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Home My WebLink AboutCC 1996-10-07 MinutesNN Nit NPARED sy..TsE OF �n': OF THI- CITY, CLRK CITY. WALL Fft W,ALTFD-,;- FOEMAN �i INDEX MINUTES OF SPECIAL MEETING October 7, 1996 } ITEM LEGISLATION PAGE SUBJECT NO. NO. 1. COMMISSIONER PLUMMER INFORMS COMMISSION R 96-697 1-2 OF THE DEATH OF COMMISSIONER HEL N 10/7/96 MILLER FROM CITY OF OPA LOCKA -- APPROVE RESOLUTION EXPRESSING APPROPRIATE CONDOLENCES TO FAMILY OF COMMISSIONER MILLER AND TO CITY OF OPA LOCKA. 2. (A) CASH FLOW ANALYSIS: DISCUSS DISCUSSION 3-- CONVERSION OF FEMA LOAN TO A GRANT TO 10/7/96 REDUCE GENERAL OPERATING BUDGET SHORTFALL PROM FIFTY MILLION DOLLARS ($50,000,000) TO SIXTY MILLION DOLLARS ($60,000,000) -- CAPITAL IMPROVEMENT PROGRAM: DISCUSS FINDING OF TWENTY-SIX MILLION DOLLARS ($26,000,000) IN UNFUNDED LIABILITIES RESULTING FROM CAPITAL IMPROVIIMENT PROGRAM OF WHICH EIGHTEEN MILLION DOLLARS ($18,000,000) MUST BE PAID DURING FISCAL YEAR ' 97 -- MANAGER INFORMS COMMISSION OF SIXTY- f i EIGHT MILLION DOLLAR ($68,000,000) COMBINED TOTAL SHORTFALL. � (B) DISCUSS PRELIMINARY FAIRNESS MATRIX ADDRESSING INCREASED REVENUES/REDUCED EXPENSES/LOANS/ONE-TIME REVENUE SOURCES IN ORDER TO BALANCE 1996/1997 BUDGET. (C) DISCUSS IMPACT OF DELAY ON REQUIRED SAVINGS/REVENUE INCREASES -- DELAYS COST MORE MONEY. i I t 3. (A) ADOPT RESOUITION DECLARING "TRUE R 96-698 FISCAL EMERGENCY" -- DELEGATE TO 10/7/96 MANAGER AUTHORITY TO REOPEN ALL COLLECTIVE BARGAINING AGREEMENTS FOR IMPACT BARGAINING IN CASE OF MODIFICATIONS TO AGREEMENTS NTS -- PLEDGE C)rM'IISSION' S EFFORTS TO MOVE CITY TOWARD FISCAL SOLVENCY. (B) MANAGER REPORTS ON LOOKING AT AREAS THAT CAN BE CUT WITHOUT COMPROMISING DELIVERY OF SERVICES TO CITIZENS -- SHORTY BRYSON, PRESIDENT OF FIREFIGHTERS' LOCAL 1907, REQUESTS MORE TIME TO EXAMINE AND ANALYZE BUDGETARY DATA. (C) COMMISSIONER PLLMER REQUESTS AN IMPACT ANALYSIS FROM ADMMINISTRATION REGARDING LAYOFFS -- MANAGER RECOMMENDS LAYOFFS AS A THIRD OPTION AFTER DELETION OF COLA (COST OF LIVING ALLOWANCE) INCREASES AND PERKS. (D) COMMISSIONER REGALADO COYbffM'S ON PUBLIC'S CONCERN ABOUT POSSIBILITY OF POLICE SERVICE CUTS STEMMING FROM MIAMI HERALD NEWSPAPER ARTICLE OF SUNDAY, OCI'OBER 6, 1996. (E) SHORTY BRYSON EXPRESSES INTENT OF FIREFIGHTERS' UNION NCT TO FUND ANY NEW POSITIONS IN THE 1996/1997 BUDGET -- MAYOR CAROLLO COMMENDS MR. BRYSON FOR HIS COOPERATION. 4. (A) DISCUSS LEVEL OF BASIC POLICE DISCUSSION SERVICES -- POLICE CHIEF DONALD WARSHAW 10/7/96 REPORTS ON POTENTIAL TO OBTAIN FURTHER FEDERAL CRIME BILL FUNDING TO HIRE AN ADDITIONAL 152 POLICE OFFICERS -- COMMISSIONER REGALADO REQUESTS REPORT REFLECTING NUMBER OF TAKE -HONE POLICE CARS ASSIGNED TO PERSONNEL RESIDING OUTSIDE CITY AND COUMT LIMITS. �i 5. 8. 9. (A) AUTHORIZING HIRING OF SEEVE IAPIDUS R 96-699 20-21 FROM GREENBERG, TRAURIG ET AL., AS R 96-699.1 CITY'S TEMPORARY LEGAL COUNSEL TO 10/7/96 PROVIDE LEGAL OPINION ON ROLLOVER OF INTERNATIONAL CITY MANAGERS' ASSOCIATION DEFERRED COMPENSATION MONIES INTO CITY'S PENSION PROGRAM FOR 15 MIAMI EXECUTIVES. (B) AUTHORIZE HIRING OF JAMES C. CROSLAND OF LAW OFFICES OF MULLER, MINTZ, KORNREICH ET AL., TO REPRESENT CITY AT BARGAINING TABLE AT A FEE OF $125 PER HOUR, PLUS EXPENSES. AUTHORIZE MCUTION OF TWO ESCROW R 96-700 22-23 AGREEMENTS: CITY OF MIAMI, FIRST UNION 10/7/96 BANK, CITY OF MIAMI GENERAL E2hTLOYEES' AND SANITATION EMPLOYEES' RETIREMENT TRUST AND CITY OF MIAMI FIREFIGHTERS' AMID POLICE OFFICERS' RETIREMENT TRUST RESPECTIVELY -- FOR ESCROW ACCOUNTS BETWEEN SAID PARTIES WITH TERMS/C0MITI0NS. DISCUSS EXTERNAL AUDITING PROCESSES AND DISCUSSION 5 PROCEDURES OF DELOITI'E TOUCHE, EXTERNAL 10/7/96 AUDITORS FOR CITY -- (QUESTION/ANSWER PERIOD). (A) AUTHORIZE AND DIRECT CITY MANAGER M 96-701 45-52 TO DISENGAGE FIRM OF DEL0IrITE & TOUCHE M 96-702 AS EXTERNAL AUDITORS FOR THE CITY OF 10/7/96 MIAMI; FURTHER AUTHORIZE MANAGER TO HIRE CERTIFIED PUBLIC ACCOUNTANTS) ON AN EMERGENCY BASIS TO REVIEW CITY'S INTERNAL CONTROLS AND PROCEDURES; FURTHER DIRECT MANAGER TO ADVERTISE FOR A PUBLIC ACCOUNTING FIRM TO SERVE AS EXTERNAL AUDITORS. (B) AUTHORIZE CITY MANAGER WITH ASSISTANCE OF CITY ATTORNEY TO SEARCH FOR FIRM SPECIALIZING IN LEGAL MALPRACTICE TO REVIEW POSSIBLE LIABILITY BY DEJOITI'E & TOUCHE AS EXTERNAL AUDITORS FOR CITY; ADVISE CITY IF THERE ARE ANY POSSIBLE (MAIMS THAT CITY MAY HAVE AGAINST SAID FIRM. COMMISSIONER DUNN COMMENTS ON TENURE OF DISCUSSION 53 MERRETT STIERHEIM AS MIAMI CITY MANGER 10/7/96 AFTER OCIIOBER 30, 1996 -- MAYOR CAROLLA SUGGEST THAT COMMISSIONERS MEET INDIVIDUALLY WITH MR. STIERHEIM TO DISCUSS ISSUE. i I I 1 j MINUTES OF SPECIAL MEETING; OF THE CITY COMMISSION OF MIAMI, FLORIDA On the 7th day of October, 1996, the City Commission of Miami, Florida, met at its regular meeting place in the City Hall, 3500 Pan American Drive, Miami, Florida in special session. The meeting was called to order at 10:29 a.m. by Mayor Joe Carollo with the following i members of the Commission found to be present: Mayor Joe Carollo Vice Mayor Wifredo Gort Commissioner Tomas Regalado Commissioner Richard P. Dunn, II Commissioner J.L. Plummer, Jr. ALSO PRESENT: Merrett Stierheim, City Manager A. Quinn Jones, III, City Attorney Walter J. Foeman, City Clerk Maria J. Argudin, Assistant City Clerk An invocation was delivered by Mayor Carollo who then led those present in a pledge of allegiance to the flag. NOTE FOR THE RECORD: At 10:09 a.m., Mayor Carollo announces a ten-minute a ay due to a brief meeting between the City Attorney and the City Manager regarding legal issues; after which, the scheduled special meeting began at 10:29 a.m. ------------------------------------------------------------------------------------------------------ 1. COMMISSIONER PLUMMER INFORMS COMMISSION OF THE DEATH OF COMMISSIONER HELEN MILLER FROM CITY OF OPA LOCKA -- APPROVE RESOLUTION EXPRESSING APPROPRIATE CONDOLENCES TO FAMILY OF COMMISSIONER MILLER AND TO CITY OF OPA LOCKA. ---------------------------------------------------------------------------------------------------------------- Commissioner Plummer: Mr. Mayor, before we start, I think it would be appropriate, if I may, to send a resolution to the family and to the City of Opa Locka for the passing, the untimel passing of Helen Miller, a long-time Commissioner, and a good friend in the Florida League Cities. Her funeral will be, I think, this coming Saturday, but it's always approprh� - that we send a resolution to the family and to the City of Opa Locka. I would so move at this 1-ii- 1 October !, 1996 i Mayor Carollo: There's a motion by Commissioner Plummer. Commissioner Dunn: Second. Mayor Carollo: Second by Commissioner Dunn. All in favor, signify by saying "aye." The Commission (Collectively): Aye. Commissioner Plummer: Thank you, sir. Mayor Carollo: Thank you, Commissioner Plummer. _ The following resolution was introduced by Commissioner Plummer, who moved its adoption: j RESOLUTION NO. 96-697 { A RESOLUTION EXPRESSING DEEPEST SYMPATHY AND SINCEREST CONDOLENCES OF THE CITY COMMISSION ON BEHALF OF THE CITY OF 4 MIAMI AND ITS CITIZENS TO THE FAMILY AND FRIENDS OF HELEN MILLER, 1 UPON HER UNTIMELY DEATH. (Here follows body of resolution, omitted here and on file in the Office of the City 1 Clerk.) Upon being seconded by Commissioner Dunn, the resolution was passed and adopted by the following vote: AYES: Commissioner Tomas Regalado Commissioner Richard P. Dunn, 11 Commissioner J.L. Plummer, Jr. Vice Mayor Wifredo Gort Mayor Joe Carollo NAYS: None. I ABSENT: None. I jf 1 j ti f 2 - October 7, 1996 r ,00014\ ---------------------------------------------------------------------------------- --- -- 2. (A) CASH FLOW ANALYSIS: DISCUSS CONVERSION OF FEMA LOAN TO A GRANT TO REDUCE GENERAL OPERATING BUDGET SHORTFALL FROM FIFTY MILLION DOLLARS ($50,000,000) TO SIXTY MILLION DOLLARS ($60,000,000) -- CAPITAL IMPROVEMENT PROGRAM: DISCUSS FINDING OF TWENTY-SIX MILLION DOLLARS ($26,000,000) IN UNFUNDED LIABILITIES RESULTING FROM CAPITAL IMPROVEMENT PROGRAM OF WHICH EIGHTEEN MILLION DOLLARS ($18,000,000) MUST BE PAID DURING FISCAL YEAR '97 -- MANAGER INFORM:: COMMISSION OF SIXTY-EIGHT MILLION DOLLAR ($68,000,000 COMBINED TOTAL SHORTFALL. (B) DISCUSS PRELIMINARY FAIRNESS MATRIX ADDRESS114(. INCREASED REVENUES/REDUCED EXPENSES/LOANS/ONE-TiME REVENUE SOURCES IN ORDER TO BALANCE 1996/1997 BU173r-1'. (C) DISCUSS IMPACT OF DELAY ON REQUIRED SAVINGS/REd 8 INCREASES -- DELAYS COST MORE MONEY. Mayor Carollo: The special City Commission meeting of today will begin with Section A in the agenda of this morning, the Cash Flow Analysis and Capital Improvement Program. The Manager will explain this to the Commission, along with some of the other areas that are attached into the agenda that we have before us today. Mr. Manager. And by the way, let me publicly thank you and all your staff, including those that are called the "Three Wise Men," for all the hours in time and energy that all of you have been spending on a daily basis, including Saturdays and Sundays. Mr. Merrett Stierheim (City Manager): Thank you, Mr. Mayor, and I appreciate tl . _'%nd I apologize to the Commission. Normally, I like things to be in your hands well ahea tin btu` I think, as some of you know that I spoke with over the weekend, we did spend b, . ai y and Sunday in developing this, and, of course, it was typed this morning, and it is he, 3-_ !1 walk through it slowly, and there will be ample opportunity for questions. The f:_st it____ th last component of the analysis of the City's shortfall. In my prior presenta. ; t e Commission, our immediate priority was to try to get a handle on the budget th ; yt_.; :.ad adopted on first reading, and, of course, that report reflected what I defined as hard and so shortfall, which now approximates fifty million dollars ($50,000,000). We picked up two and a half million when the FEMA (Federal Emergency Management Agency) loan was converted to a grant. So in round figures, we're talking about a fifty million dollar ($50,000,000) shortfall in the operating budget. The first memorandum is a summary of the actions that have been taken in our analysis of the capital improvement liabilities. We started... And there's a typo in the first sentence. Staff reviewed "over," it should be, instead of "our," one hundred million ($100,000,000) in capital projects. I think the actual figure is about a hundred and fifteen million ($115,000,000) that were approved by the City Commission, and are contained in the City's Capital Improvement Program. From that, we identified about forty-eight millic,_= ($48,000,000). An initial forty-eight million dollar ($48,000,000) shortfall was pr('...ni::�: pry projected. But we weren't satisfied with that. We wanted to cut that number, it ; ,e Obviously, we removed from that list projects that were either completed or were rl +t we had no legal obligation. We have a public policy obligation, if this Cornrn:ss.�: i.ad approved it, but they were not under construction or under design. And we rem ol;.:d i►,ose projects that had adequate funding from CDBG (Community Development Block nt) FEMA funds. The net result left us with a liability of approximately twenty-six million, dollars 3 October 7, 1996 ...:. ...... r N ($26,000,000), which we would define as an unfunded liability. These are projects that are under construction, requiring payment, or absolutely critical to complete. There was eight million ($8,000,000) in there that we thought we could take out, also, because we could arrange a different method of funding, either a lease -back or some type of financing that would no. obligate the City, at least in the first year, or maybe even the first two years. The net thr • is eighteen million ($18,000,000), which is, in our judgment, unavoidable cost that n, _.-.t b: ,;. Jl for during the current fiscal year. And the last line, when we add the fifty million ($5C 000,0V ; that I've already described with the eighteen million ($18,000,000) in capital im.provPtnent obligations, we now have what I think is a fairly realistic number of sixty-ci 11,f ($68,000,000), and I would say, more or less, it could change a million here or a mill;. or a million down, but I think that's a very hard number to deal with as we move foiw ,c in this fiscal year. That's the first report. Next, once we had that number, we tried to elop a strategy on how we could approach this. This is a very complex problem. it involvn, on the revenue side, every possible alternative, and we've certainly presented all that we were aware of when we gave you the 76 ideas on how we could raise additional dollars, collect additional fines, fees, what have you, as well as reduce expenditures. This matrix is the first cut of a plan to address the deficit. And I really want to emphasize for our employees, our collective bargaining leaders, our department directors, and the Commission, and the general public that this is a very preliminary analysis. It's designed so that the Commission and all of us can kind of get a handle on this problem, as to how we might move forward. It could change substantively, but let's walk through it. We begin with the deficit. That's been fairly well identified. In total, sixty-eight million ($68,000,000). Next, we analyzed the recurring, because, Mr. Mayor, you know, you've talked about the recurring problem. You start with a deficit, what is the problem that w add tlo, into the next year, and so forth. And we endeavored to break those costs out in th inalysi We felt that there was slightly in excess of thirty million ($30,000,000) which we conic line as recurring shortages that require solutions. We also felt that capital repair and renova:. are inevitable. For example, in the process of the budget hearings, a couple of weeks . I have lost track of time. Maybe a week ago - no, two weeks, I guess - we heard th. _,.ers at the Convention Center, the engineers said they had to be replaced. The roof ,s lei We need to do roof repairs. This building requires waterproofing. I mean, there just... Vj. .now that there are going to be obligations, and we generally set that at a ten million ($10,000,000) level. Fleet replacement, which would include heavy equipment and smaller vehicles, again, an estimate at two and a half percent, five million ($5,000,000), and a contingency for unknown liabilities, forty-six point five. Secondly, the extent to which one-time revenues are reasonable. This, again, is an estimate. I just have to qualify all of this, that this is the first cut at trying to put this whole package together. And that totals your sixty-eight million ($68,000,000). Now, let's go to potential allocation and funding solutions. Clearly, we have met and discussed with the pension administrators, our collective bargaining leaders, their counsel and so forth, and believe I am told that the appropriate authorities are reviewing the pension situation to determine. whether or not there can be some cost reductions or allocations there. Fee and revenue increases, we've... Incidentally, the latter was six million ($6,000,000). Fee and revenue increases, we,, pegged at fourteen ($14,000,000). Maybe it can be fifteen ($15,000,000), or mayb;, ' will uc thirteen ($13,000,000), but we think that's a reasonable estimate. Service -du � •s, modifications and non -union cuts, approximately three million ($3,000,000) Some c,_ ,e i already initiated... take-home cars, cellular telephone allowance, which is certainly a I.t� ,ors expensive than the number of telephones, because everybody had their own, and tha+'s wh; the got the allowance, et cetera, but that's three million. And then we've identified; again, Lr estimate of concessions from our bargaining representatives, fifteen million ($15,000,000). That's approximately ten percent of the total non -pension payroll. And it goes into some detail, which we can discuss. The aggregate there is thirty-eight million ($38,000,000). Now, one-time revenues, we're pegging it at thirty million ($30,000,000). To the extent that we can dispose of City assets, that's an acceptable option to the Commission. Lease -backs, sit down with the Parking Authority and find out whether or not we can enter into some type of an arrangement with our parking garage, ask whether or not MSEA (Miami Sports and Exhibition Authority) 4 October 7, 1996 r i might be able to provide some assistance, if there are any Federal and State grants, :_ ;he be some forbearance with the pension system or other loans, State loans, et cetera. mean there's just a wide range of options that need to be explored, many of them very a,mp,'.., and so forth. That's the first cut. It's there to adjust. At least it frets us started. It gives us same k a focus. How realistic it is, time will tell. The next chart... I wanted to demonstrate N& time money, and delays will increase the cost of balancing the budget. This chart, for exampt, , this chart shows a monthly cost. You pick any month that we effect the solutions. Let's say that we don't really address this and we don't solve it until December. Then the monthly cost for the remaining ten months is three million eight hundred thousand ($3,800,000). If we wait until September of '97, the cost then is thirty-eight million ($38,000,000). Now, the reason I have thirty-eight ($38,000,000) instead of sixty-eight ($68,000,000) is that this only applies to costs that are uniform throughout a year. If you talk about a pay cut, for example, that flows throughout the year. If you talk about eliminating take-home cars, if you talk about increasing a fee or revenue that is collected each month, that cut goes through... that revenue goes through the entire year, as opposed to a one-time infusion of capital, which could come at any tim, during the year, and does not increase the overall deficit. I hope I'm not confusing you by that. time is money. The quicker we solve this problem, the quicker we come to, hopefully, ar ,cable j agreement with Labor, the better it is for all of us, the less it will cost. The more we v, the more expensive the solution becomes, because you must provide that solution in lc So the impact, then, on a monthly basis, is higher. 