OIG No. 23-22: The Ballet Valet Parking Company. Parking and Lease Agreements Oversight AuditDocuSign Envelope ID: 7EDA4050-4D4F-4CB8-977E-CA7E196402C7
Joseph M. Centorino, Inspector General
TO:
FROM:.
DATE:
PROJECT.
PERIOD:
Honorable Mayor and Members of the City Commission
Joseph M. Centorino, Inspector General
November 20, 2023
The Ballet Valet Parking Company, LTD. Parking and Lease Agreements
Oversight Audit
OIG No. 23-22
August 1, 2018- July 31, 2023
The City of Miami Beach Office of the Inspector General (OIG} examined the performance of The
Ballet Valet Parking Company, LTD. (Ballet Valet) with selected provisions of its Parking and
Lease Agreements with the City related to the operation of the parking garage located on City-
owned property at the southwest corner of Collins Avenue and Seventh Street (see the picture
below). The OIG Auditor also reviewed the related performance of the Parking Department and
Facilities and Fleet Management Department Asset Management Division (Asset Management
Division), which are responsible for monitoring compliance with the Parking and Lease
Agreements, respectively. This audit focused primarily on the related activities occurring during
the period of August 1, 2018, through July 31, 2023.
INTRODUCTION
On July 14, 1993, the Mayor and City Commission conceptually approved a Letter of Intent
submitted by Ballet Valet outlining the general terms for developing and constructing a new five-
level parking structure, including new retail storefronts. The City Commission further authorized
the City Administration to proceed with negotiations on a definitive agreement outlining the
specific terms of the project. Subsequently, a licensed general contracting firm experienced in the
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construction of parking structures, McCarthy Brothers Company, was selected by Ballet Valet.
Both companies, Ballet Valet and McCarthy Brothers Company, successfully negotiated with the
City Administration an Acquisition, Construction, and Development Agreement setting forth the
respective rights and obligations of the parties with respect to the acquisition of the property, the
construction of the garage, the construction of the retail space, and the operation, maintenance,
and opening of the garage to the public.
The Mayor and City Commission approved the Acquisition, Construction, and Development
Agreement for the Parking Garage Project, located at the Southwest Corner of Collins Avenue
and Seventh Street, under Resolution No. 94-21099, which was executed on March 30, 1994 (the
Development Agreement").
The real property and air space acquisition was completed by an Agreement between The Ballet
Valet Parking Company, LTD and Ballet Valet Corp. (seller), and the City of Miami Beach (buyer).
The acquisition consisted of certain land, air space, and easements described on "Exhibit A" of
the "Agreement to Purchase and Sell Property and Air Space" owned by Ballet Valet Corporation
for $2,842,544. Funding for the project was secured with the tax-exempt proceeds from the
issuance of the Gulf Breeze Bond.
The goal of the project was to construct a Garage Space and the Retail Space. Section 1.18 of
the Agreement defined the garage as 646 spaces (including seven in the loading area) in a 5-
story structure to be constructed by McCarthy Brothers Company and Ballet Valet for the City.
As per Section 2.4 (c) of the Development Agreement, Ballet Valet was responsible for designing
the project so that the Garage Space and Retail Space structures would properly mesh and that
the design of the Retail Space appropriately provided for the support of the garage and for access
to support and all other components necessary to maintain and service the garage. As per
Seventh and Collins Parking Garage Case Studies #C031004 by the Urban Land Institute,
Arquitectonica was chosen as the lead designer for the project. The firm's design retained the
existing historical facades of the retail and residential buildings that the project would replace,
complementing the art deco style of South Beach.
Following the conditions and stipulations of the Development Agreement, as a result of
negotiations, on August 11, 1997, two other separate agreements, a Parking Agreement_and a
Lease Agreement were made, entered into, and documented.
Parking Agreement
The City and Ballet Valet agreed to the location of the parking spaces in the garage subject to the
Parking Agreement. The rules and regulations pertaining to the parking spaces were to be
determined by the City; Ballet Valet was to pay the City in advance a monthly fee consisting of a
Base License Rate per parking space plus applicable taxes. Initially, the Base License Rate per
parking space license to Ballet Valet was $75.00 per month, fixed for two years. Thereafter, the
Base License Rate would be subject to adjustments every five years from the Commencement
date; however, the base license rate would never be less than $75.00 per month for the entire
term of the parking agreement, including any renewal period. Ballet Valet was to obtain and pay
for not less than 150 parking spaces, and its option up to a maximum of 25% of the total parking
spaces in the garage each year (646 x 25% = 162). The parking spaces licensed ta Ballet Valet
were not to be specifically designated or assigned and were to be accessed on the same
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conditions as other licensees of parking spaces in the garage, except as to the rate charged and
term of the license.
The City would have no obligation to leave empty at all times the total number of parking spaces
licensed under the contract. The initial term of the Parking Agreement was for thirty years
commencing on August 1, 1997, with the Ballet Valet's option to renew for two successive thirty-
year terms, subject to adjustments in the Base License Rate based upon the Consumer Price
Index (CPI), among other things.
The use of the licensed parking spaces was restricted to tenants, guests, and customers of
properties owned by Anthony Goldman or his heirs (collectively "Goldman Properties") or entities
in which Goldman Properties had a majority interest. Ballet Valet is controlled by Goldman
Properties. The right to use the parking spaces subject to the Parking Agreement would not be
transferable upon sale of any of the Goldman Properties or any interest therein that would reduce
Goldman Properties' ownership interest to less than 50%. The City Parking Department was
tasked with monitoring Ballet Valet's performance related to the executed Parking Agreement.
Lease Agreement
Under the Lease Agreement, the City agreed to lease to Ballet Valet the land and improvements
under the ramp of the garage, a total of 3,286 square feet, comprised of 2,213 square feet of
Loading Dock, 166 square feet of Trash Room, and 907 square feet of Storage Room. In return,
Ballet Valet agreed to pay the City a fixed rental "base rent" of $1,369.16 monthly (based on $5
per square foot), subject to annual adjustment based upon the CPI but not more than 3%, plus
Florida Sales Tax. Any portion of the premises utilized by the tenant for parking was to be solely
for loading and unloading trucks or other vehicles in connection with Ballet Valet's utilization of
the retail space. The thirty-year lease was to remain in effect, until July 31, 2027, with the option
to extend the term of this Lease for two consecutive thirty-year periods provided that certain
conditions, as specified in the Agreement, were satisfied. Monitoring of billings and collection of
revenues under the Lease Agreement was made the responsibility of the Asset Management
Division.
