SEC accuses South Miami of defrauding bond investors in downtown parking garage deal

 

jweaver@MiamiHerald.com

A South Miami parking-garage controversy that has sparked political clashes, malpractice lawsuits and firings reached a climax Wednesday, when the Securities and Exchange Commission accused city officials of defrauding bond investors about the downtown facility’s tax-exempt status.

In a civil action, the SEC charged the city with misleading those investors about the tax-exempt eligibility of $12 million in bonds sold to build the five-level parking garage and retail complex that opened in late 2007. In the order, the federal commission accused South Miami officials of failing to disclose that they had jeopardized the tax-exempt status of two bond sales by “impermissibly loaning proceeds from the first offering to a private developer and restructuring a lease agreement prior to the second offering,” according to an SEC statement.

The order noted that in 2011 the city settled with the Internal Revenue Service by paying $260,325 in taxes and by taking out a new long-term bank loan of about $1.2 million to cover the additional costs of the private-public parking project after it was deemed taxable.

The city also was ordered to cease violating SEC laws and to hire an independent consultant to oversee its compliance on municipal bond disclosures over the next three years.

“Municipalities in South Florida and elsewhere cannot rely on a lack of internal procedures or experience in debt offerings to excuse fraudulent disclosures made to investors,” said Eric I. Bustillo, director of the SEC’s Miami regional office.

City officials seemed relieved that the decade-long controversy may finally be over.

“It is not costing us a heckuva lot more than it originally did, [but] it’s been a major annoyance,” said South Miami Mayor Philip Stoddard, who inherited the problem when he took over the city’s top political post in 2010.

That year, Miami-Dade’s property appraiser ruled that the parking garage at 5829 SW 73rd St. was subject to property tax. The appraiser concluded that because a private developer operated the garage, it ought to be taxed.

When South Miami worked out an agreement with developer Mark Richman to run the garage, officials allowed Richman to collect all revenues. From that money, the developer must pay the city a yearly base rent plus a certain percentage of gross revenue. He must also pay the property taxes.

Although city taxpayers don’t have to pay property tax on the garage, they don’t receive any property tax from it either. The reason: The deal with Richman said the city must waive its share of those taxes.

According to the property appraiser’s office, the county estimated the taxable value of the garage and attached retail space at nearly $10 million — double earlier assessments, which only covered the retail portion of the garage. That part had been taxable all along.

The project dates to 1997, when the city issued a request for proposals to develop the South Miami Municipal Garage.

The Florida League of Cities, acting as a conduit, issued a series of bonds in 2002 and 2006 to finance its construction.

Bryant Miller Olive, the city’s bond counsel at the time, issued opinions that the bonds were tax-exempt. City Attorney Luis Figueredo supported his opinion.

Now, the city is suing both attorneys for malpractice.

Read more Miami-Dade stories from the Miami Herald

  •  
 <span class="cutline_leadin">FLEEING HONDURAS:</span> Sindy,18, who came to the United States as an unaccompanied minor from Honduras in March, tells the story of her dangerous journey.

    Children of the Americas: From Central America to South Florida

    Children have arrived in the United States without their parents for decades, but over the past two years the number of unaccompanied minors — primarily from Central America — has become so large, it has been characterized as a humanitarian crisis.

  • MIAMI-DADE

    Pizza man robbed, shot in Southwest Miami-Dade

    Miami-Dade police detectives were looking Sunday for two masked men who, they say, robbed a pizza delivery man at gunpoint in Southwest Miami-Dade and then shot him as he tried to drive away.

  • MIAMI

    Parts stolen from three Miami Police boats

    The Miami Police Department is looking into how parts from three of the city’s police boats went missing.

Miami Herald

Join the
Discussion

The Miami Herald is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere on the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

The Miami Herald uses Facebook's commenting system. You need to log in with a Facebook account in order to comment. If you have questions about commenting with your Facebook account, click here.

Have a news tip? You can send it anonymously. Click here to send us your tip - or - consider joining the Public Insight Network and become a source for The Miami Herald and el Nuevo Herald.

Hide Comments

This affects comments on all stories.

Cancel OK

  • Marketplace

Today's Circulars

  • Quick Job Search

Enter Keyword(s) Enter City Select a State Select a Category