HomeMy WebLinkAboutSEOPW-CRA-M-01-0145W
ITEM 13
PROGRESS REPORT FROM DEPARTMENT OF
INTERNAL AUDIT (SAWYERS WALK)
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Item 13
CITY OF MIAMI, OFFICE OF INTERNAL AUDITS
r
a I N C 0 R P ORATED
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AUDIT OF THE LEASE AND DEVELOPMENT
AGREEMENT BETWEEN THE COMMUNITY
REDEVELOPMENT AGENCY (CRA) OF THE CITY OF
MAIMI AND TIME INDIAN RIVER INVESTMENTS OF
MIAMI, INC. (GENERAL PARTNER FOR POINCIANA
VILLAGE OF MIAMI, LIMITED)
AUDIT NO. 02-003
Prepared By
Office of Internal Audits
Victor I. Igwe, CPA, CIA
Director
ADRIAN E. LIBURD, CPA, STAFF AUDITOR, SENIOR
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Tal of � t�xxrYt
G`(i OF
VICTOR I. IGWE, CPA,CIA
Director
CO., F� o
December 06, 2001
Mr. Carlos A. Gimenez
City Manager
444 SW 2nd Avenue
Miami, FL 33130
CARLOS A. GIMENI
City Manager
Re: Audit of the Lease and Development Agreement Between the Community
Redevelopment Agency of the City of Miami and the Indian River Investments
of Miami, Inc., (General partner for Poinciana Village of Miami, Limited).
Audit No. 02-003
At the City Commission meeting bf July 26, 2001, the City Commission passed and
adopted Resolution number 01-824, which directed the Office of Internal Audits (OIA)
to conduct an audit of the lease and development Agreement between the City of Miami
and the Indian River Investment of Miami, Inc., (General partner for Poinciana Village
of Miami, Limited). The purpose of the lease/development Agreement, which was
signed on June 15, 19?8, was to develop/construct residential (condominiums)
I- .
buildings on the property located between Northwest 2" Avenue, Northwest 3`d
Avenue, Northwest 7' Street, and Northwest 8`' Street, which the City acquired. The
City assigned this lease and development Agreement to the Community Redevelopment
Agency, in accordance with Resolution number 95-268, which was passed and adopted
by the City Commission on April 27, 1995.
Resolution number 01-824 directed the OIA to examine certain issues as they relate to
the lease and development Agreement, further recommending the appropriate forms of
restitution to make them whole.
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OFFICE OF INTERNAL AUDITS
444 S.W. 2nd Avenue, Suite 715/Miami, FL 33128/(305) 416-2040/FAX (305) 416-2046
Mailing Address: P.O. Box 330708 Miami Florida 33233-0708
This report provides the results of our review and/or examination of the issues relating
to this lease and development Agreement as directed by the City Commission. Our
audit covered the period June 15, 1988, through July 31, 2001.
Sincerely, �—
Victor I. Igwe, CPA, CIA
Director
Office of Internal Audits
C: The Honorable Mayor Manuel A. Diaz
Commissioner Tomas Regalado
Commissioner Arthur E. Teele
Commissioner Joe M. Sanchez
Commissioner Angel Gonzalez
Commissioner Johnny L. Winton
Genaro Iglesias, Chief of Staff, City Manager's Office
Frank N. Rollason, Assistant City Manager
Dena S. Bianchino, Assistant City Manager, Planning and Development
Robert-J. Nachlinger, Assistant City Manager, Finance and Administration
Walter J. Foeman, City Clerk
Alejandro Vilarello, City Attorney
Members of the Audit Advisory Committee
Scott Simpson, CPA, Director, Finance department
Linda M. Haskins, CAA, Director, Management and Budget department
Annett Lewis, CPA, Acting Executive Director, Community Redevelopment
Agency (CRA)
William Bloom, CRA Legal Counsel
File
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AUDIT REPORT OF THE
LEASE AND DEVELOPMENT AGREEMENT BETWEEN THE COMMUNITY
REDEVELOPMENT AGENCY OF THE CITY OF MIAMI AND THE INDIAN
RIVER INVESTMENTS OF MIAMI, INC.
