand follows recent findings by Broward’s Inspector General that Margate deliberately mishandled $2.7 million in CRA funds. It also comes amid fresh criticism about the way Hallandale Beach allegedly handled its community redevelopment funds.

Frank Schnidman, an attorney and senior fellow at Florida Atlantic University’s School of Urban and Regional Planning, said in an interview that Hallandale Beach appears to have mishandled $12.6 million in CRA funds – an allegation disputed by a top city official.

“They lost track of the money,” Schnidman said. “They were not aware there were all these millions of dollars…they had misplaced.”

The County approves the establishment of CRAs after the need for redevelopment is studied and documented and contributes tax dollars – so called tax increment funding, or TIF – to the municipal agencies from revenue generated by the increase in property values in the redevelopment area.

Ten Broward cities have CRAs that receive TIF dollars. Others include Fort Lauderdale, Hollywood and Pompano Beach, have CRAs.

Henry said in an interview last week that the county will enhance its review of expenditures to make sure municipal CRAs don’t improperly bank funds at year end instead of spending them as required by state law.

“They now know they have to comply,” said Henry, referring to the Inspector General’s publicized findings.

Under state law, CRAs that have funds at the end of the year must spend that money on projects to be completed in three years, pay down debt or return it to the county.

INSPECTOR GENERAL’S PROBE

For months, the Inspector General has been conducting what appears to be a review of how some municipal CRAs in Broward have handled funds unspent at the end of each fiscal year.

In Margate, investigators found, the CRA mishandled funds by rolling them over from year to year without designating them for specific purposes. The Inspector General said the county could retrieve $2.7 million in funds provided to Margate.

Henry’s parallel review of CRA spending is expected to take two months. County representatives will then meet with CRA’s receiving tax increment property tax funds. For cities that don’t have projects ready to go, “I will recommend we go after the money,” she said.

Cynthia Chambers, director of Broward’s environmental protection department whose duties include overseeing municipal CRAs, will also be watching. She said the county would “certainly” seek the return of tax funds from CRAs that violate state law regarding the handling of year-end funds.

The Inspector General’s ongoing CRA probe began in 2012 after a string of stories in BrowardBulldog.org about questionable loans to local businesses and land purchases by Hallandale Beach. The 14-month investigation found $2.2 million in questionable CRA expenditures, the improper co-mingling of city and CRA funds dating to the CRA’s establishment in 1996 and poor record keeping.

The Inspector General also asked the city to tell it how much money the CRA had, suggesting the amount was uncertain. An audit by Hallandale Beach that in July, 2013 identified $12.6 million in CRA funds co-mingled with city funds.

Schnidman, the FAU professor and a former consultant for the Hallandale Beach CRA, was critical of the audit finding such a huge sum.

“They were not aware the money was there; they misplaced it. They were hanging onto the money…year after year,” Schnidman said.

The $12.6 million, Schnidman said, should be returned to the government agencies that, like the county, contributed property tax increase funds to the Hallandale Beach CRA – the city, South Broward Hospital District and Children’s Services Council.

Hallandale Beach City Manager Renee Miller disputed the notion the CRA had excess funds. “Anyone saying that is misleading the public. It’s not found money…not excess cash,” she said.

Miller said the audit went back to as far as 1996 to ascertain the amount of CRA funding, with interest. The money, she said, was then transferred to the CRA trust fund. Asked where the money was located, Miller said it was from current funding that year, not from any leftover funds from previous years.

Miller said the city had a good estimate of the amount of CRA dollars co-mingled with city funds, but the audit confirmed $12.6 million.

In the past when funds were co-mingled, Miller said it had been the city’s practice to account for CRA costs near the end of the budget year on September 30.

The $12.6 million CRA funds were used to pay agency costs during 2012-2013, according to Miller and city controller Melissa Cruz. Of that, more than $10 million went to pay salaries and benefits, administrative charges, debt service, utilities, material and supplies, repairs and maintenance, community redevelopment programs, grants to community groups, professional and outside services, subsidized loan programs, and other service charges. Another $500,000 was transferred to the city, and $2.3 million was designated for capital projects.

“It’s not as insidious as was inferred,” Miller said.

 

Holness: Margate isn’t the only city that’s mishandled CRA funds

By William Gjebre, BrowardBulldog.org 

Broward Commissioner Dale V.C. Holness

Broward Commissioner Dale V.C. Holness

In the wake of a critical inspector general’s report that accused Margate of mishandling millions of dollars in community redevelopment funds, Broward Commissioner Dale V.C. Holness says he expects similar findings of wrongdoing about other cities as the county’s investigation continues.

