Miami Gardens - Opa-locka

Bank declares Opa-locka in ‘default,’ could seize millions in future revenues

Opa-locka has been declared to be in default on the city’s government center.
Opa-locka has been declared to be in default on the city’s government center.

Opa-locka’s largest lender declared the city to be in default on millions of dollars in loans in what could jeopardize the future of the city’s most prized asset: City Hall.

City National Bank of Florida, in a sharply worded letter to local officials, said Opa-locka has failed to meet its loan agreement on its sprawling government complex in the center of the city and failed to turn over key financial records after repeated requests by the bank.

Former Assistant City Manager Jordan Leonard talks about his 2012 discovery of over one million dollars of uncollected water bills in inactive accounts in the city of Opa-locka.

In declaring the city to be in default, the bank positioned itself to seize millions in future tax revenues that were used to purchase the 82,000-square-foot building in what would be a symbolic loss for a city that has struggled to stay solvent amid millions in debts.

“It’s everything they have worked for to be taken away from them,” said former City Manager Steve Shiver, who first alerted the state to the city’s fiscal failure last year. “It’s a shame.”

The bank’s demands for all of the money — $8.2 million in loans — follow a Miami Herald investigation in June that showed city leaders secretly ordered their staff to tap into a reserve fund that was set aside to cover the bank loans on the City Hall building in case the city failed to pay them.

Despite the protests of two top directors, City Manager Yvette Harrell ordered her staff in May to dip into the fund — more than $600,000 — to cover payroll and other basic costs in a last-ditch effort to keep the city from going broke, records and interviews show.

In so doing, the city drew well below the level of money it must keep to guarantee the loans and broke its own rules by failing to get permission from the city commission, records show.

Members of the state oversight board that is now overseeing the city’s finances said they are trying to work out differences between the city and its largest lender to keep City Hall open.

Melinda Miguel, the state chief inspector general who chairs the panel, said the city has been making monthly payments to meet the loans, but that it is quickly running out of money and will be forced to tap into a highly restricted water and sewer fund to stay solvent.

“Everything is on the table,” she said.

The grim news follows the arrests two weeks ago of two of the city’s most recognized administrators, City Manager David Chiverton and Public Works Supervisor Gregory Harris, in a sweeping FBI corruption probe that has dominated the life of the city for two years.

Both men were charged with taking bribes from local business owners in exchange for water connections and business permits in what’s expected to be the first of numerous arrests. The other targets include Mayor Myra Taylor, City Commissioner Luis Santiago and influential lobbyist Dante Starks.

The trouble surrounding the bank loans was first brought to the attention of city leaders in a letter on July 20 but was not divulged to the public.

For weeks, the bank said it tried to get the city to turn over crucial internal records to show the state of the city’s finances but that local officials failed to deliver the documents, the bank said in an Aug. 11 letter. That letter was obtained over the weekend by the Miami Herald.

“Three weeks have passed since the Notice Letter was sent,” wrote Jeffrey DeCarlo, a Miami attorney representing the bank. “In that time, borrower has failed to provide any financial information that would enable the lender to properly analyze borrower’s financial condition and the security for the loan.”

The bank cited a host of reasons for the default, including the city’s “becoming insolvent,” its inability to pay its debts and Gov. Rick Scott declaring a financial emergency on June 1.

“The entire principal amount of the notes is now due and payable,” the letter states. One note is for $3.3 million, and the other $4.9 million.

Both notes are secured by the city’s collection of tens of thousands of dollars in fees each month from cable, phone and electric customers — revenues that could be seized by the bank.

Eddie Dominguez, a spokesman for City National, said the bank is “willing to work with the city and the state oversight board to resolve this matter.”

Keith Carswell, an Opa-locka budget director, said the problems began when City Manager Yvette Harrell turned to the reserve money set aside to guarantee the loans to meet the city’s payroll. The issue became so heated, the budget director was joined by the finance director, Charmaine Parchment, in opposing the move.

