OIG No. 21-29: Inspector General G.O. Bond Quarterly Report
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August 13, 2021
TO: Honorable Mayor and Members of the City Commission
FROM: Joseph Centorino, Inspector General
RE: Inspector General G.O. Bond Quarterly Report
OIG No. 21-29
INTRODUCTION
This report is written in compliance with Section 2-256(j) of the City of Miami Beach Code, which
requires the Office of the Inspector General (OIG), on a quarterly basis, to prepare and submit to
the City Commission a written report concerning the planning and execution of the General
Obligation Bond Program, including, but not limited to, progress reports, financial analyses and
potential risks. The review is based on official city records, OIG attendance at implementation and
oversight committee meetings, interviews with staff and other department personnel as well as
regular discussions with the Program Director. This report is intended to provide the Mayor, City
Commission and the general public with useful information and periodic evaluations regarding the
implementation of the G.O. Bond projects to date.
PROGRESS REPORT
As of this writing, the program has progressed as follows:
Parks Infrastructure Public Safety Total
Spent $19,054,950 $8,714,591 411,736,579 $39,506,120
Encumbered $11,802,086 $6,459,816 $3,480,370 $21,742,272
Available $55,875,918 $12,825,574 $21,189,019 $89,890,511
Future $81,167,048 $168,000,019 $34,809,032 $283,976,097
Total $167,900,000 $196,000,000 $71,215,000 $435,115,000
The total amount of savings is $3,233,639.00. Approximately two million dollars of savings will
be utilized to fill budget gaps on other projects.
For the most part, this quarter has focused on the budget process, schedule delays and finding
solutions for the large budget gaps in the largest Tranche 1 projects. Material/labor shortages,
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scope changes without concomitant budget adjustments and the regulatory process have been
identified as the main causes of these challenges. These pressures have affected the following
projects:
1. 72nd Street Complex.
2. Bayshore Park (Par 3)
3. Fire Station #1
4. Police Headquarters
5. Maurice Gibb Park
On April 29th, the new City Manager addressed the G.O. Bond Oversight Committee and
expressed her concern that projects were coming in over budget and not moving quickly enough.
Subsequently, the G.O Bond Oversight Committee inquired from staff regarding the budget gaps
and schedule delays in an effort to understand why the biggest and most transformational projects
were facing obstacles. At the G.O. Bond Oversight Committee’s request, the Program Director
created a “Project Challenges Tracker” which identifies the projects that pose scheduling and/or
budgeting challenges. The tracker details the action that the administration will take to overcome
the obstacles and includes a target date for resolution. This plan was discussed with the
implementation team in May.
The 72nd Street Complex is the clearest illustration of the consequences of adding desired
enhancements to project scope without concomitantly increasing budget. This project was
referred to the Finance and Economic Resiliency Committee, which has been working with the
City’s CFO to find funding for the budget gap. As reported in prior OIG quarterly reports, this
project has a budget of nearly $65 million. A total of $53.8 million comes from general obligation
bonds and the remaining $10 million from other sources. The RFP process, which included
design criteria well beyond the voter-approved project scope, resulted in three shortlisted
proposals. The Haskell Company, with which the City is currently negotiating, assured a
guaranteed maximum price of $94,200,25.00. The other proposals were $80,202,724 (PCL
Construction Services, Inc.) and $79,976,000 (Kaufman Lynn Construction, Inc.)
At the July 30th Finance and Economic Resiliency Committee Meeting, the Administration
reported that the initial funding shortfall was between $24 million and $49 million. CFO John
Woodruff proposed closing the funding gap by issuing parking bonds for $19.4 million. Other
possible sources of funding include $1 million set aside from the Ocean Terrace legal settlement
and an additional $1.6 million from the same settlement that is currently uncommitted. These
additional funds would bring the overall gap down to approximately $17 million.
The Finance and Economic Resiliency Committee and CFO Woodruff have also discussed the
potential sale of five parcels of land that surround and include the North Shore Branch Library.
Two of the lots abut Collins Avenue. The remaining three lots are oceanfront. The oceanfront lots
cannot be sold without a voter referendum. It was assumed that the two front lots would provide
enough funding for the project; however, these properties were recently appraised and the two
front parcels came in at $10.5 million by CBRE and $7.3 million by Cushman Wakefield. During
the Finance and Economic Resiliency Committee on July 30th, it was reported that the five parcels
were valued at $75 million as calculated by CBRE (Caldwell Banker Richard Ellis). The second
appraisal for all 5 parcels was performed by Cushman Wakefield, which valued the properties at
49.5 million. The City is preparing an RFP for their sale.
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It is unclear whether the administration has other ideas for closing the budget gap at this time.
Nevertheless, the Administration has identified three options in an effort to move the project
forward:
1. Continue to negotiate with Haskell and while identifying ways to close the funding gap,
with the caveat that the funds be identified prior to entering into a contractual relationship
with Haskell.
2. Terminate negotiations with Haskell and enter into negotiations with the second proposer.
3. Change the scope of the design criteria package, which is the reason for the cost increase,
and begin the procurement process again.
The Finance and Economic Resiliency Committee has elected to pursue option #1. The
administration has recommended that should option #1 fail, the negotiations with PCL
Construction Services will commence. In the next quarter, results from the RFP for the sale of
the North Shore Library site should be available. This project will remain on the G.O. Bond
Oversight Committee Tracker sheet so that it can monitor the progress.