FOR THE PERIOD JUNE 15, 1988, THROUGH JULY 31, 2001
TABLE OF CONTENTS
INTRODUCTION........................................................ !............................................ 1
SCOPEAND OBJECTIVES......................................................................................... 2
METHODOLOGY..................................................................................................... 3
RESULTSIN BRIEF.................................................................................................. 4
POINCIANA VILLAGE LIMITED PARTNERSHIP........................................................ 4
THE PROMISES THAT WERE MADE TO ORIGINAL LAND OWNERS TO ENTICE THEM
TO INVEST IN POINCIANA VILLAGE LIMITED PARTNERSHIP ................................. 4
ANALYSIS OF MONIES LOST BY SAWYER DEVELOPMENT CORPORATION (ORIGINAL
LANDOWNER) WHO INVESTED IN POINCIANA VILLAGE LIMITED PARTNERSHIP.... 5
COMMITMENTS OR PROMISES THAT WERE MADE TO PROSPECTIVE BUYERS AT THE
TIME THE UNITS (CONDOMINIUMS) WERE PURCHASED ....................................... 6
THE REASONABLENESS OF THE CONDOMINIUM ASSOCIATION FEES CURRENTLY
PAIDBY THE OWNERS...................................................................................... 7
AUDIT FINDINGS AND RECOMMENDATIONS............................................................. 8
POINCIANA VILLAGE LIMITED PARTNERSHIP........................................................ 8
THE PROMISES THAT WERE MADE TO ORIGINAL LAND OWNERS TO ENTICE THEM
TO INVEST IN POINCIANA VILLAGE LIMITED PARTNERSHIP ................................. 8
ANALYSIS OF MONIES LOST BY SAWYER DEVELOPMENT CORPORATION (ORIGINAL
LANDOWNER) WHO INVESTED IN POINCIANA VILLAGE LIMITED PARTNERSHIP... 10
COMMITMENTS OR PROMISES THAT WERE MADE TO PROSPECTIVE BUYERS AT THE
TIME THE UNITS (CONDOMINIUMS) WERE PURCHASED: ..................................... 13
THE REASONABLENESS -OF THE CONDOMINIUM ASSOCIATION FEES CURRENTLY
PAIDBY THE OWNERS..................................................................................... 15
EXHIBITI............................................................................................................. 18
EXHIBITII............................................................................................................ 19
EXHIBITIII........................................................................................................... 20
EXHIBITIV........................................................................................................... 21
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INTRODUCTION
On July 31, 1984, the City Commission passed Ordinance Number 84-893, which
authorized the issuance of a Request for Proposals (RFP) for the unified development
project to be known as Southeast Overtown/Park West Redevelopment project phase I
development. Pursuant to this RFP, the City of Miami signed a lease and development
Agreement dated June 15, 1988, with the Indian River Investments of Miami, Inc.,
(General Partner for Poinciana Village of Miami, Limited).
The purpose of the lease/development Agreement was to develop/construct residential
(condominiums) buildings on property located between Northwest 2nd Avenue,
Northwest 3`d Avenue, Northwest 7`' Street, and Northwest 8' Street in the City of
Miami, and collectively referred to as "Block 46" and currently known as Poinciana
Village. Block 46 consists of approximately 3.25 acres of land shown on the survey
and plat attached to the Agreement and was designated as the "Leased Property" on the
east half of the block and the "Future Leased Property" on the west half of the block.
Several families/individuals owned the entire land, prior to the development of Block
46. In accordance withthe Agreement, the Developer was required to construct sixty-
four (64) dwelling units n a four-story building. The Developer's improvement on the
west half of Block 46 would consist of ninety-one (91) condominium units in a single
tall building or tower of twelve (12) floors.
The City assigned this lease and development Agreement to the Community
Redevelopment Agency, in accordance with Resolution number 95-268, which was
passed and adopted by the City Commission on April 27, 1995.
The purpose of the audit is to review and/or examine certain issues relating to this lease
and development Agreement as directed by the City Commission through Resolution
number 01-824.
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SCOPE AND OBJECTIVES
As part of our oversight responsibilities, the Office of Internal Audits (OIA) performs
financial and operational audits to determine the extent of compliance with provisions
of contracts, programs, and/or lease agreements between the City and private
companies. The scope of this audit focused primarily on those issues articulated in
Resolution number 01-824, as described in the bullets below. The audit also included
examinations of various transactions to determine whether they were executed in
accordance with governing provisions of the controlling legal authority. The
examination covered the period June 15, 1988, through July 31, 2001. In general, the
audit focused on the following 5 broad objectives:
• To examine and determine the promises that were made to the original
landowners to entice them to invest in Poinciana Village Limited
Partnership.