“Unfortunately, this is not the only CRA (Community Redevelopment Agency) handling it this way; others are doing it,” said Holness. “Funds should be utilized…to rid areas of slum and blight, reduce unemployment and help businessmen. CRAs are going for big projects that don’t help neighborhoods and small businessmen.”

The inspector general referred the matter to the Broward Commission “for any action they deem appropriate,” stating the county may reclaim as much as $2.7 million from Margate’s Community Redevelopment Agency (MCRA). The commission has yet to debate the matter.

But Holness, the only member of the nine-member commission to respond to requests for comment, said he’s more interested in the Margate CRA using the funds “the way though should be used, but are not” rather than focusing on reclaiming any mishandled funds.

Attorney Frank Schnidman, a CRA expert and senior fellow at Florida Atlantic University’s School of Urban and Regional Planning, also expects county overseers to find that other CRAs mishandled funds similar to Margate. CRAs have “not paid attention as to how to account for funds left over” at the end of the year, treating their funds “as another [city] account and not as a trust fund” to be maintained separately, Schnidman said.

The county’s findings gives it “leverage to bring Margate to the table to get them to comply” with state requirements through an agreement that would tighten accountability, Schnidman said. If no agreement is reached, the county “has the legal right to the return” of the $2.7 million in county property tax funds that the IG identified in its report.

Should the county take no action, commissioners would be left to explain “to the taxpayers not going after the money,” Schnidman said.

The inspector generals’ July 22 report found that the Margate CRA had “engaged in misconduct in connection with the handling of tax increment financing (TIF) funds it received from Broward County and other taxing authorities.” TIF funds come from taxes levied on the increased value of property in the designated redevelopment area.

“We found that the MCRA has a pattern of intentionally retaining excess funds for the later use of whatever unspecified matter it desired,” the report state. “The MCRA’s failure to appropriate the money in accordance with any legally prescribed alternatives has resulted in a debt to Broward County of approximately $2.7 million for the TIF monies contributed in fiscal years 2008-2012.”

Under state law, the report said, the agency must allocate excess funds to projects to be completed within three years, to reduce existing debt, or to place money in accounts to pay down future anticipated debt. Otherwise, end of the year funds have to be paid back to the county, the city, or the North Broward Hospital District – the entities contributing funds to the Margate CRA.

The report cited one Margate CRA official who informed his board two years ago that the agency “had roughly $10 million in cash that was not committed to any project.”

The county’s report said Margate CRA officials claimed that the funds were allocated to the long-awaited City Center project. However, the report concluded, “…evidence plainly shows that the MCRA has never appropriated a single dollars of annual excess TIF monies for that project.”

In its response to the inspector general, the Margate CRA asserted that it was in “compliance with the spirit if not the letter” of state law, asserting said it “did not hoard public monies for improper purposes.” It nevertheless offered to “appropriate money it ‘hoarded’ to a more specific mandated option,” according to the response prepared by Rachel Bach, a Margate CRA official.

The county’s report on Margate stemmed from an investigation started last September of 10 Broward cities and appeared to center on their handling of end-of-year funds. Other cities included Hollywood, Fort Lauderdale, Lauderdale Lakes, Davie, Pompano Beach, Deerfield Beach, Plantation and Coral Springs.

The probe followed a yearlong investigation of the Hallandale Beach CRA in which county investigators found the agency made $2.2 million in questionable expenditures. The Hallandale investigation and report, issued in March 2013, followed a string of stories in BrowardBulldog.org about questionable city loans to local businesses and controversial land purchase through the CRA.

The inspector general’s office also previously determined that Lauderdale Lakes misspent over $2.5 million in CRA funds.

Margate, like Hallandale before it, challenged the authority of the inspector general to investigate the city’s CRA.

“No report should be issued in this investigation, and if it is, it should be issued to the MCRA or the City of Margate, and not Broward County,” the Margate CRA stated in its response.

The Inspector General has dismissed that jurisdictional claim, stating it has the authority to investigate and asserting that it will continue to probe expenditures of CRA funds.

Broward opens broad inquiry into misuse of property tax dollars by CRAs; millions at stake

By William Gjebre and Dan Christensen, BrowardBulldog.org iglogo

The Broward Inspector General’s Office has opened a broad inquiry into the potential misuse of public funds across the county with written requests sent to at least nine cities with a Community Redevelopment Agency to hand over a variety of financial records for inspection.

One official with knowledge of the inquiry told BrowardBulldog.org the Inspector General’s review is “the beginning of a long term process.”

Frank Schnidman, an attorney and senior fellow at Florida Atlantic University’s School of Urban and Regional Planning, said the Inspector General’s request for records is all about millions in tax dollars and who should control them.

