94-21442 ResoRESOLUTION N0.94-21442
A RESOLUTION OF THE CITY COMMISSION OF THE CITY
OF MIAMI BEACH, FLORIDA SETTING A PUBLIC
HEARING TO CONSIDER VACATING MERIDIAN AVENUE
BETWEEN IST STREET AND 2ND STREET AND VACATING
MELOY COURT BETWEEN WASHINGTON AVENUE AND
MERIDIAN AVENUE AND ABANDONING RELATED PUBLIC
AND PRIVATE UTILITIES AND EASEMENTS WITHIN
THOSE RIGHTS -OF -WAY FOR THE COBB DEVELOPMENT
PROJECT
WHEREAS, as part of the contractual obligation included in the
Development Agreement dated March 31, 1989 between the Miami Beach
Redevelopment Agency ("Agency") and Cobb Partners Development, Inc.
("Developer"), the Agency is required to provide Parcel 2
consisting of Block 53 and the adjacent Meridian Avenue right-of-
way to the Developer; and
WHEREAS, prior to effectuating and closing on Parcel 2, it is
necessary for rights -of -way to be vacated and public and private
utilities and easements to be abandoned; and
WHEREAS, these activities include, but are not limited to,
the following locations within or adjacent to Block 53:
1) A seventy (70) foot roadway known as Meridian Avenue
located between 1st Street and 2nd Street, in Ocean Beach
Addition No. 3, as recorded in Plat Book 2, Page 81, of
the public records of Dade County, Florida; and
2) A fifteen (15) foot roadway known as Meloy Court, located
between Meridian Avenue and Washington Avenue, within
Block 53 of Ocean Beach Addition No. 3, as recorded in
Plat Book 2, Page 81, of the public records of Dade
County, Florida; and
WHEREAS, the City Commission wishes to hold a public hearing
to determine whether abandonment of public or private utility lines
or easements and vacation of the above referenced rights -of -way
would be in the public welfare.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF THE
CITY OF MIAMI BEACH, FLORIDA:
Section 1. That the City Commission hereby finds and determines
that it is in the public interest of the City of
Miami Beach to call for a public hearing to consider
vacating the public rights -of -way and abandoning
related public and private utilities and easements
within the rights -of -way located as follows:
a) A seventy (70) foot roadway known as Meridian
Avenue located between lst Street and 2nd
Street, in Ocean Beach Addition No. 3, as
recorded in Plat Book 2, Page 81, of the public
records of Dade County, Florida; and
b) A fifteen (15) foot roadway known as Meloy
Court, located between Meridian Avenue and
Washington Avenue, with Block 53 of Ocean Beach
Addition No. 3, as recorded in Plat Book 2,
Page 81, of the public records of Dade County,
Florida.
Section 2. The public hearing shall be held on
January 18 , 1995 at10 4VAM o'clock.
PASSED and ADOPTED this 21st dz
1995.
ATTEST:
-CITY CLERK
FORM APPROVED
Legal Dept.
By.
Date
CITY OF MIAMI BEACH
CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH FLORIDA 33139
COMMISSION MEMORANDUM NO. �� t
To: Mayor Seymour Gelber and DATE: December 21, 1994
Members of the City Commission
FROM: Roger M. Carlto
vak_
City Manager
SUBJECT: A RESOLUTION .OF THE CITY OF MIAMI BEACH SETTING A PUBLIC
HEARING TO CONSIDER VACATING OF MERIDIAN AVENUE BETWEEN
1ST STREET AND 2ND STREET AND MELOY COURT BETWEEN
WASHINGTON AVENUE AND MERIDIAN AVENUE AND ABANDONING
RELATED PUBLIC AND PRIVATE UTILITIES AND EASEMENTS WITHIN
SAID RIGHTS -OF -WAY FOR THE COBB PROJECT.
RECOMMENDATION•
It i-s recommended that the City of Miami Beach and the Miami Beach
Redevelopment Agency implement the necessary actions to vacate
Meridian Avenue between 1st Street and 2nd Street and Meloy Court
between Washington Avenue and Meridian Avenue (see attached map,
Exhibit.AJ, including the setting of a public hearing to consider
vacating the -public right-of-way and abandoning the -existing and
public and private utilities and easements within said right-of-way
for the Cobb project.