• To determine how much money was lost by any original landowner who
irnvested in Poinciana Village Limited Partnership, and also to recommend
appropriate forms of restitution to make it whole.
• To examine and determine whether the project Developer fulfilled those
commitments or promises that it made to individual buyers at the time the
units (condominiums) were purchased.
• To examine the reasonableness of the condominium association fees
currently paid by the owners.
• To verify compliance with other significant provisions of the Lease and
Development Agreement.
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METHODOLOGY
We conducted our audit in accordance with generally accepted auditing standards and
applicable auditing standards contained in the Standards for the Professional Practice
of Internal Auditing, issued by the Institute of Internal Auditors. However, our Office
has not gone through the required peer review process. To obtain an understanctmg of
the internal controls, we interviewed appropriate personnel, reviewed applicable
written policies and procedures, and made observations to determine whether the
prescribed controls had been placed in operation. The audit methodology included the
following:
• We obtained sufficient understanding of the internal control policies and
procedures, and determined the nature, timing, and extent of substantive tests
necessary and performed the required tests.
• We determined compliance with all the objectives noted on page 2.
• We performed other procedures as deemed necessary.
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RESULTS IN BRIEF
POINCIANA VILLAGE LIMITED PARTNERSHIP
THE PROMISES THAT WERE MADE TO ORIGINAL LAND OWNERS TO
ENTICE THEM TO INVEST IN POINCIANA VILLAGE LIMITED
PARTNERSHIP.
According to the Developer, the Sawyer Development Corporation (husband/wife) was
the only original landowner that exercised the option, as provided in the original RFP
for this project, to participate in the development project (as an equity investor in a
development constructed on one's former property). Pursuant to the option to invest,
the Sawyer Development Corporation (Sawyers) made an initial contribution of
$150,000 as a limited partner in the Poinciana Village Limited partnership in 1986,
which provides ten percent (10 %) interest per annum, and additionally 10 % to be
earned on the profits.
The Sawyers made anoth6°contribution of $200,000 in 1990. However, the General
Partner of Poinciana Village Limited Partnership and the Sawyers verbally agreed that
the rate of return that would be earned by the Sawyers on this investment would be
11.65 % and 13.80 %. The verbal agreement on the interest rate was changed to a fixed
8 % in 1992 due to cash -flow problems.
The prospects of earning ten percent (10%) interest per annum and the 10% of the
profits earned by Limited Partnership may have enticed the Sawyers to invest the initial
$150,000 in the partnership. Additionally, the prospects of earning the rate of return
agreed upon, as noted above, may have enticed the Sawyers to make the subsequent
$200,000 investment.
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ANALYSIS OF MONIES LOST BY SAWYER DEVELOPMENT CORPORATION
(ORIGINAL LANDOWNER) WHO INVESTED IN POINCIANA VILLAGE
LIMITED PARTNERSHIP.
Prior to the development of Block 46, several families/individuals owned the entire
land on which this development project is located. The Sawyers family who owned
two of the lots, which was approximately 10,000 square feet of the total 3.25 acres,
was the only original landowners who agreed to invest in Poinciana Village Limited
Partnership.
Our review of the Federal Income Tax filed by the Poinciana Village Limited
Partnership (Partnership) disclosed that the Partnership incurred a total loss of
$2,162,318 during the period January 01, 1988, through December 31, 2000.
Therefore, the Sawyers may have regrettably lost a total of $654,029.55. This total
amount of loss may be reduced by any tax benefits that the Sawyers may have derived
and/or by the total Association fees of $21,746.50, which the Partnership assumed on
behalf of the Sawyers.
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COMMITMENTS OR PROMISES THAT WERE MADE TO PROSPECTIVE
BUYERS AT THE TIME THE UNITS (CONDOMINIUMS) WERE PURCHASED.
The brochure that was provided to prospective buyers at the time the condominium
units were purchased stated that certain amenities would be provided within the
confines of the condominium area when all phases of the construction are completed.
Our audit disclosed that all the commitments have not been met because the second
phase of the development has not been started and completed. We noted that the delay
is due to certain contractual issues between the Developer and the Community Re-
development Agency (CRA).
