BALANCE SHEET BLOG – HOLLYWOOD, FL


Balance Sheet In The Crosshairs
March 25, 2013, 10:35 AM
Filed under: Budget, City Staff, Taxes

A comment submitted last week by Hollywood resident Jeff Brodeur rails against the City’s treatment of our employees (salary cuts, pension cuts, outsourcing, lack of overtime pay, and more).  He deplores the departure of valued staff for better jobs elsewhere “because they are overworked, underpaid, and not appreciated” here in Hollywood.

His comment also nails the Balance Sheet as a “mouthpiece” for the City, an about-face from what he saw as our former role of challenging the City. His entire statement can be found here.

We agree the current state of our City is distressing.  City employees have been subjected to abrupt salary reductions and pension cuts.  In addition Hollywood has way too many dilapidated buildings and litter strewn, pot-holed streets. The City’s infrastructure is badly in need of repair or replacement.  But it’s one thing to rail against these conditions and another to come up with solutions.  The fact is the City has very little money.  Why?

City Finances

The compromised financial situation the City finds itself in today was foreseeable years before the economic downturn.  A long state of official denial and refusal to take hard steps on pensions in past years brought us to the huge and ongoing painful consequences of Financial Urgency in 2011.  The Balance Sheet’s efforts to sound the alarm about this looming problem started back in 2004 and continued right up to the point of Financial Urgency in 2011. Our record on these issues is summarized in the attached document:  Balance Sheet History With Cartoons

To say that the Balance Sheet has changed from critic to mouthpiece is to ignore both our record and the fact that the City has changed from years of denial, possibly ignorance, about the consequences of its actions.

By 2011, the City had overspent its budget in mid-year.  Then, there was no choice but to take hard steps to address the problems that the Balance Sheet had been urging the City to fix for at least eight years.  Had the City done so earlier, the results today would be far less painful.  However, there’s no way to go back and do things differently.  Hollywood is now in the process of digging the City out of a huge self-made financial hole.  The necessity of digging out is obvious to anyone who has paid close attention

The hard truth is that without significant increases in property taxes and fees, the General Fund is inadequate  to substantially improve employee salaries and pensions at this time. Additional ways to increase the General Fund in future years include  proposed development such as the Walmart Shopping Center at 441, suing for the WiFi shortfall guarantee if that’s the only way to get it, and possibly either capping the Beach CRA or removing the Diplomat from its boundaries if future beach development would allow such a change.

Some have suggested borrowing from the City’s Water and Sewer Enterprise Fund to make up for salary and pension cuts.  As many of us know, Hollywood residents already pay disproportionately high water and sewer fees and we don’t hear anyone offering to pay more. Note:  The City recently did borrow $2 million from the Water and Sewer Fund to purchase and outfit police vehicles.  This money is supposed to be repaid with interest.  We view this transaction as a highly questionable practice. The City normally would have bought these vehicles with a lease-purchase agreement — a form of financing now unavailable to the City because of its low fund balance.

Other Matters

Mr. Brodeur also criticized the Balance Sheet for ignoring “inconvenient facts” by not disclosing the returns of the Police and Fire pension funds.  Both of these funds post investment returns on their websites for all to see.  We did review them before writing our article.  It is important to understand that one year’s returns do not stand in isolation.  For example, the Police Pension Fund earned about 17% this year, and about 2% last year. A great many more really good years would be required to significantly reduce the City’s pension obligations that the City Commission was still voting to increase as late as 2010.

While  Mr. Brodeur’s comment raises important issues for Hollywood, we object strenuously to his charge that the Balance Sheet heaps “more garbage on the men and women that protect us every day.”  Everyone agrees that our City employees are hard working professionals and we all deplore the current situation that has caused them so much hardship. They are victims of more than a decade of overly generous promises that the City is unable to keep.

Finally, Mr. Brodeur correctly notes that the Balance Sheet does not cover many important City issues that residents should be informed about.  We are such a small volunteer operation that there is no way our coverage could be comprehensive, nor have we ever claimed it to be.  We would welcome Mr. Brodeur and any other residents so inclined to try their hand at their own blog, researching and writing about City issues of concern to them.  A clear analysis of difficult issues can be a force for progress.




City Budget Squeeze
March 15, 2013, 3:28 PM
Filed under: Budget, City Staff, Residents, Taxes

A recent budget workshop for City Commissioners demonstrated that the City is recovering from its 2011 financial meltdown. Nonetheless, property tax revenues are cautiously projected to remain more or less flat for several years to come. (We’ll be watching for City staff’s mid-year revenue projections expected later this month for any significant changes in the forecast.) The City has stated its commitment to improving City employee salaries and benefits insofar as the budget can support it – a little at a time.

Working against our strapped City’s potential salary and service improvements, however, is litigation spawned by the City’s two Pension Boards.  The Police Pension Board and the Firefighter Pension Board are City Boards whose purpose and members are listed on the City’s website along with those of the 17 other City Boards (African-American Advisory Board, Historic Preservation Board, Education Advisory Board, Green Team, etc.).  But unlike the other City Boards, the two Pension Boards have the power conferred by State statute to sue and be sued.

After Hollywood voters approved the Pension Referendum in September 2011, the trustees of each Pension Board voted unanimously to sue the City in an effort to overturn the pension changes that resulted from the Referendum.

Each Pension Board pays its administrative expenses including legal fees from the pension fund it administers. Every year the pension plan’s actuary examines the plan’s financial obligations and tells the City how much it must pay into the plan.  The plan will be short whatever amount was spent on legal fees and the City will have to make that up. So when these Boards sue the City, the City pays not only its own legal fees but those of the Boards as well.