3. (A) ADOPT RESOLUTION DECLARING "TRUE FISCAL EMERGENCY" -- DELEGATE TO MANAGER AUTHORITY TO REOPEN ALL COLLECTIVE BARGAINING AGREEMENTS FOR IMPACT BARGAINING IN CASE OF MODIFICATIONS TO AGREEMENTS -- PLEDGE COMMISSION'S EFFORTS TO MOVE CITY TOWARD FISCAL SOLVENCY. (B) MANAGER REPORTS ON LOOKING AT AREAS THAT CAN BE CUT WITHOUT COMPROMISING DELIVERY OF SERVICES TO CITIZENS -- SHORTY BRYSON, PRESIDENT OF FIREFIGHTERS' LOCAL 1907, REQUESTS MORE TIME TO EXAMINE AND f ANALYZE BUDGETARY DATA. (C) COMMISSIONER PLUMMER REQUESTS AN IMPACT ANAL-i FROM ADMINISTRATION REGARDING LAYOFFS -- MAN.. ''E, RECOMMENDS LAYOFFS AS A THIRD OPTION Af- ER I DELETION OF COLA (COST OF LIVING ALLOWANC':` INCREASES AND PERKS. (D) COMMISSIONER REGALADO COMMENTS ON PUBLIC'S CONCERN ABOUT POSSIBILITY OF POLICE SERVICE CUTS STEMMING FROM MIAMI HERALD NEWSPAPER ARTICLE OF SUNDAY, OCTOBER 6, 1996. (E) SHORTY BRYSON EXPRESSES INTENT OF FIREFIGHTERS' UNION NOT TO FUND ANY NEW POSITIONS IN THE 1996/1997 BUDGET -- MAYOR CAROLLO COMMENDS MR. BRYSON FOR } HIS COOPERATION. ------------------------------------------------------------------------------------------------------------ Mr. Merrett Stierheim (City Manager): The next item, Mr. Mayor, is a resolution that `.as �.,..., drafted, pursuant to the collective bargaining agreements, which, if the Cornmissioi. disposed, declares, in fact, a true fiscal emergency. All of your bargaining agreements n, •e, or at least three out of the four, I believe - perhaps all of them - require a declarat'�. . of tine I 5 October 7, 1996 fiscal emergency. I would emphasize here that I am not recommending that we ...- mediatei) open the contracts under the collective bargaining process. As I have discussed with tht, leaders of our four unions, we would first try to informally meet, that we are most receptive 'he unions' suggestions of areas that we can reduce cost. I have been assured by se. 'd o -w leaders of our bargaining units that they are already reviewing; that at the same time '. they review the cost estimates and the way that we arrived at the deficit. Incidentally, in that ,egarJ, I believe everything we've done at this point has been made available to their designated representative. We've given him our spread sheets, our cash flow analyses, and I believe that that is in process. So their independent review, and, hopefully, verification of the information I have given you is underway. This does, however, if you approve it, empower me to energize the collective bargaining process, if, at some point, we do not feel that we have adequately addressed the shortfalls. That's a judgment call. I, obviously, would keep the Commission fully advised of that process, but I emphasize, again, and underscore that it's imperative that we proceed expeditiously. We have a very serious situation at hand. I could stop there, Mr. Mayoi . There are other items on the agenda I'm requesting outside legal counsel. Mayor Carollo: Well, Mr. Manager, before we move on to the next item on the agen..,.., think we need to deal with this ore. And let me give the chair to the Vice Mayor, and I wi :e the resolution. If there's a second, then we will open it up for discussion of the Commissi , "A resolution declaring a true fiscal emergency consistent with the Cit_ ..' Miami's collective bargaining agreements, and delegating to the City Manil; . the authority to reopen all collective bargaining; agreements for bargaining, in the event the City Manager determines that the agreement mu.,,.' modified, in the event that necessary economic concessions are not promptly received from the City's recognized bargaining units; and further pledging the City Commission': efforts to consider all viable, practical and responsive revenue enhancements to move the City towards fiscal solvency." I so move this resolution. Vice Mayor Gort: There's a motion. Is there a second? Commissioner Regalado: Second. Vice Mayor Gort: It's been moved and seconded. Discussion. Commissioner Plummer: Mr. Manager, as I understand what you just said, if this is in fact, you would not execute this until such time as you had notified the Commission Mr. Stierheim: Yes, sir. Commissioner Plummer: I guess... Mr. Stierheim: In terms of "execute," I mean, I would not energize the collective bargaining process without notifying the Commission. But the resolution does empower me to proceed. Commissioner Plummer: I understand that. Mayor Carollo: Absolutely. Commissioner Plummer: Now, the other day when we met... And I would like to have on the record, negatively, if it's negative, that all four unions complained the other day that the,- had not received what they felt was necessary to start doing their analyses. I would ask at th.. time there's any of the four union presidents or the four union spokesmen who have a dif..• .ncc - opinion from what you've just said, that you've kept them fully informed, and prov- them tol October i, 1996 1 10 ' with all the documents, that if they say... I'd like to know if any of them think that they hi. e not received not only the cooperation of the Manager, but the documents that are requested. Mr. Shorty Bryson (President, International Association of Firefighters): Shorty Bryson, Miami Firefighters. Since the other day, we have received a hell of a lot of material, a lot of it loaded on disks. I want to compliment the Finance Department over there. He's been very cooperative with us. We have run into a couple glitches. I received a letter from Larry Jessup, our economist, today, that said that the '95 revenue report was not in the format, it did not make any sense. I just want to alert you that there are a few things we still have to clean up. But the cooperation has been there. We have the material. It will take a while to analyze all tLw material, but that part has been done. And I sent letters, and I hope everybody got one in ch, fax machine, saying that we had made a lot of progress in that area. Commissioner Plummer: Has Mr. Jessup given you any indication of how long he ,c .t will take him to do his analysis? Mr. Bryson: Well, I gave Mr. Jessup a... I said the union leaders needed an answer, -r the time he got all the material, within two weeks, a quick and dirty. Now, there's going :one that follow through further than that, because it's a very complicated process. One of the things I have to mention here is the Capital Improvement stuff. We have not received any of that stuff. Mr. Stierheim: Just finished, just finished over the weekend. Mr. Bryson: OK. Well, we want that stuff. Mr. Stierheim: We'll have it for you. Mr. Sheehan? Mr. Sheehan is here, I think. Grant and everybody, turn over all of your work papers today, this morning. Mr. Bryson: Well, it's great when we can get it on disks. It saves our economist from V1110 ' load it, and that speeds up the process. Also, Commissioner, two weeks is what wt oot'.� for to have an idea of how close... I mean, we're not going to quibble over a mi ..iol_ re or there, but we want to get to where we believe that the problem, is right in the ball part., Commissioner Plummer: Well, I think you've heard very clearly from the Manager, .,me money. And the longer this delays, the more it's going to cost. So... Mr. Bryson: Well, all the unions have a strained situation. Time is money for the City and the Commission, and keeping that deficit as small as possible, and we need time. So it's a mixed... It's very difficult. We need the time to be able to research. This has come up so quickly. So it's going to be one of those... There's going to be a way to work it out, and we've already talked to the Manager, and I think that we'll be able to do that. Mr. Stierheim: While you're there, Shorty, if I may. Mr. Mayor, can I comment? Mayor Carollo: Yes, sir. Mr. Stierheim: I mean, there's several things going on simultaneously. The barl,:.ining agreements are very specific that the Commission has to exhaust all of its revenue-raiship potential before we can bargain. I mean, I have some problems with that kind of lai:+;Jdge, but be that as it may... I mean, it's very inhibiting on the Commission. But we are procc.ncling ..`h all of the items that we reviewed the other day, 30 or 40 of them. They have been assiL,ed u., to various department directors, staff and so forth, to crunch those numbers, prepare the necessary reports, identify any pitfalls in the recommendation, and bring them back so that I can present them to the Commission for action. So that process is going on as we speak, and I will 7 October 7, 1996 try to accelerate that as rapidly as I can, in the same spirit that I hope the unions accelerate their review. I will say, also, the first time we came up with the shortfall, we did it by normal budgetary process. Essentially, we condensed in a period of ten days to weeks what a Manager normally does with his department directors over three or four months. We went through the budget, we went through all of the revenue, we went through all of the expenses. Ar,, obviously, those that were under -funded, we put reasonable projections, and those revenues tl,. were over -projected, we cut them back. We held two days of intensive budget hearir;;s with wi, departments over a weekend. In fact, the labor leaders were present during that pn ocess. 4, came up with a shortfall by going through a normal budget. Since then, we 'Nave prcr;. - d, which Shorty and Mr. Jessup have, the first comprehensive cash flow analysis in, from can determine, 17 years or longer. We did not have a comprehensive cash flow anal That has been prepared, and that analysis confirmed, in quite a different way, the sh;.._ It validated what we had done in budgeting, give or take a couple of million. So I was v: pleased that the process... I think the first process was sound. The second one coria .. d the shortfall. So, I mean, I am in complete comfort here in recommending that you adopt this resolution. Commissioner Plummer: The next question, Merrett, I have is, based on your comment just now, that the inhibiting language that says that you have to demonstrate that every other source of revenue has been expended, how are you going to be able to come up with any kind of numbers in that category, when this Commission has not made, really, even any discussion, much less acted? And let's just use one thing for an example. You've talked about a potential increase in garbage fees. Mr. Stierheim: Yes, sir. Commissioner Plummer: Now, I don't know whether you're talking about a t- ;en" increase, or doubling, or what. How would you be able to demonstrate, to go in- union contracts, if you don't know what that number is, to identify the shortfall? You un,.' Land I'm saying? Mr. Stierheim: Perfectly, totally. I've given a lot of thought to it. In the matrix, for example, we talk about fourteen million dollars ($14,000,000) to be raised from additional fees, revenues and so forth. We made... Commissioner Plummer: You have a breakdown on that? Mr. Stierheim: We made some assumptions. The only way we could do it is make assumptions, because the Commission hasn't acted yet. Commissioner Plummer: Well, that's the point. Mr. Stierheim: The public hasn't been able to come in and express itself. But at the end ()" thc; day, these issues have to be addressed. I am not guaranteeing that the Commission go is to adopt any fee I am strongly recommending that you do. And in my judgment, it mu:;;..y� part the solution. I'm not preempting your legislative prerogative, at all. But there's no . Flier �r� Fa approach this. Commissioner Plummer: Well, all right. I guess the real bottom line that I'm asking i,, :hen are we going to receive from you what you recommend to this Commission as to that so-called ten million ($10,000,000) increase in fees? Mr. Stierheim: What... Excuse me. Just let me confer with staff. What is our projection on when that should be ready. 8 October 7, 1996 W (INAUDIBLE COMMENT NOT ENTERED INTO THE, PUBLIC RECORD) Mr. Stierheim: I would say that we should be able to give you a report within a week to ten days, with some detail. We'll do our best to have it. And, now, some actions, you have to take immediately. In the case of the solid waste fee, those bills are sent out on January 1st and July 1st. So you really have some time to consider that option. It is a major option, obviously, and one that we will recommend. But in the case of some of the others, I would say a week Lo ten days, we'll give you a list of every area that we think is reasonable, and, hopefully, not arb:t.ary or unreasonable. Commissioner Plummer: You said before that you're talking about the possibility of :,c: only increasing revenues, but in areas that were potentially reduction of service, which you d_,'t feel would affect the overall level. For example, I remember you saying, yes, we've got '..icrease fees, but possibly, we could consider going to trash pickup every two weeks, rather ':''an every week. So will that be a combination of what you're going to forward to us? Mr. Stierheim: Yes. And everywhere that we think there can be a cost reduction... We talked about the NET (Neighborhood Enhancement Team) Centers. Do we need 13? Can we get by with six? I don't have any answers right now, and I don't know exactly what the mood of the Commission is here. But I think there can be some economies there. You know, the Chief has said that the north and south stations, substations are not essential to policework, and those facilities could be sold or leased. We're talking about take-home cars. Any area that we think will generate a savings and not hurt the service delivery capability of the City, at least unreasonably, is fair game. Commissioner Plummer: All right. My last question. One of the things that has been s-e , to whether or not it will be incorporated, and I'm asking, will this be in the week to ten- ' iper that you're going to send to us, is that every employee in this City is concerned abc , offs. Will, in that ten-day paper, will you be identifying, if there are layoffs, and if so, how sL re'. Mr. Stierheim: That's a difficult question to answer from this standpoint. Commissioner Plummer: Well, it's asked of... I guarantee you, every one of us sitting la here is asked every day, numerous times. Mr. Stierheim: Right. I mean, there are two... There are three areas that are germane and very much a part of the bargaining agreements that you have. I can deal unilaterally with the unclassified exempt service, and already have. And I can deal even further there, if I have to, or decide that it's in the interest of the City. I would call one of them, one of those three perks. Five percent here, two and a half percent here, you know. There's all kinds of things that have been stuck in these bargaining agreements that cost money that are differentiated, in my judgment, from base salary and a job. That's one area. The second one is salary. We have built in COLAs (Cost of Living Allowances). We've got one right now for Sanitation, we got anothc four percent one coming up in January. I personally do not see this as a time to be giving raise :, no matter how long people have waited for them, whatever. We just don't have the money. And the third one is a job, a position. Somehow, in those three areas, in addition to everyth -,; :,',se I have on here... You're adopting fees, cutting back, eliminating programs where we car sel assets. But somewhere in those three lies the solution, along with the others. The.... An I would reserve a definitive response until after I have an opportunity to meet with the leader::, have these informal discussions, and... or if that is not successful, open up the bargaining proc�*bs and hit the table. And then at that point, everything is open, and, you know, that's a process that goes on all over America, and has gone on in the past in this City and... but it may not be necessary. And looking at my colleagues out there, I hope it won't be. That's my hope. 9 October 7, 1996 a Commissioner Regalado: Mr. Manager... Vice Mayor Gort: Any further... Commissioner Plummer: Thank you, sir. Vice Mayor Gort: Yes, sir. Commissioner Regalado: I'm troubled by an article that I read yesterday, and, as a matter of fact, was repeated over, and over by the media this morning regarding the services of the Police Department. It appears that we are going to do away with the Police Department, that there won't be any homicide investigations, and no departments. And I was talking to the Chief, and he says, "Well, that's not true." So how can we remedy that? Because the ultimate goal c - :his meeting is to inform the people of Miami. And if we let the people believe that we are 'k,:ng to do away with the Police Department, that we are going to give back the Fire Departmept, .,, give it to the County, all the people, which is what we work for, are really concerned. Mr. Stierheim: Commissioner, I was equally disturbed, and for the record, Ms. Gai! z.,. tcin did not call me or speak to me about that article. And let there be no doubt iha , ''here is misinformation and disinformation being distributed. And it's difficult, sometimes, to 0, -i; with. I mean, it's absurd. Channel 6 called me over the... Saturday... Sunday and wanted a St. �ment. f I gave a verbal statement on the phone that, that was absurd. Who, in their right mind, says we're not going to have homicide investigation or whatever? I mean, that's a fundamental responsibility of the Police Department, and protection and service to the public, and support of the law, and everything else. So, you know, I mean, I don't know exactly how to respond to that. I mean, it's just off the wall. It doesn't make any sense, and I'm certainly not going to recommend anything like that. Vice Mayor Gort: Any further discussion? Commissioner Dunn. Mayor Carollo: Yes, Commissioner. Mr. Bryson: Could I throw in one more thing, Mayor, please? Mayor Carollo: Go ahead, Shorty. Mr. Bryson: Shorty Bryson, Miami Firefighters. I want to make a statement before arip.hing is done publicly on this years budget, coming budget. That is that my union, prior to looking a' and I've already committed to helping out and looking at concessions - but prior to giving dime, will not fund one new position in this City with our dollars. So I look in this year's budget, I see... and this is not to negotiate here. I mean, when we sit down, we're going to look. But 164 new positions added to this year's budget, some of them partially grant funded. Not one dime is going to come out of our pocket to put something new on the payroll. I think that's got to be said, and I've got to make a firm stand on that, because I don't want to see anything happen between now and the time we sit down, and somebody says, "Well, we need these new nice things to have." When it comes time to unzip a contract, that's the time to keep things status quo, or even go down. My rank and file, I hope, in my own department, that we point the finger at positions we can do without for a year, not positions that we need to create. Mr. Stierheim: I... Mayor Carollo: Shorty, stay there for a minute. First of all, I'd like to personally thank you ..