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THE REASONABLENESS OF THE CONDOMINIUM ASSOCIATION FEES
CURRENTLY PAID BY THE OWNERS.
As part of our audit we analyzed two months of the Condominium Association
operating expenses to determine whether the $208 monthly association fees currently
paid is reasonable. Based on our analysis as shown in exhibit III, on page 20 it appears
that the $208 monthly fee as currently charged may not be sufficient to pay for all the
daily operation/maintenance needs, land lease payments due to the CRA, and a
reasonable reserve necessary for contingency repairs. The association currently does
not have any funds reserved for contingencies. A reasonable reserve would ensure that
emergency repairs would be made on a timely manner. Our analysis as shown on
exhibit III, on page 20, indicates that the projected Association fees that would be
sufficient to fund all operating expenses for the 64 units would be $265.30, and not
$208, as currently charged. We project, as shown on exhibit III, on page 20, that the
Association fees that would be sufficient to fund all operating expenses for a 155 units
(phases I and II) would be $169.33.
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AUDIT FINDINGS AND RECOMMENDATIONS
POINCIANA VILLAGE LIMITED PARTNERSHIP
THE PROMISES
THAT
WERE MADE
TO ORIGINAL
LAND OWNERS TO
ENTICE THEM
TO
INVEST IN
POINCIANA
VILLAGE LIMITED
PARTNERSHIP.
The Request for Proposal (RFP) which was issued in connection with the Southeast
Overtown/Park West Redevelopment project, provided for a "Property Owners Equity
Participation Plan" (Plan). This plan provided that the original landowners could
participate in the development project through any of the following options:
• As a developer/investor
• As a participant in an investment group; and
• As an equity investor in a development constructed on one's former property.
According fo the Developer, the Sawyer Development Corporation (husband/wife) was
the only original landowner that exercised the option to participate in the development
project (as an equity investor in a development constructed on one's former property).
Pursuant to the option to invest, the Sawyer Development Corporation (Sawyers) made
an initial contribution of $150,000 as a limited partner in the Poinciana Village Limited
partnership in 1986. Section IX(1) of the Certificate of Limited Partnership provides
that the Limited Partner (Sawyers) shall receive ten percent (10%) interest per annum.
Additionally, Section IX(3) provides that the Sawyers would receive 10% of the profits
earned by the Limited Partnership over and above the ten percent (10%) interest paid to
the Limited Partner (see exhibit I, on page 18).
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The Sawyers made another contribution of $200,000 in 1990, as shown on exhibit II,
page 19. Prior to this additional contribution to the Partnership, the Sawyers invested
this amount in two Certificate of Deposit (CD) accounts, which generated 11.65 % and
13.80% rates of interest. The CD accounts were liquidated and the principals
($195,000) were invested in Poinciana Village Limited Partnership in 1990. The
Sawyers re -invested the first $5,000 of interest earned. At the time this contribution
was made there was nothing formally in writing which described the nature and
conditions of this additional contribution of $200,000 to the Partnership. However, the
General Partner of Poinciana Village Limited Partnership and the Sawyers verbally
agreed that the rate of return that would be earned by the Sawyers on this investment
would be the same as those rates of interest earned on the CD accounts as described
above. However, the verbal agreement on the interest rate was changed to a fixed 8 %
rate of interest in 1992 due to cash -flow problems.
Phase I of the project, which is made up of 64 units has been completed and sold.
However, as of the date of this audit report, the construction of the final phase (12
stories with 91 units), which was promised and may have enticed the Sawyer
Development Corporation to invest in Poinciana Village Limited Partnership has not
commenced due to certalo contractual issues between the Community Redevelopment
Agency (CRA) and Poinciana Village Limited Partnership. The entire development
project was scheduled to have been completed by September 04, 1998. The prospects
of earning ten percent (10%) interest per annum and the 10% of the profits earned by
the Limited Partnership may have enticed the Sawyers to invest the initial $150,000 in
the partnership. Additionally, the prospects of earning the rate of return agreed upon,
as noted above, may have enticed the Sawyers to make the subsequent $200,000
investment.
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ANALYSIS OF MONIES LOST BY SAWYER DEVELOPMENT CORPORATION
(ORIGINAL LANDOWNER) WHO INVESTED IN POINCIANA VILLAGE
LIMITED PARTNERSHIP.
