LTC 007-2008 Impact on CMB from the First Amendment to Interlocal Agmt.R~l°;~~~1~~
~ ~ n 1~ !1 I ~ C A ~... 2006 JA~d - 9 P i2~ O 1
OFFICE OF THE CITY MANAGER
NO. LTC # oo~-zoos LETTER TO COMMISSION
TO: Mayor Matti H. Bower and Members of the City Commission
FROM: Jorge M. Gonzalez, City Manager
DATE: January 8, 2008
SUBJECT: Impact on the City of Miami Beach from the First Amendment to the Interlocal
Agreement among Miami-Dade County, City of Miami, and the Omni Community
Redevelopment Agency approved December 12, 2007 by the Board of County
Commissioners
The purpose of this Letter to Commission (LTC) is to update on Impact on the City of
Miami Beach from the First Amendment to the Interlocal Agreement among Miami-Dade
County, City of Miami, and the Omni Community Redevelopment Agency. In addition,
this LTC provides related background information on the City of Miami Beach's
Redevelopment Agency and its separate Interlocal Agreement with Miami-Dade County
for the for the distribution and use of Convention Development Taxes.
Background
The Miami Beach Redevelopment Agency was created in 1973, in accordance with the
Community Redevelopment Act of 1969, (Chapter 163.330 of Florida State Statutes).
The Agency prepared the "South Shore Redevelopment Plan" for the area generally
south of Sixth Street. Due to the Metropolitan Form of government and the Miami-Dade
County Home Rule Charter, the creation of the Redevelopment Agency and plan were
endorsed by the County Commission.
From approximately 1973 through 1983, the agency operated as an independent
authority with a Board of Commissioners. In 1983, the Agency was reorganized and
incorporated in the City of Miami Beach administrative structure and the City
Commission was designated to serve as the Redevelopment Agency Board. In 1993, the
City designated a second redevelopment area. The City Center/Historic Convention
Center Redevelopment and Revitalization Area generally encompasses the Convention
Center and the Lincoln Road areas. Pursuant to the Redevelopment Act of 1969, both
districts required the establishment of a redevelopment Trust Fund, funded annually by
County and City property tax revenues (Tax Increment Funds -TIF) in an amount equal
to 95% of the increase in assessed values in each area over the assessed property
value in the base year (1976 and 1992, respectively) for each area multiplied by the
applicable tax millage of each taxing authority (Miami-Dade County and Miami Beach).
Monies deposited to the Trust Funds are restricted to development activities within the
district. TIF monies may be used for debt service, bond issuance costs, real property
acquisitions, infrastructure and other capital improvements and the related costs of
planning, surveys, etc., as well as community policing which was added by a change in
state statute in FY 2003-2004.
LTC #
Impact from the First Amendment to the Interlocal Agreement among Miami-Dade
County, City of Miami, and the Omni Community Redevelopment Agency
Page 2
The South Pointe redevelopment area was terminated in September 2005 by Interlocal
Agreement with Miami-Dade County and has been the most successful redevelopment
district in the State of Florida to date. Assessed values have increased from $59 million
when the district was established in 1976 to almost $2.2 billion as of January 1, 2005
and $3.5 billion as of January 1, 2007.
With the termination of the South Pointe Redevelopment area and pursuant to the 2001
and 2003 amendments to the Convention Development Tax (CDT) Interlocal Agreement
with Miami-Dade County, one half of the City ad valorem revenues previously restricted
to the South Pointe area as TIF revenues became available for use Citywide. The
balance of the City ad valorem revenues previously restricted to the South Pointe area
as TIF revenues continue to be restricted for use in the South Pointe area, but now can
be used for general operating purposes. In addition, one half of the County ad valorem
revenues previously restricted to the South Pointe district as TIF revenues continue to
be restricted for South Pointe projects, thereby helping to ensure completion of the
Redevelopment Plan. Further, for a limited number of years, the Amended CDT
Interlocal Agreement provides for additional intergovernmental revenues approximately
equivalent to the balance of the County ad valorem revenues previously restricted to the
South Pointe district as TIF revenues that can be used to offset CDT or municipal resort
tax type eligible expenditures throughout the City.
At the time of the amendment it was estimated that during the fiscal years ended
September 30, 2006, 2007 and 2008 the City would receive a total of $17,127,117 from
the County subsequent to the termination of the South Pointe area. To date funding
received since the expiration of the district has dramatically exceeded original
projections and has totaled $41,730,704, or an increase of $24,603,587 or 144% as
demonstrated by the chart below. These dramatic increases are the result of significant
new construction and increasing property values.
2001/ 2003
Amendments to CDT Agreement
Eligible
Source of Funds Ex enditures FY 2005/06 FY 2006/07 FY 2007/08 Cumulative
Miami-Dade County
Wiami-Dade County
revenues equivalent to
50% of the County tax
increment revenues South Pointe capital
through 2020 projects -ongoing $6,203,997 $7,990,287 $7,769,2 $21,963,528
CDT/municipal
Wiami-Dade County resort tax eligible or
revenues equivalent to general Citywide
25% of Countywide tax exp., based on
increment revenue source of County
through 2016 revenues $3,101,999 $3,995,1 $3,884,622 $10,981,76
Miami-Dade County
revenues equivalent to
20% of Countywide tax
increment revenues up CDT/municipal
to a cum ulative resort tax eligible
maximum of $45 million expenditures $2,481,599 $3,196,115 $3,107,697 $8,785,411
Sub-total Revenues from MDC $11,787,595 $15,181,546 $14,761,563 $41,730,704
LTC #
Impact from the First Amendment to the Interlocal Agreement among Miami-Dade
County, City of Miami, and the Omni Community Redevelopment Agency
Page 3
Amended CDT Agreement & Expiration
of the S. Pointe RDA (continued)
Eligible
Source of Funds Expenditures FY 2005106 FY 2006107 FY 2007108 Cumulative
City Revenues
50% of CNB tax
increment South Pointe
revenues expenditures $7,718,251 $10,493,389 $9,593,660 $27,805,300
50% of CMB tax
increment
revenues (net of
5% previously General
received by Citywide
general fund) expenses $6,946,425 $9,444,051 $8,634,293 $25,024,769
Sub-total Revenues from CMB 14,664,676 19,937,440 18,227,953 52,830,069
Sub-total Revenues from MDC $11,787,595 $15,181,546 $14,761,563 $41,730,704
Total Revenues $26,452,271 $35,118,986 $32,989,516 $94,560,773
In addition, CDT funding to the City of Miami Beach from the Amended CDT Interlocal
Agreement was provided as follows:
$15 million, to be used for a Convention Center Complex Area project;
$50 million for a CDT eligible project by May 1, 2004, if funds are not pledged for a
baseball stadium by December 1, 2003; which became a $55 million allocation in the
County's November 2004 General Obligation Bond plus the $45 million (capped)
payment stream of an amount equivalent to 20% of the South Pointe Tax Increment
from October 1, 2005 to September 30, 2016 (shown on the chart above), and
continuing to September 30, 2017 at a rate of 45% if the $45 million cap has not
been achieved for the expansion or enhancement of the Miami Beach Convention
Center;
An increase in the annual CDT payment from $1.1 million for depreciation and up to
$3.4 million to cover actual cash losses at the Convention Center to a fixed annual
payment of $4.5 million for any valid CDT ;
A share (of 50% in the majority of years) of excess annual CDT revenues between
the five percent County growth estimate and a cap of 7.56% growth through the term
of the Agreement (latest of 2040 or the latest expiration of any agreement providing
for the pledge of CDT revenues for the PAC or a baseball stadium) with an annual
cap of $50million in addition to the annual $4.5 million of CDT funds.
LTC #
Impact from the First Amendment to the Interlocal Agreement among Miami-Dade
County, City of Miami, and the Omni Community Redevelopment Agency
Page 4
County Audit
In August 2005, Miami-Dade County initiated an audit to determine if CDT funds granted
to the City were properly utilized pursuant to the Amended CDT Interlocal Agreement.
The City received a copy of the CDT Draft Audit Report dated September 15, 2007 to us
on September 21, 2007.
Regretfully, despite numerous meetings with County audit staff during the past 2-1/2
years, there continues to be an a flawed understanding of certain key elements of the
CDT Interlocal agreement and the subsequent amendments negotiated in 2001 and
2003, which were mutually agreed to by both Miami Dade County and the City of Miami
Beach. While the County has made clear certain "preferences" for how funds provided
pursuant to these agreements may be used, the agreements and the negotiations which
led to those agreements clearly indicate that the City would continue to retain its
discretion and furthermore, that the City would not be precluded from seeking additional
funds in the future.
More specifically, the document repeatedly references that the use of the Convention
Development Tax funds provided to the City pursuant to the Interlocal agreement dated
June 21, 1996, as amended, was to reduce operating deficits at the Convention Center.
While the original 1996 agreement stated this purpose, it was specifically removed in its
entirety with the 2001 amendment. The fact that this requirement was consciously
removed in 2001 with the amendment signed by both the County and the City, reflects a
clear understanding by both parties that the funds would no longer be limited to
offsetting operating deficits, and therefore could be used for any valid CDT purpose.