-r having been one union president that has been dealing with this issue with moderation 10 October 7 1996 r Mr. Bryson: I think they all want to, Mayor. Mayor Carollo: And I encourage you to... having the courage to deal with it with that same moderation that you have been showing. I know it's not easy. You have an equal obligation to your union representatives, which you represent the firefighters of the City, at the same time that you care about the City, and I know you do. So I know that it's not an easy solution for you to take on any of these major decisions that will have to be made. It's not easy for any of us, either. I don't think that there are going to be any easy solutions, any easy decisions for any of us to make. But nevertheless, you're dealing with it with moderation. You're not coming with ::�_ : tactics, not feeding false stories to further enhance what some are trying to do, and that'!, s) disinform, misinform, and further create chaos in the City. See, the basic question that Id have to deal with is, what are we going to do to resolve this problem? And certainly,►iot going to be resolved by those that, all that they want to do is to further create he*e, ' ' .rther create disinformation, misinformation, and chaos. Frankly, I believe that there arr - 'rne out there that would really like to see us fall flat on our face, but with the cooperation - 111 of us working together, that's not going to happen. It's not going to be easy. It's not going to be easy for anyone, because we're all going to have to pay a price here. I sometimes wake up in the morning, and I feel like I'm aging a year for each day, because I kno--,Al that the decisions that are going to have to be made, no matter how I describe them to the public, people aren't going to like them. Employees are going to like it, the residents aren't going to like it. Heck, my own mother is calling me up already, and not liking some of the things she hears. Nevertheless... She's going to end up, I'm sure, being mad a me, but, I think, in the long run, once everything comes out in the open, people will see that we would have done what was right, that we have done the only thing that we could have done for the City. I don't care where the chips fall. My decisions aren't going to be based on what is politically expedient to do. It's going to be b:+a A on what I know is right for this City. We all know, I think, many of the reasons why we a • -r.: today. We don't have to hash that out again. But only by working together can we , the solutions. For instance, one area that your department can be of extreme help, we have ybe, as much as 50 percent of all our businesses in the City that either don't have certificates of u,. 'r occupational licenses. There's no question in my mind that we could bring in, gas y, thice million dollars ($3,000,000) of new revenue each ,year -maybe double that, who kno, . • . to th City. And these are areas that the average resident is not going to be paying th - prir Businesses out there, they know that they have to pay that. So these are areas that we can bring new revenues without going into the pocketbooks of the residents, or in asking for concessions from the employees. But, unfortunately, the amount of deficit that we're facing is so great that there is not just one, or two, or three, or four, or five areas that we could tap in to resolve this. There are going to be many, many areas that we're going to have to tap to finally come up with these dollars. And one of them that I have been working very hard on is in trying to have the cooperation that we need from the State of Florida, hopefully, our Federal government, and I believe we will have cooperation from Dade County government, also. So, again, Shorty, I thank you for the moderation that you have shown up to now. And I... Mr. Bryson: Thank you. Let me just make one quick statement. That I've talked to all the Uaher unions in Miami, and, you know, maybe I get up here, and I've said a few things, but 1 horc`:ly believe that everybody's interest is in solving this, and they've expressed that, too. I'm putting words in their mouth. They can get up here and say they're negative, if they want But everybody's scared. There's some things that have happened here that I don't ':pink wcic pretty. I think we got to get over that, put anything aside that's personal, and get down_ io wL: . 's going to be fair. You're going to have to make some tough decisions. I don't envy yoo. You`n, in the same position I'm in. I'm going to have to go to my union and take a little heat there, too. But that's how we're going to solve it together. Everybody has got to share in that. Mayor Carollo: Well, I'm glad you realize that, because we also have to go to our union, and that's the residents of Miami. 11 October 7, 1996 Mr Br son• That's ri ht y g Mayor Carollo: And thank you. Mr. Stierheim: Mayor... Vice Mayor Gort: Mr. Mayor... Mr. Stierheim: I'm sorry, go ahead. Vice Mayor Gort: Yes, go ahead. Go ahead, Mr. Manager. Mr. Stierheim: No, I just wanted the Commission to be aware that in the memoraEs%J.-,- that I { sent out, I froze... I froze all vacant positions, future positions, and so forth. Now, there is a safety valve. If the Fire Chief comes to me, if the Police Chief comes to me and that a position is absolutely essential, that's a judgment call. For example, I will be advertiJ li, for a Director of Internal Auditing, who will have a CPA (Certified Public Accountant). And I will be advertising for a Director of Finance, who will have a CPA, for obvious reasons. So there are positions, occasionally, that are critical that will be filled, but I can tell you, there are going to be darned few. Commissioner Plummer: What about promotions? Mr. Stierheim: What about what? Commissioner Plummer: Promotions. Vice Mayor Gort: None, there are none. Mr. Stierheim: Everything, everything has been frozen. Commissioner Plummer: It's frozen, OK. Vice Mayor Gort: Mr. Mayor, I'd like to... Go ahead, Mr. Goenaga. Mr. Manuel Gonzalez-Goenaga: Before this resolution is passed, I, as a citizen, innocent victim, just like all other citizens of Miami, of what I have said here for years, since 1990, before that, Mr. Mariano Cruz; also, Mr. McMaster, we are not in a position to pay for the things and be punished by new fees. That's the... only my personal thinking, and is a very justified and reasonable explanation and argument. Up until every single thing, every fraud, and deceit, and negligence of any employee or previous Commissioners, and at least two existing Commissioners, they confess their sins publicly, or tell us that they put their head in the sand while these things were going on. Thank you very much. Vice Mayor Gort: Thank you, sir. The one statement I'd like to make is, I, like tl:e: Muayor, thank you for the team you have put together. I've had the opportunity to work with :,Vo of those individuals that are working with you, and they're very professional. But I want people know there's a lot of rumors going around. Now, we have a document that has been resrar(•'tea, it's going to be recommended, and, you know, a lot of professionals put a lot of hour into putting these documents together. Those people are going to be working Saturday, Sunday, and this is what we've got to go by. So let's not go by rumors. Let's go by the facts that we have here. We have decisions to be made here, and I'm sure we're going to make them. And I'm sure, as we have in the past, that the unions and all of us are going to work together. We all love 12 October 7, 1996 Miami, and we're going to solve this problem. It's solvable. Thank you. Any further,, discussion? Being none, all in favor, state so by saying "aye." The Commission (Collectively): Aye. The following resolution was introduced by Mayor Carollo, who moved its adoption: RESOLUTION NO. 96-698 A RESOLUTION DECLARING A "TRUE FISCAL EMERGENCY" IN E Cl IA OF MIAMI, FLORIDA, CONSISTENT WITH THE CITY OF MIAMI'S C:OL.LECTIVE BARGAINING AGREEMENTS AND DELEGATING TO THE CITY MAl`:AGER THE AUTHORITY TO RE -OPEN ALL COLLECTIVE BARGAINING AGREEMENTS FOR IMPACT BARGAINING IN THE EVENT THE CITY MANAGER DETERMINES THAT THE AGREEMENTS MUST BE MODIFIED, AND IN THE EVENT THAT NECESSARY ECONOMIC CONCESSIONS ARE NOT PROMPTLY RECEIVED FROM THE CITY'S RECOGNIZED BARGAINING UNITS; AND FUR'TI-IER, PLEDGING THE CITY COMMISSION'S EFFORTS TO CONSIDER ALL VIABLE, PRACTICAL AND RESPONSIBLE REVENUE ENHANCEMENTS TO MOVE THE CITY OF MIAMI TOWARDS FISCAL SOLVENCY. (Here follows body of resolution, omitted here and on file in the Office of 'he Clerk.) Upon being seconded by Commissioner Regalado, the resolution was passed:.., lopted by the following vote: AYES: Commissioner Tomas Regalado Commissioner Richard P. Dunn, II Commissioner J.L. Plummer, Jr. Vice Mayor Wifredo Gort Mayor Joe Carollo NAYS: None. ABSENT: None. U. ----------------------------------------------------------------------- - 4. (A) DISCUSS LEVEL OF BASIC POLICE SERVICES -- POLICE CHIE► DONALD WARSHAW REPORTS ON POTENTIAL TO OB'L N FURTHER FEDERAL CRIME BILL FUNDING TO HIRE A - ADDITIONAL 152 POLICE OFFICERS -- COMMISSIONER REGALADO REQUESTS REPORT REFLECTING NUMBER OF TAKE-HOME POLICE CARS ASSIGNED TO PERSONNEL RESIDING OUTSIDE CITY AND COUNTY LIMITS. Mayor Carollo: Before we move on to the next question, I do think that the Chief, if he could come up here, needs to clarify some things on the record. We've gone through the quest lis that ; Commissioner Regalado made of the article on Sunday. Is there anything other that yo'. would like to state, Chief, based on some of the statements that were made in the article, to clari`v" Chief Donald Warshaw (Chief of Police): Well, the only other thing I'll state, Mayu -I my conversations with Gail Epstein, I, as the Manager stated, made some very definitive :vents, that I would never accept anything less than a full service Police Department. And Ilk I've been on the record for that for a long time. As you said, there are a lot of rumors. d in the Police Department, at the direction of the Manager, we have also been working arous. .` e clock and on weekends, costing out every single service that we provide, so that if the Manager comes to me and asks me, "Chief, what does it cost us to do marine patrol, or aviation, or homicide, or anything else?" that we have a cost associated with that. And that's all that's for, because we need to know what it costs for every service, so that in the event there are going to be any service cutbacks, there's an awareness. And I might add that there are some things that have the potential to be cut. Things like aviation, for example, which costs us a hundred thousand dollars ($100,000) a year in fuel, are certainly things that are on the table that could be pushed off to the side until we get through this crisis. But there absolutely has never been, never will be... And I've been talking to police officers and civilians around the clock for the last two weeks, assuring them that the Police Department is not, in any way, going to be cutting back its basic services, 4 including and especially homicide investigations. And again, those things are unfour '�-d rumors. Mayor Carollo: Additional questions for you, Chief. Early this year, when you and i °t a. numerous occasions, and then met with the former Manager to discuss the increase on for the Police Department - and we're talking about sworn officers out in the street:: at time, we were under a thousand police officers. Were you in full agreement with the disc..i6sions that we had? And I think the record speaks for itself, back when we finally approved ii!rreases But nevertheless, I'd like to go back for the record. Were you in favor that this City needed to increase its force to the level that we had discussed, and in particular, since there were monies available, that it was not going to cost this City a cent, and it was going to be done in a progressive way, if I remember correctly, during a period of about four years or so? Chief Warshaw: That's correct. And in four years, I think our projection was in our discussion that we'd be somewhere in the area of 1250 to 1300 officers. Mayor Carollo: Approximately that, Chief. Chief Warshaw: That's correct. Mayor Carollo: Now, the amounts that - and I know you're going from memory, so I �on'r ' you to the exact figure - the amounts that it was going to cost for the additional police officers that we had discussed, do you remember the amount that it was, Chief? 14 October 7, 1990 r a Chief Warshaw: Well, I'm not sure if you're talking about the conversations regarding crime bill monies? Mayor Carollo: Exactly. Chief Warshaw: OK. Well, the crime bill monies, as of this date, we've recei" . Pno!!-h funding to have a net gain of approximately 152 additional officers. And as I ca;' ik we. discussed, I also told you that, related to me late on Friday, or on Thursday, we now ha%;: Ole potential to get those monies, with the possibility of a full match from the Federal governor( meaning that it will not cost the City of Miami one penny to hire any of those additional officers. And one of the things in that article that was true is that by being in the situation that we're in now, could actually work as a benefit for us. Mayor Carollo: That is correct, Chief, and I compliment that you've taken the initiative to have started trying to find the ways that we could receive all that money without paying a cent for those additional 150-plus officers. But back then, the dollar amount that we would have had to pay for those officers was approximately how much, versus what the government would have paid, the Federal government? Chief Warshaw: Well, if we would have had to hire 152 officers without the benefit of any Federal money, we're talking about more like ten, probably close to ten milli` dollars ($10,000,000). Mayor Carollo: But the full amount that the Federal government was going to be ::,,.ig was how much, approximately? Chief Warshaw: Back then? I don't... Mayor Carollo: Well, when... back when we approved this. Because the bulk of that was going to be paid by the Federal government. Chief Warshaw: That's correct, you know. And that number is somewhere in the area of ten to twelve million ($10,000,000 to $12,000,000). I have to go back and look at my notes, because we've gotten this money in increments. The cops... Every time we get an award, it goes back almost a year, and then there's another award, and another award. So over a period of time, we're up over twelve million ($12,000,000) already. Mayor Carollo: Now, the difference... I think you are correct, it was approximately twelve million ($12,000,000) the Federal government was going to pay. And I think our part ws s ioa_.g to be approximately three million ($3,000,000)... i Chief Warshaw: Three million ($3,000,000), that's correct. i Mayor Carollo: ... if I recollect correctly. Chief Warshaw: That's correct. Mayor Carollo: Those three million ($3,000,000) were coming from what account that we thought we had monies in? Chief Warshaw: From the general fund. Mayor Carollo: OK. But were there any particular accounts that we had identified at the time in j our discussions? 