Prior to the development of Block 46, several families/individuals owned the entire
land on which this development project is located. The Sawyers family who owned
two of the lots, which was approximately 10,000 square feet of the total 3.25 acres,
was the only original landowner who agreed to invest in Poinciana Village Limited
Partnership.
The Sawyer Development Corporation (Sawyers) made a contribution of $150,000 as a
limited partner in the Poinciana Village Limited partnership in 1986. Section IX(1) of
the Certificate of Limited Partnership signed by the General Partner (Indian River
Investments of Miami, Inc.), and the Limited Partner (Sawyer Development
Corporation) provides that the Limited Partners shall receive ten percent (10%) interest
per annum on the amount of funds the Limited Partners have invested from time to
time, calculated on a daily basis and paid monthly, quarterly or annually by the tenth of
the following month. Additionally, Section IX(3) provides that, "The Limited Partner
is to receive 10 % of the gpofits earned by the Limited Partnership over and above the
ten percent (10%) interest paid to the Limited Partner. For the purpose of this
paragraph, the term profit shall mean the net difference between cash income and cash
or accrued expenditures." The original term of the Limited Partnership will be from
January 15, 1985, through December 31,1989, and thereafter from year to year, unless
at least nine (9) calendar months before December 31 of any year, the General or any
of the limited Partners shall have delivered to the principal office of the Limited
Partnership a written notice that he or she desires the Limited Partnership to terminate
at the close of business on December 31 of such year, in which event the Limited
Partnership shall terminate at the time so designated. Based on our audit inquiry, the
Limited Partnership is still active.
10 SEOPW/CRA
Our review of the Federal Income Tax filed by the Poinciana Village Limited
Partnership (Partnership) disclosed that the Partnership incurred a total loss of
$2,162,318 during the period January 01, 1988, through December 31, 2000. The
audit further disclosed that the Sawyers received only $60,178.77 in interest payments
from its $150,000, initial contribution/investment made into the Partnership. Section
XVI of the Certificate of Limited Partnership provides that, "The General Partner shall
be responsible for the obligations of the Limited Partnership to the extent that a
General partner is now liable under the Laws of the State of Florida, but no Limited
Partner shall at any time be liable for the debts and losses of the Limited Partnership in
excess of the amounts contributed or then due to be contributed by him to the capital of
the Limited Partnership." Based on the provisions of Section XVI of the Certificate of
Limited Partnership the Sawyers may have regrettably lost a total of $322,321.23 in
Principal and accrued interest, as shown on exhibit I, on page 18.
As noted on page 9, the Sawyers liquidated two Certificate of Deposit (CD) accounts,
which earned 11.65 % and 13.80 % rates of interest and invested an additional $200,000
into the Partnership. The audit disclosed that the Sawyers received only $66,949.20 in
interest payments from this additional investment into the Partnership. The terms and
rates of return for this additional $200,000 investment, which was verbal between the
parties is separate and distinct from the initial $150,000 limited partnership
contribution. As noted above, the Partnership has not been profitable, and therefore,
the Sawyers may also have lost an additional $331,708.32 in principal and accrued
interests, as shown on exhibit II, on page 19.
Our audit also disclosed that the Sawyers purchased 3 condominium units and paid for
those units with their personal funds. Records maintained by the Partnership disclosed
that the Partnership assumed the Sawyers portion of the Association fees for the period
October 1993 through October 2000, amounting to a total of $21,746.50. We also
noted that the Sawyers, as a limited partner, was issued annual K-1, Partnership
:),LUP W / CRA
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Allocation of Profit and Losses Tax Schedules, which entitled the Sawyers to 10%
interest in the total losses incurred as a limited partner. Therefore, the actual loss
incurred by the Sawyers would be $654,029.55 ($322,321.23+$331,708.32) reduced
by any tax benefits that the Sawyers may have derived as described above and also by
the total Association fees assumed by the Partnership as noted above.
Recommendation:
As a possible outcome in any investment venture, the Sawyers regrettably lost
substantial savings in this development project. They should explore all available
options including negotiating with the general partner, and/or use the losses to reduce
its future income tax liability.