Further, the audit purports that the City has requested additional funds to further
rehabilitate the Convention Center, and that this request is premature. To be clear, the
City has not requested additional funding at this time, but rather has raised a concern to
the County from along-term perspective regarding funding ongoing renewal and
rehabilitation of the facility. The potential for this concern was addressed in the 2001
amendment, in section IV.M, in which the County agrees that the City's right to request
additional funds was not limited by the funding approved in the agreement. The City has
stated that the proposed ballroom will probably cost more than the $55 million
programmed through the Building Better Communities General Obligation Bond issue,
and that any additional costs of this improvement beyond the $55 million should not be
borne by the City. In addition, the fact remains that, as of September 30, 2007,
Convention Center Capital funds are almost fully expended. Clearly, raising a concern is
more financially prudent than ever. This issue continues to remain unresolved for the
long-term.
Finally, the stated purpose of the audit was to audit the operations of the Miami Beach
Convention Center and the Theatre of the Performing Arts for the five years ended
September 30, 2005; the period from October 1, 2000 through September 30, 2005.
None-the-less, the most significant finding of the audit, dating back to 1996, is the use of
CDT funds for the construction of the Miami-Dade County Regional Library in Miami
Beach. The construction of the library for $11.5 million on land provided by the City was
clearly contemplated in the agreement -however, as with many legal issues beyond
their statute of limitation, none of the parties involved in the transaction are still with
either the County or the City. More than 10 years later, should it now be determined that
LTC #
Impact from the First Amendment to the Interlocal Agreement among Miami-Dade
County, City of Miami, and the Omni Community Redevelopment Agency
Page 5
these funds are ineligible to be paid from CDT funds, it is the City's position that the
County should reimburse to the City, the funds the City spent to construct an
architecturally and artistically significant regional library on the County's behalf.
In a similar vein, the audit found that the construction of the Lincoln Road Improvements
and a portion of the Fires Station 2 costs, paid for with $1.7 million in CDT funds, were a
not qualifying expense. However, in this case, the Interlocal, as amended, and
supporting documentation does not provide any further insight. Therefore, the City
agrees that the Lincoln Road and Fire Station 2 would be more appropriately funded
from other sources.
A copy of the draft audit report and the City's response dated October 3`d, 2007 is
provided for your information. We have not received a response from the County on this
issue since our October 3`d letter.
On December 18, 2007, the Miami-Dade County Board of County Commissioners
approved a Global Agreement between the County, the City of Miami, the Southeast
Overtown/Park West Community Redevelopment Agency (SEOPW CRA), and the Omni
Community Redevelopment Agency Omni CRA, as well as a First Amendment to the
Omni CRA Interlocal Agreement.
The agreements provide for additional tax increment funding support to the Performing
Arts Center (PAC); development of a separate Finding of Necessity and plan
Amendment for both the Omni CRA and SEOPW CRA, to extend the life and adjust
current boundaries for the inclusion of projects such as Museum Park, the Port of Miami
Tunnel, infrastructure and affordable housing; and the CDT and TDT funding support
levels by the City and County towards the construction of the ballpark and associated
parking.
More specifically, the agreements:
Increase the payments to the County by the Omni CRA. For the first five years, in
addition to $1.43 million, the county will receive an amount equal to 35 percent of the
tax increment revenues exceeding $1.43 million. Following the first five years, the
County will receive the greater of $1.43 million or 35 percent; the estimated net
present value of the additional tax increment revenues to the County for use towards
payments of County Performing Arts Center bonds and loans is approximately $100
million;
• Provide the option to extend the life of the Omni CRA by three years, terminating in
2030 rather than 2027;
• Expand the boundaries of the Omni CRA to include Watson Island and Museum
(Bicentennial) Park;
Provide that funding for the Museum Park and the Port of Miami Tunnel will come
from Omni CRA tax increment revenues;
LTC #
Impact from the First Amendment to the Interlocal Agreement among Miami-Dade
County, City of Miami, and the Omni Community Redevelopment Agency
Page 6
• Provide that funding in the amount of $20 million towards the Downtown Miami
Streetcar Project is contemplated to come from the County as a result of additional
SEOPW tax increment revenues being remitted back to the County in the first fiscal
year following the extension of the life of the CRA;
• Free up additional capacity in the CDT and TDT revenues, due to the increased
payments from the Omni CRA to the County will be applied toward the PAC debt
service;
• Deletes the Orange Bowl Renovation as a project within the voter-approved Building
Better Communities General Obligation Bond issue and reprograms its $50 million
allocation to construction of the baseball stadium;
• Provide that the County's tourist taxes (CDT or Professional Sports Tax, PST)
contribution to the ballpark project will increase by $10 million. The County will also
retain control of the 20 percent share of the Tourist Development Tax in order to
leverage $88 million to be used towards the ballpark project. This allows the City of
Miami to allocate $50 million of its $60 million in CDT funding for parking to support
the ballpark and any other eligible activities at the Orange Bowl site;
• The County agrees to waive any claims if may have to approve the annual budget for
the Omni District for fiscal years prior to the one beginning on October 1, 2007;
• The County agrees to waive the 1.5% administrative fee charged to the Omni and
SEOPW CRA's.
Of note, also, the amendment did not include an exit strategy or implementation of the
county's performance measures, both, recently approved in a Manager's report accepted
by the Board of County Commissioners as requirements for Board consideration of all
future CRA amendments.
Impact to the Citv of Miami Beach
At this time there does not appear to be a direct impact to the City of Miami Beach from
the First Amendment to the Interlocal Agreement among Miami-Dade County, City of
Miami, and the Omni CRA. However, with the exemption of Omni and SEOPW CRA's
from payment of administrative fees to the County, this means that the remaining CRA's
in the County will, in effect, be subsidizing the County's administrative oversight. Even
more significant, with additional CDT funds used for the Florida Marlins Ballpark Project,
availability of funds for ongoing renewal and rehabilitation of the Convention Center
facility, what would logically be the primary purpose of CDT funds, or other CDT eligible
projects which we may pursue in the future, will become ever more scarce. Additionally,
use of CDT funds for the Marlins Ballpark project could also impact the availability of
CDT revenues for the New World Symphony project in Miami Beach.
JMG/KGB/PDW/KC
Attachments
m MIAMIBEACH
City of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 331 39, www.miamibeachfl.gov
Jorge M. Gonzalez
Ciry Manager
OFFICE OF THE CITY MANAGER
Tel: 305.673.7010 Fax: 305.673.7782
October 3, 2007
Cathy Jackson, Director
Audit and Management Services
Miami-Dade County
One S.E. Third Avenue, 11 Floor
Miami, Florida 33131
Dear Ms: Jackson, ~~`""
We are in receipt of your Miami Beach CDT Draft Audit Report dated September 15, 2007 and
transmitted to us on September 21, 2007. Attached is our response to the audit, as requested.
While I appreciate your willingness to meet with us over the past two years to discuss your
understanding of the elements of the CDT Interlocal agreements and the results of your audit, it
is important to reiterate to you that there continues to be an overall premise throughout your
report that is based on a flawed understanding of certain key elements of the CDT Interlocal
agreement and the subsequent amendments negotiated in 2001 and 2003, which were mutually
agreed to by both Miami Dade County and the City of Miami Beach. This critical flaw renders
most of the findings at best moot and at worst inaccurate. It is unfortunate that despite our best
efforts to try and correct this misunderstanding over the past two years, the findings remain in
the document. I understand that the County may have certain "preferences" for how funds
provided pursuant to these agreements may be used, however, the agreements and the
negotiations which led to those agreements clearly indicate that the Citywill continue to retain its
discretion and furthermore, that the City would not be precluded from seeking additional funds in
the future.
More specifically, the document repeatedly references that the use of the Convention
Development Tax funds provided to the City pursuant to the Interlocal agreement dated June 21,
1996, as amended, was to reduce operating deficits at the Convention Center. While the
original 1996 agreement stated this purpose, it was specifically removed in its entirety with the
2001 amendment. The fact that this requirement was consciously removed in 2001 with the
amendment signed by both the County and the City, reflects a clear understanding by both
parties that the funds would no longer be limited to offsetting operating deficits, and therefore
could be used for any valid CDT purpose.
The audit gives the impression that the County has chosen to ignore the amendments approved
in 2001 and 2003. While we appreciate the input from the County regarding the prioritization of
CDT funds, it is important to remember that, pursuant to the Interlocal, as amended, the
prioritization of the use of these funds is up to the elective body of the City of Miami Beach.
Further, the audit purports that the City has requested additional funds to further rehabilitate the
Convention Center, and that this request is premature. I would like to clarify that the City has not
requested additional funding at this time, but rather has raised a concern from along-term
perspective regarding funding ongoing renewal and rehabilitation of the facility. The potential for
Response to Miami-Dade County
Audit Report -Miami Beach Convention Center Tax
City of Miami Beach Response
October 3, 2007
Page 2
this concern was addressed in the 2001 amendment, in section IV.M, in which the County
agrees that the City's right to request additional funds was not limited bythe funding approved in
the agreement. The City has stated that the proposed ballroom will probably cost more than the
$55 million programmed through the Building Better Communities General Obligation Bond
issue, and that any additional costs of this improvement beyond the $55 million should not be
borne by the City. In addition, the fact remains that, as of September 30, 2007, approximately
$12 million remains unexpended in the Convention Center Capital fund, and of this amount, over
$9 million has already been appropriated for projects considered critical to the ongoing
operations of the facility. This leaves a balance of under $3 million available for ongoing capital
upkeep. Clearly, raising a concern is more financially prudent than ever. This issue continues
to remain unresolved for the long-term.