OVERALL OPINION
As a result of this audit, which focused primarily on licensed parking rental fees and lease
payments, the OIG determined that the following identified deficiencies during the audit period
require corrective action:
1. Re-calculation of the monthly rental payments required under the Lease Agreement
determined that Ballet Valet overpaid the City by a total of $21,924.75, consisting of
$20,581.13 in base rent and $1,343.62 in Florida Sales Tax.
2. Re-calculation of the monthly fee payments to be paid to the City under the Parking
Agreement resulted in a net underpayment of $17,349.38, excluding Florida Sales Tax.
3. The Parking Department did not collect and remit Florida Sales Tax due to the State for
the use of licensed parking rental fees, resulting in an underbilling of $12,879.72.
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In addition, the OIG has suggested the following opportunity for improvement:
1. Ballet Valet routinely remitted late payments to the City under both the Parking and Lease
Agreements, but neither agreement provides for the charging of penalties and/or interest
for late payments received after the designated due dates.
SCOPE, OBJECTIVES, AND METHODOLOGY
The purpose of this audit was to determine whether Ballet Valet was compliant with selected
provisions in the Parking and Lease Agreements related to the integrity, reliability, and accuracy
of rental fees, records, and data; to determine whether fees due were properly and timely collected
and accounted for; and to determine whether sufficient documentation was maintained by both
Ballet Valet and the City.
The scope of this audit was to verify compliance with selected terms of the Parking and Lease
Agreements and verification of internal controls, and to determine whether sampled payments
were accurately calculated, fully remitted, and properly recorded in the City Financial System
during the August 1, 2018, through July 31, 2023, audit period.
The audit methodology included the following:
• Reviewed applicable sections of the Parking and Lease Agreements between the City and
Ballet Valet;
• Interviewed and made inquiries of staff to gain an understanding of internal controls and
plan audit procedures;
• Performed substantive testing consistent with stated audit objectives, including, but not
limited to, examination of pertinent transactions and records;
• Drew conclusions based on the results of testing, made corresponding recommendations,
and obtained auditee responses and corrective action plans; and
• Performed other audit procedures as deemed necessary.
FINDINGS, RECOMMENDATIONS, AND RESPONSES
1. RE-CALCULATION OF THE MONTHLY RENTAL PAYMENTS REQUIRED UNDER
THE LEASE AGREEMENT DETERMINED THAT BALLET VALET OVERPAID THE
CITY BY A TOTAL OF $21,924.75, CONSISTING OF $20,581.13 IN BASE RENT AND
$1,343.62 IN FLORIDA SALES TAX.
Section 3 of the Lease Agreement states as follows:
Tenant agrees to pay landlord, without any prior demand therefor and without any
deduction or setoff whatsoever, and as fixed rental (the "Base Rent"), the sum of One
Thousand Three Hundred Sixty-Nine and 16/100 Dollars ($1,369.16) (calculated at the
rate of $5.00 per square foot) as minimum monthly base rent. Base Rent shall be payable
monthly commencing August 1, 1997 and monthly thereafter on the first day of each
calendar month through duly 31, 2027. Thereafter, the Base Rent shall be subject to
annual adjustment based upon the Consumer Price Index for Wage Earners and Clerical
Workers, Miami, Florida (1982-1984=100) published by the Bureau of Labor Statistics of
the United States Department of Labor ("CPI"). The "Base Number" shall be the index for
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that month and year which is two (2) months prior to the commencement date of this Lease
(the "Base Month"). The "Current Number" shall mean the latest index published for the
Base month of each calendar year during the term of this Lease by the Bureau of Labor
Statistics or other governmental agency then publishing the CPI (or if the CPI is no longer
published, a similar index for Miami Beach, Florida most closely comparable to the CPI)
after making such adjustments as may be prescribed by the agency or entity publishing
the same, or as otherwise may be required, to compensate for changes subsequent to the
Base Number in the base, items included or method of compilation thereof.
If the Current Number exceeds the Base Number, then the Base Rent shall be multiplied
by a fraction, the numerator of which is the Current Number and the denominator of which
is the Base Number and the product shall thereupon be deemed to be the Base Rent for
the forthcoming year. In no event shall the Base Rent be less than $5. 00 per square foot
of space during the entire term of this Lease.
In the event that the Current Number shall be unavailable at the time of commencement
of an adjustment, Tenant shall pay to Landlord on the basis of the existing Base Rent until
such time as the required adjustment is determined, at which time an accounting will be
made retroactive to the commencement of the lease year. Anything herein to the contrary
notwithstanding, it is agreed that the Base Rent shall not increase more than 3% in any
one year...
The OIG Auditor contacted the City Attorney's Office (CAO) for assistance in interpreting
whether the CPI increases to the Base Rent were applicable during the initial term (i.e.,
August 1, 1997 - July 31, 2027) or only after the initial term. The response received in a
May 4, 2023 email from a Deputy City Attorney stated, ".. it is fairly clear that the parties'
intent was to apply CPI increases to the Base Rent every year after the first year during
the entire term of the Lease. There are several references to 'the term of this Lease' in the
provisions related to the CPI increases. Moreover, as I understand, the Base Rent has in
fact been adjusted by CPI commencing in 1998, further evidencing the parties' intent."
