By William Gjebre, BrowardBulldog.org
The owner of a private, for profit surgical center received two $100,000 taxpayer-backed business loans from Hallandale Beach after city officials changed guidelines that previously had allowed for only one such loan.
City records show the Hallandale Outpatient Surgical Center, 306 E. Hallandale Beach Blvd., benefitted from the second $100,000 loan after the city doubled a cap that had limited such loans to a total of $100,000. Who authorized raising the cap, and why, is not clear because city records are incomplete.
The city’s Community Redevelopment Agency (CRA) administers the $200,000 in loans. But nearly a third of that money – $65,000 – amounted to a gift from taxpayers because the city has said the surgical center does not have to repay it.
The city awarded the low-interest loans even though the surgical center’s owner/manager, Dr. Lance Lehmann, reported annual wage income averaging more than $700,000 for three years prior to obtaining the first development loan in 2005.
For nearly a year, Broward Bulldog has reported about questionable CRA business loans and land purchases. The city’s management practices, including those at CRA, are now under investigation by the Broward Inspector General’s Office, which sent several agents to Hallandale Beach City Hall on April 10 to meet with city officials.
Hallandale Beach’s redevelopment agency is funded by property tax dollars and funds are allocated for community and business improvements.
Lehmann did not respond to repeated requests for comment. However, CRA director Alvin Jackson said the medical center, which opened in 2006, has been an asset, making its loan repayments on time, improving the area, increasing the tax base and providing jobs.
“That’s a fine example of what should happen,” said Jackson, who was named CRA director 15 months ago, after the surgical center loans were approved.
Nevertheless, the city’s generous terms coupled with a lack of documentation in city files raise new questions about its troubled business loan program. Why was Hallandale’s cap on loans was changed? How did the surgical center become eligible for additional funds when it was a party to the cap on its first loan?
A WINDING TRAIL OF PAPERWORK
The CRA’s file on the medical center is a winding, yet incomplete trail of letters and memos. The records clearly show the city commission, which also sits as the CRA’s board of directors, approved the first $100,000 loan. The second loan appears to have been OK’d by City Manager Mike Good.
Lehmann initially sought a city loan of $213,000 in May 2004 after acquiring the property the year before for $1.1 million. He explained the loan was needed because of rising construction costs.
The loans were not based on need and Lehman’s substantial prior income was not an impediment to obtaining the loan, according to CRA officials. Applicants are checked only to determine their ability to repay.
City staff recommended a $75,000 loan. On November 3, 2004, commissioners approved a $100,000 loan, adding a provision that only $50,000 would have to be repaid if the complex created 10 new jobs. The loan carried a 2 percent interest rate.
Lehmann’s representatives stated the business would have 24 employees, including 13 new positions. The following May, the city issued a check for $100,000 to LJL Hallandale Holdings LLC, which lists Lehmann as manager, according to state corporation records.
At the time, $100,000 was the largest city loan a business could get and the surgical center was the first to receive the maximum, according to one city memo.
A memo in February 2006 stated that Lehmann inquired about borrowing additional taxpayer money, saying he was told to submit the request to then city manager Good.
The medical center formally requested the additional $100,000 April 2006, seeking the same terms as the original loan.
STAFF CONCERN ABOUT A NEW LOAN
City staff, meanwhile, expressed reservations about additional funding for Lehmann’s project. In memos to Good in February and March that year, then Development Services Director Marc Gambrill said city policies prevented additional loans.
Gambrill cited two written policies, including one that stated “a business may only utilize a loan program once per property.” He noted Lehmann had already received $100,000 loan for site preparations.
A month later, that concern had dissipated. On April 14, Gambrill wrote another memo noting that the city had doubled the loan cap to $200,000. He recommended the city manger approve the additional loan for Lehmann’s business, and handwritten notes indicate that Good later approved it.
The file is not specific, but the policy change was apparently set in motion earlier by the city commission. On Dec. 1, 2004 – a month after it approved the first $100,000 loan for Lehmann’s project – commissioners authorized the city manger to change CRA policy “to administer and change grants, loans and finances charges for all CRA related programs.” The changes were intended to give the city manager new “flexibility in meeting the needs of the community.”
A city check for the additional $100,000, also made out to LJL Hallandale Holdings LLC, was issued July 7, 2006.
The surgical center borrowed a total of $200,000, but must only repay $135,000. The city forgave half of the first $100,000 loan, and 15 percent of the second loan.
The surgical center began paying back the $50,000 on the first loan at two percent interest on July 1, 2005, $1,382 monthly, with the final payment on the 10-year loan due on April 1, 2015.
It pays the city $2,588 a month on the second 10-year loan. The interest rate is four percent and the final payment is due on April 1, 2016.
Both loans are backed by promissory notes signed by the company to repay the city funds. The medical center also signed an agreement to use the property mortgage as collateral.