15 October 7, 1996 Chief Warshaw: I'm sorry, Mayor, I don't... Mayor Carollo: From within the general fund, were there any particular areas that we - d identified... Commissioner Plummer: Line item. Mayor Carollo: ... on those three million dollars ($3,000,000) at the time? Chief Warshaw: I don't recall. Mayor Carollo: OK. For instance, I recall that I was told that we had a surplus. And I was told that as early - as late, should I say - as the week of July the 20th of this year, that we had a surplus of over five million dollars ($5,000,000) in our general fund. And this is where I was looking to get those three million dollars ($3,000,000) that we needed in order for us to receive some twelve million dollars ($12,000,000) of free money to bring more officers, gradually, during the next years. Chief Warshaw: OK. And Mayor, then let me readdress the question. I had misunderstoi! you. There was never a doubt about it, because when we went to Washington in the last year and a half to get this money, there was never any question about the fact that we had the mate. money somewhere in the general fund. Otherwise, we wouldn't have gone, and we w have done this from the beginning. So that was unquestionably... Mayor Carollo: Yeah. At least this is what we were being told from the people t,, ere in charge of our finances, and others in a position to know, that we had the funds in ity of Miami. Frankly, I believe... I believed then and I believe now that it was mely irresponsible to have let those twelve million -plus dollars go without taking any actio,..o br. those in, and put additional police officers in the streets that this community needed. It's not the Police Chief's fault, it's not the Police Department's fault. They had been saying for some time they needed more manpower, but that wasn't one of the priorities. And frankly, if we would have had, and would have another 200 officers in our streets today, which is the minimum that we should have to be at a level with other police departments across the country, I assure you that many of the crime problems that we have in some of our neighborhoods would be reduced tremendously. Now, the mission that we have is to try to convince the Federal government for them to fund the full fifteen million ($15,000,000), and I think, with a major effort of many of the people that some of us could talk to, I think we will be successful in that. I thank you, Chief. Chief Warshaw: Thank you, Mayor. Commissioner Plummer: Chief, I have a question. Are we talking 152 sworn officers, o, i-s that sworn officers and civilians? Chief Warshaw: OK. It's 152 sworn officers. And as recently as this morning, we're about to apply, and have been kind of given a tentative approval that we're also going to get funding for additional technology, as well as 60 PSA (Public Service Aides). Now, there is also a match -it, and we had discussed that previously, as well, to get those numbers up. So our goal, when we started this, was to get as much money as we could from the Cops Program for officers, and then to get those additional PSAs that would have taken us to 160. And there was money set aside, supposedly, for a match for those. We would never have gone after these monies if we didn't think that we had the capability to match the dollars. Commissioner Plummer: Do we have an ongoing class now? 16 October 7, 199( J Chief Warshaw: Yeah, small. Yeah, 15 right now, and plans to... Commissioner Plummer: Fifteen? Chief Warshaw: Right. And plans to start another class this month, actually. Commissioner Plummer: Now, when you start talking the 152, will they be put into the academy over a period of time. Chief Warshaw: Yes. Commissioner Plummer: And what is that period of time? Chief Warshaw: Well, the period of time is somewhat open-ended. With the kinds of... Commissioner Plummer: No. The bottom line is, the open-ended is not... What I'm worried about is the funding. Chief Warshaw: Well, when I say it's open-ended, it's a process. It's 152 net gain officers. You've got to space these academy classes over time, so we don't get into a hiring mode that's beyond our ability to assimilate, you know, those numbers. Some of the monies we got doesn't kick in until 1999, and we're already looking into the year 2000. So every time the Cops Office has given an award, we have been an award recipient. So in reality, we could have enough Federal money to fund positions into the beginning of the next century. We'll do that. We a very active list. We're also working with the Mayor, advertising statewide, and we've f.. tremendous number of applicants who are certified officers who have applied. And :use, that saves us the cost of six months of training. We've got an already State of Flo :ert officer we can put to work after a 40- or an 80-hour brush up training course. So n we h_- the mechanism ready right now to do substantial hiring, providing we have the matchinb lol,ais, or the Federal government gives us the waiver and pays the full freight, which would be about forty-two thousand dollars ($42,000) per officer. And I'm optimistic we can make a strong case to get those monies. Mayor Carollo: Chief... Mayor Carollo: Go ahead, Richard. Commissioner Dunn: Chief, I had a question as it related to... I believe it was about three or four months ago, you had a recruitment drive going. What happens to that, in light of the situation that we're facing now? Is that in jeopardy? Because I heard you mention something, possibly foregoing the training, because these were basically civilians who had no prior police training. Chief Warshaw: OK. All right. Commissioner, we've got an active register of over 2,U;)0 names. It was the largest, most successful recruitment drive I think we've ever had it 't > Pol ce Department's history. The problem is, the longer you wait to hire and recruit... We n competition with Dade County, with Miami Beach, with Coral Gables, and anyone anc else who's hiring. So particularly the people, say, in the first thousand, who are candio.alAs w. have probably scored well in exams in other municipalities and the County, they're gob t take the job that's offered to them first, even though I know many of them would like to come tc work here. So time -wise, if we don't move, you get let success rate on a list, as you hesitate or wait before you process the applicants. Commissioner Dunn: OK. But my question is, in light of what the new revelations are as it relates to our budget, is that in jeopardy from our end of it, to be able to recruit those persons? 17 October 7, 1996 r Chief Warshaw: Well, I hope it's not in jeopardy. And, of course, at the... in my discussions with the Manager, the decision will have to be, if we don't qualify for the match and the w ' er, whether or not there will be sufficient funding to match the twenty-five thousand d :s ($25,000) per officer, per year, that we get from the Federal government. I'm optimistic _t w^ will get the match. And I've been in discussions with the Manager regarding the Ilse... qIsc, have another three million dollars ($3,000,000) from the Law Enforcement Block G. ant. a.nd those were monies that we had identified to be used for the match. But in light of th:. amity's fiscal problems, those three million ($3,000,000) can go in other places. And I've bean in discussions with the Manager as to where they're going to go. Mayor Carollo: What we have been doing, Commissioner, the Chief and I and others have met, and we had set up a plan where we were consistently advertising throughout the major urban areas of the State to try to recruit sworn officers that have gone through the academies, that have the State certification for law enforcement officers. And not only were we saving thousands of dollars, but also saving months and months of time in being able to bring new officers i<< the streets. Obviously, the first step that we have to take from here forward is to try to assure that we get the full funding by the Federal government. And I am also very optimistic of that, Chief. Commissioner Regalado: Chief, I want to thank you for your statement saying that you, of course, us, will not favor other than a full service Police Department. That's what the '.ca 4 Miami want, and I'm sure that they will have that. But you have to make cuts ic_ , _-::r department, and I know that you are doing that. I wanted to ask you about the take-hc •ars. I know that there is in the contract, but I guess that you will have some input on the ta. if that issue comes up. How many cars are we talking about, and especially, how many ca*F are going outside the City of Miami limits? Chief Warshaw: Well, Commissioner, we have approximately 1,025 officers, and just about every one of them, with the exception of the last academy class, which would be the lowest on the seniority totem pole, so to speak, has a take-home car. So we've got almost the entire complement of sworn officers have take-home cars. A very small percentage of the officers live in the City, and I don't... I couldn't tell you exactly what the percentage is, but it's very low. Mayor Carollo: Is it ten percent, five percent? Chief Warshaw: It's less than ten percent, more like five. Commissioner Plummer: Less than? Chief Warshaw: Less than ten percent, I would say, absolutely. Commissioner Regalado: We've got officers living in Broward Chief Warshaw: Yes, sir. Commissioner Regalado: Palm Beach? Chief Warshaw: Yes, sir. Commissioner Regalado: Monroe? Chief Warshaw: A few. Commissioner Regalado: We don't know like how many... I mean within 50 miles. 18 October 7, :496 9 Chief Warshaw: Yeah, we... I can give you... We did a study when we put the take-home ca program in place. Commissioner Regalado: No, no... Chief Warshaw: So we can get you those numbers today. Commissioner Regalado: Yeah. The reason, Chief, that I raise that question is because it shows that the Citycan save money. I don't know what will be the end of the talks between (he y Manager and the unions, but I guess that if... several issues are going to be discussed. I 11,(C,►n, before laying off anybody, we'll have to address that issue, and it just... this is why I war,., to raise that, in light of what people are saying of doing away with the Homicide Departnie or, i mean, the helicopters, or other services in the Police Force. And this is one issue tl:a: 'lik should be addressed. I don't know if the Manager has done that, and I'm sure that he w: Mr. Merrett Stierheim (City Manager): No, I have not directly with the FOP (Fraternal �:i f Police) leadership, but I've talked to the Chief about it. I... Before you start laying peopie and cutting salaries, it would seem to me that's an area that certainly ought to be examined. Chief Warshaw: And Commissioner; I'd like to just add again for the record, and I've said it over and over again, as recently as this morning, to a large group of police officers, a City like Miami, with all its complexities, could not have a Police Department that was not 100 percent full service, in every way. And I understand there's frills that we all have, and I know the Police Department has some areas it can out, and I've discussed some of those with the Manager, and I don't think any of you would object to some of those cuts. But as it relates to the ability to investigate, to have intelligence, to provide high visibility, and all the things that we do for a living on a daily basis, there's no question about it, that none of those things are goinb to touched, and I wouldn't have it any other way. Commissioner Regalado: Yeah. I want to thank you again, and I encourage my colleag4cs - rn the press to deal with that statement that you have made. Thank you. Mayor Carollo: Thank you again, Chief. Chief Warshaw: Thank you, Mayor. 4 4 i f c 19 October 7, 1996 F E i '01-'\ ------------------------------------------------------------------------------------------------------- ---- 5. (A) AUTHORIZING HIRING OF STEVE LAPIDUS FROM GREENBERG, TRAURIG ET AL., AS CITY'S TEMPORARY LEGAL COUNSEL PROVIDE LEGAL OPINION ON ROLLOVER OF INTERNATIONi.* CITY MANAGERS' ASSOCIATION DEFERRED COMPENSATIO. MONIES INTO CITY'S PENSION PROGRAM -- FOR 15 MI -uviI EXECUTIVES. (B) AUTHORIZE HIRING OF JAMES C. CROSLAND OF LAW OFFICES OF MULLER, MINTZ, KORNREICH ET AL., TO REPRESENT CITY AT BARGAINING TABLE AT A FEE OF $125 PER HOUR, PLUS EXPENSES. Mayor Carollo: We are now in agenda item number "E", outside legal counsel. Mr. Merrett Stierheim (City Manager): Mr. Mayor and members of the Commission, you have memorandum dated today, in which I am requesting your authorization to retain leg! , services. In the first case, I requested a legal opinion from the City Attorney over the... what i ,,_ •ceive to be excessive cost to the City of converting 15 employee deferred compensation acco -its, w are in the.. an ICMA (International City Managers' Association) deferred... - I think its a 401 or "K" plan - to the City's pension plan. The cost... How I heard about this was that tr, is were in the millions of dollars, depending on how it was paid off. I went back and loc,i.ed at G report from the Manager, and the minutes of the Commission meetings when this was presented to you. I could not find any disclosure that when you acted on the item that you were r v ue aware by the Finance Director or the Manager that there were these added costs involved. 1 he essence of my legal opinion was, "Could this be rescinded?" And the attorney, I think, quite innocently but very appropriately indicated that he would prefer not doing that, because some of his employees, as well as himself, were among the group that were affected, along with many other executives. So I have inquired, and I'm recommending that you authorize me to retain Mr. Steve Lapidus from Greenberg, Traurig. He is a nationally recognized expert on pension law and... to advise us whether or not we can rescind that action, return those monies from the pension fund to the ICMA deferred. I would propose doing it at no penalty to the employees affected by whatever they had earned. And I believe... I'm looking over at Mr. Silver. i believ the pension boards have also raised a similar question, and would be dependent on t!-.at le,4ii, advice, as well. Am I speaking correctly, Ron? Thank you. So I would recommend tlie. Mayor, I can break these out, if you would like. The second recommendation is that w,� r-,%;:* - expert legal assistance in the area of collective bargaining, and I'm recommending tha+ v, e J 'n Mr. James Crosland from the firm of Muller, Mintz, Kornreich, et cetera, et at. I have. �ttac,. i for each of you a summary letter and a client list from the firm. They are very highly I have personally met with Mr. Crosland, conferred with him now on three separate occasions, and I feel that we would be well represented. Obviously, while we're having some of thes: initial discussions, I clearly would not require that much of their service. I would confer with them and seek their advice on anything that we do. And I don't want to put words in the City Attorney's mouth, but I think you concur that they're an excellent law firm, and very well qualified in this area. Commissioner Plummer: I move them both. Mr. Stierheim: Thank you, sir. Mayor Carollo: There's a motion. 20 October 7, 1' �n 1i fi Commissioner Dunn: Second. Mayor Carollo: There's a second. All in favor, signify by saying "aye." The Commission (Collectively): Aye. The following resolutions were introduced by Commissioner Plummer, who moved their adoption: RESOLUTION NO. 96-699 A RESOLUTION AUTHORIZING THE ENGAGEMENT OF THE LAW FIRM OF GREENBERG TRAURIG, ET AL, P.A., AS COUNSEL TO PROVIDE A LEGAL OPINION TO THE CITY OF MIAMI IN CONNECTION WITH THE ROLLOVER OF INTERNATIONAL CITY MANAGEMENT ASSOCIATION (ICMA) DEFERRED COMPENSATION MONEYS INTO THE CITY'S PENSION PLAN FOR FIFTEEN CITY OF MIAMI EXECUTIVES. RESOLUTION NO. 96-699.1 A RESOLUTION AUTHORIZING THE ENGAGEMENT, IF NECESSARY, OF THE LAW FIRM OF MULLER, MINTZ, KORNREICH, ET AL, AS COUNSEL TO REPRESENT THE CITY OF MIAMI'S INTEREST AT THE BARGAINING TABLES WITH THE FOUR LABOR UNIONS IN CONNECTION WITH THE FISCAL EMERGENCY. (Here follows body of resolutions, omitted here and on file in the Office of the City Clerk.) Upon being seconded by Commissioner Dunn, the resolution was passed and adopted by the following vote: AYES: Commissioner Tomas Regalado Commissioner Richard P. Dunn, II Commissioner J.L. Plummer, Jr. Vice Mayor Wifredo Gort Mayor Joe Carollo NAYS: None. ABSENT: None. 6. AUTHORIZE EXECUTION OF TWO ESCROW AGREEMENTS: CITY OF MIAMI, FIRST UNION BANK, CITY OF MIAMI GENERAL EMPLOYEES' AND SANITATION EMPLOYEES' RETIREMENT TRUST AND CITY OF MIAMI FIREFIGHTERS' AND POLICE OFFICERS' RETIREMENT TRUST RESPECTIVELY -- FOR ESCROW ACCOUNTS BETWEEN SAID PARTIEq WITH TERMS/CONDITIONS. Mayor Carollo: We're in item "F" of the agenda. Mr. Merrett Stierheim (City Manager): This item has to do with the pension... the two pens' funds. I met with the... I believe the chairman, legal counsel, and all of the collective bargain leadership from the FIPO, the :Fire and Police, and GESE, the General Employees' Pens Board and Fund. We had a wide-ranging discussion. The City was obliged to make a quarto payment on those funds, and I advised them that what I would like to do was to place those fu in escrow. Obviously, the City had the money, wanted to meet its obligation, and provide joint signatory between the Pension Administrator for each of those two funds and the C Manager. While we explored our options with the Pension Boards and the City Administrati as to how we might, hopefully, or how we might be helped, if I can put it that way, by Pension Boards in meeting some of our monetary crisis. I think this action certai demonstrates our good faith. It is putting the money in a safe place. It cannot be remol without the signatory of the Pension Administrator for each of the funds, the County... the Attorney, and the bank requested an authorization - pardon me - to enter into :Ie _�.. agreements. The Attorney has prepared the attached resolution, and I recommend its 1pp;- Mr. Mayor. Commissioner Plummer: So move. Mayor Carollo: There's a motion. Is there a second? Vice, Mayor Gort: Second. Mayor Carollo: There's a motion by Commissioner Plummer, second by Vice Mayor Gort. further discussion? Hearing none, all in favor, signify by saying "aye." The Commission (Collectively): Aye. ton ng ion nds the nl Any rly for ity on ;w 1, i i i g z f i F } f i C Li The following resolution was introduced by Commissioner Plummer, who moved its adoption: RESOLUTION NO. 96-700 A RESOLUTION AUTHORIZING THE CITY MANAGER TO EXEC Ti. 