Auditee's Response and Action Plan:
The President of Indian River Investments of Miami, Inc., also the Developer, stated
that, "The Agreement, in principle, reached with Bank of America in November of
2000 was the end result of meetings and discussions that continued over a several
month period. Bank of America had been the lead lender for the last 24 units built.
The Agreement to enter into a Joint Venture to do Phase II of Poinciana Village and the
3 blocks of Sawyer's Walk evolved from the previous relationship.
The understanding is that the Bank will provide all of the funds as requested to build
the development and repay the Investors. The letter dated November 17, 2000, spelled
out how the investors will be repaid. In November the actual amount due to the
Investors, Developer, Creditors, etc, was not calculated but estimated. It was agreed
with the Bank that the approximate amount was $4 million. The actual amount was to
be determined. "
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lot COMMITMENTS OR PROMISES THAT WERE MADE TO PROSPECTIVE
BUYERS AT THE TIME THE UNITS (CONDOMINIUMS) WERE PURCHASED:
0
The brochure (see exhibit IV, on page 21) that was provided to prospective buyers at
the time the condominium units were purchased stated that the following amenities
would be provided within the confines of the condominium area when construction is
completed:
• Private exterior decks and terraces
• Modern swimming pool
• Landscaped deck over the parking area
• Meeting rooms
• Enclosed recreation area
• Lush landscaping
In response to our audit inquiry, three current owners stated that owners were also
promised that vandalism and homelessness in the area would be eliminated through
increased security (Police presence) and the development of "Sawyer's Walk" in the
condominium's immediate vicinity. The "Sawyer's Walk" development plan includes
the construction of high rise condominium units with retail stores, specialty shops, bars
and restaurants on the ground level (a mini mall), and a park with large lawn areas,
play space, and a water fountain.
In connection with security, we observed that the property is partially fenced with
seven and half feet metal rails, and the undeveloped portion is fenced with six feet
wire. The property has a card access security system and a two metal -rail entry gates.
The property also has a security surveillance system and a watchdog. The property has
a swimming pool and each unit has an exterior deck and a terrace. The other amenities
such as parking lot, enclosed recreation area, and clubhouse, which were promised but
not realized so far, are associated with Phase II of the project, which has not been
SEOPW /Cl7 k
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started. Additionally, we observed temporary residence of homeless population along
NW 7`' Street between NW V and NW 2°d Avenues (Sawyer's Walk).
Recommendation:
We recommend that all pending issues as they relate to the construction of the second
and final phase (12 stories with 91 units) of this development project be finalized. The
completion of this final phase would provide all the amenities promised. The
completion of this final phase will include a parking garage and also will facilitate other
amenities, which were promised to the prospective buyers at the time the condominium
units were purchased.
Auditee's Response and Action Plan:
The developer stated that the second phase has not been started as a result on going
issues with the CRA.
e
14
THE REASONABLENESS OF THE CONDOMINIUM ASSOCIATION FEES
CURRENTLY PAID BY THE OWNERS.
Phase I of the project, which is made up of 64 units has been completed and sold.
However, the construction for the final phase (12 stories with 91 units) and a parking
garage has not commenced due to certain contractual issues between the CRA and
Poinciana Village Limited Partnership. Prior to July 2001, each of the current owners
paid a monthly $98 condominium association fees to the Developer (Indian River
Investments of Miami, Inc.) At the beginning of July 2001, the association fee
increased to $208 (112 percent increase). The association fees collected are used to
maintain and provide security for the property. The Developer stated he had
subsidized the $98, which was •charged prior to July 2001, and therefore the 112
percent increase was necessary to cover increasing cost of maintenance and other costs.
The Developer further noted, that the association fees would have been lower if the
additional 91 units (final phase) had been completed and occupied as planned.
The daily management of the condominium association affairs including operation of
the condominium office, supervision of maintenance personnel, and collection of
monthly assessment feep are performed by the President and Vice -President of Indian
River Investments of Miami, Inc., (General Partner for Poinciana Village of Miami,
a
Limited).
