The Broward Inspector General’s final report on the “gross mismanagement” of millions in tax dollars by Hallandale Beach is sharply critical of city leaders it says have shown a “basic misunderstanding” of what’s gone wrong.
Hallandale Beach city managers past and present, the city attorney, the mayor and other city officials defended the handling of funds of the city’s Community Redevelopment Agency in formal responses included in the 56-page report released last week.
The Inspector General, after a year investigating, determined that from 2007 to 2012, city leaders used the CRA like a piggybank to improperly pay for the city’s general expenses and other pet projects, including donations to favored charities and loans to local businesses.
By law, the Hallandale Beach CRA is a limited purpose special district whose funds are only to be spent to address slum and blight conditions within a defined area. It receives 95 percent of the taxes collected on the appreciated value of properties within its boundaries, or about $70 million since it began in 1996.
Some of the report’s bluntest words rebut claims by Mayor Joy Cooper and City Attorney V. Lynn Whitfield that the Inspector General had no authority to investigate the CRA’s activities.
Whitfield’s “assertions ignore the fact that the [Office of Inspector General] has authority over all municipal officials in identifying mismanagement of public resources,” the report says. “A municipality cannot avoid OIG oversight by spending taxpayer funds through an agency that is independent in name only.”
Likewise, the report ripped “another common theme” of the city’s defenders that the Inspector General mistakenly relied on a Florida Attorney General’s advisory opinion that the Inspector General said precluded the city from spending CRA funds as it had.
City Attorney Whitfield’s arguments “reflect the basic misunderstanding that is at the core of the gross mismanagement identified in this report: the city has failed to comprehend that the CRA has a limited purpose and that the powers of the CRA to expend CRA…funds is not equal to the power of the municipality to expend general funds.”
The report urged Hallandale Beach’s leaders to ask the Attorney General for another opinion if they don’t like the original one.
The report also criticized City Manager Renee Crichton Miller, who it said made “unsupported” arguments to support Cooper and Whitfield’s erroneous claims that the Inspector General had incorrectly determined that CRA funds were improperly used to repay city bond obligations for park improvements in other parts of the city.
City officials contended that it was always the city’s intention to repay any CRA funds spent on parks outside the CRA boundaries. The report, however, says those arguments failed to “address the plain fact that $416,365 in CRA funds — deemed ‘negligible’ by [Miller] — have already been expended on parks outside the CRA boundaries” without any repayments or any plan for repayment.
Miller, hired last summer and not identified in the report as being responsible for past mismanagement, stuck by her arguments in an interview after the report’s release, saying the city has every intention to repay funds owed the CRA. She said it does not have to do so now because those projects have yet to get underway.
“We have a difference of opinion with the Inspector General,” said Miller. “I would not disparage their view.”
Asked for comment, Mayor Cooper referred a reporter to her statements in the Inspector General’s report.
Said former City Commissioner Keith London, who lost a race for mayor to Cooper last November, “I hope the State Attorney’s office will look into this further.”
BrowardBulldog.org first reported the Inspector General’s preliminary findings last month. Last week’s final report incorporated the responses of city leaders.
Investigators found at least $2.2 million in questionable CRA expenditures, including inappropriate loans to local business and grants to local non-profits. The city improperly also spent $416,000 in CRA money for parks outside the CRA boundaries, the report said.
The report also said there is “probable cause” to believe that Dr. Deborah Brown, the founder and director of the Palm Center for the Arts engaged in criminal misconduct. In one case, the center allegedly spent nearly $5,000 to make a payment on Brown’s timeshare at the Westgate Resort in Orlando, and make payments to Brown and her brother. The matter was referred to the Broward State Attorney’s Office for criminal prosecution.
In her response to the Inspector General, Brown provided a document of expenditures and details of youth activities that she said provided “positive, measurable results” at her Palm Center for the Arts. The report, however, said there was a lack of supporting documentation for those expenditures.
“Her submission does not alter our determination that there is probable cause to believe that Dr. Brown may have engaged in criminal misconduct,” the report says.
Brown could not be reached for comment.
In their responses, Cooper and former city manager Mike Good defended various CRA loans to local businesses, including a $75,000 loan in 2009 to Digital Outernet Inc., a startup firm that planned to earn income from advertising on televisions screens it hoped put in local businesses.
Digital Outernet closed a short time later when its principal owner died. But the city failed to secure a guarantee of repayment from other investors and waived a provision in the deal that would have given it some collateral for the loan.
Cooper said the Digital Outernet loan was “not gross mismanagement” because it attempted to help establish a minority-owned business, according to the report. Good said the loan was “properly made,” adding that at it was “unfortunate that some paperwork had not been signed,” the report said.
Good, too, defended a $50,000 loan to the South Florida Sun Times weekly newspaper, saying it was “justified” because the newspaper needed assistance. The 2009 loan, under terms so favorable that half of it need not be repaid, was made under a new program Good had established for assist struggling businesses.
At the time, the two top executives of the for-profit newspaper reported to the IRS that they’d paid themselves $469,000 in salaries in the two years before receiving the loan.
Cooper told the Inspector General that the salaries of those seeking loans are now part of the loan evaluation process, the report said.
But the Inspector General’s report said Hallandale Beach’s failure until recently to take any steps to empower the CRA as an independent body that might “act as a check on the improper use” of CRA tax funds is problematic.
“While we are encouraged by the remedial steps taken by the city and the CRA in the last year, the OIG remains concerned that the city has not acknowledged the statutory limit on the use of TIF [tax increment financing] funds diverted to the CRA,” says the report, which makes a number of recommendations it said would ensure the CRA’s independence.
Hallandale Beach is not the only Broward city to have misspent CRA funds. Within the last year, the Inspector General found $2.5 million misspent by Lauderdale Lakes and the Florida Auditor General identified “several significant expenditures” by Hollywood that did not follow state law.
“It is becoming increasingly apparent that the gross mismanagement of CRA funds by a Broward County municipality is not a unique occurrence,” the report says. “The OIG will continue to examine the expenditure of CRA funds by municipalities.”
The report also recommends the county assess its legal options “to prevent the ongoing abuse of the CRA process and recover those funds that may have been misspent.”
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