“It’s about time that somebody was trying to hold CRAs accountable. The Inspector General’s Office might not be the right mechanism to do that, but it’s about time,” Schnidman said.

CRA’s administer programs within districts designated by local governments under state law as community redevelopment areas.  Boards made up of local government officials or persons appointed by the local government run them.

Tax increment financing is used to fund CRAs, which receive tax revenue generated by increases in real property value in their area over a baseline number determined when the CRA is created. By law, those revenues – the “increment,”— are put into a CRA Trust Fund that’s dedicated to the redevelopment of the area.

KEEPING TABS ON CRAS

In sending letters to the CRAs the Inspector General’s Office is carrying out a vow made earlier this year amid its investigation of Hallandale Beach’s CRA to keep close tabs on municipal redevelopment groups that receive half their funds from property taxes collected by the county.

Identical records requests were sent to at least eight of the 10 Broward cities with CRAs that receive county funding – Hallandale Beach, Hollywood, Fort Lauderdale, Lauderdale Lakes, Davie, Pompano Beach, Margate, Deerfield Beach and Plantation. An official in Coral Springs, the 10th city, said that city has not received a letter but expects one soon.

While some CRA officials express uneasiness, others welcomed the Inspector General’s action.

“I think they are looking for general information, but they may want to see if there is anything that’s improper,” said Will Allen, administrator at the Davie CRA. “They won’t find anything wrong here.”

In Hallandale, City Commissioner Michele Lazarow said, “I don’t think it is an accident that the letter was sent” shortly after the Inspector General issued a critical report against the Hallandale Beach CRA.

Earlier this year, the Inspector General charged that Hallandale Beach city officials had “grossly mismanaged” millions of dollars in CRA funds. The office said it found at least $2.2 million in questionable expenditures between 2007 and 2012.

Mayor Joy Cooper challenged many of the county’s allegations. Asked to comment about the Inspector General’s new request for documents, she said the city “will respond accordingly.”

The Inspector General’s office asked the cities to produce:  

*A copy of the ordinance that established the CRA Community Redevelopment Trust Fund. Hallandale Beach, for instance, did not have a separate fund for the first 16 years of the agency’s existence.

*Bank statements for the redevelopment trust fund accounts for the months of September and October for the years 2009-2012.

*The CRA’s general ledger account ending balances from 2009-2012

*Any and all CRA capital improvement plans for 2009-2012.

*Documentation for the disposition of all money remaining in the redevelopment trust fund at the end of fiscal year ending September 20, 2012 that was later used to reduce indebtedness for pledged funds.

*Records regarding all money deposited into escrow accounts from 2009-2012 for repayment of CRA debts.

Schnidman said the records that were sought indicate that the county’s agents are attempting to determine if the CRAs have complied with the requirements of state statute – 163.387(7) – regarding how tax increment trust fund balance amounts are to be treated at the end of the fiscal year.

Under the law, Schnidman said, those balances are supposed to be proportionally returned each year to each taxing authority, such as the county, that paid into the CRA.

“What the Inspector General is doing is he’s trying to figure out which of the county’s CRAs are in violation of the law and need to return all this money they’ve husbanded away,” said Schnidman. “It’s millions of dollars.”

WILL OTHER COUNTIES FOLLOW BROWARD’S LEAD?

At a time of tight municipal budgets, the Inspector General’s gambit could reverberate it city halls across the state.

“I wonder if other counties will follow this effort by the Broward IG’s Office in the continuing revenue discussions between some counties and their CRAs,” said Schnidman. “The threshold question is by what authority is the Broward IG seeking this information from Broward County Dependent District CRAs that it arguably does not have jurisdiction over?”

City officials in Hallandale briefly challenged the Inspector General’s authority over its CRA, but later backed off that position.

In Margate, where the CRA has focused on “streetscape” improvements along Atlantic Boulevard and State Road 7, City Attorney Eugene Steinfeld took a wait-and-see approach to the county’s inquiry.

“It sounds like they are just gathering information,” Steinfeld said.

Lauderdale Lakes CRA executive director J. Gary Rogers welcomed any new oversight.

“They are doing their job,” said Rogers.

In 2012, following up on a story the year before by BrowardBulldog.org about missing redevelopment funds, the Inspector General found that Lauderdale Lakes had misspent $2.5 million in CRA funds. The city is repaying the money to the CRA.

“We were investigated and employees were terminated,” Rogers said. “We came close to a big financial disaster” under a previous administration, added Rogers who was not with the city at the time.

“I got no problem with them looking at us,” Rogers said. “They want to make sure we are spending money appropriately.”

William Gjebre can be reached at wgjebre@browardbulldog.org

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