As part of our audit we analyzed two months of the Condominium Association
operating expenses to determine whether the $208 monthly association fees currently
paid is reasonable. Based on our test as shown in exhibit III, on page 20, it appears
that the $208 monthly fee as currently charged may not be sufficient to pay for all the
daily operations/maintenance need, land lease payments due to the CRA, and a
reasonable reserve necessary for contingency repairs. The association currently does
not have any funds reserved for contingency. A reasonable reserve would ensure that
emergency repairs would be made on a timely manner. For example, there are cracks
15 SEOPW / CRAB
L 1.- itc3
on the walls of some of the units, the exterior walls of some of the units needs to be
painted, and the fire sprinkler needs to be upgraded. Our analysis as shown on exhibit
III, on page 20, indicates that the projected Association fees that would be sufficient to
fund all operating expenses for the 64 units would be $265.30, and not $208, as
currently charged. We project, as shown on exhibit III, on page 20, that the
Association fees that would be sufficient to fund all operating expenses for a 155 units
(phases I and II) would be $169.33.
We noted that the Developer/Condominium Association owes the CRA back land -lease
rental fees of $4,428.11 ($4,062.50+$365.61). This amount is composed of land -lease
rental fees of $4,062.50 for the period of January 1, 1998, through June 30, 1998, and
additional fees of $365.61, which constitute shortages of prior remittances to CRA.
Upon audit inquiry, the Developer stated that it was his understanding that the back
rental fees for the period of January 1, 199�, through June 30, 1998, was waived by
the amendment to the Agreement dated July 1998. In connection with the additional
fees of $365.61 as noted above, he stated that CRA accepted the remittance without any
questions.
The Condominium Assri'ation records disclosed a total of $11,512.92 of outstanding
bills for security, water, and franchise cable television fees, and $10,728.87 of past due
association fees owed by 27 owners. It appears that the outstanding bills may be the
result of past due association fees.
Recommendation:
We recommend that the Association make every effort to collect all past due
association fees. We further recommend that the CRA Board may consider waiving the
back land -lease rental fees of $4,428.11 as described above. Based on our analysis as
shown in exhibit III, page 20, the $208 monthly Association fees as currently charged
is not unreasonable when compared to what it would actually cost ($265.30) to
16 SEOPW / CRA
properly fund the operations of the Association. However, the estimated monthly
Association fees would have been $169.33, if the second and final phase of the project
had been completed and sold. Therefore, we recommend that the CRA Board may
consider waiving the annual land lease payment of $10,937.52 currently due and
payable to CRA from the Association until phase II construction starts. By waiving
this annual lease payment, the monthly association fees will be reduced to $193.76
(estimated) as compared $169.33 (estimated), which would have been the Association
fees, if phase II of the project had been completed and sold.
Auditee's Response and Action Plan:
Not applicable
[SIEOPW / CRA
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Exhibit I
Poinciana Village of Miami, Ltd
Schedule of Sawyers Development Corporation
Principal and Accrued Interests
February 1, 1986 through July 31, 2001
Limited Partnership Accrued Simple Total Principal
Contribution made Interest of 10% from and Accrued Payment
on 2/1//86 2/1/86 through 7/31//01 Interest Received
$ 150,000.00 $ 232,500.00 $ 382,500.00 $ 60,178.77
Balance
Owed
$ 322,321.23
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err► V1,00
Exhibit II
Poinciana Village of Miami, Ltd
Schedule of Sawyers Development Corporation
Investment and Accrued Interests
March 8, 1990, through July 31, 2001
Contributions made
Date Investment
as Investment
Amount
was made
Investment
$ 100,000.00
03/8/90
Investment
95,000.00
03/8/90
Investment
2,100.00
04/20/90
Investment
2,010.66
05/10/90
Investment
289.34
05/1190
Investment
600.Q0
06/069Q
Total
$ 200,000.00
Less Payments Received
Less Association Fees Assumed
by the Developer for the Period Oct. 1993 through Oct. 2000
Balance Owed
* Accrued Simple
Interest at varied rates
3/8/90 through 7/311/01
$ 99,329.17
94,445.83
2,065.18
1,957.46
281.68
578.20
$ 198,657.52
* Interest rates for the period 03/8/90 through 06/30/92 was 11.65 % and 13.8 %
Effective 07/01 /92 interest was fixed at 8 %.
a
Total Principal
and Accrued
Interest
$ 199,329.17
189,445.83
4,165.18
3,968.12
571.02
1,178.20
$ 398,657.52
(66,949.20)
(21,746.50)
$ 309,961.82
SEOPW / cm
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Exhibit III
Poinciana Village Condominium Association, Inc.
