Miami-Dade County

Sweetwater teeters on bankruptcy amid political power struggle

Miami-Dade Commissioner José 'Pepe' Diaz says county is ready to help Sweetwater navigate financial crisis

Miami-Dade County Commissioner José 'Pepe' Diaz, who is a former Sweetwater mayor, talks on Thursday, June 30, 2016, about how the county is ready to help the city of Sweetwater fix its financial woes.
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Miami-Dade County Commissioner José 'Pepe' Diaz, who is a former Sweetwater mayor, talks on Thursday, June 30, 2016, about how the county is ready to help the city of Sweetwater fix its financial woes.

It was just before Halloween, and the mayor of a tiny west Dade suburb had some bad news for employees.

Instead of a holiday bonus, Sweetwater’s workers — those who’d survived three turbulent years of corruption arrests, firings and layoffs — would be asked to defer their next two paychecks in order to stretch what was left of the city’s money.

A few days later, the blue-collar community just north of FIU’s Modesto A. Maidique campus defaulted on a $2 million loan from Regions Bank. Eventually, Mayor Orlando Lopez announced he would have to stop making required payments to the city’s pension funds in order to make payroll.

Then last week, he said Sweetwater’s money was all but gone.

“For nearly one year I have warned that the city’s resources would run out sometime this summer,” Lopez wrote Wednesday to city commissioners. “It is with great regret and absolutely no pleasure that I inform you the day of reckoning has arrived. We are broke.”

It is with great regret and absolutely no pleasure that I inform you the day of reckoning has arrived. We are broke.

Sweetwater Mayor Orlando Lopez

But is Sweetwater broke? Or is it just broken?

In the wake of a series of corruption stings that sent former mayor Manny Maroño to a federal prison and revealed a government rife with graft, a political power struggle has paralyzed the city of 20,000 and pushed it to the brink of insolvency. Following years of misspending, the city’s seven-member commission and current strong mayor have now deadlocked over everything from raising taxes to hiring and firing police officers.

Instead of agreeing on a 2016 budget, they sued each other, asking a judge to decide who will run the city while spending money they can’t afford on private lawyers. For a year now, Lopez has repeatedly asked Gov. Rick Scott to step in, declare a “financial emergency” and appoint a financial oversight board to grab hold of the city’s financial decisions, as he did last month with Opa-locka. But the governor’s decision has been complicated because several commissioners have told the state that Lopez is overblowing the city’s problems in order to use the state as a tool to supplant their power.

Late Thursday, during a heated special meeting called at the mayor’s behest to request the state’s help, commissioners ripped Lopez’s tenure as “an utter failure.” They questioned the mayor’s projections and refused again to seek state intervention — despite some acknowledgment that the city may indeed be nearing bankruptcy.

“It’s like a mom and dad going through a divorce,” said Saul Diaz, a Sweetwater resident who unsuccessfully ran last year for City Commission. “And we’re like the kids paying the consequences.”

Thursday’s special hearing, which Lopez called a “last opportunity to save face” for commissioners, was just the latest act in a political drama that began during Maroño’s crooked reign and fall as Sweetwater’s mayor and chief administrator.

Under Maroño’s long tenure, the city looked like it was blossoming. Residents voted to annex the Dolphin Mall in 2010 and a second real estate boom began, ultimately boosting the city’s property tax base nearly 500 percent, by $1.2 billion, in six years. Homeowners in the mostly low-rise residential community enjoyed one of the lowest tax rates in the county, and still do.

An investigation into Sweetwater’s police department found cash, liquor, guns and even bicycles were disappearing from Sweetwater’s police evidence room

But when the FBI busted Maroño for taking bribes in the summer of 2013, it popped the top off a sewer of corruption and launched years of chaos and decline.

An investigation into the police department found cash, liquor, guns and even bicycles were disappearing from Sweetwater’s police evidence room (not to be confused with a second, secret evidence room). Thousands in cash that should have been coming in from towing fees — tied to a shady company owned at one time by Maroño — also disappeared. When the dust began to clear, the city was forced to eat about $1 million in expenses after an audit confirmed that grant money for a senior center had been misspent on purchases like a Tahoe for a city employee who happened to be Maroño’s wife.

When Commissioner Jose M. Diaz was appointed as Maroño’s successor, he took over a reeling city now hammered with lawsuits. He distanced himself from the former mayor, fired a number of officials in a “clean house” campaign, and said he was so unnerved by the mess he found that he temporarily shut down Sweetwater’s tiny finance department.

He warned almost two years ago that the city might go broke, but says he ultimately believed the city’s money problems were manageable.