“[Yvette Harrell] didn’t want to hear it,” said Carswell, who was fired just days later. “She told me that I needed to understand the hierarchy, and if I didn’t, I could leave. To me, it was reckless and irresponsible.” Carswell has since filed a whistleblower case in Miami-Dade circuit court.

At the time, Harrell defended the transfer and criticized the Herald, saying the story was “defamatory” and incorrect. However, records clearly show the city is supposed to keep a “debt service coverage ratio” — equal to a year’s worth of loan payments to cover emergencies, such as the current fiscal crisis.

“What surprises me is that she is a trained lawyer,” Carswell said. “She is able to read contracts and agreements. What she did was wrong.”

Harrell declined to comment about the default notice sent by the bank’s lawyer.

The financing of City Hall has been under scrutiny since April by the Securities and Exchange Commission, which is investigating whether Opa-locka failed to reveal its financial condition when it sought money from the bank in 2015, including millions through a tax-exempt bond.

At the time, the city was bleeding revenue every year and then covering up the shortfalls by tapping into highly restricted funds, records show.

Shiver, the city manager who was fired in November after he warned the state about the budget meltdown, said the default by the city “could be the final straw” that forces Opa-locka to seek bankruptcy protection from hundreds of creditors.

Just months after he was hired to resolve Opa-locka’s deepening financial crisis, City Manager Steve Shiver was fired from his job by commissioners in yet another tumultuous development in a city millions of dollars in debt.

The latest development follows weeks of tension between some Opa-locka commissioners and the state board overseeing the city’s tattered finances. Miguel blasted the city’s leaders during a meeting two weeks ago for failing to meet budget deadlines, cut spending and provide critical documents.

She and other board members ordered Mayor Taylor and commissioners to surrender their city vehicles and credit cards, drawing a stinging rebuke from Mayor Taylor. In an email to the board chairwoman last week, Taylor said the board is “exerting power that belongs to the city commission” and accused the board of being “rude and disrespectful.”

“Instead of focusing in on our finances, the focus shifted on to the elected officials,” she wrote to Miguel on Friday. Taylor criticized the state for holding its meetings from the dais at Sherbondy Village community center while the commissioners are forced to sit in the audience.

“Whereby the board ‘looks down’ on the elected officials,” she wrote.

She complained that the board doesn’t allow the commissioners “to speak or give input” and chided the state for sending “an extra person to ‘watch us’ from the inside,” referring to former county manager Merrett Stierheim, who is serving as the state’s representative at City Hall.

Taylor said she was “highly disappointed in the board’s non-action in coming up with viable solutions in a more speedily [sic] and professional manner.”

Miguel declined to respond to the mayor’s email. Steve Barrett, a vice mayor in the 1990s, said Taylor should not have sent such a critical message while the state is engaged in delicate talks with the city.

“She is not used to someone else running the city,” he said. “She is used to getting things her way. That’s why we are in the shape we are in now.” Barrett said he and other community activists have welcomed the state’s help in the crisis. “We are finally hearing the truth.”

For the past two months, the state has been wading through the city’s budget, checking accounts and billing systems to look for ways to cut costs and pay down more than $8 million in debts.

Hundreds of checks have piled up at City Hall to send to vendors for payments that are overdue but remain in envelopes because the checks will bounce.

Stierheim, who was deputized as an inspector general, said the crisis with the bank is simply the latest in a wave of problems that have crushed the city.

He said he is working on a recovery plan with the city and state. “The only reason I came here is to save the city,” he said. “I don’t want to be part of a bankruptcy.”

Opa-locka Commissioner Terence Pinder who was scheduled to turn himself in to state prosecutors Wednesday on corruption charges was killed after driving into a tree.

Michael Sallah: 305-962-2218, @MikeSallah7

Jay Weaver: 305-376-3446, @jayhweaver

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