'W ESCROW AGREEMENTS, IN A FORM ACCEPTABLE TO THE CITY A )R BETWEEN (1) THE CITY OF MIAMI, THE FIRST UNION BANK AND 7 CITY OF MIAMI GENERAL EMPLOYEES' AND SANITATION EMr 1ES11 RETIREMENT TRUST ("GESA") AND (2) THE CITY OF MIAMI, THE l'IRST UNION BANK AND THE CITY OF MIAMI FIREFIGHTERS' AND POLICE OFFICERS' RETIREMENT TRUST ("FIPO"), TO ESTABLISH AND MAINTAIN ESCROW ACCOUNTS BETWEEN SAID PARTIES AT TERMS AND CONDITIONS MORE PARTICULARLY SET FORTH IN SAID AGREEMENTS. (Here follows body of resolution, omitted here and on file in the Office of the City Clerk.) Upon being seconded by Vice Mayor Gort, the resolution was passed and adopted by the following vote: AYES: Commissioner. Tomas Regalado Commissioner Richard P. Dunn, II Commissioner J.L. Plummer, Jr. Vice Mayor Wifredo Gort Mayor Joe Carollo NAYS: None. ABSENT: None ---------------------------------------------------------------------------------------------------------------- 7. DISCUSS EXTERNAL AUDITING PROCESSES AND PROCEDURES OF DELOIT FE TOUCHE, EXTERNAL AUDITORS FOR CITY -- (QUESTION/ANSWER PERIOD). Mayor Carollo: We're on item "G" in the agenda. Are the representatives from Del, te, Touche here? Would you come up, please, and if you could identify yourselves, and yc• :i begin making your presentation when you are ready. Mr. Frank Paredes: Good morning, Mr. Mayor. Mayor Carollo: Good morning, sir. Mr. Paredes: I'm Frank Paredes, a partner with Deloitte and Touche. I've been associated with Deloitte and Touche for over 20 years. I am the partner in charge of this audit for the City of Miami since 1989. With me, I have Cheryl Hudson, our office managing partner, and with me also, I have Joe Echevarria, our partner in charge of our audit practice. What we're giving you, sir, is a chronology of some of the events and some of the information. I was happy to hear the Manager indicate that there's been a lot of misinformation and disinformation, and, hopefully, we're here to answer and straighten out all those type of issues, sir. 23 October 7, 1996 ; Commissioner Plummer: Did they get a copy of what we have here about so-called questions and answers to be asked? Mr. Paredes: I don't know. No, sir. Commissioner Plummer: I don't know where it came from. Mayor Carollo: These were some that we had typed up, Commissioner, and before I w ,16 w lti some of them, I wanted to give it to each and every one of you, so that you could see somt of tz,;: questions that I was going to be asking. Commissioner Plummer: All right. I just didn't know if they had it or not. Mayor Carollo: Well, they will hear it once I start asking questions. But before we be„it that process, I'd just like to ask Mr. Paredes, is there any additional statement, presentation, that they would like to make at this point in time, before we start asking questions? Mr. Paredes: No, sir. Mayor Carollo: OK. Now, I'd like to ask the City Attorney to give his best legal advice to this Commission as to the steps and procedures that we should follow while we ask questions of the representatives of Deloitte and Touche that are here today. I think we all know what the possibilities and potentials are here, so I think that it is proper for the City Attorney to advise this Commission as to the limitations that we should make upon ourselves here today. A. Quinn Jones, III, Esq. (City Attorney): Mr. Mayor and members of the Commission, i ' ' ;ht of your remark, I'd only say to you that I would caution you in terms of any remark. ny responses to the questions that may be posed here. I don't think that I have to tell yo,: — it comes as any surprise that we're at risk, a potential litigation. In that regard, you should always remember that anything that you say or will say may be very well used against you in your capacity as Commissioner, and against the City in any potential litigation. So I'd only ask that you respond or keep your remarks succinct and on point. You know, we all have a time where we get emotional. This is a very emotional time. It's nothing to be mean -spirited about or to take personally. So I'd only ask that with those limitations, with those restrictions, you conduct your question and answer period. Mayor Carollo: Thank you, sir. As I stated, I have a list of questions that I will be asking of Deloitte and Touche, and I've presented copies of those questions to my colleagues here. They, of course, can ask any additional questions that they would like. The first question that I have, Mr. Paredes, is if you could explain the Deloitte and Touche overall responsibility in coordinating the annual audit with the other CPA (Certified Public Accountant) firms and the City staff, the other CPA firms that you were involved with. Mr. Paredes: Commissioner, we are the lead auditing firm. Fifty percent of the engage::..t is distributed out to other minority firms. In the area of 22 percent to the black -owned fi-rsof Sharpton and Brunson; 16 or 17 percent... I - as soon as I do the math, I'll be able - to the firn,. of, the Hispanic firm of Sanson, Klein and Jacomino; seven percent to the black -owned wcmr_:n's firm of Pam Watson and Associates; and five percent to the women -owned Hispanic f;rrri of Aida Brail (phonetic) and Company. The sum of that would add to 50 percent. We have 50 percent. We are the lead firm. We distribute the work accordingly to those percentages, and we are the ones that sign the opinion. Mayor Carollo: Correct. In addition to that, what were your main responsibilities in coordinating the annual audit with those CPA firms and the City staff? 24 October 7, 1996 a i 4 I Mr. Paredes: We are the ones that coordinate, plan and administer the audit, sir, togeth.- 'Ih those joint venture partners and the City staff. Mayor Carollo: The next question that I have for you is, what was your firm's I. ;eduie for evaluating the City's internal controls and accounting procedures which would satin,., you the separation of duties, and safeguards of the City's assets? Mr. Paredes: Commissioner, no different than in any other audit engagement. We look at the system of internal controls to come up with a conclusion in our audit. Your system of internal controls provide the basis for you to produce your financial statements, your official financial statements. That is what we do. That's what we do to evaluate your system of internal controls, to make sure that the financial statements that you present to outsiders is fairly presented. Mayor Carollo: But what were your firm's procedures in evaluating the City's internal controls and accounting procedures that satisfied you as to the separation of duties, and the safeguards of the City's assets? Mr. Paredes: Those involve inquiries, testing, various methods of testing through 'ilquiries, through procedures, through knowledge of what we know about the City, throughout th:. xars of our understanding. Those are the type of procedures that give us the basis tc make the conclusions on the internal controls. Mayor Carollo: Can you state for the record the sort of inquiries and to whom - and testinL u to whom that you conducted, so that we could get a better idea of the extent? Mr. Paredes: Those inquiries are throughout: the City -- the Finance Department, their personnel, City Manager's personnel, some of your documents that you have. It just goes across the board, depending on the circumstances and depending on the item. Mayor Carollo: Why was the audit in your management letter completed so late after the fiscal year ended in September 30, 1995? Mr. Paredes: The audit of the financial statement, sir, was completed in March 30 of '96. And your financial statements were issued as of that date. Those financial statements became and were filed with the CFO (Chief Financial Officer) on March 30 of '96. But I think what yo;.. -e referring is to the single audit reports and maybe to your management letter. But the financial statements were out on March of '96. Mayor Carollo: Again, but why was your management letter completed so late after tile; fisca! year ended on September 30th of 1995? Mr. Paredes: It's typical for the management letter to lag the process, because you have to compile the comments, you have to perform the draft, you have to draft them, draft those comments, you have to do internal reviews, you have to submit them to the City for their comments and their observations before it ever becomes a final product. So it's a longer process, and it generally follows the financial audit. Mayor Carollo: And again, the audit was completed, when did you say? Mr. Paredes: The audit was completed... The audit was completed on March 22nd, 1996. That's when we signed our opinion, that's when we dated our opinion. The financial statements of the City was issued in March 30 of '96, and the management letter was issued on September 18th of '96. 25 October 7, 1996 3 Mayor Carollo: OK. As of September 30, 1995, the total due from other funds Citywice approximately fifty-five million dollars ($55,000,000), according to Footnote 5 in page 10 of.. I'll wait for you to find that before I proceed. ... approximately fifty-five milAl."n . ors ($55,000,000), according to Footnote 5 in page 40, of which... Let me know when yvou e.._, '+ before I proceed. Mr. Paredes: No, no, I have it. I'm looking for... Mayor Carollo: OK. Of which twenty-four point seven million dollars ($24.7 millio.�) was + W amount due from the pension bond, and done after September the 30th. Is it realistic to believe that the City could recover the thirty million dollar ($30,000,000) balance from the funds which owe these amounts? Mr. Paredes: The money for the financial... for the bonds were already in place in December of '95, so they would have been used to pay this amount. Mayor Carollo: All right. Any other statement that you would like to make to clarify that? Mr. Paredes: No, sir. Mayor Carollo: OK. Vice Mayor Gort, do you have a comment to make on that? Vice Mayor Gort: I eah. On this one, let me ask you a question. My understandi. is, this money was to deposit in the escrow account, in an account to be utilized. These fees were to be used and deposited in an escrow account in order to make the payment later on. Mr. Paredes: Into the pension trust, the pension account? Vice Mayor Gort: Right. Mr. Paredes: That is correct. That was my understanding, also. Vice Mayor Gort: OK. In your... During your audits, do you all check into these accounts, that they're available? In other words, there's many accounts that are supposed to have escrow accounts, where there's monies to be deposited. When you do your audit, do you check into those accounts? Mr. Paredes: Well, you have the equity pool of cash in a lot of... some of those accounts. But -11 your cash accounts are reconciled, yes, sir. Vice Mayor Gort: Thank you. Mayor Carollo: Can the City of Miami be assured that all wire transfers were to legal expenditures, and no funds were directed to bank accounts for which other parties would benefit from short-term investing, even for periods as short as overnight or over the weekend? Mr. Paredes: Commissioner, based on our testing and based on our reviews of internal controls, we hope we would have picked those type of items up, but it's based... I can't give you a 100 percent guarantee. There is... Mayor Carollo: So you cannot give us a 100 percent guarantee that no wire transfers were made for either overnight or as short as the weekend, that were not legal wire transfers? 26 October 7, 1996 r eNIM Mr. Paredes: Commissioner, if it wasn't selected... Audit procedures require selections. If J's an item that didn't get selected, we wouldn't have had any reason to have picked that up. Mayor Carollo: Any further statements that he would like to make on that? Mr. Paredes: Oh, he's reminding me that to make sure we all understand that the pulp, audit is to present an opinion on the fair presentation of the financial statements. That'„ t.:o ultimate. Mayor Carollo: On wire transfers, did you ever take any action to see what proccaares w done, if records were kept on wire transfers, and what kind of records were kept? Mr. Paredes: Those would have been subjected to our internal control testings, yes, sir. Mayor Carollo: Do you know if copies were kept, paper copies from the banks, when wire transfers were made? ' Mr. Paredes: No, sir, I can't tell you that right now. I'd have to look at our papers. Mayor Carollo: OK. Would that be a procedure that you would normally look at, on wire transfers? Mr. Paredes: Yes, we would look at wire transfer transactions, but I'm not sure we .!•)uld ep the documentation in our work papers. We generally don't keep those. Mayor Carollo: Thank you. To what extent has your firm performed any prelimini: lit work for the year ended September 30, 1996? Given that the City has implement financial accounting system that was effective October 1st of this year, has your t, been involved in any aspect of this conversion, such as reviewing internal control procedure, staff training and planning for a clean year-end closing of the old system, prior to transferring the data to the new system? Mr. Paredes: We have not started, sir, the procedures for 1996. We have not started. With regards to your new information system, early on, or... Early on in the process, we did some administrative, some implementing, some management consulting services, and then we also did some data conversion procedures, to make sure that the data from the old system would be converted to the new system. But that was... that was done a few months back. That might have even been done during our '95 audit. I don't recall correctly at this time the timing for that. Mayor Carollo: Are there any particular reasons why you haven't performed any prelimirlwy audit work for the year ending September 30th of this year? Mr. Paredes: There's a couple of reasons. We haven't had... We haven't had the opportr• y. i think the City has had all kinds of situations during the summer and the early fall. Mayor Carollo: Have you... Mr. Paredes: We have not had the opportunity to plan and organize the engagement. Mayor Carollo: Have you contacted anyone in the City to have made such request, or been told by anyone in the City that they could not help you and provide you with any of the information that you needed? Mr. Paredes: No. We've had our normal conversations with the Finance Department to... And they've asked us when are we going to start. And we've told them that we wanted to make sure 27 October 7, 1996 at that point in time that we had yet to issue the management letter, so we wanted to wrap up 70.5 and start '96 anew. But we've had our ongoing conversations with the Finance Department. Mayor Carollo: OK. But you did ask. our Finance Department, and our Finance Deparu.:.nt •. willing and able to help you. Mr. Paredes: Yes, yes, and we are willing and able to start. Mayor Carollo: Given the preliminary assessment of the City's financial condition, and lack of internal controls, and weak accounting and management information systems, how can the Cite Commission be comfortable with the existing external audit term? Mr. Paredes: Commissioner, the issues that you're talking about here, your systems were in place. Your information was available. The issues that you're talking about are a people issue. People issue. They're not about the system of internal control. They're not about some of the accuracy of these financial statements. I think the accuracy of those financial statements and our audit procedures, we stand behind them. Based on all the information we had at that time, based on all our procedures, we have disclosed everything that it is within our standards to disclose, both in the financial statements, and in the management letter. Mayor Carollo: When you say that they are people issues, can you name some of the people that are involved in the issues, and what are the issues? Mr. Paredes: The issues is, you can have as good a system as you can ever have, t if the people do not apply them, if the people do not apply the procedures, then the system L ..) good. That's what we mean. You had... You previously had a Finance Director, you previo" sly had a City Manager. You have now a new Administration. That new Administration is maki,ig things happen differently than the old Administration. So it's still all people. And I think it's very important, and we all must understand that your day-to-day debits and credits, which is the foundation of these financial statements, the system was there. The information... Some of the analyses that your new Administration has done, they came out of your systems from the City. OK? But they looked for them, and they asked for them, they analyzed them. Those are the type of things that we're dealing with. Mayor Carollo: Did you at any time advise or gave the opinion to the former City Manager or anyone in the City Administration that the Finance Department and the Budget Department should be placed under one person? Mr. Paredes: Yes, sir. When we consulted, when the previous Administration was doi.1g a similar process as this one that is being done, in the right -sizing and analyzing their c,.:.;t E their budgets, the question, after the former City Finance Director had resigned or retired, I should say, I was consulted. It is not uncommon in the industry to have, it is not uncommon in corporate America for the CFO (Chief Financial Officer) to have a Budget, and the Final,ce and the Accounting Departments to report to him, and it's not uncommon in the State and lu lal government industry. Mayor Carollo: Were you satisfied with whatever work that you saw, work product that was being done by our internal auditors, or did at any time, did you feel that they should have been doing work that was not being done? Mr. Paredes: Mr. Mayor, the Internal Audit Department, since we've been associated with the City, has always been... their focus has been to do sub -grantee audits. We have never relied on their work on terms of... and we have never used their work for purposes of our financial statements. They have always been very effective in what they did in doing the sub -grantees. At 28 October 7, 1996 that point in time, or based on those decisions of the City at that time, that's what they v, r ed to see the Internal Audit to focus on, the sub -grantee audits. Mayor Carollo: Is it normal, or is it a procedure that should not concern any external "toi find that you have relatives of the people that are the Director of the Budget Departn..nt N. ':il,b j for the Director of the Finance Department, and for the Director of the Finance DeNs +m:._ have relatives working for the Director of the Budget Department? is that something that sliou:�; concern an