BALANCE SHEET BLOG – HOLLYWOOD, FL


Margaritaville
April 1, 2013, 2:12 PM
Filed under: Beach, Budget, City Commission, CRA Districts, Development

Margaritaville will request an extension at a Special Joint Meeting of the City Commission and the CRA on Wednesday, April 3, at 5 PM, at City Hall.  The announcement of this event, made today from the City Manager’s Office,  is posted below.  According to the City Clerk, “the agenda and backup are not completed at this time.  When completed, the information will be posted on the [City] website.”

City’s Announcement:

“As you know, the City of Hollywood and the Hollywood CRA have been working with Margaritaville Hollywood Beach Resort LLC for the redevelopment of the Johnson Street property on Hollywood Beach after a two-stage competitive Request for Proposal process.  A Development Agreement and Ground Lease was executed in February 2011 followed by a First Amendment in April 2012 which revised the timelines for development.  Later, in September 2012, additional amendments revised the funding sources for the project including the diminished role of EB-5 financing, the introduction of a $23 million Compensated Funding Agreement with the CRA, and the anticipated role of Starwood Capital as an equity partner in Margaritaville Hollywood Beach Resort LLC.  Third Party reimbursements (allowing the City and CRA to contract with advisors at the expense of the developer) and rental income to the City were increased as a result of the updated funding sources.  Because the project had encountered unanticipated delays, an April 10, 2013 “outside possession date” was also established.  Several important milestones would have to be satisfied by that date thereby allowing the property to be transferred to the developer for the commencement of construction.  Although City and CRA staff have been vigilant in reminding the developer of the upcoming deadline and the developer has made significant progress, Margaritaville Hollywood Beach Resort LLC has asked to appear before the City Commission/CRA Board to provide an update on the project and to request one last extension. Representatives from Margaritaville, Lojeta, and Starwood Capital will be in attendance. 

 



Pension Reform
July 2, 2012, 12:52 PM
Filed under: Budget, City Commission, City Staff, Taxes

Editors’ Note:  Long-time Hollywood resident Larry Legg has sent us the following letter.  We believe that it warrants serious attention by the City Commission and City staff.  Residents, too, need to understand these issues. We are grateful to Larry for sharing his expertise on a difficult subject that affects us all.

Dear Balance Sheet,

I have been a CPA and business advisor for about 27 years now, 20 years of which were spent auditing government and not-for-profit entities.  I am also a life-long student of economics and politics, although you will never catch me running for office.  I’m not Republican or Democrat, nor a Tea Partier, but attempt to look at the world around us in an independent and objective manner, in light of the underlying economics.  Your blog has helped me better understand the difficulties that our city faces today.  There is one issue, however, that should not be swept under the carpet, and that is pension reform.  I know this is cliché, but the giant Gorilla is still in the room and, although only 800 pounds now, he’s still going to mess some things up!

After having observed a lengthy blogger debate on pension reform, and having studied much of the relevant evidential materials – including but not limited to comments on both sides of the issue, citywide financial audits, pension audits, actuarial reports, 2012 budget analysis, national municipal bankruptcies cases, etc. – I am convinced that, no matter who has to pay the tab, our city is still at a moderate to high level of risk of bankruptcy and/or austerity measures.  Pensioners have a legitimate argument, particularly with respect to “Legacy Costs and Liabilities.”  It is difficult to believe that any employer could breach such a promise, and I’m sure the courts are beginning to decide this very issue all over the country.  The debate appears to be in the hands of the judiciary at this point, so let’s all keep our eyes on the cases that are being filed in this alarming nationwide trend.  Many of your bloggers appear to be bogged down in the details due to their own special interests (which I fully understand), so they fail or refuse to see the big picture “from 30 thousand feet” so to speak.