Still, little about Sweetwater’s spending changed. Taxes stayed low, and expenses kept growing, masked only by withholding the state’s cut of red light camera fines and covering payroll with grant funds that should have been used to pay down a Regions Bank line of credit. Auditors would soon find that Sweetwater had badly overshot its $17.5 million budget and blown through almost all its reserves in just two years.

“The city is rotten to the core,” says Rick Diaz, an attorney who has represented multiple clients in lawsuits against the city, including a class-action suit that alleged police trumped up charges in order to improperly seize vehicles and auction them off. “You really want to think enough is enough and somebody is going to come in there and clean house, but it just doesn’t seem like they have the capability, desire or brains to do it.”

Enter Lopez, a long-time Sweetwater commissioner who won the mayor’s office in May of 2015 after he sued and disqualified Diaz from the ballot on the grounds that he violated Florida’s “resign to run” law.

When Diaz was mayor, Lopez had argued that the city’s finances were fine. But like Diaz before him, the city’s new mayor says he was kept in the dark as to how past administrations were spending money and unaware of the extent of the problems. He says he realized upon becoming mayor that Diaz was driving the city into the ground.

Warning that the city was headed for bankruptcy, he proposed hiking the city’s tax rate by 60 percent.

When commissioners scoffed at Lopez’s budget proposal, he laid off a slew of employees. In return, commissioners voted to rescind the layoffs and demanded that he remove what they called unbudgeted hirings that were projected to cost the city about $700,000. In what would begin a series of confounding interactions, Lopez vetoed their votes, commissioners overrode his vetoes with a super-majority, and then Lopez refused to follow their directives, calling them illegal under the city’s laws and charters.

The same thing happened in the fall with the city’s budget after commissioners chose to balance their inflating budget by selling off city land between the Dolphin and International malls — even though the sale must pass a referendum and the property is now pledged as collateral to Regions Bank. Lopez ignored them, implemented his own budget and in January sued the commission, alleging that commissioners were usurping his power as mayor and chief administrator and trying to implement an illegal budget.

This mayor wants to operate as a dictator without speaking or sharing any ideas with the commissioners.

Commissioner Jose M. Diaz

Commissioners counter-sued, accusing Lopez of doing the same to them. The case has led to a slew of depositions. A judge will consider motions next week by each side to decide the case outright before it goes to trial.

“This mayor wants to operate as a dictator without speaking or sharing any ideas with the commissioners,” said Commissioner Diaz, who disputes Lopez’s assertions that he caused the city’s crisis. “He’s trying to make an extreme and chaotic situation just to show the media and the public that he’s right about the financial situation of the city.”

Things are so toxic, when Lopez asked the city of Miami to provide two employees to help Sweetwater’s understaffed finance department examine its financial standing, commissioners threw them out. When Miami’s cursory report came out last month, it agreed with Lopez and the city’s auditors: The city doesn’t have enough money to last the year.

“They’re in cahoots to try to cripple the administration and blame the financial crisis on me,” said Lopez.

Miami’s report aside, what matters now is whether the state agrees with Lopez. Spokespersons did not respond to a request for comment from Scott’s office. Chief Inspector General Melinda Miguel’s press staff would only say that she is aware of Lopez’s request for state intervention, and of warnings from Lopez and the city’s auditors that Sweetwater’s money won’t last the summer.

Currently, Miguel is waiting for commissioners to provide a written response due around the middle of the month. Commissioners say they’re having trouble responding because Lopez won’t provide requested information, but believe the city can still avoid bankruptcy by renegotiating debt, seeking loans or authorizing emergency bond notes. An Aug. 30 referendum is set for the sale of city property at a price of $2.8 million.

They also say Lopez gave more than a dozen employees raises while warning about a fiscal crisis and could have avoided the current situation had he spent as much time trying to fix the city’s problems as he did lobbying the state to take over the city.

“I don’t think anybody here is negating that we have financial challenges,” Commission President Jose Bergouignan said Thursday following a heated exchange with the mayor. “It’s the doing of the mayor’s administration. They’ve just concentrated on taking us down.”

Lopez, who laughed out loud at some of Bergouignan’s suggestions Thursday night, says he’ll do what he can to keep Sweetwater afloat. So far, residents like Saul Diaz say the city’s financial problems haven’t caused problems noticeable to the average taxpayer, like reduced garbage pickup. But Lopez says he’s already cut the city’s staff — including police force — roughly in half and negotiated down a series of pricey city contracts. And he says the sale of Sweetwater’s property will only cover the city’s outstanding debts.

Lopez predicts the city only has money to last another four to six weeks.

“If we continue spending at our current rate then we run out of money in August,” Lopez said. “It will get to the point that the last employee will close the door and turn out the lights.”