Consequently, the monthly rent due to the City was re-calculated, including the CPI
increase based upon the Consumer Price Index for Urban Wage Earners and Clerical
Workers (CPI-W), Miami-Fort Lauderdale-West Palm Beach, Florida (1982-1984=100)
published by the Bureau of Labor Statistics of the United States Department of Labor and
Sales and Use Tax on the Rental, Lease, or License to Use Commercial Real Property as
follows:
CONTRACT YEAR
BASE NUMBER CURRENT
(June 1997) NUMBER
(DENOMINATOR) (NUMERATOR)
EFFECTNE l cP l l [ ASE ] ] ] EFFECTIVE ] BASE ] LICENSE l., ,[MONTHLY! TOTAL
RATE , INCREASE l9TE CAPPED/RENT PER] RATE [SALES TA] sLES MONTHLY
FRACTION /FROM YEAR, 4T3 MONTH WITHCB} RATE ] TAX PAYMENT
(=C/BS) ] TOYEAR i { [INCREASE] [
August 1, 2018 10 August 1, 2019/
August 1, 2019 to August 1, 2020
August 1, 2020 to August 1, 2021
August 1, 2021 to August 1, 2022
August 1, 2022 to August 1, 2023/
155.6 i 262. 352
155.6 264.939
155.6 l 266 636
1556 I 280.683
155.6 J 310.398
68.61% 735% 3.00% /$2,109.92/$2,173.21/ 6.8% $ 14778/$ 232099/
70.27% 166% 1.66% /$2,173.21/$ 2,209.34/ 6.7% $ 14803/$ 235737 ]
71.36% 1.09% 1.09% /$2,209.34/$ 2,233.44[ 6.5% $ 14517 $ 2,37861
80.39% 9.03% 3.00% {$2,233.44 /$ 2,300.44] 6.5% $ 14953 $ 244997
99.48% 19.10% 3.00% ]$2,300.44 /$ 2,369.46] 65% S 154.01/s 252347 /
OIG staff then compared the amounts due with those paid by Ballet Valet during the 60-
month audit period (August 2018 through July 2023) in the table below, as recorded in the
Munis system, the City enterprise resource planning system, and noted the following:
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BASE LICENSE AMOUNT MONTHLY SALES TAX SALES
PERIOD INVOICE BASE RENT RATE WITH CPI MONTHLY SALES TOTAL PAID BY PAYMENT PAID Y SALES TAX TAX RA TE
# PER MONTH INCREASE SALES TAX TAX RATE MONTHLY TENANT AS DIFFERENCE TENANT AS DIFFERENCE PAID BY
PER MUNIS PR MUNIS TENANT
Aug-18 14856 $ 2,109.92 $ 2,173.21 $ 147.78 6.80% $ 2,320.99 $ 2,483.26 $ 310.05 $ 168.86 $ 21.08 6.8%
Sep-18 15356 $ 2,109.92 $ 2,173.21 $ 147.78 6.80% $ 2,320.99 $ 2,483.26 s 310.05 $ 168.86 $ 21 08 6.8%
Oct-18 15913 $ 2,109.92 $ 2,173.21 $ 147.78 6.80% $ 2,320.99 $ 2,483.26 $ 310.05 $ 168.86 $ 21 08 6.8%
I Nov-18 16396 $ 2,109.92 $ 2,173.21 $ 147.78 6.80% $ 2,320.99 $ 2,483.26 $ 310.05 $ 168.86 $ 21.08 6.8%
Dec-18 16845 $ 2,109.92 $ 2,173.21 $ 147.78 6.80% $ 2,320.99 $ 2,483.26 $ 310.05 $ 168.86 s 21 08 68%
I Jan-19 17462 $ 2,109.92 $ 2,173.21 $ 147.78 6.80% $ 2,320.99 $ 2,483.26 $ 310.05 $ 168.86 $ 21.08 6.8%
I Feb-19 18171 $ 2,109.92 $ 2,173.21 $ 145.61 6.70% $ 2,318.82 $ 2,483.26 $ 310.05 $ 168.86 $ 23 25
l Mar-19 18455 $ 2,109.92 $ 2,173.21 $ 145.61 6.70% $ 2,318.82 $ 2,483.26 $ 310 05 $ 168.86 $ 23 25 6.8% l
l Apr-19 19111 $ 2,109.92 $ 2,173.21 $ 145.61 6.70% $ 2,318.82 $ 2,483.26 $ 310.05 $ 158.93 $ 13.32 64%
l May-19 19540 $ 2,109.92 $ 2,173.21 $ 145.61 6.70% $ 2,318.82 $ 2,483.26 $ 310.05 $ 166.38 s 20.77 67%
I Jun-19 20135 $ 2,109.92 $ 2,173.21 $ 145.61 6.70% $ 2,318.82 $ 2,483.26 $ 310.05 $ 166.38 $ 20.77 6.7% !
I Jul-19 20854 $ 2,109.92 $ 2,173.21 $ 145.61 6.70% $ 2,318.82 $ 2,483.26 $ 310.05 $ 166.38 $ 20.77 6.7%
Aug-19 21422 $ 2173.21 $ 2,209.34 $ 148.03 6.70% $ 2,357.37 $ 2,557.76 $ 348 42 $ 171.37 $ 23.34 67%
Sep-19 21968 $ 2,173.21 $ 2,209.34 $ 148.03 6.70% $ 2,357.37 $ 2,557.76 s 348. 42 $ 171.37 $ 23.34 6.7%
Oct-19 22519 $ 2,173.21 $ 2,209.34 $ 148.03 6.70% $ 2,357.37 $ 2,557.76 $ 348.42 $ 171.37 s 23 34 6.7%
I Nov-19 22811 $ 2173.21 $ 2,209.34 $ 148.03 6.70% $ 2,357.37 $ 2,557.76 $ 348 42 $ 171.37 $ 23.34 6.7%
I Dec-19 23270 $ 2,173.21 $ 2,209.34 $ 148.03 6.70% $ 2,357.37 $ 2,557.76 $ 348.42 $ 171.37 $ 23 34 67%
Jan-20 23788 $ 2173.21 $ 2,209.34 $ 148.03 6.70% $ 2,357.37 $ 2,557.76 $ 348.42 $ 166.25 s 18.22 65%
Feb-20 24357 $ 2,173.21 $ 2,209.34 $ 143.61 6.50% $ 2,352.95 $ 2,557.76 $ 348.42 $ 166.25 s 22.64 6.5%