Finally, the stated purpose of the audit was to audit the operations of the Miami Beach
Convention Center and the Theatre of the Performing Arts for the five years ended September
30, 2005; the period from October 1, 2000 through September 30, 2005. It is therefore curious
that the most significant finding of the audit, dating back to 1996, is the use of CDT funds for the
construction of the Miami-Dade County Regional Library in Miami Beach. Accordingly, this does
not appear to be a valid audit finding. None-the-less, in the spirit of cooperation, we are
responding to this issue. Specifically, the construction of the library for $11.5 million on land
provided by the City was clearly contemplated in the agreement -however, as with many legal
issues beyond their statute of limitation, none of the parties involved in the transaction are still
with either the County or the City. We have contacted the prior City Manager at the time, and his
recollection is clear that a portion of the CDT funds specified in the same agreement were
intended to fund the library specified in the agreement. More than 10 years later, should it now
be determined that these funds are ineligible to be paid from CDT funds, the County should
reimburse to the City, the funds the City spent to construct an architecturally and artistically
significant regional library on the County's behalf.
Sincerely,
-~`
~lbrgeU~'. Gonzalez
City Manager ~-- __ ___~
C: Kathie G. Brooks, Office of Budget and Performance Improvement Director
Patricia Walker, Chief Financial Officer
JMG/KGB/PW
F:\cmgr\$ALL\KATHIE BROOKS\Response to CDT Audit 10-3-07doc
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AUDIT REPORT -MIAMI BEACH CONVENTION CENTER TAX
DURATION OF AUDIT: AUGUST 2005 -SEPTEMBER 2007
AUDIT REPORT DRAFT DATE: SEPTEMBER 15, 2007
AUDIT REPORT TRANSMITTAL DATE: SEPTEMBER 21, 2007
CITY OF MIAMI BEACH RESPONSE
OCTOBER 3, 2007
The City of Miami Beach appreciates the Miami-Dade County's willingness to meet over the
past two years to discuss your understanding of the elements of the Convention Development
Tax (CDT) Interlocal agreements and the results of the audit. None-the-less, it is important to
reiterate that there continues to be an overall premise throughout the audit report that is based
on a flawed .understanding of certain key elements of the CDT Interlocal agreement and the
subsequent amendments negotiated in 2001 and 2003, which were mutually agreed to by both
Miami Dade County (the County) and the City of Miami Beach (the City). This critical flaw
renders most of the findings at best moot and at worst inaccurate. It is unfortunate that despite
the City's best efforts to try and correct this misunderstanding over the past two years, the
findings remain in the document. It is understood that the County may have certain
"preferences" for how funds provided pursuant to these agreements may be used, however, the
agreements and the negotiations which led to those agreements clearly indicate that the City
will continue to retain its discretion and furthermore, that the City would not be precluded from
seeking additional funds in the future.
SUMMARY OF RESULTS
Draft Finding and Recommendation
"$4.4 of the $18 million in operating subsidies for the general fund earmarked to offset ongoing
operatina deficits was transferred to the City's General Fund, along with $3.1 million in CDT
~esewes [Interest] to support Tourism and Cultural Arts of $12.2 million ... It is interesting to
note that the City collects on average $26 million annually in Resort Taxes that should have
been used to fund its Tourism and Cultural Arts Program"
City of Miami Beach Response
• Pursuant to the CDT Interlocal agreement, as amended, there is no earmark of the CDT
funds to reduce operating deficits. This restriction was consciously removed by both the
County and the City in 2001. Further, the City documented that the $4.4 million as well as
the $3.1 million in CDT reserves were used to offset eli ible CDT expenditures well in
excess of the $4.4 million and $3.1 million combined.
The overall premise regarding the provision of funds to reduce operating deficits repeatedly
referenced throughout the document is flawed and renders most of the findings at best moot
and at worst inaccurate. It is unfortunate that despite our best efforts to try and correct this
misunderstanding over the past two years, the findings remain in the document.
While the original 1996 agreement stated this purpose, it was specifically removed in its
entirety with the 2001 amendment. The fact that this requirement was consciously removed
Attachments to Response to Miami-Dade~County
Audit Report -Miami Beach Convention Center Tax
City of Miami Beach Response
October 3, 2007
in 2001 with the amendment signed by both the County and the City, reflects a clear
understanding by both parties that the funds would no longer be limited to offsetting
operating deficits, and therefore could be used for any valid CDT purpose.
The audit gives the impression that the County has chosen to ignore the amendments
approved in 2001 and 2003. While we appreciate the input from the County regarding the
prioritization of CDT funds, it is important to remember that, pursuant to the Interlocal, as
amended, the prioritization of the use of these funds is up to the elective body of the City of
Miami Beach. The County may have certain "preferences" for how funds provided pursuant
to these agreements may be used, however, the agreements and the negotiations which led
to those agreements clearly indicate that the City will continue to retain its discretion and
furthermore, that the City would not be precluded from seeking additional funds in the future.
The audit report statement that it is "interesting to note'; and giving the impression that
resort tax revenues could have been used to offset CDT eligible expenditures in lieu of using
CDT revenues, is more importantly inappropriate to note. The audit did not include any
review of the use of resort taxes in the City of Miami Beach, and the misleading statement
gives the impression that that the $12.2 million, documented to the County in support of
eligible CDT expenses, reflects the total expenditure by the City for tourism and cultural arts
related expenses.
As clearly stated in the City's annual operating budget documents, with an average daily
population of almost twice its resident population, the City's tourism related expenditures
vastly exceed $12.2 million. Resort tax revenues supports approximately $20 million in
tourist related services and costs including our ocean rescue, police services on Lincoln
Road, Ocean Drive/Lummus Park, Collins Avenue, Washington Avenue, ATV officers,
Boardwalk security, special traffic enforcement and special event staffing; and fire rescue
units in tourist and visitor areas as well as special event support services. The funding also
supports code compliance services to respond to evening entertainment areas and for
special events; provides for a portion of the operational costs of the Tourism and Cultural
Development Department; and provides a contribution to the Cultural Arts Council beyond
their annual interest allocation from the investment of City funds.
The City operating costs supported by resort tax revenues represents approximately 10
percent of the City's General Fund Budget, clearly not at all reflecting the full cost of tourism
related services in the City of Miami Beach.
Additional costs supported by the City's Resort Tax include:
o Annual contributions to the Greater Miami Visitor's and Convention Bureau in
excess of $5 million, and prior to FY 2004/05, almost as much as $6 million
o $1.5 million to the Miami Beach Visitors Convention Authority
o $1.0 million for resort tax collections and audits
o $1.5 million for debt service
Page 2 of 8
Attachments to Response to Miami-Dade County
Audit Report -Miami Beach Convention Center Tax
City of Miami Beach Response
October 3, 2007
Draft Finding and Recommendation
"City officials were also unable to substantiate administrative overhead charges of $3.6 million.
City of Miami Beach Response
The City is in the process of finalizing an allocation study for administrative overhead charges
citywide. However, while the City was unable to substantiate the administrative fee of
approximately $700,000 charged to the Convention Center Fund annually to your satisfaction,
the 4% charge of total Convention Center Fund expenditures is not out of line with generally
accepted practice for administrative overhead. 1 am sure there is recognition and understanding
that the City incurs substantial costs in administering the Convention Center enterprise fund.
Further, the amount is probably consistent with the amounts charged by the County to its
enterprise funds.
Draft Finding and Recommendation
"Finally, City Officials have asked for additional monies to further rehabilitate the Complex,
however, the request appears premature..."
City of Miami Beach Response
The City has not requested additional funding at this time, but rather has raised a concern from
a long-term perspective regarding funding ongoing renewal and rehabilitation of the facility. The
potential for this concern was addressed in the 2001 amendment, in section IV.M, in which the
County agrees that the City's right to request additional funds was not limited by the funding
approved in the agreement. The City has stated that the proposed ballroom will probably cost
more than the $55 million programmed through the Building Better Communities General
Obligation Bond issue, and that any additional costs of this improvement beyond the $55 million
should not be borne by the City. In addition, the fact remains that, as of September 30, 2007,
approximately $12 million remains unexpended in the Convention Center Capital fund, and of
this amount, over $9 million has already been appropriated for projects considered critical to the
ongoing operations of the facility. This leaves a balance of under $3 available for ongoing
capital upkeep; raising a concern is more financially prudent than ever. This issue continues to
remain unresolved for the long-term.
CDT FUNDS USED IN THE GENERAL FUND
Draft Finding
"Over a period of three years, $4.4 million in CDT operating receipts awarded to reduce
complex operating deficits were transferred to the City's General Fund for cultural grants,
including $336,000 awarded to the Bass and Wolfsonian Museums ..."
Page3of8
Attachments to Response to Miami-Dade County
Audit Report -Miami Beach Convention Center Tax
City of Miami Beach Response
October 3, 2007
Draft Recommendation
"Prospectively, the City should not use CDT receipts to support its Cultural Arts programs, as
the priority should be to reduce Complex deficits."
City of Miami Beach Response
Pursuant to the CDT Interlocal, as amended, CDT funds provided to the City are not limited to
reducing operating deficits, a clear intent by both the County and the City when this language
was removed in the 2001 amendment to the Interlocal agreement.