external auditing firm, or not? Mr. Paredes: Commissioner, we never test for nepotism. It would be impossible for us to understand and know the nepotism rules and work/family relationships. That is not a typical audit procedure. Mayor Carollo: That's all that. I'm asking. What do you think a typical auditing procedure should be or not? Mr. Paredes: Typical audit procedures in payroll is to make sure that the person that's getr •;g the paycheck is a live person, is a person working or assigned to the City. And in our t +ing, which is a selection, we would, once in a while, do what's called a payoff, and v✓k. -would actually get the checks from the Payroll Department, and we would go out, and hascd on identifications, we would do that. We've done that throughout the years. Mayor Carollo: Who were the main people that you dealt with, both in the Finance L.;p,•rtment, besides Mr. Surana, and in the Budget Department, besides Mr. Chhabra? Mr. Paredes: We've rarely dealt with Mr. Chhabra, I might add. With regards to the Finance Department, we dealt for many years with Carlos Garcia. We've dealt many years, or every single year, with Phil Luney. When Mr. Surana took over as the Finance Director, we dealt with him, and we dealt with some of the City management staff. Mayor Carollo: I have no further questions at this point in time. Commissioner Regalado: Can I... Mr. Paredes, you mentioned that you were consulted about the possibility of having one person as Director of Finance and Budget. However, I have heard that somebody has been saying that you proposed that both departments would be unified. Werc- you consulted, or you took the initiative in proposing that those two departments were u iiec* under one person? Mr. Paredes: Commissioner Regalado, I can't decipher which I did or which I didn't to fi, "m my recollection. It was during the right -sizing, during some of the budget cutting than that Administration was doing. Carlos Garcia had just resigned, and the conversations cani� -_p. Whether I initiated that conversation or whether I did not, I can't recall. But the fact of tl. matter is that we were consulted, and we found that it was common in the industry; we have examples of it, and we didn't see any problems with it. Commissioner Regalado: You say here that the City should ensure that these measures that you recommended become inculcated in this culture, and that the benefit generated become permanent, the City must avoid the possibility that a budget deficit, as defined by Florida statute, does not occur for two consecutive years. Did you notify the City about any budget deficits other than the ones that we are dealing now? Mr. Paredes: Commissioner, the purpose of this management letter at this time was... and that's part of our chronology that we've indicated. While we were doing the audit of the 1994 financial statements, which was in early January '95, give or take, in terms of the timing, we, as 29 October 7, 1996 part of our procedure, started realizing that the City was starting to run out of cash. At that time, we communicated with the Finance Director and the Administration that that was a problem, that that was a concern. That was the genesis of this letter, because after we were looking, after... After we reviewed and started analyzing those situations, we realized that a lot of these measures, which, by the way, are a lot of the measures that are being recommended now, were:... that this was the type of philosophy that the City needed to start getting themselves into. A, those wordings are just to... forewarning, just to... Listen, you're in tight financial circumstances. Just make sure you keep on the right side of the fence, so that you don't ral! over. And all of a sudden, within two years... OK? But these are our recommendations. "H.,; is our best intent at that time to let you know how we... Commissioner Regalado: '94, '94, yes, sir. Mr. Paredes: '94. As a result of our '94 audit, which was... Commissioner Plummer: In... Excuse me. Mayor Carollo: Go ahead, Commissioner. Commissioner Plummer: In your audit procedures, do you normally do the Capital Improvement budget? Mr. Paredes: No, sir. In our normal auditing procedures, we don't do anything with the budget. i Commissioner Plummer: Excuse me. Do you audit the Capital Improvement Program': Mr. Paredes: We audit the expenditures that are reflected in the financial statement. Commissioner Plummer: Only the expenditures. Mr. Paredes: Yes, sir. f { Commissioner Plummer: So in other words, you would not be identifying any shortfalls of monies that had been approved, and not sufficient funds to cover. Mr. Paredes: No. We would... We are based on actual... on actual activities. Commissioner Plummer: You... Excuse me. We were furnished for the first time last week copies of the management letter, which we had never seen before, for whatever reason. When we were furnished these copies, it was, obviously, the letter had gone to the Finance Department, and had come back with their answers, and that's what we have copies of. My question has to be that when they came back with the answers to your questions, did you follow up to make sure that, in fact, what was said was going to be done was done? Mr. Paredes: To the best of our ability at that time, if we knew that information, yes, w; _id. I.E., if your system... We knew that, for instance, in your grant monitoring check list, >.i?at SC— was implementing a grant monitoring program. Commissioner Plummer: Well, I'm more talking about the terminology that I can't find right now, but basically said that you told them that the City was twenty-six million ($26,000,000) short, and that it could cause a State procedure to be kicked in. And their answer was that they were addressing that problem. And you seemed to be, or they seemed to be satisfied that the problem was being addressed, which, today, we're finding out that maybe it was or was not being addressed. And I'm asking the question in a follow-up, did you follow up to make sure that the answer they gave you to your question was, in fact, done? 30 October 7, 1996 t ra Mr. Paredes: That the budget for '96 included those efficiency measures and those red _ io"t, .;~� cost, yes, sir. The actual results for 1996, we have not been associated with them at all, aw we don't conduct interim audits. We don't conduct any interim reviews. Commissioner Plummer: I'm assuming that you read most of the articles that have at,peare. and maybe, let's say, that they're 80 percent correct, or maybe 90 percent, or some Nrcent correct. Are you shocked at the findings of Mr. Stierheim? Mr. Paredes: Commissioner, without seeing the '96 actual results, and analyzing them... We just saw them Friday for the first time. I can't... I haven't had the opportunity to analyze it. But I can say that for the past two years, the City's finances have been bare bones, and very hard financial situations, and the hard decisions are being made. Commissioner Plummer: Well, I don't find... Maybe our terminology and semantics is... '. don't fine bare bones. I don't find no bones. What I'm saying to you, the management letters that I have in front of me, which is what we've seen for the first time, go back two year. Ari I correct, Merrett, two years? Mr. Merrett Stierheim (City Manager): Yes, sir. Commissioner Plummer: OK. So I'm not talking about just '96, OK? I'm talking abc .t '94 and '95, in which both of those years, you were... your company was the external auditors, rind my question has to be, again, are you shocked, or do you have a comment as to what Mr. Stierheim has come up and informed this Commission on the procedures? Mr. Paredes: Commissioner, I'm not shocked, because the financial statements for both '94 and '95 do reflect those... and I'm not trying to deal with semantics... Commissioner Plummer: No, I... Mr. Paredes: ... but do reflect the true financial picture that the City was in. Mayor Carollo: Which was what, Mr. Paredes? Mr. Paredes: Just what the financial statements show. In '95, that you had a twenty-si_ illio'. dollar ($26,000,000) deficiency in revenues over expenditures. That was disclosed _n th„_ & financial statements, which those are your financial statements, on which we audit thc.n:, financial statements and issue our report. That information was knowledgeable and kno:,�i to the City, because that's what the actual numbers from 1995 reflected. Actual numbers. Mayor Carollo: Is that on the first draft or on the second that it was reflected? Mr. Paredes: No, no. That's on the financial statement, sir. That is on the financial statement. Mayor Carollo: Right, the final financial statement on the draft. Mr. Paredes: Right. It is... I am being advised, sir... Mayor Carollo: No, I'm just trying to verify where you are reading from. Mr. Paredes: OK. What page? Thirty-three, right? Commissioner, if you turn to page 33 or the City of Miami's 1995 financial statements, there is a footnote there that reads, "Deficienc-s of Revenues and Other Sources." The wording there says in fiscal '95, the City had a net 31 October 7, 1996 r deficiencies of revenues and other sources of approximately twenty-six million ($26,(X;` :. O(,) under -appropriation. The deficiency resulted from receiving approximately twelve I i f million less than planned revenues, and incurring non -planned expenditures for Polio_ _.id . overtime, claim payments, and others. The deficiency became apparent in February '95 id th City immediately began the process of correcting the deficiency through several ac:'.:Ils, including work force reductions, cost reductions, and operating efficiency. These benefit... benefit of these measures are expected to reduce - are expected to reduce - operating costs by the City by more than thirty-six million ($36,000,000) in 1996. In addition, the City Commission approved a bond program in July '95 to finance the City's current and future pension contribution. On December 1, 1995, the City issued sixty-two million ($62,000,000) of pension bonds to fund approximately twenty-five million ($25,000,000) of fiscal '95 pension contributions, and that wording, sir, is almost paraphrased in your management letter. And this financial statement, and this report has been out on the streets since March 30 of '96. Mayor Carollo: My follow-up question to that is, on the sixty-two million dollars ($62,000,00t'.) of pension bonds that were issued, it states that approximately twenty-five million ($25,000,000) was going to be used for the pension contributions of fiscal 1995, and approximately thirty-seven million ($37,000,000) for future contributions. Did you do anything during your audit to, indeed, make sure that those monies were being used for the pension, and that none of it was being used for the general fund? Mr. Paredes: Well, the twenty-five million dollars ($25,000,000) went to cover the deficiencies for that year. Mayor Carollo: That's correct. Mr. Paredes: OK. With regards to the thirty-seven million dollars ($37,000,000) - that's the balance of the sixty-two million ($62,000,000) - we have not performed any procedures for 1996 to see where those got recorded, and where those got applied, sir. Mayor Carollo: Now, at any time during the year, did you perform or were you performing any kind of auditing, any kind of testing, to see if, indeed, those other thirty-seven million dollars ($37,000,000) were being used or being placed in any account for future contributions? Mr. Paredes: No, sir. We don't... We don't do any ongoing monitoring on the City's fina..i.dt statements. We audit after fiscal year end, which just ended seven days ago, as we all know. Mayor Carollo: OK. Now, you're pretty familiar with the Cuban community, aren't y,:a, Frank? Mr. Paredes: Yes, sir. Mayor Carollo: And the community here as a whole? Mr. Paredes: Yes, sir. Mayor Carollo: Do you consider yourself an individual that's pretty much up to date as to what's going on in Miami? Do you read the paper every day? Do you listen to radio, every so... during the week? Mr. Paredes: Yes, sir. Mayor Carollo: OK. Do you listen to Spanish radio every now and then? 32 October 7, 1996 Mr. Paredes: Especially when it was a client of mine, but once in a while, I certainly do. Mayor Carollo: Especially when it's a client of yours. That's what I figured. That's why I'm asking the question. Do you know that a client of yours that was the CEO (Chief Executive Officer) of the City of Miami, do you recollect him going on radio in October of 1995, from radio station to radio station, calling some of the candidates who were running for public office liars, because they had made some reference in commercials that the City might have some financial problems? And do you recollect that client of yours, that CEO of the City of Miami making statements that we had a sound financial situation, that we were in great financial shape? Mr. Paredes: Commissioner, that's... that's... Mayor Carollo: Because this went on for day, after day, after day in October of 1995. Mr. Paredes: We'd like to... We comment on the financial statements. Mayor Carollo: I understand what you're commenting on, but since, you know, you acknowledged that, in particular, when a client of yours goes on the radio, you take an interest in listening to what they say, if the CEO... Mr. Paredes: No, I'm sorry. You might have misunderstood me. Mayor Carollo: ... if the CEO of the City, that is your client, is going around publicly and making statements to something that is not true, do you feel that, if you would have heard that, you had an obligation to notify the City that it was wrong, in the opinions that were being given? Mr. Paredes: Commissioner, let me first... because I think I mis... I either misspoke, or you misunderstood. But when I said that I listen to Spanish radio once in a while, is when the r stations were a client of ours. I used to represent some of the radio... some of the Hispanic rac stations here before they got sold. That's what I meant at that point, and from that perspective, not from the City's individual perspective. Mayor Carollo: OK. All right. I'm glad you clarified that. Thank you. Mr. Paredes: My apologies if I... Mayor Carollo: Yes, sir, Commissioner. Commissioner Plummer: Can I finish? Mayor Carollo: Yes, go ahead. Commissioner Plummer: Frank, I have... Vice Mayor Gort: You haven't finished yet? Commissioner Plummer: Huh? Vice Mayor Gort: You haven't finished yet? Commissioner Plummer: Well, I acquiesced to the Mayor, who wanted to ask questions. I have really two things that I want to ask you. In your management letter of March 22, you have two statements in there, and I'm going to ask you to comment on both. 33 October 7, 1996 F "Observation. As expected, the City of Miami had a very difficult financial year. Nonetheless, the City appears to have met all of its financial obligations, and managed through the financial challenges of fiscal 1995." Would you comment on what you meant by that. Mr. Paredes: Commissioner, at that time of our audit, you had met... You were not ii. Lhe i of any liabilities that were due. You, apparently, by hook or by crook, worked a... :, )rimed... That is not a... I don't mean it from... from a smirk remark. But you worked the finances of the City. We were concerned hack in '94. We were concerned back in '94 as to how wera you going to survive through the '95, and you did. And that's what we were trying to convey the_., that you did... Commissioner Plummer: Does that also... Go ahead. Mr. Paredes: But you did meet all your obligations that were due at that time. Commissioner Plummer: Is that also the same reason you made the comment in your recommendations, where you say in the March of '96 letter, "We commend the City and its Administration for immediate actions to address its financial difficulties"? Mr. Paredes: That's correct, sir, because when we brought it to the attention of the then - Administration back in January of '95, they immediately started a similar process or whit'-, going on now. And they implemented, they worked some arrangements with the Sanita'. __ Union. They worked some arrangements. They offered some of the early retiyem',iit opportunities. So they acted on some of those. The results of those actions would be hovin in the actual numbers in 1996. Commissioner Plummer: Your management response... And this is why I asked the ou. question previously. This is coming back from the questions which you asked. "Management Response. These matters were considered during the fiscal year 1996 budget process, and the City Commission adopted the measures proposed by the City Administration." Can you comment on that? Mr. Paredes: That you had approved the 1996 budget, which showed thirty some -odd million dollars of cuts, and which showed no dependency, if I recall correctly, on some single sources of revenues. Commissioner Plummer: So what you're saying is that in and around March the 26th - the 22nd - of 1996, it would have been your opinion that the City was financially in pretty dr.-ent shape; not good, but decent. Mr. Paredes: No, because I didn't know the actual results, sir. You had implemented... 