The other projects facing large shortfalls are the Fire Station #1 and Police Headquarters projects.
As previously reported, the funding shortfall is $6-10 million for Fire Station #1. The total G.O.
Bond budget for this project is $10 million. The first issuance of $7 million was scheduled to be
spent in Tranche 1 and the remaining $3 million in Tranche 2. However, the revised
implementation plan resulted in $4 million in Tranche 1 and $6 million in Tranche 2. This quarter,
the Administration worked with the construction manager at risk to value engineer the project. The
construction contract is expected to be issued in October 2022. The administration has opined
that over the next year the estimated shortfall may be less as COVID cost pressures subside.
Once the true project cost is known, the Administration’s recommendation to close the project
gap is to again apply funds from the sale of the five vacant parcels identified by Property
Management and CBRE’s asset inventory study.
With respect to the Police Headquarters renovation, the initial budget shortfall is $4-$5 million.
The expectation is that the project will be phased in over time. Tranche 1 includes $5.5 million
and Tranche 2 contains $4.5 million. The Administration intends to work with the Police and
Property Management Departments to review the scope for potential changes. Tranche 1 funding
will be used to complete short term elements and potentially supplement Tranche 2 funds with
additional funding in the future.
Funding gaps for Maurice Gibb Park, North Beach Oceanside Park and Bayshore Park/Par 3
have been resolved by utilizing savings from other projects. It should be noted that the Maurice
Gibb Park project is almost nine months behind schedule due to delays in the regulatory process.
The delays at North Beach Oceanside Park, a non-G.O. Bond project, (due to the Champlain
Towers collapse) have been resolved and the Commission has been advised that the City is
commencing the improvements with construction of the new North Beach Beachwalk from 79th
Street to 87th Street. This addition is the final link in the citywide network. The North Beach
Beachwalk is expected to be complete in 10 months.
IMPLEMENTATION
As reported last quarter, the Program Director proposed revising the project implementation plan
as a result of changing priorities in the City and the need to spend Tranche 1 money. In April, the
Commission approved the plan. The program now has three tranches rather than four. Projects
that had been scheduled for later tranches are now in Tranche 1. The following projects have
been moved into Tranche 1:
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Project Name Budget Tranche 1
Budget
Dept
1 #5 Flamingo Park Masterplan $15,150,000 $15,150,000 CIP
2 #13 North Shore Park – Other Improvements $795,000 $795,000 Parks
3 #18 Scott Rakow - Flooring $640,000 $640,000 Parks
4 #23 Bay Garden Manor Link $1,350,000 $1,350,000 CIP
5 #23 Bayview Terrace Link $850,000 $850,000 CIP
6 #23 South Bay Club Link $2,800,000 $2,800,000 CIP
7 #31 Ocean Drive Corridor $20,000,000 $2,000,000 Econ Dev/CIP
8 #36 Washington Ave Corridor $10,000,000 $1,000,000 Econ Dev/CIP
9 #46 Ocean Rescue North Beach Facility $5,000,000 $1,000,000 CIP
10 #52 LED Lighting in Parks – Flamingo Park $2,700,000 $2,700,000 CIP/Parks? $59,285,000 $28,285,000
At its May 20th meeting, the G.O. Bond Committee reviewed the above list and discussed issues
with staff regarding current increases in the cost of construction material and labor, and the effects
of those escalations on G.O. Bond projects. Oversight Committee members expressed concern
that expediting projects without increasing staff could prove detrimental to project schedules.
Currently, CIP has advertised three new positions, one of which is a capital projects coordinator.
The Director of CIP, David Martinez, does not necessarily agree that additional staff will make a
difference in scheduling. The problem, as he sees it, is that projects get significantly slowed down
for some of the reasons stated above. Once the delay occurs, project momentum and continuity
are disrupted and, according to Martinez, efficient project development and delivery are negatively
affected.
This quarter has also seen the opening of the Middle Beach Beachwalk, the procurement for the
41st Street Corridor Improvements (the RFQ has been released and an evaluation committee
selected) and continued progress on tree planting in the City. Over 1,61 trees have been planted
to date, with upcoming planting in Normandy Shores, Pine Tree Drive, LaGorce Drive, Lakeview,
Orchard Park and Nautilus neighborhoods. It is anticipated that 1700 trees will have been planted
by the end of September.
CONCLUSION
As the OIG continues to monitor the G.O. Bond projects, there are policy considerations that the
City should consider as it proceeds with the larger construction contracts within the G.O. Bond.
These policy considerations have been addressed with the Administration in the context of other
historical investigations performed by the OIG on major construction projects. However, the
upcoming construction projects mentioned in this report are utilizing design-build or other project
delivery methods such as construction manager at risk or design-bid-build contracts, all which
require stronger internal controls to reduce the risk of schedule delays, cost escalation, and
performance failures.
One of the best practices of the current G.O. Bond program is that the work is not being done in
a compartmentalized manner. The internal implementation team meetings allow for a holistic
approach to project management as all departments are represented and provide relevant
information to the Program Director. This internal control will improve the City Manager’s ability
to make fully informed decisions and recommendations to the Commission about the technically
complex engineering, design, and construction-related issues that arise during design-build
projects. However, the OIG believes that additional protections are needed, some of which are