Mar-20 24948 $ 2,173.21 $ 2,209.34 $ 143.61 6.50% $ 2,352.95 $ 2,557.76 s 348. 42 $ 166.25 s 22 64 6.5%
0ct-20 27776 $ 2,209.34 $ 2,233.44 $ 145.17 6.50% $ 2,378.61 $ 2,634.49 s 401.05 $ 171.24 $ 26.07 6.5%
Nov-20 28099 $ 2,209.34 $ 2,233.44 $ 145.17 6.50% $ 2,378.61 $ 2,634.49 $ 401.05 $ 171.24 $ 26.07 6.5%
Dec-20 28335 $ 2,209.34 $ 2,233.44 $ 145.17 6.50% $ 2,378.61 $ 2,634.49 $ 401. 05 $ 171.24 $ 26.07 6.5%
Jan-21 28854 $ 2,209.34 $ 2,233.44 $ 145.17 6.50% $ 2,378.61 $ 2,634.49 $ 401.05 $ 171.24 $ 26.07 6.5%
Feb-21 29299 $ 2,209.34 $ 2,233.44 $ 145.17 6.50% $ 2,378.61 $ 2,634.49 $ 401.05 $ 171.24 s 26.07 65%
Mar-21 29746 $ 2,209.34 $ 2,233.44 $ 145.17 6.50% $ 2,378.61 $ 2,634.49 s 401. 05 $ 171.24 $ 26 07 6.5%
Ar-21 30206 $ 2,209.34 $ 2,233.44 $ 145.17 6.50% $ 2,378.61 $ 2,634.49 $ 401.05 $ 171.24 $ 26.07 6.5%
May-21 30850 $ 2,209.34 $ 2,233.44 $ 145.17 6.50% $ 2,378.61 $ 2,634.49 $ 401.05 $ 171.24 s 26.07 6.5%
i Jun-21 31301 $ 2,209.34 $ 2,233.44 $ 145.17 6.50% $ 2,378.61 $ 2,634.49 $ 401. 05 $ 171.24 $ 26.07 6.5%
Jul-21 31724 $ 2,209.34 $ 2,233.44 $ 145.17 6.50% $ 2,378.61 $ 2,634.49 $ 401.05 $ 171.24 s 26.07 6.5%
! Aug-21 32146 $ 2,233.44 $ 2,300.44 $ 149.53 6.50% $ 2,449.97 $ 2,713.53 $ 413.09 $ 176.38 $ 26. 85 65% t
I Sep-21 32508 $ 2,233.44 $ 2,300.44 $ 149.53 6.50% $ 2,449.97 $ 2,713.53 $ 413.09 $ 176.38 s 26.85 6.5%
! 0ct-21 32913 $ 2,233.44 $ 2,300.44 $ 149.53 6.50% 1$ 2,449.97 $ 2,713.53 $ 413.09 $ 176.38 $ 26.85 6.5% !
Nov-21 33435 $ 2,233.44 $ 2,300.44 $ 149.53 6.50% $ 2,449.97 $ 2,713.53 $ 413 09 $ 176.38 $ 26.85 6.5%
Dec-21 33766 $ 2,233.44 $ 2,300.44 $ 149.53 6.50% $ 2,449.97 $ 2,713.53 $ 413.09 $ 176.38 $ 26.85 6.5%
Jan-22 34435 $ 2,233.44 $ 2,300.44 $ 149.53 6.50% $ 2,449.97 $ 2,713.53 $ 413.09 $ 176.38 $ 26.85 6.5%
Feb-22 34719 $ 2,233.44 $ 2,300.44 $ 149.53 6.50% $ 2,449.97 $ 2,713.53 $ 413.09 $ 176.38 $ 26.85 6.5%
Mar-22 35211 $ 2,233.44 $ 2,300.44 $ 149.53 6.50% $ 2,449.97 $ 2,713.53 $ 413.09 $ 176.38 $ 26.85 6.5%
t Apr-22 35810 $ 2,233.44 $ 2,300.44 $ 149.53 6.50% $ 2,449.97 $ 2,713.53 $ 413 09 $ 176.38 $ 26 85 6.5%
May-22 36326 $ 2,233.44 $ 2,300.44 $ 149.53 6.50% $ 2,449.97 $ 2,713.53 $ 413.09 $ 176.38 $ 26.85 65%
Jur-22 36758 $ 2,233.44 $ 2,300.44 $ 149.53 6.50% $ 2,449.97 $ 2,713.53 $ 413.09 $ 176.38 $ 26.85 6.5%
Ju+-22 37472 $ 2,233.44 $ 2,300.44 $ 149.53 6.50% $ 2,449.97 $ 2,713.53 $ 413 09 $ 176.38 $ 26.85 6.5%
Aug-22 37952 $ 2,300.44 $ 2,369.46 $ 154.01 6.50% $ 2,523.47 $ 2,794.93 $ 425 47 $ 181.67 $ 27 66 6.5%
Se-22 38477 $ 2,300.44 $ 2,369.46 $ 154.01 6.50% $ 2,523.47 $ 2,794.93 $ 425 47 $ 181.67 $ 27.66 6.5%
0ct-22 38994 $ 2,300.44 $ 2,369.46 $ 154.01 6.50% $ 2,523.47 $ 2,794.93 $ 425 47 $ 181.67 s 27.66 6.5%
Nov-22 39514 $ 2,300.44 $ 2,369.46 $ 154.01 6.50% $ 2,523.47 $ 2,794.93 $ 425 47 $ 181.67 $ 27 66 6.5%
Dec-22 40003 $ 2,300.44 $ 2,369.46 $ 154.01 6.50% $ 2,523.47 $ 2,794.93 $ 425. 47 $ 181.67 $ 27.66 6.5%
Jan-23 40637 $ 2,300.44 $ 2,369.46 $ 154.01 6.50% $ 2,523.47 $ 2,794.93 $ 425. 47 $ 181.67 $ 27.66 6.5%
Feb-23 41205 $ 2,300.44 $ 2,369.46 $ 154.01 6.50% $ 2,523.47 $ 2,794.93 $ 425 47 $ 181.67 s 27.66 6.5%
Mar-23 41845 $ 2,300.44 $ 2,369.46 $ 154.01 6.50% $ 2,523.47 $ 2,794.93 $ 425. 47 $ 181.67 $ 27 66 6.5%
Apr-23 42491 $ 2,300.44 $ 2,369.46 $ 154.01 6.50% $ 2,523.47 $ 2,794.93 $ 425 47 $ 181.67 $ 27.66 6.5%
May-23 43204 $ 2,300.44 $ 2,369.46 $ 154.01 6.50% $ 2,523.47 $ 2,794.93 s 425 47 $ 181.67 s 27.66 6.5%
Jun-23 43734 $ 2,300.44 $ 2,369.46 $ 154.01 6.50% $ 2,523.47 $ 2,794.93 $ 425 47 $ 181.67 $ 27.66 6.5%
Ju!-23 44170 $ 2,300.44 $ 2,369.46 s 154.01 6.50% $ 2,523.47 $ 2,794.93 s 425 47 $ 181.67 $ 27.66 6.5%
$ 20,58113 $ 1,343.62
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a) The base monthly rental rate was incorrectly calculated, resulting in a $20,581.13
overpayment by Ballet Valet.