'y". were operating under a budget that was selected, based on some of these measures tha: ,gas performed by prior Administration. The budget that you were operating under in '96 did have some of our recommendations that we had suggested in '95... in '94. Commissioner Plummer: My final question to you, sir, of today: Management letters, are they normally given to the Board of Directors, as well as the Administration? I'm questioning, from your aspect, did you have a feeling that, when you gave these management letters to the Administration, which is the management, that they would forward those to us? Would it be a normal procedure that they would be forwarded to us? Mr. Paredes: That has been the historical pattern since '89. We would provide the... every report through the Finance Department, and the Finance Department would then distribute it to 34 October 7, 199E FA the appropriate representatives of the City. I might add, also, that we - excuse me - that we have also met with the Audit Advisory Committee to discuss some of these, which is another forum that you have for communications on these matters. Commissioner Plummer: Thank you, sir. Mayor Carollo: Vice Mayor Gort. Vice Mayor Gort: Mr. Mayor, I'm glad these statements were made, since I was one of the Commissioners that got elected in '93, and came up with this problem in '94. As I reca?l, I was assigned by this Commission in 1995 to work... Because we were aware of the shortfall of the twenty-six million dollars ($26,000,000) for that year. And we got together, and I remember the procedure. We got together with staff, with the directors, with the unions, and we were able to reduce the budget by... I got different figures from twenty-six to thirty million dollars ($26,000,000 to $30,000,000). Now, my understanding, from what you're saying today, we, as the Commission, took the steps recommended by you to reduce that budget. Mr. Paredes: We don't administer the City. We don't recommend budgets. Vice Mayor Gort: No, I understand that, but I... Mr. Paredes: We don't recommend budgets, Commissioner. Vice Mayor Gort: I understand that. But what. I'm saying is, we tried to foll.: ;,:ur recommendations in trying to cut the budget. And according those instructions, we 1 told that the '96 budget was reduced by thirty million dollars ($30,000,000). 1 know you d+dr.'t audit that. I understand that. Mr. Paredes: And I want to make sure of that. That's not our responsibility. That is the City management and the City Administration's responsibility to develop a budget, administer the budget, and monitor the budget. Vice Mayor Gort: But my understanding is, those actions taken by the employees, by the unions, and by the City would not be seen until another audit takes place now, which indirectly, Stierheim and his staff has done that, and they came out with a shortfall of fifty... sixty-eight million dollars ($68,000,000). Mr. Paredes: No, no. From what... From the schedule that we saw from Mr. Stierheim, it is for the fiscal year '96, your actual deficiencies might be nineteen million dollars ($19,000,000). Vice Mayor Gort: Nineteen million ($19,000,000), correct. OK. Mr. Paredes: OK? If we would be... If we would start our audit and finish it by March, li. we normally do, we would... I have... I think we would come up with that same nineteen mill=:gin dollars ($19,000,000) that Mr. Stierheim has come up with, in terms of actual numbers, whic:_ is what we audit. We audit actual numbers. Mayor Carollo: The only problem is that based on the numbers that I'm seeing, by March, when you finish that, this City might be likely out of money to write any checks. Mr. Stierheim, do you have any questions that you would like to ask them on the record? Mr. Stierheim: I have some technical questions. Frank, to what extent did you audit capital project funds to make sure that they were in compliance with State laws, which restrict awarding contracts without sufficient funds? 35 October 7, 1996 Mr. Paredes: Commissioner, we... I mean... I'm sorry, Mr. Manager. Our normal procew.,.,,. s to audit is we run a selection on the expenditures, and when we select an expenditure, we le-t : I all compliances. And if something comes up, we follow up. If something doesn't com= :p, move on. Mr. Stierheim: In other words, it's a spot check? Mr. Paredes: It is spot-checked, yes, sir. Mr. Stierheim: But, I mean, how extensive? I mean, does it give you comfort that... Mr. Paredes: It's based on a materiality factor that would give us the basis to state, in our opinion, that the financial statements are fairly presented. Mr. Stierheim: OK. Secondly... (INAUDIBLE COMMENT NOT ENTERED INTO THE PUBLIC RECORD) Mr. Paredes: Commissioner, I'd have to get back to you. I'd have to look at the work papers for that. Commissioner Plummer: Give me a worst factor case. I'm sorry. I mean, you don't have any idea. Mr. Paredes: No, no, sir. I would be... Commissioner Plummer: OK. I would like to know. Mr. Paredes: I would get that information this afternoon for you. Commissioner Plummer: Thank you. Mr. Stierheim: Secondly, what is... I'm going to rephrase a question the Mayor asked earlier Is it accepted auditing and accounting practice to not be present in at least the last two mont: 3 of a fiscal year for an organization, and a budget, and a client the size of Miami? Should nc ' ,your auditors have been present in at least August and September, as the City began closing do. ;n and winding up the end of the year? Is that... The fact that you were not, is that an acceptable auditing practice? Mr. Paredes: Mr. Manager, there is no accepted... It all depends on... That's a business decision. Those are business decisions. When is it more efficient, when is it more effective, depends on staffing. There is no set requirement to do interim procedures and final procedures. There's been years that we have done interim procedures, but generally, those are not of the nature of financial statements. Those are some of the procedural work that is done and confirmation work that is done. Because the City, itself, does not close your books, and we don't have numbers to audit until two to three months after year end. Mr. Stierheim: OK. Did you provide an audit opinion on any of the bond issues that the City has issued, any audit statement for those bonds? Mr. Paredes: We consent to the use of the opinions that is issued on the financial staterr:.::t, because the financial statements are included. 36 October 7, 1996 i 4 i r i i f I Mr. Stierheim: Would you say that the decision to issue seventy-two million doll:3rs ($72,000,000) in special obligation bonds to fund what I consider to be normal, general fu.,.. appropriations, without establishing adequate reserves, even to the point of moving sor le o those bond monies into a prior year, after the books are closed, that this was a go(-' fis, 4 management decision? Mr. Paredes: Mr. Manager, we audit your decisions. That was not our decisions. %�'e do i.,,L audit... Those are financial decisions. Those are administrative decisions. Once you did ihem, we audit how you recorded it, and how you booked that transaction, and make sure that that iss, disclosed as appropriate, under the appropriate standards. But the actual decision... Mr. Stierheim: But isn't... Wasn't that bond issue an indication of fiscal decay, clearly, with red flags? Mr. Paredes: I think the financial statements, standing on itself, does demonstrate the financial situation of the City, that the City was in. Mr. Stierheim: Why did you not question, or do you think that it's good accounting practice to record in the general fund bond proceed, specifically, the Florida Power and Light acquisition, where I note on page 23, in the Combined Statement of Revenues and Expenditures, twenty-one million dollars ($21,000,000), which were the proceeds of that bond issue being recorded in the General Fund Statement, is that acceptable accounting practice? Mr. Paredes: And if you also look at the balance sheet, sir, you will see an approved r ject in reserve of that money that came into the general fund, because that money carve in bef,-�re � __ end, so the money was in the bank. But the actual expenditure of that was after year end. !�,nd... Mr. Stierheim: Would it not have been more appropriate to show that money in the Capital Improvement Statements, as opposed to the general fund? Mr. Paredes: Not necessarily. Mr. Stierheim: As a general fund asset? Mr. Paredes: But it hasn't been shown as a general fund asset. The cash was... and the cash is shown as restricted cash, with it corresponding on the balance sheet with the corresponding approved projects. So from a balance sheet perspective, and a deficit perspective on the fund balance of the general fund, it's almost a wash there. If you look at the balance sheet on page 20 and 21, there is twenty-one million dollars ($21,000,000) of cash and cash equivalent under . e caption, "Restricted Cash," and if you looked at the fund balances reserved, you have the twc.l ;- one million dollars ($21,000,000). Mr. Stierheim: I have no more questions, Mr. Mayor. Commissioner Plummer: Did the twenty-one million dollars ($21,000,000) include debt service? Mr. Paredes: That's just the proceeds. Commissioner Plummer: The proceeds? Mr. Paredes: Of the bonds. Commissioner Plummer: To the acquisition of the building? 37 October 7, 19'A r Mr. Paredes: For the acquisition of the building. That was the purpose of the issuaU.,• of th< bonds, as we understand. Commissioner Plummer: Well, I guess my question is, for the purchase of the building, toes that twenty-one million ($21,000,000) represent the long term? Mr. Stierheim: No. It was the acquisition of the building. Commissioner Plummer: All right. Let me come at it a different way. My understanding was that the cost of the building, itself, the actual cost to the City from Florida Power and Light, was twelve; is that correct? Mr. Stierheim: Fifteen point six million ($15.6 million). Mr. Paredes: No. Sixteen... Commissioner Plummer: OK. But that... Mr. Paredes: If you look at footnotes on page 56, on October 16th, 1995, the City purchased an Administration building for approximately sixteen million dollars ($16,000,000) from the Florida Power and Light Company. Commissioner Plummer: OIL. Now, does... That's sixteen million ($16,000,000). There's a difference between sixteen and twenty-one. All right? We knew... I asked a question here, that, in fact, how much was it going to cost to move from the Dupont Building over to the new building. That, which didn't hold true, eventually, was two million dollars ($2,000,000). That's eighteen. It's still a three million dollar ($3,000,000) gap. Where was that other money allocated for? That's what I'm trying to get at. Mr. Stierheim: I don't know whether he can answer it or not. My understanding is that the building cost fifteen point six million ($15.6 million). Two point four million ($2.4 million) was reserved for the cost of moving into the building. Two million ($2,000,000) was for Park W,- t Project, and one million ($1,000,000) was for Hadley, Hadley Park. Twenty-one milliun ($21,000,000). Commissioner Plummer: So it wasn't twenty-one million ($21,000,000) for the building. OK. Well, that's what I was trying to get at. Mayor Carollo: One final question that I have, Frank, and we'll have some follow-up questions when you answer it. Your client was the City of Miami. Who hired you for the City of Miami? Mr. Paredes: We were selected through an Audit Advisory Committee process and... Mayor Carollo: And what year was that? Mr. Paredes: That was in the year of '95. To... Mayor Carollo: Now, was that the same Audit Committee process that went out in 1994, before, or is this a different one? Mr. Paredes: Basically the same, yes, sir. Mayor Carollo: OK. Basically the same. Because what I have here is from 1994, the Audit Advisory Committee that was comprised of Juan Sanchez, Chairman; Clifton Addison, Mirtha 38 October 7, 1996 Li Guerra -Aguirre, Arturo Jordan and Bertina Soto -Fernandez, had ranked the following companies. Number one, Peat Marwick; number two, Arthur Andersen; and number three, your firm, Deloitte, Touche. Now, did that change in 1995, in the rankings, or were they working still from these '94 rankings? Mr. Paredes: I think the rankings changed, sir, and there are members of the Audit Advisory Committee that could go... can answer to that. Mayor Carollo: It's not important. I just wanted to see if you knew the answer. My question k, the City of Miami is your client, you've answered that. But who in the City of Miami had }lie final say, the final authorization in hiring you? Mr. Paredes: I think it was the Commissioners, sir. Commissioner Plummer: It's the Commission. Mayor Carollo: That's correct, the City Commission. Now, the management letter that you sent, that was sent to whom? Mr. Paredes: That was given to the Finance... Director of the Finance Department for distribution to the City Administration and City Commission. Mayor Carollo: OK. So that was given to the Finance Department, and only the Finance Department. Now, if we hired you, which you just stated that it's the City Commission that hired you, wouldn't it have made sense for you to have sent that letter directly to the City Commission? Mr. Paredes: Commissioner, the normal... The normal process, and your authority histori. has been delegated to the City Manager, and the Finance Department, and the Audit '-,dvi,, Committee to deal with us. That's been the historical pattern. Mayor Carollo: But... Well, I'm talking versus historical pattern, that you're saying it's historical as to logical process. If we are the ones that have the authorization to hire you, wouldn't, at least, if you didn't feel that you should have sent us the management letter directly, instead of going through the Finance Director, wouldn't, at least, have you taken the steps or should have taken the steps to have made sure that we received the management letter, and could, at least, call to see what opinions members of this Commission that were here then might have had, if the Commissioners that was here then, might have had any questions on the management letter that you sent? Or is that something that you don't feel was normal procedure, to call the people that hire you, that had the final authority to hire you, to inquire if they received the letter, and if, in fact, they had any questions on it? Mr. Paredes: It is normal for us to submit all our financial statements, all our records, anything that we have to the departments, the Finance Department, the Accounting Department, the CFO. We generally, every... All our reports are addressed to the Board of Directors and to the Col - Commissioners - City Commissioners, but it always goes... the vehicle that's always de1.iv_c:.1 through is through the Finance Department. But that's... Mayor Carollo: OK. Mr. Manager, do you have any final questions? Mr. Joe Echevarria: I'm going to have a... Mr. Mayor, if 1 may clarify something there? Mayor Carollo: Go ahead, sir. 39 October 7, 1996 r Mr. Echevarria: The agreement that was executed between the... Commissioner Plummer: For the record, sir, your name, please. Mr. Echevarria: Yeah, I'm sorry. My name is Joe Echevarria. I'm the partner in charge of the audit practice. And what Frank has not mentioned, and I'll just mention it for him, is the agreement, specifically with the City of Miami, our professional service agreement, specifically states that we are to deliver our product, our report, to one of the following three persons. First, I believe the first person is the City Manager, comma, the next person is the Audit Advisory Committee, comma, or the City Commission, as requested. So I think what's important here is, we delivered our reports in accordance with the contractual agreement we had with the City. It wasn't... It wasn't based on past history. it wasn't based on what everybody thought should bt done. It was based on the contractual commitment that this Commission apparently approves between the City and us, under our professional service agreement. Mayor Carollo: OK. But you have just stated that it states in the contract, the City Manage►, cne Audit Advisory Committee, the City Commission. Mr. Echevarria: As requested. Mayor Carollo: As requested. Commissioner Plummer: He's requesting. Mayor Carollo: That's correct. Mr. Echevarria: We were never requested by the City. Mayor Carollo: Now, I'm going... based on what you're telling me, that's what the contract states. Now, Mr. Paredes has been telling us all along that he did not send it to any of those people, that he sent it to the Finance Department. Mr. Paredes: That is correct. That's a fact. I turned... I submitted the management letter and all our financial reports to the Finance Department. Mayor Carollo: So then, in fact, you're telling me that you did not follow what the contract stipulated, that you did not give it to the Manager, the Audit Advisory Committee, or to the Commission, if requested. Mr. Echevarria: No, sir. The... And I should have not left this out. It's the City Manager or his designee. Mayor Carollo: When did the City Manager designate... Now then, you're telling me that there's something different in the contract than what you originally stated. And I don't have it before me, so I can't challenge that. But when did the City Manager give you anything in writing that designated Mr. Mano Surana as his designee? Do you have anything in writing that can show that? Mr. Paredes: No, sir. Mayor Carollo: Did he ever give you any such statement, verbally? Mr. Paredes: I should say that I... Those financial... Those reports were not issued to Mano Surana. He was no longer the Finance Director of the City. Those reports were submitted to Phil Luney in the Finance Department. 