While, since FY 2004/05, the funds have been used entirely within the Convention Center fund,
the prioritization of the use of these funds within eligible CDT purposes, pursuant to the
Interlocal, as amended, is entirely at the discretion of the City of Miami Beach Commission.
Further, the use of these funds for museums, etc. is consistent with the County's use of its
share of CDT revenues.
INTEREST INCOME ON CDT CASH AND INVESTMENTS
Draft Finding
"If the City earned the average rate-of-return ..., the complex would have been credited another
$3.1 million in investment income based on average outstanding cash balances..."
Draft Recommendation
"The City should credit the CDT Reserve Fund $3.1 million for interest transferred to the
General Fund, plus other amounts earned between October 1, 1996 and September 30, 2001,
plus other amounts earned between October 1, 1996 and September 30, 2001. Prospectively,
investment income and other CDT receipts should be retained in the Complex Fund"
City of Miami Beach Response
The City agrees that the interest earnings from CDT funds should be expended on CDT-eligible
expenses, and firmly believes that the expenses on which the interest was expended were
eligible. The supporting documentation was provided to your staff, and is consistent with the
expenses for which Miami-Dade County uses its CDT interest. It is merely an issue of
mechanics of whether to transfer the interest to another fund to offset the eligible expenses,
rather than leaving the interest in the fund and transferring the eligible expenses. The net result
is the same.
It would perhaps be an appropriate recommendation if the funds were restricted in use to
specific purposes. However since neither is the case, crediting the CDT reserve by the $3.1
million and then transferring the eligible expenditures to the Complex Fund would have a net $0
effect.
Page 4 of 8
Attachments to Response to Miami-Dade County
Audit Report -Miami Beach Convention Center Tax
City of Miami Beach Response
October 3, 2007
NON-COMPLEX CAPITAL PROJECTS FUNDED BY CDT
Draft Findings
"In 1996, the County issued bonds totaling $46.5 million, secured by CDT receipts, on behalf of
the City to Finance Improvements for the Complex, pursuant to the agreement. However, upon
receipt, the City transferred to a Restricted Account for Complex capital expenditures and set
aside $11.5 million in another Fund to build a regional Library on South Beach. According to
Florida Statutes, CDT receipts should not be used to build libraries. In fiscal year 2004, the City
was given another $15 million in County CDT receipts for capital improvements.
As of September 30, 2005, $37.5 million had been spent on various capital projects for the
complex ... Our review disclosed that 23% or $3.5 million of the $15 million was spent on
projects unrelated to the Complex and another 6% or $838,914 was used for Convention Center
furnishings and equipment as well as maintenance work."
"In 1995, the City began a $1.2 million project to improve lighting and infrastructure on Lincoln
Road, of which $670,000 in CDT funds were appropriated on June 5 1995. As of September 30,
2005, $480,000 had been spent."
"On May 16, 1996, the City of Miami Beach authorized $5 million to renovate and expand Fire
Station 2 located on Dade Boulevard. As of September 30, 2005, $535,876 of CDT funds was
expended as City officials claim this fire station directly supports the complex."
"On December 22, 1997, the City of Miami Beach donated $2.5 million of CDT monies to the
Miami City Ballet to construct a training facility located at 2300 Liberty Avenue. In 2005, the City
purchased the facility for $4.5 million and leased it back to he City for $1 per year."
Draft Recommendation
"The City should reimburse the Complex capital fund for improper expenditures totaling $15.8
million, which includes $11.5 million used for the Regional Library."
City of Miami Beach Response
Use of $11.5 Million for Miami-Dade County Regional Library:
The stated purpose of the audit was to audit the operations of the Miami Beach Convention
Center and the Theatre of the Performing Arts for the five years ended September 30, 2005; the
period from October 1, 2000 through September 30, 2005. It is therefore curious that the most
significant finding of the audit, dating back to 1996, is the use of CDT funds for the construction
of the Miami-Dade County Regional Library in Miami Beach. Accordingly, this does not appear
to be a valid audit finding. None-the-less, in the spirit of cooperation, we are responding to this
issue. Specifically, the construction of the library for $11.5 million on land provided by the City
was clearly contemplated in the agreement, however, as with many legal issues raised beyond
their statute of limitation, none of the parties involved in the transaction are still with either the
County or the City.
Page 5 of 8
Attachments to Response to Miami-Dade County
Audit Report -Miami Beach Convention Center Tax
City of Miami Beach Response
October 3, 2007
The Florida Statues do not specifically state that CDT receipts should not be used to build a
library but rather state that "[CDT] tax revenues and interest accrued may be used to acquire,
extend, enlarge, repair, improve, plan for, operate, manage, or maintain one or more convention
centers, stadiums, exhibition halls, arena, coliseums, or golf courses ..." And more than 10
years later, it is difficult to know the interpretation at the time by those involved as to why the
City (and we think the County also) felt that the construction of the library was a qualifying
expense. It is possible to guess that it was interpreted in a broad sense as an auditorium or
type of museum, but it would be a guess given the lengthy passage of time. What is known are
the following facts:
• The agreement provided for $46.5 million in CDT revenues, of which $35 million were clearly
itemized in the March 1996 Proposal for the Settlement of the Convention Development Tax
to Provide Funding for the Performing Arts Center", signed by both the County and the City,
leaving exactly $11.5 million not itemized on that list.
At the time of negotiation and during the 12 years that followed, the County has never
previously raised the issue. The discussion must have included that the Library was to be
located on the cultural campus in the Convention Center Redevelopment District and was
ancillary to the development and maintenance of the Convention Center and TOPA (the
Jackie Gleason Theatre).
Item 6 and 6a of the same proposal, signed by both the County and the City, are clearly
related, reflecting the intent that the library was intended to be funded from the $46.5 million
"6. The County will give to the City $46.5 million as soon as possible for capital
improvements for the Convention Center- and TOPA-related projects.
6(a). The City will provide the land and construct a Regional Library on Miami Beach
and the County will operate and maintain the Regional Library."
The $11.5 million is the exact amount as the Convention Center funds that the City gave to
the County that was subsequently returned to the City as CDT.
The current understanding of then City Manager Jose Garcia-Pedrosa is that the $11.5
million in CDT funds was for the construction of the Regional Library.
Should it now be determined that these funds are ineligible to be paid from CDT funds, more
than 10 years later, the County should reimburse to the City, the funds the City spent to
construct a architecturally and artistically significant regional library on the County's behalf.
$838 914 for Convention Center Furnishing Equipment and Maintenance
The City does not agree that the projects identified are ineligible projects. The City defines a
capital project as a project costing in excess of $25,000, including maintenance type projects
that extend the useful life of a facility. Further, given the size of the Convention Center and
scope of operations, items such as a Center-wide replacement of garbage cans or chairs for the
Convention Center (rather than "arena" chairs as stated in the draft report) is a significant capital
project.
Page 6 of 8
Attachments to Response to Miami-Dade County
Audit Report -Miami Beach Convention Center Tax
City of Miami Beach Response
October 3, 2007
$1.2 million for Lincoln Road Improvements and $0.5 million for Fire Station 2:
As with the Miami-Dade County Regional Library, after more than 10 years later, it is difficult to
know the interpretation at the time by those involved as to why the City (and we think the
County also) believed at the time that the construction of the Lincoln Road Improvements and a
portion of the Fires Station 2 costs were a qualifying expense. However, in this case, the
Interlocal, as amended, and supporting documentation does not provide any further insight.
Therefore, it would appear that the Lincoln Road and Fire Station 2 would be more appropriately
funded from other sources.
$2.5 million for Miami City Ballet Building:
The City does not agree that these $2.5 million in expenditures are unrelated to the complex.
The attachment to the March 19, 1996 Proposal for the Settlement of the Convention Center
Development Tax to Provide Funding for the Performing Arts Center signed by both the County
and the City specifically lists $2.5 million for Miami City Ballet as a Convention Center Complex
project. A copy of this schedule was provided to the County during the course of the audit.
In addition, please be advised that the language contained in the audit report is not entirely
factual and somewhat misleading.
The initial $2.5 million provided to Miami City ballet was for the purchase of the land for the
Miami City Ballet's training facility.
Further, the purchase of the buildin for $4.5 million was from non-CDT funds, and based on
a construction value for the building of approximately $7 million - in fact, the appraised
value of the building would have been much higher.
Finally, the leasehold purchase of the building provided ongoing support for one of the major
cultural anchors in Miami-Dade County (and one who is a resident company in Miami-Dade
County's new Performing Arts Center) at a time when no other entity would step forward to
provide support.
ALLOCATION OF CITY EXPENSES
Draft Finding
"The allocation fof overhead costs to the Complexl for Fiscal Years 2001 through 2005 totaling
$3.6 million could not be substantiated.
Draft Recommendation
"The City should justify the indirect charges or exclude them when determining operating cost
deficits."
Page 7 of 8
Attachments to Response to Miami-Dade County
Audit Report -Miami Beach Convention Center Tax
City of Miami Beach Response
October 3, 2007
City of Miami Beach Response
While the City was unable to substantiate the administrative fee of approximately $700,000
charged to the Convention Center Fund annually to your satisfaction, the 4% charge of total
Convention Center Fund expenditures is not out of line with generally accepted practice for
administrative overhead.