The Facts:

The following are some highlights of my research on Hollywood’s citywide finances:

Assets as of last fiscal audit, September 30, 2011 $ 727 million
Liabilities Recorded on Books  (553) million
Liabilities Not Recorded on Books (Unfunded Pension costs)  (350) million
Liabilities Not Recorded on Books (Unfunded Healthcare costs)  (433) million
Citywide Net Deficit in Fund Balance – Adjusted Net Assets  (609) million
  • Unfunded pension liability is net of $66 million in downward adjustments related to the referendum, and as per the most recent actuarial reports and city staff.  This is a real debt that does not get recorded on the City’s books.  In addition to this debt, the City has an actuarial “unfunded” liability to legacy employees for their lifetime healthcare benefits of $433 million as per the most recent certified audit.

 

Your bloggers have properly enumerated the many wasteful projects Commissioners have spent our hard-earned tax dollars on for the past three decades.  This spending, I concur, must stop.  No more developer handouts, no more capital expenditures on non-essential infrastructure, etc…the list goes on and on.  For obvious reasons, city employees’ heads are in the sand regarding an expense item that currently makes up about 21 percent of Hollywood’s operating budget – i.e., pension expense.  There will be no winners in this process, unfortunately, so it’s easy to see why people naturally shy away from the subject.  The pain will be even worse if the City is forced to seek protection under the U.S. Bankruptcy Code.  The hard, cold economic facts and circumstances will drive the outcome:

  •  $609 million deficit in Net Assets;
  • Pension Expense that constitutes 21 percent of total revenues;
  • Unfunded pension liability of $350 million (approximately 50% funded) – severely underfunded according to most experts;
  • Unfunded Post Employment Healthcare Benefits of $433 million;
  • Pension expense as a percent of gross salaries is between 36% and 81%, depending upon which department, which is far above national averages;
  • Overly optimistic actuarial assumptions about returns – currently 7 percent.  That should be reduced to the “new normal”, which many economist and analysts (and astute private sector investors) agree is about 5 – 6 percent;
  • Weak stock market performances;
  • Weak investment returns on pension assets, compared to the broad market, unmanaged averages;
  • Declining Property Values; and
  • Aging Infrastructure

Our City’s current finances are not too different from several recent Chapter 9 municipal bankruptcy filings.

Opinion:

My advice to Commissioners and Future Commissioners:

  1. Honor Legacy costs.  I think that even in bankruptcy court the judges will lean toward such a requirement.  Keep an eye on these cases.
  1. Do not make promises you cannot keep.  The stock and bond markets are unpredictable. And you, your accountants, your actuaries, economists, and investment advisors can never accurately calculate how much money to set aside for some variable defined benefit, ad-infinitum into the future.  And, no organization in the world – whether for-profit, not-for-profit, or governmental – can afford 21 percent of its revenues in pension expense – period.
  1. Employ a contributory, 401(k) type plan like most organizations in this day and age – i.e., a defined contribution plan.
  1. Urge retired employees to push for further pension reform.  They need to understand that it is in their best interest to help devise a solution to this problem before their livelihoods are in jeopardy.
  1. Quit spending money on almost everything except for critical infrastructure and routine operations for a few years.  We need to get back on our financial feet.  That would include a complete moratorium on new hires for an indefinite period of time.
  1. Review the entire way of doing business, perhaps by way of an “Operational Audit”, and make changes.  Change is good, so long as it’s economical.
  1. Forget about your own pocket books and about getting re-elected when making decisions that affect 143,000 citizens and taxpayers – it’s your duty to do so.
  1. Stop caving to special interests.  They don’t run the city, “We The People” do, supposedly through YOU, our elected officials.
  1. Don’t raise the millage rate; it’s already one of the highest in the county.  Property owners have already paid an inordinate amount of money for taxes, and I don’t think they can bear further increases.

As always, I invite comments and questions.

Sincerely,

Larry Legg, CPA



Call For Resignation
May 30, 2012, 3:05 PM
Filed under: City Commission, City Staff

We began the Balance Sheet eight years ago with the goal of providing factual information about City issues and seeking solutions to problems.  We have tried throughout to be fair and accurate. So today, it is after much discussion, deliberation, and sadness that we call for the City Manager to step down immediately. Despite his many good qualities, he has demonstrated a stunning lack of maturity and readiness for the job during his short tenure with our City

His arrest for driving drunk shows poor judgment.  His Twitter post shows immaturity and a lack of seriousness.  By not informing the Commission the full circumstances of the night of his arrest, his behavior raises concerns of both judgment and truthfulness.

