The ‘Bleeding’ City

North Bay Village is in danger of going broke. Although city officials say they have it under control, some residents aren’t so sure.

By Angie Hargot

Mayor Joe Geller

North Bay Village commissioners are still trudging through a 61-page audit of the city’s finances for fiscal year 2006-07.

And the news isn’t good.

That’s according to and certified public accountant Carlos Trueba, of the auditing firm Rodriguez, Trueba & Co., PA., who delivered the report to commissioners June 10.

“The city might experience a negative balance if the current financial trend stays constant over the remaining months of our fiscal year,” City Manager Jorge Forte said.

Although the city’s unrestricted net assets — the portion that can be used to finance daily operations without any constraints — totaled roughly $1.5 million in 2006, it only amounted to $335,903 in 2007.

“That tells me the city is losing $100,000 a month,” said Vice Mayor George Kane. “I just wanted to [confirm] the speed at which we’re bleeding.”

Trueba confirmed that “the city is in a downward trend,” resulting from increasing expenses and decreasing revenue, in large part because the city is receiving less money from building fees due to the waning market for new development.

“It’s the result of a downturn in the economy, taxes, decreases in revenue from building fees, declining revenue from sales and property tax and declining revenue from the Building Department,” Trueba said. “You’re among many South Florida cities [in] this financial situation.”

Forte also attributes the city’s hardships to the economy, recent property tax reform and even its residents.

“Many homeowners contested their property’s appraised value to the Tax Valuations Board,” Forte said. “That has caused us to lose almost $200,000 in anticipated revenue.”

Trueba explained that when his firm conducts a city audit, it uses standards set by the Office of the Auditor General to analyze financial indicators, and compares those numbers to prior years and to other cities throughout the state. The results can be favorable, unfavorable or neutral, he said; North Bay Village’s numbers are considered “borderline.”

“Three things can put a city in financial emergency: having a deficit in funds, a situation where the city is unable to meet its payroll or pension numbers” and having insufficient reserves, he said — especially in areas prone to natural disasters. North Bay Village recently switched its city-run police pension into the state’s retirement program.

The auditor also found that bank reconciliations in 2007 “were not timely,” although officials have started getting them up to par; there were outstanding checks more than a year old. In addition, the city was not properly tracking its assets, relying on an insufficient physical inventory system using inadequate software — issues the city is already addressing, he said.

Mayor Joe Geller thanked the firm for conducting its audit early, and warned that since commissioners only had a day to review the audit, Trueba would have to come back to answer more questions.

Geller added that one of the biggest issues affecting the financial numbers was the city’s utility enterprise funds.

According to the audit, over the last decade, the city’s general fund has been subsidizing the city’s utility fund, to the tune of $1.6 million in reallocated tax dollars.

“This practice was done in the past to keep utility rates low for residents,” Forte said. He added that the city is now looking for new sources of revenue, and management has taken a proactive approach to the financial hemorrhaging.

“Language was added to the utility code that enabled the utility to operate independently without a huge subsidy from our general fund,” Forte said, and addressed steps the city is taking to stave off financial ruin.

“In addition, we have reduced staffing in nonessential areas that would not impact the level of services we provide to our residents,” he said.

Two longtime city employees were recently laid off in the wake of waning city coffers. Characterized as low-ranking clerical positions in the manager’s office and Public Works Department, the city manager says their terminations saved the city $130,000.

“The reduction in workforce affected positions that were entry-level or nonessential to our daily operations,” Forte said. “Unfortunately, the reduction impacted two full-time, long-term employees. It also impacted part-time workers, including Building Department inspectors.”

Residents are still outraged. Resident Ann Bakst charged that Forte fired “a 15-year employee and an eight-year employee,” and “hired five new high-priced employees. The city manager’s office is beautiful. He was hired a year and a half ago and he makes $101,000,” and has since received multiple raises, she said. “When I moved here, we had two people working in this city. We’re overstaffed in this city.”

Forte admits that the city has hired some new higher-ups. “Several key positions have been filled in the city over the last two years,” he said. “These were mid- to high-level positions essential to our operational goals as a city.”

Resident Nancy Sonnett-Selwyn expressed anger that Forte “let go of longtime employees” and “brought his cronies to fill in. Four of these people are directly surrounding him … [and were] never needed before,” she said.

Forte was hired in November 2006 to replace ousted City Manager Charity Good, who became mired in a storm of controversy and resident complaints after the SunPost first reported that although she was given permission by the city to perform outside “consulting work,” she was simultaneously employed in similar positions in both North Bay Village and the town of Southwest Ranches in Broward County. Good submitted her resignation in August 2006.

Forte’s initial salary was $101,000, a figure in line with Good’s departing compensation. However, Forte’s contract included a $30,000 salary increase that took effect in May 2007. He was later given a 6 percent cost of living raise that all city employees receive, and then, in November, received a 4 percent yearly merit increase, bringing his total salary to roughly $143,000 per year, not including health benefits, retirement benefits and a car allowance.

“Every few years, somebody wants to fire the city manager,” resident Flo Klein said at the city commission meeting. With severance packages, “This is a costly game,” she said.

“These are painful times,” said an excited Rachel Dugger, wife of former City Commissioner Bob Dugger, who was ousted from the dais after he was arrested in 2003 for failing to disclose financial dealings with a property owner who had lawsuits filed against the city. He maintained his innocence, but settled his criminal charge with the Miami-Dade State Attorney’s Office in 2005.

“I’ve lived here 12 years and have gone through four city managers,” Rachel Dugger said, after Mayor Geller broke up a hollering match that had broken out between her and the audience. “It’s like they’re threatening you,” she told Forte. “If you get paid that, it’s because everyone else in your position gets paid that.”

Although Forte has his supporters, many more citizens are upset at what they consider the mismanagement of city money.

Three years ago, the city, claiming mold problems in what officials called an uninhabitable City Hall, moved administrative operations to a leased suite at 1666 Kennedy Causeway.

“The notion that offices were renovated is erroneous in the context implied,” Forte said. “Standard modifications were made such as paint, partitions and other minor necessary improvements to become operational.”

North Bay Village voters approved four ballot items on Jan. 29 that included issuing $19.3 million in bonds to build a new City Hall and public safety complex, buy land and equipment for new parks and revamp the John F. Kennedy Causeway.

Although residents fearing further debt had rejected similar bond items in previous years, in January, Commissioner Oscar Alfonso sponsored an initiative that would offset the cost of the bonds with new and future developments: The city would reduce the millage rates for property taxpayers by enough to counter the cost of the bonds, replacing that money with development income.

However, few South Floridians foresaw the unprecedented market crash and effects of impending property tax legislation that have become a sobering reality for all state municipalities in recent months. North Bay Village is hardly unique, and may be reevaluating some future projects.

“The status of these projects remains in a preliminary planning stage,” Forte said. “The City Commission will be making decisions over the next few weeks on all capital improvement projects.”

Feeling the crunch, the city has canceled its annual July Fourth fireworks display. Residents were notified on the city’s Web site that the annual celebration had been called off, although transportation would be available to celebrations in neighboring cities.

Many residents protested the cancellation because the city manager’s office had just undergone a renovation that, they claim, cost taxpayers $200,000. Canceling the celebration saved the city roughly $17,000, Forte said.

However, Geller insisted that he couldn’t justify spending thousands on a fireworks display when they city was experiencing layoffs.

“As much as I regret” canceling the celebration, he said, “I could not look in the face of those two [who were] laid off while spending 50 percent of their annual salary for 15 minutes of fireworks.”

Comments? E-mail angie@miamisunpost.com