More importantly, pursuant to the CDT Interlocal agreement, as amended, there is no earmark
of the CDT funds to reduce operating deficits. This restriction was consciously removed by both
the County and the City in 2001. Therefore, whether or not the administrative overhead is
included in the calculation of operating deficits is really a moot point.
Page 8 of 8
MIAMI-DADE COUNTY, FLORIDA AUDIT AND MANAGEMENTSERVICES I~EPARTMI:NT
ONE S.E. THIRD E,VE, 11 FLUOR
MIAMI, I LORIDA 3:131
MIAMI•D,ADE TELEPHONE: 305 349-f~I00
Pd:TIY.~J FA}:: 305 349-0190
FAX TRANSMITTAL COVER SHEET
DATE: September 21, 2007
TO: Jorge Gonzales, City Manager
City of Miami Beach
FAX NO. 305-673-7782
FROM: Cathy Jackson, Director
Audit & Management Services
RE: Miami Beach CDT Draft Audit Report
Enclosed is a copy of the final draft of the Miami Beach CDT Audit Report. As we
discussed, we would appreciate receiving your response no later than October 3, 2C 07.
A copy of the Uraft Audit Report will be hand delivered to you this afternoon.
NUMBER OF PAGES, INCLUDING THIS COVER SHEET: 21
1
IVlerr~orandum "~®i~°~
Date: September 15, 2007
l~
To: George M. Burgess ~
County Manager
From: Cathy Jackson, Director
Audit & Management Services Department
Subject: Audit Report -Miami Beach Convention Center Tax
PURPOSE AND SCOPE
As requested, we audited the operations of the Miami Beach Convention Center (M BCC} and
Theater of Performing Arts (TOPA), collectively the Miami Beach Convention Center Complex
{the Complex), for the five years ended September 30, 2005. The purpose of our audit was to
determine if Convention Development Tax {CDT) funds granted to the City of Mimi Beach
(City) were properly utilized pursuant to the Interlocal Agreement dated June 21. 1996, as
amended. On a test basis, we reviewed documentary evidence supporting account balances,
capital projects, and other recorded transactions. We also verified existence of selec~ ed capital
improvements completed and in progress, interviewed City and management company
personnel, as well as performed other tests considered necessary to satisfy our audit ob~ ectives.
BACKGROUND
On June 21, 1996, pursuant to Resolution R-730-96, Miami Dade County (the County) and the
City entered into an Interlocal Agreement (Agreement) setting forth guidelines for u~;e of CDT
funds awarded the City for Complex capital improvements and other operating purposes. Florid.
Statute Section 212.0305(4)(b)2, defines eligible uses of CDT taxes, including interest earnings..
as follows:
a. Two-thirds to extend, enlarge, and improve the largest existing publicly o~~vned
convention center in the county.
b. One-third to construct a new multipurpose convention/coliseum/exhibition/staiium
or the maximum components thereof as funds permit in the most pop~ilous
municipality in the county.
c. After completion of any project under sub-subparagraph a., tax revenues and
interest accrued may be used to acquire, extend, enlarge, remodel, repair, improve,
plan for, operate, manage, or maintain one or more convention centers, stad=ums,
exhibition halls, arenas, coliseums, auditoriums, or golf courses, and may be used to
acquire and construct an intercity light rail..."
9/2 t /2007 3:45:00 PM
Audit Report -Miami Beach Convention Center Tax
Page 2
Over the past 10 years, the City has received $61.5 million for capital improvement: and $24
million in operating subsidies for the Complex (Table I). In April 2001 and March 2004, the
Agreement was amended to increase CDT funding to finance operating deficits, am~~ng other
things (Exhibit I). Nonetheless, the Complex has reported deficits over the last five fiscal years,
averaging $3.3 million annually. See Schedules I through III for financial highlights.
Table I
Convention Development Tax Receipts
Year Ca ital O eratin Total
1996 $ 46,500,000 $ - $ 46,500,000
1997 - 1,500,000 1,500,000
1998 - 1,500,000 1,500,000
1999 - 1,500,000 1,500,000
2000 - 1,500,000 1,500,000
2001 - 1,500,000 1,500,000
2002 - 3,000,000 3,000,000
2003 - 4,500,000. 4,500,000
'?004 15,000,000 4,500,000 19,500,000
2005 - 4,500,000 4,500,000
$ 61,500,000 $ 24,000,000 $ 85,500,000
Since 1990, the City has contracted with Spectacor Management Group (SMG) to operate the
Complex for a base price adjusted by the CPI annually plus an incentive fee up to 100'/0 of base
compensation (Table II). The incentive is computed using the following performance factors:
maintenance of facility and capital equipment (20%}, financial performance (30%), customer
satisfaction (20%), booking events (20%), and City discretionary (10%). SMG is reiml-ursed for
all operating expenditures including its executive salaries, fringes and bonuses. Ma iagement
fees have averaged $1.3 million annually or 11 % of operating revenues (Table II).
Table II
SMG Fees Earned
For Fiscal Years Ended September 30,
coos zoos Zoo3 2002 zoos roTac
Base Management Fee S 302,375 S 295,000 $ 273,836 S 283,538 S 271,798 S 1,426,547
Incentive Fee 269,114 188,800 213,592 262,285 263,644 1,197,435
Executive Compensation 856,313 818,180 717,789 665,649 709,242 _ 3,767,173
Tota] SMG Fee ' S 1,427,802 5 1,301,980 5 1,205.217 S 1,211,472 S 1,244,684 $ 6 3_ 9
Operating Revenues $ 13,675,356 S 11,043,494 5 10,595,144 $ 10,502,494 $ 11,935,898 $ 57,752,386
%of Total Fee to Revenues 10.44% 11.79% 11.38% 11.54% 10.43°/a 11.07%
~ Prior to 2004, the City paid for SMG executive compensation as pert oCCotnplex operat6+g expenses. After 2004, with the new contract, the Ciry Days SMG di ~ectly for these
exprnscs. Executive Fringe BeneSts for 2001 to 2003 were estimated using swages for 5sca1 years 2004 and 2005.
Audit Report -Miami Beach Convention Center Tax
Page 3
SUMMARY RESULTS
Of the $61.5 million awarded for capital projects (Table I), $46.5 million has been spent,
including $11.5 million used to finance a Regional Library located in South Beach (Table VI).
Using CDT receipts to finance a library is inappropriate according to Florida Statutes Section
212.0305(4)(b)2. We also identified $3.5 million in capital outlays that were unrelated to the
Complex and another $838,914 expended on maintenance-type items (Table VIII).
As shown in Table III, $4.4 of the $18 million in operating subsidies earmarked to offse t ongoing
deficits was transferred to the CitY's General Fund, along with estimated interest earnin;s of $3.1
million on DZ`~ T Reserves, to support Tourism and Cultural Arts activities of $12.2 million
(Schedule IV). City officials were also unable to substantiate administrative overhead charges of
$3.6 million. Operating deficits would have been eliminated if these monies had 1 peen used
solely for the Complex (Table III). It is interesting to note that the City collects on average $26.4
million annually in Resort Taxes that should have been used to fund its Tourism and Cultural
Arts programs.
Table Ill
Complex Operating Deficits using Cash Method
For Fiscal Years Ended September 30,
~ 2005 2004 - 2003 2002 2001- 'OTAL
Operating Deficits as Reported
Add Back:
General Fund Transfers
$ (3,044,593) $ (3,794,516) $ (4,993,017) $ (2,926,604) $ (1,655,841) $ {16,414,571)
2,016,000 1,840,000 500,000
4,356,000
Lost interest 803,507 340,184 283,253 539,944 1,105,079 3,07!,967
Subtotal (2,241,086) (1,438,332) (2,869,764) (1,886,660) (550,762) (8,986,604)
Depreciation (Non-Cash) 4,164,109 4,167,477 4,035,978 3,429,605 2,767,224 _18,564,898
Operating Income as Restated 1,923,023 2,729,645 1,166,214 1,542,945 2,216,467 9,578,294
Unsubstantiated Chargebacks 740,600 740,600 700,000 700,000 700,000 _ 3,581,200
Adjusted Operating Income $ 2,663,623 $ 3,470,245 $ 1,866,214 $ 2,242,945 $ 2,916,467 $ 13,159,494
Finally, City Officials have asked for additional monies to further rehabilitate the Complex,
however, the request appears premature since $15.6 million in CDT funds were available as of
September 30, 2005. Although the City provided its Five-Year Capital Expenditure Plan
(Attachment I) suggesting these funds will be spent no later than September 30, 2008, resolution
of the audit findings is recommended before releasing any more monies.
These and other findings and recommendations are detailed in the remainder of this report. We
appreciate the courtesies and cooperation extended by the City to our staff during the audit
process. A written response to this report has been requested from the City within 30 days, and
will be :furnished to the Office of the County Manager after receipt. Please contact n-e, at 305-
349-6100, if you have any questions.
Audit Report -Miami Beach Convention Center Tax
Page 4
FINDINGS AND RECOMMENDATIONS
CDT Funds Used in the City General Fund
Over a period of three years, $4.4 million in CDT operating receipts awarded to reduce Complex
deficits were transferred to the City's General Fund for cultural arts grants, including $336,000
awarded to the Bass and Wolfsonian Museums (Table IV). The Wolfsonian project involved
constructing a 2,500 square foot museum shop/cafes on Washington Avenue. In return, the
Wolfsonian agreed to allow the City unlimited use of the Women's Club parking lot for five
years and admit City residents to the Museum at no chazge. The City would meter the parking
lot, and proceeds split 50/50 with the Wolfsonian after recovery of improvement costs. If the
City had not transferred CDT receipts to its General Funds, Complex operating losses would
have been lower.