The Manager is the top appointed official in our City.  For him to exhibit such impaired judgment is an unacceptable blow to the City’s well-being.  He is, after all, responsible for supervising the entire City staff other than the City Attorney’s office. Recent media coverage about his behavior is not just a private matter.  The City itself has been tainted by the scandal.

As a City, we appear to be lurching from one catastrophe to another: financial urgency, pension referendum, sewer break, and now the Manager’s arrest for drunk driving at 3:30 AM after leaving a strip club. The City has responded with great strength to recent major challenges, and it must do so again now.

Judgment

Driving while legally drunk demonstrates an extreme lack of good judgment. Driving under the influence presents inherent danger to both the driver and the public at large. Hollywood does not deserve and cannot afford a Manager so lacking in judgment.

Some say the Manager was drinking and driving on his own time, not on City time.  For this reason they imply that such behavior should be given a pass. We disagree.  The International City Managers Association (ICMA) Code of Ethics specifies “exemplary conduct in both personal and professional matters.”  No one could dispute that the Manager’s conduct “in personal matters” has been far from exemplary.  Indeed, reports of his behavior have been splashed across the media, showing the City of Hollywood in a highly unfavorable light.

Some say the Manager should be given a second chance. Again, we  disagree.  Hollywood is a troubled City financially and demographically.  Our City requires the staff’s full, professional attention. The Manager’s ability to lead has been tarnished. His behavior has been a huge distraction. For the City to limp along while the Manager tries to gain maturity and judgment would be unfair to City staff, residents, and businesses alike.

Internet Behavior

The Manager’s Twitter account reveals a surprising lack of maturity and judgment.  He describes himself as the “Uncivil Civil Servant – You’ve been warned! Florida.” Whatever this is supposed to mean, it does not reveal a person who is taking his new job seriously.

Conclusion

This Manager should step down.  If he does not, the City Commission should fire him for cause.

Recommended Action

We encourage our readers who feel strongly about this issue to write to the Commission immediately.  Let them know your opinion before  9 AM Friday, June 1, when a Special Commission Meeting on this subject has been scheduled.

City Commission E-Mail Addresses

pbober@hollywoodfl.org

passeff@hollywoodfl.org

bfurr@hollywoodfl.org

hosheehan@hollywoodfl.org

rblattner@hollywoodfl.org

frusso@hollywoodfl.org

lsherwood@hollywoodfl.org



City Manager Finalists Here
January 2, 2012, 9:58 PM
Filed under: City Commission, City Staff

The schedule is now set for meeting and interviewing the finalists for Hollywood  City Manager.  All six finalists will be in Hollywood on Thursday and Friday this week, Jan. 5-6.  Executive staff will meet the candidates first, accompanying them on a tour of the City and lunch on Thursday morning .  Thursday afternoon and Friday morning will be devoted to commissioner interviews.   Each candidate will interview individually with Vice Mayor Asseff, Commissioner Blattner, Commissioner O’Sheehan, Commissioner Russo, and Commissioner Sherwood on Thursday afternoon, and with Commissioner Furr and Mayor Bober on Friday morning.

The public’s opportunity to meet the candidates will occur at a “Meet and Greet”  on Thursday evening, from 6-7:30 PM, at the Art and Culture Center.  At this event, the Mayor will introduce each candidate and each one will give a brief two-minute self introduction.

On Friday at 2 PM, a special commission meeting open to the public will be held, at which time the entire Commission will conduct formal interviews with each candidate and then decide on what step to take next.



City Manager Finalists
December 17, 2011, 10:15 PM
Filed under: City Commission, City Staff

The City Commission is now considering the top applicants for the position of city manager. The executive search firm, Affion Public, received 60 applications for the position and selected six finalists to describe to the City Commission at a workshop earlier this week. Based on the head hunter’s presentation, the Commission voted to interview all six.

You can see a photo of each candidate and assess their qualifications at this link on the City website. Hiring a new manager is one of the most important decisions this Commission will make. Because it will affect all of us, Hollywood citizens must become knowledgeable about the candidates and make their wishes known to the City Commission as the selection process continues.