b) Due to the incorrect billing of the monthly base rent amount and the occasional
use of an incorrect Florida Sales Tax rate, the State was overpaid by $1,343.62.
c) The Asset Management Division was not calculating the annual CPI in accordance
with Section 3 of the Lease Agreement; instead, a flat 3% increase was being
incorrectly applied annually, which caused further inaccuracies in the calculation
of the monthly rental rate.
Recommendation{ s ):
The Asset Management Division should re-calculate and credit Ballet Valet for the
$20,581.13 overpaid plus Florida Sales Tax. In addition, a journal entry should be created
to reduce the City Sales Tax liability general ledger account due to the identified $1,343.62
overpayment.
Asset Management Division Response:
The Asset Management Division concurs with the recommendation from the Office of the
Inspector General. The Asset Management Division has recalculated the CPI (Consumer
Price Index) increases retroactively to 2013 to accurately arrive at what the current billings
should be. A Direct Payment has been processed to issue a reimbursement check as
payment to the Tenant for the credit due in the amount of $21,924.75 ($20,581.13 from
the Revenue Account and $1,343.62 for sales tax). Going forward, the Asset Management
Division will continue annual base rent escalations at the lessor of CPI or 3%.
Ballet_ Valet Parking Company ("By") Response;
BV agrees that the City should credit BV the principal amount of $20,581.13 because of
the City's overbilling during the audit period. BV also requests to be paid interest on the
overpaid amount.
2. RE-CALCULATION OF THE MONTHLY FEE PAYMENTS TO BE PAID TO THE CITY
UNDER THE PARKING AGREEMENT RESULTED IN A NET UNDERPAYMENT OF
$17,349.38, EXCLUDING FLORIDA SALES TAX.
Section 1 of the Parking Agreement states as follows:... BV {Ballet Valet} shall pay to the
City monthly in advance a monthly fee (the "Monthly Fee") consisting of a Base License
Rate (the "Base Line Rate") per month per parking space, plus applicable taxes. Initially,
the Base License Rate per parking space licensed to BV shall be $75.00 per month, fixed
for two (2) years from the date of this Agreement. Thereafter, the Base License Rate shall
be subject to adjustment as provided in this Agreement, provided, however, that the Base
License Rate shall never be less than $75.00 per month for the duration of this Parking
Agreement inclusive of any renewal periods. The Base License Rate shall be subject to
annual adjustment based upon the Consumer Price Index for Wage Earners and Clerical
Workers, Miami, Florida (1982 - 1984 = 100) published by the Bureau of Labor Statistics
of the United States Department of Labor ("CPI"). The "Base Number" shall be the CPI
index for that month and year which is two (2) months prior to the commencement date of
this Parking Agreement (the "Base Month"). The "Current Number" shall mean the latest
CPI index published for the Base Month of each calendar year during the term of the
Parking Agreement by the Bureau of Labor Statistics or other governmental agency then
publishing the CPI (or if the CPI is no longer published, a similar index for Miami, Florida
most closely comparable to the CPI) after making such adjustments as may be prescribed
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by the agency or entity publishing the same, or as otherwise may be required, to
compensate for changes subsequent to the Base Number in the base, items included or
method of compilation thereof. If the Current Number exceeds the Base Number, then the
Base License Rate shall be multiplied by a fraction, the numerator of which is the Current
Number and the denominator of which is the Base Number and the product shall
thereupon be deemed to be the Base License Rate for the forthcoming year. In no event
shall the Base License Rate ever be less than $75.00 per parking space per month during
the entire term of the Parking Agreement inclusive of any renewal period. If the Current
Number shall be unavailable at the time of commencement of an adjustment year, BV
shall pay to City on the basis of the Base License Rate then in effect until such time as
the required adjustment is determined, at which time an accounting will be made
retroactive to the commencement of the adjustment year. Anything herein to the contrary
notwithstanding, it is agreed that the Base License Rate shall not increase more than 3%
in any one year during each 5-year period commencing with the Commencement Date.
The Base License Rate shall be re-adjusted every 5 years from the Commencement Date
to the greater of the then existing Bulk Rate or $75. 00 per month and, at such time, the
Base Month shall be the month and year which is two (2) months prior to the
commencement of each five year re-adjustment period. The Base License Rate shall be
re-adjusted on each fifth anniversary of the Parking Agreement to equal the greater of
$75. 00 per month or the then existing Bulk Rate, as defined below, and shall thereafter be
subject to the annual CPI adjustment as above provided on an annual basis.