CDT Funds Used in City of Miami Beach General Fund
ror r~scai Years r:naeo September 30,
2005 2004 2003 2002 2001 Total
CDT Operating Subsidy $ 4,500,000 $ 4,500,000 $ 4,500,000 $ 3,000,000 $ 1,SOO,Oa ~ $ 18.000,000
Transfers to General Fund (GF) - {1,840,000) (1,840,000) (340,000) (4,020,000)
Less Disbursements:
Bass Museum Capital Projects - - - (1b0,000) (160,000)
Wolfsonian Donation - (176,000) - - (176,000)
Total (2,016,000) _ (1,84Q000) (500,000) (4,356,000)
Available for Complex Operations $ 4,500,000 $ 2,484,000 $ 2,660,000 $ 2,500,000 $ 1,SOO,Oae $ 13,644,000
%of CDT Funds Used for Complex 100.00% 55.20% 59.1 l% 83.33% 100.00'% 75.80%
Complex Losses $ 3( 044,593) $ (3,794,516) $ (4,993,017) $ (2,926,604) $ 1( ,655,84 ~ $ 1( 6,414,571)
NetC~peratingLossesasAdjusted $ (3,044,593) $ {1,778,516) $ (3,]53,017) $ 2,426,604 $ (1,655,84) $ 1( 2,05g,5~
Reduction if no GF Transfers 0.00°!° 53.13% 36.85% 17.08% 0.00'% 26.54%
Recommendation
Prospectively, the City should not use CDT receipts to support its Cultural Alts
programs, as the priority should be to reduce Complex operating deficits.
Interest Income on CDT Cash and Investments
The City pools the majority of its cash and investments, including restricted cash. l~owever,
investment income earned on CDT funds is not allocated to Complex operations, but rather to the
City's General Fund to support Tourism and Cultural Arts programs. If the City e:u-ned the
average rate-of--return as reported in its Comprehensive Annual Financial Reports (C AFR) for
fiscal years 2001 to 2005, the Complex would have been credited another $3.1 million in
investment income based on average outstanding cash balances (Table V).
Audit Report -Miami Beach Convention Center Tax
Page 5
Table V
Actual and Potential Interest Earned on CDT Cash and Investments
ror risca~ rear ~naea ~epremoersv,
2005 2004 2003 2002 200] Total
Non-Restricted Cash - Average t $ 3,509.627 $ 2,972,174 $ 3,197,840 $ 3,304,335 $ 2,156 452
Interlocal Restricted Cash - Average t 17,825,927 15,369,]07 13,405,965 17,418,001 22,379 301
Available Balance 21,335,554 18,341,281 ~ ]6,603,805 20.722,336 24,535 753
Interest on first$lOM to Arts z (10,000,000) (10,000,000) (]0.000,000) (10,000,000) I( 0,000000)
Kash above "Arts" Funds $ 1 ],335,554 $ 8,341,281 $ 6,603,805 $ 10,722,336 $ 14,535 753
Reported interest Income $ 49,915 S 2b,642 $ 27,238 $ 40,281 $ 72 637 $ 216,713
Rate of Return per CAFR t 4.00% 2.00% 1.87% 2.80% 4 80%
Potential Interest Income' $ 853,422 S 366,826 $ 310,491 $ 580,225 $ 1,177 716 $ 3,2F 8,680
.Lost Interest Income $ 803,507 $ 340,184 $ 283,253 $ 539.944 $ ],105 079 $ 3,Ui L967
Average computed based or, bepnning and ending cash balances
1 Per City Resolution 97-22560, interest will benefit the Miami Heech Cultural Arts Council.
'Computed using available balance multiplied by the Rate of Retum per Comprehensive Annual Financial Reports.
Between the estimated $3.1 million in interest earnings and the $4.4 million in other CDT
receipts, $7.5 million was deposited into the General Fund to support Tourism and Cul~:ural Arts
activities totaling $12.2 million. According to Schedules IV and V, the Bass Museum, Tourism
and Cultural Development Department as well as the Cultural Arts Council were tl.e largest
benefactors.
Recommendation
The City should credit the CDT Reserve Fund $3.1 million for interest transferrtd
to its General Fund, plus other amounts earned between October 1, 1996 arld
September 30, 2001. Prospectively, investment income and other CDT receipts
should be retained in the Complex Fund.
Nan-Complex Capital Proiects Funded by CDT
In 1996, the County issued bonds totaling $46.5 million, secured by CDT receipts, on behalf of
the City to finance capital improvements for the Complex pursuant to the Agreement. ]Iowever,
upon receipt, the City transferred $35 million to a Restricted Account Reserved for Complex
capital expenditures and set-aside $11.5 million in another Fund to later build a Region~.l Library
on South Beach (Table VI). According to Florida Statutes, CDT receipts should not b: used to
build libraries. In fiscal year 2004, the City was given another $15 million in County CDT
receipts for capital improvements.
Audit Report -Miami Beach Convention Center Tax
Page 6
Table Vl
Restricted Cash Analysis
From October 1, 1996 to Se tember 30, 2005
County Convention Development Tax Receipts
] 996 Distribution
Less: Miami Beach Regional Library Allocation
Other
2004 Distribution
Disbursements for Capital Projects
Convention Development Tax Available Funds
Accounts Payable
Advance Ticket Sales
Balance, September 30, 2005 (Schedule I}
$ 34,972,536
15,000,000
49,972,536
34,885,444
15,087,092
325,211
181,714
$ 15,594,017
As of September 30, 2005, $37.9 million had been spent on various capital projects for the
Complex (Table VII). To determine propriety of those expenditures, we reviewed ? 6 of 136
capital projects (26%} totaling $15 million or 40% of the total amount expended (Schedule VI).
Our review disclosed that 23% or $3.5 million of the $l5 million tested was spent ot~ projects
unrelated to the Complex and another 6% or $838,914 was used for Convention Center
furnishings and equipment as well as maintenance work (Table VIII}. Projects um elated to
Complex operations are discussed below.
Table VII
Construction-In-Progress Analysis
From October 1, 1996 to September 30, 2005
$ 46,500,000
(1 1,500,000}
(27,464)
Purchases from Convention Development Tax Receipts $34,885,444
Purchases From County Operating Subsidies:
Ballet Facility $2,500,000
Southeast Chiller Replacement 300,000
Environ Waste Trash Pulverizer 112,591
Miscellaneous Replacements 5,461 2,918,052
Other 50,605
Total Additions (Schedule VI) 37,854,101
Transfers to Fixed Assets (Schedule VI} (] 7,434,294)
Balance, September 30, 2005 (Schedule I) $20,419,807
• In 1995, the City began a $1.2 million project to improve lighting and other infrastr.tcture on
Lincoln Road of which $670,000 in CDT funds were appropriated on June 5, 199 S. As of
September 30, 2005, $480,000 had been spent.
• On May 15, 1996, the City of Miami Beach authorized $5 million to renovate ant expand
Fire Station #2 located on Dade Boulevard. As of September 30, 2005, $535,87E of CDT
Audit Report -Miami Beach Convention Center Tax
Page 7
funds was expended as City officials claim this fire station directly supports the Complex. It
is also acknowledged the facility serves other adjacent area businesses and residents.
On December 22, 1997, the City of Miami Beach donated $2.5 million of CDT mottles to the
Miami City Ballet to construct a training facility located at 2300 Liberty Avenue. In 2005,
the City purchased the facility for $4.5 million and leased it back to the Miami City Ballet for
$1 per year.
Table VIII
Summary of Questioned Expenditures
From October 1, 1996 to September SU, ZUUS
Ineligible Non-Capital
Description
Improvement of lighting on Lincoln Road
Renovation and expansion of Miami Beach Fire Station #2
Donation to construct training facility for Miami City Ballet
Furnishings & Equipment:
Arena Chairs
Replace Garbage Cans
Other Appropriations
Computers
Miscellaneous Replacements
Miscellaneous Maintenance
480,025
535,876
2,500,000
$ 319,955
100,000
84,136
38,635
218,961
761,687
77,227
$ 3,515,901 $ 838,914
The Complex Construction-In-Progress Fund lists at least two completed projects - :he Ballet
Facility and Lincoln Road Renovations that should be transferred to the appropriate f xed asset
category.
Recommendation
The City should reimburse the Complex Capital Fund for improper expenditures
totaling $15.8 million, which includes $11.5 million used for the Regional
Library. Further, the City should transfer completed projects from the
Construction-In-Progress account to the appropriate fixed asset category.
Allocation of City Expenses
The City allocates a portion of its General Fund overhead costs to the Complex. The allocation
for fiscal years 2001 through 2005 totaling $3.6 million could not be substantiated (Tab .e IX).