Last December, the City won a Motion to Dismiss the two Pension Board suits (now consolidated), but the judge’s ruling allows the Boards to correct their pleadings and start over. This litigation between the Pension Boards and the City is at an early stage. But already the combined legal fees of the two Pension Boards come to nearly $400,000 with the City having spent about $60,000 on its own defense.

With the City on the hook for both sides’ legal fees — an amount that seemingly will reach the millions at the rate this litigation is moving -– the City’s ability to improve employee salaries and city services is lessened.  Such a result is harmful to both Hollywood employees and Hollywood residents.

Separate from the Pension Board litigation, the Unions are seeking to have the pension changes invalidated as a violation of their collective bargaining agreements. These actions, which began in the courts, are now being adjudicated in the State’s Public Employees Relations Commission (PERC).

So far the only winners in the Pension Board litigation are the private law firms engaged in the Pension Boards’ lawsuits. We urge the Pension Boards to drop these costly unproductive suits.

As for the Unions, we can only hope that all three City Unions will enter into negotiations with the City in a mutual effort both to rebuild trust and to work out creative and sustainable salary/benefit structures that will help all their members. Only then can we move forward together to create a sound footing for a more prosperous, successful Hollywood.



Election Violations – Police Union
November 7, 2012, 12:36 PM
Filed under: City Staff

Update: March 8, 2013. We just learned that after earlier unsuccessful service of process,  the City finally served the PBA’s registered agent on Feb. 26, 2013.  Arraignment is set for April 4.

November 8, 2012.  Police Union Charged with Illegal Election Activity

Editor’s Note:  This post is not about the candidates.  We now have winners and it’s important that we unite in helping them succeed.   Campaign finance reform is the subject of this post.  The Charter Review Committee wanted citizens to know who was financing ads supporting or opposing candidates for the City Commission. The Commission agreed, and the Charter now requires it.

Alleging election-related violations of the City Charter, Hollywood’s City Attorney, late last month, charged the City’s police union with unlawful conduct.  The Police Benevolent Association’s failure to file the campaign finance reports required by Section 3.12 of the City Charter is set out in a Municipal Information** filed in county court.

The City Charter, amended in 2010 to include a section on campaign finance reform, requires disclosure of all contributions received and expenditures made by an “Express Advocacy Organization” in City Commission elections. The City’s charge against the PBA relates to its activity in the District 3 City Commission race. Under the City Charter, the public is entitled to know the source of the union’s funding for its electioneering activity targeting Commissioner O’Sheehan.  The union has refused to file the required reports disclosing this information.

The penalties for City Charter violations are limited by State law to a maximum fine of $500 or 60 days imprisonment, or both. We are unaware of the union’s rationale for noncompliance.  Perhaps it considers the penalty a slap on the wrist.  Or perhaps it has a legal argument for considering itself exempt from the City’s campaign finance requirements.  In due course, the matter will be resolved.  Meanwhile, it is disquieting that the union representing those responsible for enforcing our laws is charged with violating them.

__________

**”An information is tantamount to an indictment in that it is a sworn written statement which charges that a particular individual has done some criminal act or is guilty of some criminal omission. The distinguishing characteristic between an information and an indictment is that an indictment is presented by a Grand Jury, whereas an information is presented by a duly authorized public official.” West’s Encyclopedia of American Law



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



Economic Development
March 8, 2012, 2:37 PM
Filed under: City Staff, Development

March 8, 2012.  Hollywood has quietly rolled out an eye-popping economic development policy – one that has solid intellectual underpinnings and a promising track record in other locations. This is the first time, to the best of our knowledge, that our City has formulated an economic development strategy that focuses not only on improving the City’s economic base but also on raising the earning power of Hollywood residents.

The new approach is based on the concept of the “industry cluster” – that is, a geographical concentration of companies that are interconnected by the markets they serve and the products they produce. Silicon Valley with its thousands of high-tech companies is the most obvious example. The big question for us is this: Does Hollywood have the necessary assets to create an environment in which industry clusters will grow and prosper?

To answer that question, we start with what we already have.  Take for example, our city’s coastal location between Miami, Fort Lauderdale and Palm Beach: three shipping ports, three airports, ready access to the Florida Turnpike and I-95.  Listen to Cathy Swanson-Rivenbark, our city’s economic development guru, applying this approach to Hollywood. She says we must understand and capitalize on what’s already here – the “high-growth, high quality industries that are located in Hollywood (such as Life Sciences, Marine Industries, Aviation/Avionics, Logistics/Transportation, and Tourism) and the cross-clustering of these important industries.”  She adds that these are unique assets on which to build our development strategy.  Groups of closely related and complementary industries operating in Hollywood would reinforce each other. In addition, they would result in more and better jobs for our residents, the great majority of whom now work outside Hollywood.

She goes on to name the Joe Di Maggio Children’s Hospital, Nova Southeastern University’s National Coral Reef Institute, and Barry University’s College of Health Sciences Campus in downtown Hollywood as thriving Hollywood industries that have remained stable and strong during the recent recession and are projected to grow in the future.

Meanwhile, in furtherance of the new economic development policy, city staffer Anthony Grisby has been studying Hollywood demographics, documenting such troubling statistics as an unemployment rate higher and median income lower than nationally.  He’s also documented that health sciences, for example, can provide many entry-level jobs for high school graduates as well as job training and advancement opportunities that can help to increase Hollywood’s dwindling middle class. He demonstrates that a focus on business recruitment in health sciences would build on the resources we already have and  provide more employment opportunities for Hollywood residents.

To support this new approach, the City has combined its economic and community development functions in a new Department of Community and Economic Development.  Since the Director of the former Community Development Department resigned last year, the position has remained vacant. A search is now underway for a director of the new combined department.  Keep your eyes trained in its direction to spot what we hope will be significant, positive changes to community development, economic development, and redevelopment in the City of Hollywood.

 

 



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.