Analysis of the cost of operationshnaintenance
Phase I Currrent and Phase I & 11 Projected
Projected Annual
Projected Annual
cost of maintaining
cost of maintaining
Description of Expenses 64 units per audit
155 units per audit
Elevator Service & Repairs
Pool Supplies
Bldg. Repairs & Supplies
Equipment and Tools
Insurance
Electricity
Telephone (Gates & Elevators)
Waste Removal
Water & Sewer
Office Expenses
Bank Charges
Security Services
Security - Dog
Maintenance Payroll
Workers' Compensation
Bulk Cable TV �-
Outside Accounting Services
Payroll- Related Cost & Benefits
Annual Fees, Licenses, and Permits
Land Lease due CRA
Administrative Payroll
Gate Repairs
Reserved (Minimum $10,000)
Per Unit Monthly Fee
Current Monthly Fee
Difference - Over (Under)
6,434.64
651.84
3,000.00
864.00
13,781.40
11,520.84
2,637.72
4,376.88
27,113.88
2,004.00
300.00
51,000.00
500.00
22,983.96
5,561.64
14,854.92
4,360.82
996.00
10,937.52
8,373.04
1,500.00
10,000.00
$ 203,753.10
$ 265.30
208.00
9,600.00
1,062.00
7,265.64
1,728.00
27,562.80
37,829.16
4,258.80
11,341.93
7,200.00
3,006.00
300.00
52,000.00
43,200.00
5,580.00
35,976.76
1,000.00
5,370.30
1,000.00
21, 875.00
26,000.00
1,800.00
10,000.00
$ 314,956.39
$ 169.33
208.00
$ (57.30) $ 38.67
EOPW / CRA
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ITEM 13
December 11, 2001
RESOLUTION NO. SEOPWCRA 0
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE
SOUTHEAST OVERTOWN/PARK WEST COMMUNITY
REDEVELOPMENT AGENCY AUTHORIZING THE
EXECUTIVE DIRECTOR TO NEGOTIATE AN AGREEMENT
WITH THE HOMEOWNER'S ASSOCIATION
("ASSOCIATION") AT POINCIANA VILLAGEWHEREBY
WHEREBY
THE CRA SHALL FORMULATE A RELIEF PROGRAM,
INCLUDING BUT NOT LIMITED TO (1) A `BAIL OUT'; (2)
AMOUNTS TO ESTABLISH A RESERVE ACCOUNT; (3) AN
ANNUAL SUBSIDY TO BE DETERMINED ON A YEAR-TO-
YEAR BASIS; (4) INCORPORATING THE
RECOMMENDATION OF THE DEPARTMENT OF INTERNAL
AUDIT (4) SUBJECTING THE ASSOCIATION TO CERTAIN
CRITERIA AND CONDITIONS; IN A FORM ACCEPTABLE
TO THE CITY ATTORNEY AND TO RETURN TO THE
BOARD AT THE NEXT SCHEDULED CRA BOARD
MEETING.
WHEREAS, the Southeast Overtown/Park West Community Redevelopment Agency (the
"CRA") is responsible for carrying out community redevelopment activities and projects in the
Southeast Overtown/Park West Community Redevelopment Area established pursuant to the CRA
Redevelopment Plan, and
WHEREAS, the planned final phase of Poinciana Village, consisting of 91 units
and parking garage, has not yet been completed; and
WHEREAS, the Poinciana Village Homeowner's Association (`the Association')
appeared before and requested assistance from the CRA; and
WHEREAS, the Department of Internal Audit in was instructed to examine the
and determine reasonableness of current fees being assessed to the existing homeowners; and
WHEREAS, in its desire to provide financial assistance to Homeowner's
Association.
NOW THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE
COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF MIAMI, FLORIDA:
Section 1. The recitals and findings contained in the Preamble to the Resolution are
'r incorporated herein as if fully set forth in this Section.
Section 2. The Executive Director is hereby authorized to the negotiate an agreement
whereby a relief program is established subjecting the Homeowner's Association of Poinciana
Section 3. This resolution shall be effective upon its adoption.
PASSED AND ADOPTED this 1 lt' day of December, 2001.
Arthur E. Teele, Jr., Chairman
Walter J. Foeman
City Clerk
APPROVED AS TO FORM
AND CORRECTNESS:
Alejandro Vilarello
City Attorney
ITEM 13
December 11, 2001