The OIG Auditor re-calculated the monthly fee due per parking space, including the CPI
increase based upon the reported figures related to the Consumer Price Index for Urban
Wage Earners and Clerical Workers (CPI-W), Miami-Fort Lauderdale-West Palm Beach,
Florida (1982-1984=100) published by the Bureau of Labor Statistics of the United States
Department of Labor. The following table summarizes the calculations:
CONTRACT YEAR
CURRENT
BASE NUMBER NUMBER
(DENOMINATOR) NUMERATOR)
l I
l [ BASE
EFFECTIVE 'CPI INCREASE SFFECTNE LICENSE
RATE / FROM YEAR] RATE BASE LICENSE Approved RATE WITH
FRACTION/ TOYER / CAPPED AT /RATE PER MONTH] Bulk Rate cl
1 3% INCREASE
i August 1, 2018 to August 1, 2019 250. 91 262 352 4.56% 4.5s% 3.00% 100.00 $ 103.00
August 1, 2019 to August 1, 2020 250.91 264 939 5.59%
i
1.03% 1.03% 103.00 $ 104.06
August 1, 2020 10 August 1, 2021 250.91 266.636 6.27% 0.58% 0.68% 104.06 $ 104.77
August 1, 2021 to August 1, 2022 250.91 280 683 11.87% 5.60% 3.00% 104.77 $ 107.91
August 1, 2022 to August 1, 2023 310.396 310.398 0.00% -11.87% 0.00% $ 108.00 $ 108.00 $ 108.00
The CAO was contacted for assistance in interpreting Section 1 of the Parking Agreement
in connection with the adjustments to the Base License Rate payment. A Deputy City
Attorney provided the following response in a June 20, 2023, email to the OIG Auditor:
Your interpretation, as modified during our meeting, is correct. You should change the
name of column C by deleting "(June 1997)" because the denominator is revised each
time there is a reset... In addition, the CAO {City Attorney Office} is in agreement with your
determination that any retroactive corrections should be applied for a period of 5 years
preceding the date the Tenant is charged or credited, as applicable, for amounts under or
overpaid, respectively.
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The testing performed by the OIG Auditor determined that the Parking Department was
incorrectly billing Ballet Valet using the bulk rate outlined in Appendix A - Fee Schedule of
the City Code, instead of applying the annual CPI to the Base Rate pursuant to Section 1
of the Parking Agreement. The Parking Department billed a flat rate of $100.00 per parking
space from August 2018 to September 2022, and $116.00 from October 2022 to July
1 2023; however, the annual CPI was not included in the calculations, and, therefore, was
not billed correctly.
The OIG Auditor then compared the amounts paid by Ballet Valet for the 60-month audit
period (August 2018 through July 2023) to the amounts due in which it was determined
that the Base License Rate was incorrectly calculated for all 60 examined months. The
Base License Rate was overstated for ten months resulting in a $13,200.00 overpayment,
and understated for the remaining 50 months resulting in a $30,549.38 underpayment.
The net difference is a $17,349.38 underbilling and corresponding underpayment by Ballet
Valet, excluding Florida Sales Tax, which is addressed in finding #3.
Recommendation(s ):
The Parking Department should validate the figures using the methodology approved by
the OIG and CAO. Once finished, Ballet Valet should be invoiced accordingly. In addition,
the Parking Department should ensure that all future monthly rentals are billed in
accordance with the Agreement terms.
Parking Department Response:
The Parking Department will invoice Ballet Valet in accordance with the approved
calculations provided by the Office of the Inspector General (OIG) and verified by City
Attorney's Office (CAO). These calculations were reviewed by Parking Department
management and the auditor, who generously gave her time to ensure the formula and
calculations were understood by all.
Further, the Parking Department respectfully advises that the formula for the calculation
of parking access card fees that was provided by the OIG is not only complex, but also
counterintuitive. For example, for approximately the first eighteen (18) years of the
contract, the access card bulk rate remained at $75 per month. Applying the formula meant
that every five (5) years the rate was readjusted to $75, but the intermediate months would
see higher rates due to the CPI formula. The rate would increase in the intermediate
months and decrease at year five (5). Also, the City adjusts fees on October 1st, the start
of its fiscal year, whereas the Agreement calls for August fee adjustment; this was another
source of error.
Nonetheless, moving forward, the Parking Department will apply the accurate formula for
calculation that was provided by the OIG when invoicing Ballet Valet.
Ballet Valet Parking Company ("By") Response;
Without admitting any liability, BV will not contest the OIG's conclusion that the City
erroneously underbilled BV by $17,349.38 during the audit period.
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DocuSign Envelope ID: 7EDA4050-4O4F-4CB8-977E-CA7E196402C7
3. THE PARKING DEPARTMENT DID NOT COLLECT AND REMIT FLORIDA SALES TAX
DUE TO THE STATE FOR THE USE OF LICENSED PARKING RENTAL FEES,
RES UL TING IN AN UNDERBILLING OF $12,879.72.
Florida Statute 212.03(6) states: The Legislature finds that every person who leases or
rents parking or storage spaces for motor vehicles in parking lots or garages, including
storage facilities for towed vehicles, who leases or rents docking or storage spaces for
boats in boat docks or marinas, or who leases or rents tie-down or storage space for
aircraft at airports is engaging in a taxable privilege.
As per (Rule 12A-1.073, FAC) (2) Tax applies to the rental charge for parking, storing, tie-
down or docking paid to the operator of the facility by the one who parks, stores, ties-down
or docks. The prime lease of the parking, storing, tie-down or docking facility to the
operator is not taxable. (3) When the lease of real property includes areas which are used
for free parking the entire consideration paid by the lessee to the lessor is taxable.
Florida Administrative Code Rule 12A-1.091 (13): Any person who has purchased at retail,
used, consumed, distributed or stored for use or consumption in this state tangible
personal property, admission, communication service, or lease tangible personal property,
or who has leased any real property, space or spaces in parking lots or garages for motor
vehicles, hangar storage or tie down for aircraft, or docking or storage space for boats in
boat docks or marinas, and cannot prove that the tax levied by Chapter 212, FS, has been
paid to his vendor or lessor shall be directly liable to the State for any tax, interest, or
penalty due on any such taxable transactions.
Thus, according to the Florida Department of Revenue, Florida Sales Tax should be
assessed on the rental of property or services for those parking spaces not sub-leased/re-
rented to others by Ballet Valet.
Upon the OIG Auditor's request, the Parking Department provided Ballet Valet's 2022
Florida Annual Resale Certificate For Sales Tax (Resale Certificate) form that expired on
December 31, 2022. The OIG then requested the updated 2023 form and all forms related
to the audit period, other than 2022, but the only one provided was the certificate for the
2023 calendar year, valid until December 2023. Questioned Parking Department staff
mentioned that they are not keeping copies of the received Resale Certificate forms.
