BALANCE SHEET BLOG – HOLLYWOOD, FL


Interest-Free Loan
April 2, 2009, 11:45 AM
Filed under: Budget, City Commission

Senator Sobel’s Office

April 2, 2009

We haven’t yet seen much concern on the part of Hollywood’s City Commissioners about the financial crisis. Their business-as-usual attitude is shocking because they know that the city’s finances are in great trouble. Expenditures are projected to exceed revenues by almost $18 million next year alone. And over the next five years, the picture gets even worse. Major budget cuts must be made. Fees must be increased.

In this severe recession, we see examples of public officials willing to make sacrifices for the greater good. For example, the President of the United States is paying for White House renovations himself, rather than imposing these costs on the taxpayers who are already suffering from job loss and foreclosure. For much the same reason, a city commissioner in Sunrise plans to give his raise to charity rather than benefit from it personally. Our State Senator, on the other hand, wants our city to spend $30,000 to renovate 5,000 square feet of city-owned office space for her. Can the city afford to comply with this request?

The Balance Sheet will be monitoring the City Commission over the next months to determine how it is responding to the financial crisis. We are particularly interested in how responsibly our elected officials approach spending decisions between now and the beginning of the next fiscal year on Oct. 1.

Should the city provide State Senator Sobel with a four-year $30,000 no-interest, non-recourse loan to renovate a 5,000 sq. foot office suite in city-owned property next to City Hall? Yesterday, the City Commission unanimously approved this loan which the Senator is to pay back in the form of monthly “rent” of $750. These “rent” payments will be applied entirely to repayment of the renovation loan, with no charge added for occupying the 5,000 square feet of city property. At the end of 40 months (the end of the Senator’s term), the city will have recouped the $30,000.

Because it is illegal for a State Senator to spend state funds on office renovation, the city has agreed to call the renovation loan payments “rent.” While Mayor Bober questioned the ethical implications of calling loan payments “rent,” both the city attorney and Commissioner Asseff cited the common commercial practice of including office renovations in rent. But there are two differences here: (1) the Senator’s “rent” does not include any payment for use of the office space, and (2) city and state government officials are held to a higher ethical standard. In addition to fronting the renovation costs, the city is obligated to pay the ongoing cost of air conditioning, electricity, and water for this large office space.

We think it is fiscally irresponsible for the City Commission to commit $30,000 taxpayer dollars for office renovation in these harsh economic times. Many Hollywood residents have lost their jobs, and even their homes. Which of them would not welcome a four-year no-interest $30,000 loan from the city?

But the City Commission voted to give the Senator the renovation loan, without concern for the cost to taxpayers. As justification, Commissioner Furr stated his belief that it was extremely important for Hollywood to have the Senator close at hand, as did other Commissioners. He also expressed his excitement that the city would be receiving “State money” from the Senator. He did not address, and none of his colleagues asked, why he thinks “rent” payments from State funds are better than the same amount from a private source.

Commissioner Asseff expressed strong support for the deal. Usually she is a fierce advocate for the downtown businesses, but not this time. Instead of urging the Senator to lease one of the many vacant store-fronts downtown, Commissioner Asseff voted to undercut our downtown businesses by providing city-owned office space at a cost far below market.

Commissioner Blattner complicated the whole subject by raising the issue of “rent” paid by a second tenant who shares office space with Senator Sobel: State Rep. Elaine Schwartz.  He said the $300 per month the city charges Rep. Elaine Schwartz for office space would represent a return on the city’s $30,000 loan for Senator Sobel’s renovations. But he was mistaken according to city staff who noted that Rep. Schwartz’s “rent” was being applied to her earlier renovation loan which she has not yet paid off. The fact remains that there is zero return on the city’s $30,000 Sobel renovation loan. We do not know the circumstances of the earlier Schwartz loan.

Not a single elected official was concerned enough to even ask what the fair rental value of 5,000 square feet of office space would be, nor exactly what it will cost the city to provide air conditioning, electricity, and water each month. To them, this was not a budget matter at all. Their only concern was expressing how proud they were to have the Senator in Hollywood rather than in Hallandale or any other city. And even better, having her right next to city hall. Do they really think the Senator will not advocate for Hollywood unless the city provides these office renovation funds for her use? Or were they more focused on expressing pleasure with their own access to power by moving the Senate office next door? Either way is shocking.

However small this item, it is an indicator of how carefully our elected officials are watching our budget. A fiscally responsible solution would have been to rent the space to the Senator, but not give the interest-free loan.

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