The finalists will be in Hollywood January 5-6, 2012.  On the 5th, an evening meet-and-greet event with the public will be held at the Hollywood Art and Culture Center.  The following day, the City Commission will hold a public meeting to interview the candidates. Mark your calendars now.



State Senator’s Audit
October 4, 2011, 2:33 PM
Filed under: Budget, City Commission

State Senator Sobel —  who in 2009  sought and was granted a $30,000 interest-free, non-recourse loan from the City of Hollywood to renovate 5,000 square feet of office space for her use —  has suddenly expressed great concern with the City’s finances.  She’s requested that the State of Florida audit Hollywood’s finances and her request has been granted.

“Sobel appeared at a meeting of the Joint Legislative Auditing Committee in the Capitol to ask for the audit, citing the city’s declaration of a state of “financial urgency,” a recent 11 percent property tax increase, lucrative pension and health benefits for city employees and overly optimistic revenue projections.

Sobel questioned the work of Munilytics, an Illinois-based financial consulting firm hired by the city. She also questioned the city’s administrative set up, which she said separates the city’s budget and finance departments, resulting in accountability problems.” excerpt from Miami Herald, Oct. 3, 2011

Senator Sobel appears not to have understood the Munilytics report she questions. She states as one of her concerns a problem the City corrected months ago after Munilytics raised it — the need to separate budget from finance functions. Since the Munilytics report was issued in mid-June, the City has gone to great lengths to put its financial house in order.

It will be interesting to see what State oversight can bring to Hollywood’s financial situation.  Let’s hope it will be helpful.  We suggest the State auditors begin by reviewing the 2009 loan made to Sen. Sobel herself for office renovations — an expenditure category that does not appear to be allowed State Senators for their district offices.  The solution reached was to categorize her loan payments as “rent.”

Despite this fiction, the bottom line here is that the City has allowed the Senator to repay the $30,000 renovation loan over time, while excusing her from paying any rent for the use of City office space.  The rent forgone could have provided a City employee salary.

We opposed this transaction back in 2009.  In part we wrote:

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?

Link to full Balance Sheet 2009 post.



Corridor Development
September 18, 2011, 10:07 PM
Filed under: City Commission, Corridors, Development

No one knows more than our Commissioners how desperately Hollywood needs to stabilize and improve its neighborhoods and its corridors. Yet when our elected officials had an opportunity earlier this month to reduce the number of pawn shops on 441, they let us down.

The City Commission, in a 6-1 vote, approved a pawn shop’s request to build a new building on 441 at Duval Street now that the shop’s current location a little further south is being taken by eminent domain for 441 widening.  City staff recommended against approval as did the Planning and Zoning Board.  Both informed the Commission that there are already 12 pawn shops on a six-block stretch of 441 and here was a chance to eliminate one. Approving this pawn shop was the Commission’s first development decision for the “new” 441 corridor.

What was striking about the pawn shop proposal was its full court press led by Hollywood lobbyist Alan Koslow and the champion Broward County lobbyist George Platt.  In  hasty nonspecific disclosures before the public hearing began, every commissioner announced a prior meeting behind closed doors with “the applicant,” but none disclosed whether it was with lobbyist, pawn shop owner, or operator.  Not one member of the public spoke in support of the pawn shop and several spoke against it.

Only Commissioner O’Sheehan took the obvious principled position against the proposal. Commissioner Blattner approved it, seeming to be angling for improvements to a pawn shop on Stirling Road owned by the same company.  Commissioner Russo said the new 441 pawn shop would be a “beautiful building.”  We are quite certain that Commissioner Asseff would never have approved a pawn shop in her district.  Nor is it likely Commissioner Furr would approve one in his district. Both of them have been fighting blight.  But they were willing to put it on 441, as were Commissioner Sherwood and the mayor.

We are left with these questions:

1.  Why do Hollywood’s elected officials think so poorly of our City that a new pawn shop becomes a desired development?

2. What can we do as a City to raise our sights and recognize once and for all that we deserve better and can actually achieve it?