The Resale Certificate form allows business owners, or its representatives, to buy or rent
property or services tax-free when the property or service is resold or re-rented. The
certificate may not be used to make tax-exempt purchases or rental of property or services
that will be used but not resold or rented.
The OIG Auditor questioned Parking Department personnel regarding the use of the 162
parking spaces rented to Ballet Valet. An email response stated that Goldman Properties
employees use 52 spaces, hotel guests use 40, and Goldman Properties tenants use 70.
Through a consultation with the Florida Department of Revenue, the OIG Auditor was
informed that the 52 spaces used by Goldman Properties employees is subject to Use
Tax according to Rule 12A4-1.091(13) and would not be covered by the Resale Certificate.
No evidence was provided indicating that the City Parking Department had previously
requested documentation from Ballet Valet regarding how it was going to use the parking
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DocuSign Envelope ID: 7EDA4050-4D4F-4CB8-977E-CA 7E19640207
spaces to determine their taxability. As a result, OIG staff found differences in the amount
of sales tax paid to the City with the amounts due. Some license rental fees were
incorrectly exempted from Florida Sales Tax using an annual Resale Certificate form.
Testing determined that the Parking Department collected Florida Sales Tax for 30 of the
60 examined monthly payments comprising the audit period. In those months, due to the
incorrect calculation of the monthly fee, the Florida Sales Tax was also incorrectly
calculated, resulting in $1,419.25 not being collected and remitted to the State. In addition,
the Parking Department did not collect the amount due related to the 52 parking spaces
used by Ballet Valet in the other 30 months of the audit period, resulting in an additional
$11,460.47 due in Florida Sales Tax.
Recommendation(s ):
The Parking Department should review the OIG's calculations, and if agreed, invoice
Ballet Valet for the $12,879.72 ($1,419.25 + $11,460.47) due in Florida Sales Tax. Once
the City receives payment, it should be promptly remitted to the State.
In addition, the Parking Department should, at least annually, obtain documentation
indicating the number of parking spaces sub-leased/rented, any used by Ballet
Valet/Goldman Properties, and any used to provide free parking. It is important to note
that if any are used to provide free parking, the entire consideration paid becomes taxable
pursuant to Rule 12A-1.073 (3). Applicable Florida Sales Tax should be assessed on the
corresponding license rental fee for those spaces not sub-leased/rented and used by
Ballet Valet or any authorized parties.
Furthermore, the Parking Department should retain copies of all Resale Certificate forms
to document exempted license rental fees in the event of a Florida Sales Tax audit.
Parking Department Response:
ltem number seven (7) of the Parking Agreement states: "The parking spaces may only
be utilized for tenants, guests, and customers of properties owned by Anthony
Goldman...". As a point of notification, it has not been the practice of the Parking
Department to question the assignment of the parking access cards. The Parking
Department is working with Goldman Properties on this item. Ballet Valet and Goldman
Properties stated that 52 of the access cards were issued to employees, but also stated
they have high employee turnover, complicating access card assignments. Goldman
Properties charges employees per access card, but at a reduced rate. In addition,
Goldman Properties does not collect tax on employee cards. The OIG auditor advised that
if Goldman Properties issues any free access card, then tax is to be collected by the
Parking Department on all issued access cards. This matter is being discussed with
Goldman Properties.
The Ballet Valet Parking Company ("By")Response;
Without admitting any liability, BV will not contest the OIG's conclusion that the BV should
be invoiced for the $12,879.72 in sales tax to be remitted to the State.
Page 11 of 15
DocuSign Envelope ID: 7EDA4050-4O4F-4CB8-977E-CA7E196402C7
OIG SUGGESTION FOR IMPROVEMENT
Regardless of the proficiency of the oversight exercised by the City and Ballet Valet, an
independent audit provides opportunities for improvement. The following point is presented for
evaluation:
1. BALLET VALET ROUTINELY REMITTED LA TE PAYMENTS TO THE CITY UNDER
BOTH THE PARKING AND THE LEASE AGREEMENTS, BUT NEITHER AGREEMENT
PROVIDES FOR THE CHARGING OF PENAL TIES AND/OR INTEREST FOR LA TE
PAYMENTS RECEIVED AFTER THE DESIGNATED DUE DA TES.
Parking Agreement
Section 11 states, If BV {Ballet Valet} fails to timely pay the Monthly Fee an any other
obligations required of it under this Parking Agreement, The City may temporarily
terminate all use rights of BV under the Parking Agreement forthwith, without BV being
relieved of its obligations under the Parking Agreement including, but not limited to, its
obligation to pay the Monthly Fee, until all required payments are brought current. Failure
of BV to bring such payments current within 90 days shall entitle the City to temporarily
terminate the Parking Agreement without BV having any right to reinstate same and, in
such event, the Option granted to BV to purchase the Garage including the City Land, the
Air Space and the Easement pursuant to Article IX of the Development Agreement shall
immediately terminate. The City shall further have the right to permanency terminate the
Parking Agreement in the event that the Parking Agreement temporarily terminates five
times during the term hereof The City shall give BV written notice of its Defaults in
payment in order to commence the running of the 90-day period for permanent termination
of the Option to Purchase and this Parking Agreement, as applicable.
Section 12, states, The Monthly Fee shall be due and payable in advance at the offices of
the City in accordance with paragraph 1 on the 1° day of the month immediately preceding
the calendar month for which such Monthly Fee is to be applied. The obligation of BV to
pay the Monthly Fee and any other obligation hereunder for each month during the initial
term and any renewal term hereof is absolute and shall not be dependent upon the use
and non-use of the parking spaces by BV and shall not be changed by any temporary
termination of this Parking Agreement.
Lease Agreement
Section 3 entitled "Rent" states, ...Base Rent shall be payable monthly commencing
August 1, 1997 and monthly thereafter on the first day of each calendar month through
July 31, 2027.
Section 15 entitled "Defaults" states, The occurrence of any of the following shall constitute
an Event of Default hereunder: (i) if Tenant shall fail to pay any installment of Base Rent
or any other amount due and payable when due, whether or not such payment shall have
been demanded..