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Schedule IV
Miami Beach Com~ention Center and Theater of Performing Arts
Summary of CDT Funded Activities
For the Five Years Ended September 30, 2005
Fiscal Year _
ivitvlEzpenditore Type 2001 2002 2003 2004 2005 Total
Sources of Funds
CDT Transfers to General Fund
$ -
$ 340,000
$1,840,000
$1,840,000
$ - $ 4.020,0?0
Estimated CDT Interest Earnings 1,105,079 539,944
469
412
1 283,253
454
219 340,184
297
669 803,507 3,071,9 i7
1,940,9E 1 5,139,917
Resort Taxes and Other General Fund Support 1,269,394
$ 2,3~ 74,473 ,
,
$ 2,2.92,413 ,
S 2,342,707 ,
S 2,477,853 $ 2,744,46 B $12,231,914
Uses of Funds
Bass Mustum
811
S 388
$ 465,014
$ 502,789
$ 504,924
$ SS1,SE9
$ 2,413,107
Personnel ,
357
296 259,081 284,066 214,683 24],2.7 1,356,363
Operating ,
694
251 340,270 348,860 401,245 484,7`3 1,826,822
Internal Services ,
640
91 - - _ 91,640
Capital
,
S 1,089,441
$1,064,365
$ 1, 135,715
$1,120,852
$1,277,5` 9
$ 5,687,932
Garden Center
Operating $ 80,675 $ ]60,404 S 160,500 $ 165,007 $ 152,4"5 $ 719,061
Tourism & Cultural Development
$
843
235
$ 290,656
$ 322,820
$ 397,284
$ 383,1(8
$ 1,629,711
Personnel ,
682
60 107,050 85,996 44,195 53,7:5 351,E 78
Operating
,
407
76
95,911
94,332
96,495
118,6 9
481,194
Internal Services ,
686
3 1,654 - 1,329 2,51.7 9,i 61
Capital $ ,
376,618 $ 495,276 $ 503,148 $ 539,303 $ 558,0!9 $ 2,472,444
Colony Theater
$
-
$ -
$ -
S -
$ 27,3'9
S 27,_99
Personnel - 46
876 15,000 934 4,5 8 67,:28
Operating _ , 972 1,0:!0 l,<'92
Internal Services
$
-
$ 46,876
$ 15,000
$ 1,906
$ 32,9:7
$ 96,;'19
Byron Carlyle
S -
$ -
$ -
$ -
$ 10,0'3
$ 10,073
Personnel _ - 65,4 !2 65,x(22
Operating _
-
69
095
214,452
48,5 t 1
332,068
Internal Services $ _ $ - ,
$ 69,095 $ 214,452 $ 124,0(6 $ 407,:163
Cultural Arts Council
740
$ 827
492
S 525
$ 459,249
$ 436,333
$ 599,3 31
$ 2,848, .95
Grants (Schedule V) , ,
$$ 2,3® $ 2,292,413 S 2 42 707 $ 2,477,853 S 2,744,4 i7 $12,231,914
Sowce~ City Genera] I.cdger
Schedule V
Miami Beach Com•ention Center and Theater of Performing Arts
Cultural Arts Council Five-Year Summary
From October 1, 200] to September 30, 2005
Fiscal Year
Payee 2001, 2002 2003 2004 2005 Total
Miami Beach Visitor & Convention $ 44,000 $ - ; $ 47,750 $
.. 50 000 $
__ _, 50,000 $ 19],750
----
New World Symphony _.
40,000
29,222
24,800 '
25,000 ~
25,000
144,0
- -
Wolfsonian-FIU , -
40,000
24,900
24,800
12,500
_ 37,500:
139,700
Art Center South Florida __
40,000
__.
24,800
24,800
_
25,000
25,000
000
139,600
600
139
Miami City Ballet 40,000. 24,800 i 24,800 25,000 25.
000 ~
25 ,
127
100
Miami Design Preservation 40,000 15,500 ~
- -- 21,700 ,
- - ---. -r ---- 24,900_-
._ __..- ,
00 ,
00
118
Friends of the Bass Museum 50,800
^. _. 20,500 9,300
24
800 12,400 _ _
-
000
20 ___.25,0
400
15 ,
116,900
oncert Association FL
C 31,900 24,800 ~ , , ,
_
Mosaic IncJZiff Jewi 40,000 ~ 24 800 ~
..- 24,800 12,500 i -- _
~ _ 02, ] 00
1
Florida Dance Association 18,000
- 8 400
-- --- 12,000
_ - j{
12,977 19 6110 70,97
- - -- _
Tigertail Production
13,800
7,600.
- _
7,000
-
12,978 I
,
15,400:
56,
a99
__
_
_
-
55,099 ~
-
_
1..
s5,
Lan Liz 800
10 8,000 10,000 13,97? - l0 000 ' 52,777
Rhythm Foundation
- - ,
-
200
19 _.
8,400
5,000
11,489
7,700
51,789
Miami Beach Garden Center
_ __ ,
000
45
_
Miami Beach Arts Troupe 45,000
_ - - _. _
14
400 '~
_ - !
5,600 - ~
4,900
4,989 _._ .
10,588 ,
40,477
_.-
South Florida Composers
F
t ,
- . - --
9,600
7,500
6,500
16,800
4 _
ory
ac
Fantasy Theater
_._ _ _
-
2
400
7,500
10,977
17,640 ;
3 ,517
Momentum Dance
___
II _
800
16 _ ,
_.
_
600
7
7,500
- ; 6 300 ~
_. _~ _ ..38,200
....
Maximum Dance Company
- -- _ _
Flonda Grand Opera
I ,
_
10,800 ,
__
4 800
6,000 •
6,500
9,800 _
7,
_ _ __--
-- -- ---
- 3
7,500 37,5
Jewish Museum of Florida
Louis Wolfson 11 Med -
__ _--
16,800 _
_ _ . __.
7,200 I _ . __
3,750 _ _ _ .._
6 750 • - . -
- ; _ . _ ..
34,50
Arts for i.earning - 1,500
- - 3,500 8,500 20,400 ' 33,90
_ __ _ - _
Miami Li t Pro•ect
81i __J_ _. - _ _..__
]6,800
_ .. _. _ _
8,000
_. _-
400
__ - 7.500
000
7
.. _
._ --_ _
000
3
_
.-
000
10 32,300
-
30,
Mideastem Dance Exchange 8,400
-_-- 2,
200
3 . ,
000
3 ,
97
7 .. ,
_-__
10,000 ~
27,776
DanceNowl Ensemble
- _ 3,600 i
__ _ -
' , ,
-.._ _ __.
- ,
_____
4
p00 _ _ _
800
9
27,000
Miami Symphony Orchestra
- - - - j 10,800
- -- 2,400
000 ,
977
8 ,
_ -----..._ . _
400
8 ..
26,577
Arts At St. John's -
4
800 3,200
400
2 6,
3,000 ,
5,977 ,
]O,QD . _ __ . .
Center Folk & Community Art ,
- - __
200
7 ,
3,000
;
10,800
5,000 _ _
__ _. 26,000
_ ___ _. _- . -
Gold Coast Theater ,
,
_. _..
200
] 0 _
400
2 ~
3,000 ~:
10,000 _ I 25,600
5tory Theater Productions
_
_.... ,
_ . ------
~ , _ _ _ _
-
25,0
Alliance for Media A
_ _ __ ._. - -
--
j 25,060
-
-
_ -
12,400
_
_ ____ --
12,500
- 24,900
Bass Museum of Art
------ -
- _
-
3000 -
000
7 _
5,000
- _
9,800.
- -
24,800
South Beach Chambu Ensemble
_ _-
400
2
400
2
'
6 000 4,000 - 9,800 24,600
Mtami Choral Society _
_ ,
- -- _ . .
- ,
,
4
000 ' .
9,000 .
3,000 ' _ -
8,000 i
24,00
Dance Arts Foundation 700 r
' 8 ,
5 600 7 000 I 2,000 - 23,300
----- -
Dance Esaias Corpora ,
4
800 ._
000
4
4,500
4,000
5,576
22,87
Greater Miami Youth Symphony
- - - - ,
_ ___. , ,,.__ _
-
---
City Theater
__ _ __
'
14,400
_ _ __.
4 250
7.600
250
4
-
6 800
-i
6,250 ;
_ -.
- ,
21,550
s Cultural Coalition
Children
lroko Dance & Performance '-
9,000 i ,
8,000 !
4,500
~
-
.__ " 21,500
- - _._- ,
-
6 000
5,500
9 800
'
21 300
--- -' "
Entertainment Industry _
500
1 ..----
2 400
7 000
4,988 -' --
4,988-
_ -20,87
Center for Emerging Art , ____
000
4
-
-
-
20
Miami Momentum Dance
---- - - - - - _ • 1b,800
J -
"_ ,
- -
_ - -- _ ._ _ - - -
500
5 -- -
-
Agency for Jewish Ed
Crntral 9,~0 4,800 - .
- - *- - 650
] 7
_
-
Unidad of Miami Beach
.._ ......._
--- 2,500
- - ._ _ 4,000 5,150
_ 6,000
_ ._ _._ __.
- -
. -.
- ,
-- - - -
17,15
n~:a..oTtianrP~ 10,800 3,600. 2,750
Pege 1 of 3
Schedule V
Miami Beach Convention Center and Theater of Performing Arts
Cultural Arts Council Five-Year Summary
From October ], 2001 to September 3Q 2005
payer
2001 Fisca! 1'car
2002 2003
2004.