BACKGROUND:
As part of the contractual obligation included in the Development
Agreement dated March 31, 1989, between the Miami Beach
Redevelopment Agency and Cobb Partners Development, Inc., the
Agency is required to provide Parcel 2 consisting of Block 53 and
the adjacent Meridian Avenue right-of-way to the developer. Prior
to effectuating and closing on the aforementioned parcel, it is
necessary for rights -of -way to be vacated and public and private
utilities and easements located therein to be abandoned. These
activities include, but are not limited to, the following locations
within or adjacent to Block 53:
1
AGENDA ITEM
DATE
of their investment program over the last ten months. The magnitude
of this loss may exceed $2 billion and has resulted in the County
filing for protection from creditors under Chapter 9 of the
Bankruptcy Statutes. The investment fund managed by Orange County
had achieved an annual rate of return of over 10% for the last
fifteen years through the use of leverage and derivatives.
While the Orange County rate of return is extremely high over the
period, it was achieved in a high risk manner. The short term
investment fund purchased long term treasury securities and
anticipated that any cash needs of the participants could be
covered through the funds monthly earnings. This was determined to
be an acceptable practice by the Orange County Treasurer since the
cash needs of the member governments could be anticipated by
historical patterns. Through this point the rate of return achieved
would be almost a full percentage point above the standard short
term investments purchased for cash management purposes.
In an effort to increase the yield to the members, the Fund
embarked on a more ambitious program. The Fund began using reverse
repurchase agreements. In this type of arrangement the Fund sold,
with an agreement to repurchase at a future date, the treasury
securities they previously purchased. The Orange County Fund paid
a set interest rate on the funds they received through the reverse
repurchase agreements and retained the interest earnings on the
securities. Another provision of the repurchase agreement is that
the securities sold generally must be valued at 1020 of the funds
received in this arrangement. With the increase in interest rates
that have occurred since February, 1994, the value of the long term
securities has declined. This has resulted in Orange County being
required to place additional collateral to maintain the required
level of securities. These "margin calls" have caused the fund to
be required to expend additional funds to purchase the securities
required.
The above investment program would place a large strain on the Fund
in a period of increasing interest rates. However, the Orange
County Fund embarked on an additional program in an effort. to
increase yield which further increased the risk in the Fund. A
portion of the money that the Fund received as a result of the
reverse repurchase agreements was used to purchase additional
treasury securities to leverage an increase in the return of the
Fund. This further reduced the ability of the Fund to weather an
increase in interest rates. The Fund then entered into additional
reverse repurchase agreements with the securities purchased with
the money received from the first repurchase agreements. This
leveraging of the funds to achieve an incremental rate of return
ultimately resulted in the $7.5 billion investment fund owning $20
billion in securities.
2
The last and most risky part of the investment program that Orange
County employed was the use of a derivative product called an
"inverse floater". This product pays a rate of return based on an
index, in this case the Shearson Lehman Government Corporate Index
for a specific duration of time. This product, the reverse of the
interest rate swap contemplated in the Pension Obligation Bond
issue of the City of Miami Beach, has more volatility than.a short
term investment and produces a high yield in times of decreasing
interest rates but produces no return in a period of increasing
rates. Because Orange County entered into these derivative products
with borrowed money with the goal of earning incremental returns by
arbitrage, the earnings on the "inverse floaters" has been
insufficient to cover the cost of the borrowed funds.
The combination of leveraging the investment three times ($7.5
billion in the investment pool and $20 billion in securities
ownership) along with the losses resulting from the derivatives
have caused the magnitude of the loss.
The interest rate swap' agreement contemplated in the City of Miami
Beach Pension Obligation Bonds is a derivative product. In the
interest rate swap the City will trade the obligation to pay the
fixed rate of return on the bond issue for an obligation to pay a
rate on the same amount of money at a rate which will vary with the
LIBOR Rate (London Interbank Borrowing Rate). This will subject the
City to the possibility that the short term rate that it will have
to pay will exceed the fixed rate that it would otherwise have to
pay on the bonds for some period of time. This possibility was
fully disclosed to the Finance Committee and the City Commission in
a series of meetings over the past six (6) months. The potential
was also discussed with Moody's and Standard & Poor's who will not
rate the bonds until the decision to issue has been reached. The
reality of the risk is that the situation occurs in which short
term rates exceed long term rates has occurred in only sixty-six
( 66 ) months of the past twenty-two ( 22 ) years ( 2 64 months) .
Should interest rates decline sufficiently after the first of the
year and the savings levels required be met, the bonds are
authorized to be issued. In an abundance of caution, this matter
will be placed on the December 21, 1994, City Commission Agenda for
additional discussion to ensure that the members of the City
Commission and the public understand the difference in financial
structure for the Pension Obligation Bonds and the complex leverage
strategy utilized by Orange County, California.
RMC:RJN:pc
3