Section 16 entitled "Remedies" states, Upon the occurrence of an Event of Default,
Landlord, at its discretion, may then exercise any one or more of the following options:
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(i) Terminate this Lease, remove all persons and property from the Premises by
summary proceedings or otherwise, and take possession of the Premises, all
without prejudice to Landlord's right to collect from Tenant any Base Rent or other
sum which became payable to Landlord prior to such termination, together with all
damages suffered by Landlord resulting from Tenant's default hereunder;
(ii) Re-enter and take possession of the Premises by any lawful means, make
alterations and repairs to the Premises and re/et or attempt to re/et the Premises on
behalf of Tenant and for Tenant's account at such rent and under such terms and
conditions as Landlord may deem best under the circumstances for the purposes of
reducing Tenant's liability hereunder, and Landlord shall not be deemed to have
thereby accepted a surrender of the Premises, and Tenant shall remain liable for all
damages suffered by Landlord because of Tenant's default under this Lease; it being
understood that at any time during such repossession or reletting, Landlord may, by
delivering written notice to Tenant, elect to exercise its Option to accept a surrender
of the Premises, terminate this Lease, and retake possession of the Premises on
behalf of Landlord;
(iii) Declare the entire remaining unpaid Base Rent and other charges due
hereunder to be immediately due and payable, and take such action available to
Landlord to recover and collect same; or (iv) Exercise any and all rights and
privileges and pursue any remedy that Landlord may have under the laws of the
State of Florida.
The OIG Auditor compared the due dates of the monthly payments remitted to the City
during the audit period with the payment receipt dates recorded in the Munis system
whereby it was determined that 51 of the 54 (94%) payments were received late or after
the designated due dates ranging from one to 218 days late. In addition, 44 of the 47
(94%) examined monthly parking payments were similarly remitted after the designated
due dates, ranging from one to 23 days late. Although the City has some related remedies,
including termination of the lease, that it could enforce against the delinquent payer, such
action appears disproportionate to the offense and not geared toward efficient resolution
of the issue. Therefore, the OIG recommends that either the current agreements be
amended, or the next executed agreements establish the charging of penalties and/or
interest for any late payments received by the City.
The Ballet Valet Parking Company (By") Response;
BV rejects the OIG's determination that BV routinely remitted late payments to the City
under both agreements. As the OIG acknowledged in an e-mail to the undersigned on
October 10, 2023, the OIG's relied on the dates that City employees entered the payment
into the Munis system at the City. No evidence was offered of when the payments were
actually received by the City.
Second, BV rejects the recommendation that the current agreement be amended to
include the charging of penalties and/or interest.
OIG Reply to Ballet Valet Response:
The analysis below shows that, although the OIG relied on the dates that the City
employee entered the payments into the Munis System, the payment history of Ballet Valet
demonstrates a consistent tendency of late payments. Even allowing for a reasonable
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DocuSign Envelope ID: 7EDA4050-4O4F-4CB8-977E-CA7E196402C7
grace period of seven days for the receipt and entry of such payments, payments were
entered for periods greater than seven days 86% of the time, and up to as much as 218
days after the due date.
The OIG also acknowledges the need for the City to implement an internal control
procedure to document the date of payment receipt to accurately determine the degree of
the lateness of any given payment. Many City agreements already include provisions for
late penalties. A reliable record of payment receipt dates is important for calculating and
enforcing fees for late payments.
The late payment history exhibited by Ballet Valet often extends beyond minor delays of
a few days, as demonstrated in the tables below:
Parking Agreement
Days Late Count of Days Late
1-7 6
>7
Total
38
44
%
14%
86%
100%
Rent Agreement
Days Late Count of Days Late
1-7 10
>7
Total
41
51
%
20%
80%
100%
Recommendation
The OIG goal is to ensure efficient and accurate processing of payment receipts. For this
reason, the OG recommends that the City Administration develop and implement an
internal control procedure to accurately document the date of each payment receipt One
possible internal control to be considered by the City is to create a process whereby
payments received by any department are immediately time-stamped after receipt by a
designated employee. The Finance Department staff member who enters the payment
into the Munis System should use the time-stamp date rather than the date it was entered
into the system, and also scan the time-stamp document into Munis. Such a procedure
would better serve to ensure timely payments as well as to facilitate future audits.
Finance Department Response:
The Finance Department has implemented the following procedures for payments by
Ballet Valet.
1) Ballet Valet is being encouraged to make payments online. When doing so the
date of payment is automatically recorded in the Munis general ledger thereby
providing proper documentation of the date paid. Moreover, Munis records will
show that the payment was made online by the customer/vendor.
2) Any checks from Ballet Valet that are brought to the Cashier should include the
envelope verifying the postmark date. This documentation verifies the date
submitted and will be kept with all other proper documentation for a period of
3-5 years.
3) Finally, since many payments are made by Ballet Valet in person, checks
received from this customer will be stamped with the received date with an
additional comment added to the receipt that this was an IN PERSON
PAYMENT by the customer (with the name of the person submitting payment)
at the Cashier window. If the customer refuses to provide a name, then the
comment will read IN PERSON PAYMENT BY CUSTOMER.
Page 14 of 15
OocuSign Envelope ID: 7EDA4050-4O4F-4CB8-977E-CA7E196402C7
This final report includes all management responses received pursuant to City Code Section 2-256(h).
�DocuSigned by:
L�
Mark Coolidge, Chief Auditor
cc:
11/21/2023 I 11:40 AM EST
Date
Da(e
Alina T. Hudak, City Manager
Eric Carpenter, Deputy City Manager
Rickelle Williams, Assistant City Manager
Rafael Paz. City Attorney
Jason Greene, Chief Financial Officer
Monica Beltran, Parking Department Director
Elizabeth Miro, Facilities and Fleet Management Department Interim Director
Ozzie Dominguez, Asset Management Division Director
Marlo Courtney, The Ballet Valet Parking Company, LTD., Goldman Properties
Scott A Srebnick, CEO, Goldman Properties
OFFICE OF THE INSPECTOR GENERAL, City of Miami Beach
1130 Washington Avenue, 6th Floor, Miami Beach, FL 33139
Tel: 305.673.7020 • Hotline: 786.897.1111
Email: CityofMiamiBeachOIG@miamibeachfl.gov
Website: www.mbinspectorgeneral.com
Page 15 of 15