2005
Total
Salomao Gammerman $ 16,500 $ - $ _ - $ _ __- , $ - i $ 16.500
Akropolis Acting Com 10,800 5,600 - - - ~ 16,400
Athena-DAAT Foundation 3,b00 4,000 8,500
_ _. - :
_ -
1 16,100
- -
Miami Contemporary Dance - -
___ 3,000 5,978 _ 7.000 ~ 15,978
Tetra Avante 14,400 ~ -
__ -
_ .. -~ 14,400
_ ._ _
Ballet Flamenco La R
14,400
-
-
-
_-- ~
14,400
Nafl Foundation Adv 14,400 -
_ -
__ - -
_. 14,400
-- - _
Miami Beach Garden Conservancy
-
-
14,189
14,189
Miami Beach Film Society - -
- -- 2,000
- 12,000 14,
-- -_
._ _
Intercultural Dancc _
10,800 ,
2,400 i
_
_ _ _ -
-
_ 13,200
Dora Teitelboim Cent 5,250 ~ 2,400 ~ 5,500 - - ]3,150
Black Door Dance Ensemble 8,700 - - - 3,500 12,2 0
- ---- -- -
Press Box
11 650 '
-
-
-
11,650
- - - -- _
Miami Hispanic Ballet
- - -
3,725 ,
6,715
-
900
-
-
1 ],34
_~
Mtami Gay Men's Chorus ~ - -
__ - '
, 10,000
_. __ _ _ __ _ 10,000
-- -
Mtami Chddren's Museum
3 775
- -5,285
-_ 900
-_~ _
-_ _ __
------- - - ~ -
South Florida Youth
6000
3,850
-
_..I -
_ . 9.850
--- -
Patrons of Exceptional Artist
-
-
-
- (
- 4
9'800
'
-- - - _ _ _
Miami Ga and 1-esbian
Y
9,300
- - - --
.
_- . _ -
-
- 9,300
_ _.._
--- - -- _ . _ _
Inner City Chtldren' 6,000 3 200 - - - { 9,200
.- --- -
--- ___
South Beach Gay Men'
_-_ .
1,500 ~
1 500
900
5,000
-
8.900
- -.
Other Contractual Services - I ~
- _ - _
8 400 ,
--- -
Robert Miller Gallery -
_
- - 8,259 ~
_-. - - 8,259
- - _
-
Festival De Cine His __
-
8,220 - - 8,2
Palley Promotes 1,675 6,000 - - 7,675
--- ._ ..
- --
Bi Time Productions
I -
7,500
-
-
-
TFE-ILE Inc - - 5,500 2,000 - 7,500
Miami Beach Hispanic Com
_ -
-- - - r 7 450 7,4
_
---
Holocaust Memorial Committee - 3 200 - - } 4 200 7,400
Florida Moving Lnage
- - - - 3,000 4 200 i 7,2
----
MDCCCultural Att'air - 7,200 - 7'200
City of Mtami Beach ~ 4,650 2 400 . - ,
Freddick Bratcher Dance Co i - - - - 7,000 7,000
- - ---
World African Tradition
4,200
Z 400
-
-
- 6,600
--_. .
Murra Dtanoff Found
._ __.
y
-
-
_ - ---_ __
-
---- --
3,250
t__
3,250
__.._ - -
,
_.
--- --
Education Fund, The - - - - 6,300 6,300
- - .
Arts Ballet Theater
6,000
- :
- --- _- -
-
_ - .
- 6.000
-.
. ___-- __--
Artemis Performing Net
_. -
-
t
3,500
2,100
-
-
5,600
_ -
_
-- - -
Center for Advancement
___ _
-
-
- !
-- I
-
-
5,600 ~
5,60
----
1FP Soudr _ 2,400 _-- 3,000 ' _.__ ' , 5,4-0-
Pafotmtng Arts Academy 4,800 - - 4,800
--
Miami Intelligence - - - _ 4'200 4,2
_ .
Community Concert AS - - II
---t
--- _ ..4'000 ~
-- 4,
---
_._ - -
Miami Beach Society -
- -
~
- i
__ .
-
4,000
_
-
'
_ -- - 4,000
Miami Dance Machine - - -
_ _ _ 4,000
- -- -
_
-- -- -- --
Florida Philharmonic
-
-
-
3,749
-- __
-
- 3,749
Pan Perfotming Arts ---- - - - 3600 - 3,600
Page 2 of 3
Schedule ~'
Miami Beach Convention Center and Theater of Performing Arts
Cultural Arts Council Five-Year Summary
From October 1, 2001 to September 30, 2005
Payee
2001
2002 Fiscal Year
2003
2004
2005 Total
A ]oy Wallace
_ $ - $ 3,340 $ - $ - $ - $ 3,340
,
Miami Herald - 3,173 - - - 3,173'
'~ Miami Steel & Percus - 3,000 - - , - 3,000
Wood, Richard C
- - ~
_ 3,000 ~ - _ ~
__ 3.000
- -
~
FIU School of Music - - - 2,500 _
2,500
-
Creative Arts Enterprises - 2,400 - - - 2,400
Creative Camps
_ ..-- - 2,400 _ - - - 2,400
Miami Beach Development _ ~ - } 2,400 ' - ' - - ; 2,400
Cre8tiv Juice Group -
_ - --- 2,205 -
- -.. - '
_. - 2.205
j _. _
Mediations Solutions, ]nc. 1,750 - - - - 1,750
A Navas Party Prod - 1,725 - - - ],725
Demand Assistance KO - 1,518 - , - } - ],518
Cache Events, Inc - ' 1,500 ~ -- ~ - - ~ 1,500
Children's Film Festival - 1,500 - - ~ 1,500
ESP Events Inc - 1,250 - - 1,250
Hooker, Leslie Ann 1,000 - ~ - - 1,000
Plax 1,000 - ~ - ' - - 1,000
Aquafinn & Fit - 800 - - - 8~
Logan, William - 740 - - ! - 740
MAC Parking lnc - 575 - - ' - ~ 575
...---.
Henry, Nicole - 500 - - - 500
Colon Theater
---- --- -
y - +
---. __.-.. 385 -
--- - ,- -
_--- - 385
_
-
Cambon, Ralph
-.. - I
-
~ 99
-- --_ --. - '
_. --- - _ - _ 99
-
Hanson, Gwendolyn _ ~ - ~
-- -- 1 99 ~ - ~ - ~ - __ ~.
McDonald, Lisa -
_ _ _ 99
j -
. . - __ - I
-- - 99
------
--- __
Shapiro, Steve
_ _
- '
~ ~
-
-
- ~ 99
McRoberts Protective - 55 - - - I 55
One Community One Go - - - - - -
Welwme Publishing - - - - - -
__ __
No Vendor Name - _ - ~ (1 500)) - - . __ (1,500;
MCR _ - $ (2.000) - (2,000;
Journal Entry --- -- - --- _---
__ -
_..--.._ (3.500); (3,500;
--t.-_ .
_ -
Reclass~Revenues&F.spenses
(40,675)
2,000
2,100
-
- (36,575;
Total $ 827,740 $ 525,492 $ 459,249 $ 436,333 $ 599,381 $ 2,848,195
Page 3 of 3
E ~hibit 1
Miami Beach Convention Center Tax Review
Summary of Interlocal Agreement and Amendments
Key Stipulations and Deliverables
A reement & Date Ke
Original Interlocal • Sti ulations and D iverables
Miami Dade County's (County) defeasance of certain Miami Beach Convention
of Miami Beach (Ci y)
the Cit
ti
Agreement, dated
6 y
ng
Center bonds and issuance of other bonds gran
funding for additional capital improvements to the Miami Beach Convention Cen.er
June 21, 199 and Jackie Gleason Theater of the Performing Arts (Complex).
Convention Development Tax (CDT) bond
i
illi
• n
on
County to provide $46.5 m
proceeds for capital projects related to the Complex.
and equip a Regional Library on City land.
ct
t
• ,
ru
The City shall fund, cons
Annual CDT payments of $1.5 million through March 31, 2002 for operations and
• maintenance.
After March 31, 2002, annual CDT payment through 2012 will be $1.1 million
capital replacement plus operating deficit up to a maximum of $4.5 million.
ital paymcnt through Termination Date (Match
ual ca
2013
• p
, ann
Starting April 1,
31, 2026) set at $1.1 million, but may be reduced to $I million.
Amendment One, •
2001 •
dated Aprii 24 Payment to City adjusted to $3 million to be made by April i, 2002.
Starting April 1, 2003, operating payments through new Termination D tte
, (September 30, 2040) adjusted to $4.5 million per year in CDT receipts.
• $1S million for Complex capital projects disbursed by December 1, 2003.
City to provide $2 million for Miami Beach Regional Library books.
• Additional CDT payments through Termination Datc based on schedule in tnis
Amendment for Complex projects, or, if not needed for such projects, any otter
• projects eligiblc under state law.
City agrees that County may use CDT funds, other than those allocated to City, a ~ it
wishes pursuant to state law.
Amendment Two, •
2004 .
d March 23
t
d $55 million project to be placed on General Obligation Bond.
Clarified schedule for additional payments from CDT reccipts for Complex
,
e
a projects, or other eligible projects if funds not needed for Complex projects.
Source: Interlocal Agreement (R-730-96), Amendment One (R-453-01) and Amendment Two (R-375-04).
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