40 October 7, 1996 017, Mr. Stierheim: That's just the last report, Mr. Paredes: Yes. Mayor Carollo: The last report that he gave. Mr. Stierheim: The one I sent. Mayor Carollo: I'm talking about all the others before that. Mr. Paredes: I guess the '94 would have been to Mr. Surana, and in prior years, it had always been to Mr. Garcia. Mr. Stierheim: That was never distributed to the Commission. Mayor Carollo: OK. Do you have anything in your files, whatsoever, that stipulates anything in writing from the former City Manager, that he designated anyone other than himself to receive the management letter, or any additional financial matters? Mr. Paredes: No. That was just done in due course. Mayor Carollo: OK. So basically, based upon what your partner has told me that our contl stipulates, you didn't follow that aspect of the contract, based upon what you told me, unless you want to refresh your memory and tell me something different now. Mr. Paredes: No. Those are the facts. Mayor Carollo: OK. Thank you, then. Mr. Manager, do you have any further questions? Mr. Stierheim: Just... I'm still troubled by the Florida Power and Light bond money. Isn't it true that by recording that in the General Fund Statement, that that has the effect of overstating the fund balance? Mr. Paredes: No, sir. Mr. Stierheim: It doesn't? Mr. Paredes: No. If you look at it, if you look at it from a balance sheet perspective, Mr. Manager, you have the restricted assets. Mr. Stierheim: Yeah. Mr. Paredes: OK? Which has got twenty-one million dollars ($21,000,000), and you've got the fund balance appropriated for that purpose, approved project, at twenty-one million dollars ($21,000,000). The essence of that is... Now, there may be more components in here and all that stuff, but the basics, the big item within those two captions in the balance sheet, it nets out to zero. There is no inflation of any fund balance there, sir. Commissioner Plummer: I have another question. Mayor Carollo: Go ahead, Commissioner. Commissioner Plummer: Frank, I think the Mayor was trying to come to a conclusion that... I really didn't understand your answer. Maybe he did, but I didn't. I guess the question has to be 41 October 7, 1996 .0 that if we are the ones who do the hiring of your firm, and you find something radically wrong, that you wouldn't come to the Commission, not wait until we requested, but, in fact, came and say, "Hey guys, there are red flags flying." Now, in your... whatever this document is, recc,! events related to D&T (Deloitte and Touche), I'm seeing for the first time in March of... April '96, the financial statements audited by D&T report deficiencies of revenue of twenty-six miliinn ($26,000,000), and a cash deficit of forty-five ($45,000,000). Now, I haven't heard that before. Mr. Stierheim? Mr. Stierheim: I think he's quoting... What are you quoting from? The finance report? Mr. Paredes: Yes, the financial statements. Mr. Stierheim: There's a page in there that he's referring to. Commissioner Plummer: Do you concur with that statement? In other words, I guess, really, -6 and 45 is 71. If I were to read this, and I had known about this as a seventy-one million dollaj ($71,000,000) problem, I think I would have been really asking some serious questions. But , guess the question asked by the Mayor, if this, you knew, why didn't you come up and say, "Hey, guys, I'm not waiting for the City Manager to tell you this. I want you to know it because you're the guys that hire me." Mr. Paredes: Commissioner, first... Commissioner Plummer: If you wish to comment on it, please. Mr. Paredes: Don't add those two numbers. The 45 includes the 26, so it's not... don't... Commissioner Plummer: Twenty-six million ($26,000,000)... Mr. Paredes: It's... But these are your financial statements, sir. These are not our... Commissioner Plummer: Lack of revenue and a cash deficit, to me, you do add the two figures. Where am I wrong? Mr. Paredes: Twenty-six million dollars ($26,000,000) is what happened... your actual deficiency during the year. Commissioner Plummer: I understand that. Mr. Paredes: The forty-five million dollars ($45,000,000) is your overall cash position shortages accumulated. That... Commissioner Plummer: That includes the twenty-six ($26,000,000)? Mr. Paredes: Yes, sir. Commissioner Plummer: OK. Then forty-five ($45,000,000), you know, that's still a big number in my book. Mr. Paredes: That's right. Commissioner Plummer: OK? Now, my question, really, if you wish to comment on is, a forty- five million dollar ($45,000,000) deficit, it would have seemed like to me - and maybe ?'m wrong - that you would have been up here knocking whoever the five guys that were sitting here 42 October 7, 1996 rA in the head saying, Hey, guys, you better, you better be looking." And yet, we were never told. And that's why I asked you, if you will, to comment. Mr. Paredes: Commissioner, it's your financial statements. We audit them, but this is your financial statements. If your previous Administration did not provide them to you, there's nothing I can say, but these are your financial statements. The Code requires that tht Fin; Director submits financial reports to you. This is your report. This is your financial statement. The only thing that's ours is the opinion. Commissioner Regalado: Mr. Paredes. Mr. Paredes: Mr. Regalado. Commissioner Regalado: I just want to ask you something, not technical, just a question, so people like me - I'm not an accountant - would understand. In his daily programs, the former City Manager - because he's now doing daily programs in the Hispanic radio - has said over and over that he didn't know, that he knew nothing about this situation, because your firm always certified that the budget was OK, and that according to the City Charter - maybe the Manager can answer that part - but according to the City Manager - City Charter, I'm sorry - the City Manager does not have to do anything with the budget or finance. It's just the Finance Director who is personally responsible, and even criminally responsible - those were his words - in ease of a problem of the budget. Now, my question is, at any moment, did you or your firm sneak to the former City Manager, informing him about some potential problems that you say, n.t that time? Mr. Paredes: Commissioner, if you note some of the chronology of the events t:in, r:uve happened... And I should say, to make sure, we don't ever audit the budget. We audit the a-t� gal financial statements, the actual results of the City, after the fact. Commissioner Regalado: Right. Mr. Paredes: After the fact. Commissioner Regalado: I understand that. Mr. Paredes: After your fiscal years are ended. On January of '95, when we were doing the '94 audit, we started noticing, based on our procedures, that the City was running out of cash. We immediately informed the then -City Finance Director, who then notified... went up the chain. And they, the former Administration, started the process. 5o the fact that the City was in financial difficulties has been reported in your financial statements both years, '94 and '95. Those are historical numbers. That information has been there, from your Finance Department, and from your personnel. Commissioner Regalado: Yeah, but the reason I'm saying that is from the perspectiv- of the people, listeners of the daily programs. First of all, there is no crisis. This is all a show. A_:J second, I mean, no red flags were raised in the past. And I just wanted to hear from you, whatever I read here, that, indeed, red flags were raised. Mr. Paredes: The financial statements do disclose clearly the situation of the City. That is clearly... Mayor Carollo: This is the opinion that they have, Commissioner. The final question, and we'll close this portion of our meeting. OK. One final question from myself and one from Commissioner Plummer. The procedures that you have followed, is there anything other than what you have done that, if you would look back, you would have done differently? 43 October 7, 1996 P Mr. Paredes: No, sir. Mayor Carollo: Commissioner. Commissioner Plummer: My final question is... and let me make sure that I get my clock right. You made certain recommendations in your management letter of... for the year '94. Mr. Paredes: Correct. Commissioner Plummer: In the year '95, before you started anything, did you go back and check that those things that you recommended, and management said that they did to correct, were done? Mr. Paredes: That budget... the budget... Those recommendations... You were already operating under the '95 budget. So most of those recommendations were supposed to have been implemented in your budget for your fiscal '96, which is the fiscal year you just ended. Commissioner Plummer: No. You're getting ahead of me or I'm... my clock is not running correctly. In '94, when you did the audit of '94, OK? Mr. Paredes: Right, which is the audit of September of '94. Commissioner Plummer: The year, the fiscal year '94. Mr. Paredes: Right. Commissioner Plummer: You came out with a management letter in which you, as normal, made recommendations. The City answered to your recommendations. Now comes the year, fiscal year '95. Did you go back, before you started the audit of '95, and check to see that the City had implemented those things that you had recommended, they said they had done, for the year '94? Mr. Paredes: They had said that they had done those for the '96 budget, not for the '95 budget, in actual numbers. Commissioner Plummer: Then... OK, let me ask it in general. Is it a normal procedure for a year-end management letter, where recommendations are made and answers are given that before you start the upcoming year, you go back and make sure that all of those procedures that you recommended and they agreed to were in place? Mr. Paredes: That is done during the next audit, yes, sir. That is the normal procedure. Commissioner Plummer: You do do that? Mr. Paredes: Yes. Commissioner Plummer: All right. Is it also a procedure that you have ongoing during the year, not just of a period once the fiscal year is ended? Do you do bank reconciliations? Mr. Paredes: At the end of... We test them. We don't do them. That's the responsibility... Commissioner Plummer: No, no. I understand you test them, of course. The bank does them. All right? But, I mean, do you go during the year... I recall - was it last year or the year 44 October 7, 1996 before? - where, in fact, this Commission sat in mid -year budget hearings, and it was because there were problems that were existing. Do you have any ongoing, during the 12-month period in which you're doing either spot checking, financial checking, or anything, or is your engagement just the period after the fact of the year has closed, and you do an audit? Mr. Paredes: Our engagement is an annual audit, after the fact. We don't have any ongoing... Commissioner Plummer: You don't have anything ongoing during the year. Mr. Paredes: No, sir. Commissioner Plummer: That's probably one of our problems. Thank you. Mayor Carollo: All right. Thank you very much for coming, gentlemen. ---------------------------------------------------------------------------------------------------------------- 8. (A) AUTHORIZE AND DIRECT CITY MANAGER TO DISENGAGE FIRM OF DELOITTE & TOUCHE AS EXTERNAL AUDITORS FOR THE CITY OF MIAMI; FURTHER AUTHORIZE MANAGER TO HIRE CERTIFIED PUBLIC ACCOUNTANT(S) ON AN EMERGENCY BASIS TO REVIEW CITY'S INTERNAL CONTROLS AND PROCEDURES; FURTHER DIRECT MANAGER TO ADVERTISE FOR A PUBLIC ACCOUNTING FIRM TO SERVE AS EXTERNA! AUDITORS. (B) AUTHORIZE CITY MANAGER WITH ASSISTANCE OF CITY ATTORNEY TO SEARCH FOR FIRM SPECIALIZING IN LEGAL. MALPRACTICE TO REVIEW POSSIBLE LIABILITY BY DELOITTE & TOUCHE AS EXTERNAL AUDITORS FOR CITY; ADVISE CITY IF THERE ARE ANY POSSIBLE CLAIMS THAT CITY MAY HAVE AGAINST SAID FIRM. Mayor Carollo: At this point in time, I'd like to give the chair to the Vice Mayor, and I'd like to make the following motion: This is a motion to disengage Deloitte, Touche as the external auditors of the City of Miami; furthermore, to ask the City Manager... to give him the authorization to negotiate with the highest ranked firm from the City Audit Advisory Committee recommendation following the RFP (Request for Proposals) of either 1994 or 1995. As I stated before, in 1994, the information that I have before me that the City Clerk recently brought to !,.ie in the last hour or so, it ranked as the number one firm Peat Marwick, and the number firm Arthur Andersen and Company, and Deloitte, Touche was ranked number three. Commissioner Plummer: Excuse me. Mr. Mayor... Vice Mayor Gort: There's a motion. Is there a second? Commissioner Plummer: Second it for discussion. Vice Mayor Gort: Discussion. Commissioner Plummer: My only discussion is, under... Can we do that? I mean, can we go back and take a bid of last year, or should we reopen the bids and stipulate any of the big eight firms? I'm just asking that question. I don't know if we can go back and... 45 October 7, 1996 A. Quinn Jones, III, Esq. (City Attorney): Well, you can, but the problem is, I don't know whether the price is still... whether that firm will still do it for the same price. Mayor. Carollo: Well, we stated to have the Manager negotiate with the highest firm. I think that this is an emergency the City has. Under normal circumstances, I think we certainly cou'li spare three or four months to put out an RFP, but under the circumstances that we have, I don't think we have that luxury. And from what I've heard here today, I do not feel the comfort in keeping Deloitte, Touche as our external auditor. Commissioner Plummer: How do you say to the other firms that they can't be considered? Vice Mayor Gort: Is there any further discussion? Commissioner Plummer: I have no problem. I'm just thinking of other firms who won't have the opportunity. But you're telling me it's Arthur Andersen and Peat Marwick? Mayor Carollo: Peat Marwick was ranked number one, and then Arthur Andersen number two. Mr. Stierheim: Well, in the only one that I've seen, Peat Marwick and then Arthur Andersen, and then Deloitte. It was in that order. Commissioner Regalado: Well, Mr. Mayor... Commissioner Plummer: Huh? Commissioner Regalado: We have here in the audience members of the Audit Comnijl.eY that were the ones that recommended Peat Marwick, in case we need some kind of explanation. Commissioner Plummer: All right. Well, I have no problem. They're both of the big eight. I have no problem. Mr. Stierheim: Can I... Vice Mayor Gort: Excuse me. Mr. Stierheim: Can I comment, Mr. Mayor? Mayor Carollo: Yes, sir. Vice Mayor Gort: Yes. Mr. Stierheim: I understand, and I'm a champion of the professional service proposals, and the review. And I want the Commission to be aware that normally, that would be the only way to go. The problem you have is that I personally think the auditing should have been I ping .,I't before the close of the year. We could use auditors right now. I could use all that I could get. And, I mean, there are a lot of things that we have not had time to look at, and that, really, I really think, you know, it would be delightful, given what's happened, to also have a fraud audit. That's very expensive. And I don't know... I have no justification right now as to whether or not that's warranted. But, I mean, what's happened, obviously, raises questions, I'm sure, on this dais with the Commission, and with the public. And hopefully, everything else within the Finance Department was in accordance with procedures and law, and so forth and so on. Internal Audit did not audit the Finance Department. If they did, I didn't... I looked at every audit last year, and the internal procedures and controls and everything, I've already reported on. 46 October 7, 1996 ;i I mean, they were slim to non-existent, in my judgment. So you're in a "Catch �2." Attorney, I mean, I need your advice, too. I... Mayor Carollo: Mr. Manager... Mr. Stierheim: I mean, I could negotiate with three. There are five other... what we call the big six firms. And I would recommend for this type of an account, that you certainly have one of those. Mr. Jones: Yeah, but the problem is that you've got a set procedure on how to select. Mayor Carollo: This is why we're saying, Mr. City Attorney, to go to the highest bidder in that RFP that we had, or the next highest bidder. { Commissioner Plummer: Highest ranked. Mayor Carollo: Highest ranked bidder, correct. Commissioner Plummer: Not bidder. Mayor Carollo: Well, that's what I mean, highest ranked bidder. Mr. Jones: So what you're saying is that you want a... because you do have an existing contract. What do you want to do with that? Just... I mean, we're going to be in breach if we don't allow them to proceed, or what? I mean, that's... Commissioner Plummer: When is the end of that contract? Mr. Jones: I don't know. The Finance Department or somebody would have to tell me. But... Vice Mayor Gort: Mr. Mayor, in the meantime, while we're waiting for that, can we hear from the Advisory Committee that's here? Mayor Carollo: Who from the Advisory Committee is here? Commissioner Regalado: There are two members. Mr. Stierheim: There are four of them. Commissioner Regalado: Four, OK. Mayor Carollo: OK. Is the Chairman here? Mr. Juan Sanchez: My name is Juan Sanchez. I'm the Chairman of the Advisory Committee. Mayor Carollo: OK, Juan. Mr. Sanchez: I... In 1994, we rate or we heard from three or four firms that came with proposals. And we rated Peat Marwick - at that time Peat Marwick and Mitchell - number one, number two came Arthur Andersen, and Deloitte came number three. For some reason unbeknown to us - we don't know why - our recommendation was not followed, and Deloitte was hired by the Commission. However, I think it would be a mistake right now if we go back and hire Peat Marwick, based on what we rate in 1994. I think if we or the City is going t .; switch auditors, I believe we have to hear from proposals from the major CPA firms. r r`1 Mayor Carollo: And how long do you think that RFP and the step to pick some firms will take? Mr. Sanchez: If we really prod them, they'll be here on time, fairly... two or three weeks at the most. Commissioner Plummer: Mr. Mayor... Mr. Sanchez: However, that might not be enough time. Mr. Stierheim might need... Mr. Stierheim: No, I don't think that we can do it in two weeks or three weeks. That's very fast Mr. Sanchez: In the normal procedure... Mr. Stierheim: We have to advertise. Mayor Carollo: Well, if we could do it in two weeks time, Mr. Manager, I would be willing to modify my motion... Mr. Stierheim: I'd be very comfortable with that, Mayor. Mayor Carollo: ... to make it in two weeks time. Mr. Stierheim: That's fine. Mayor Carollo: I think that we could use basically the same RFP with whatever modifications we need to make. But we need to proceed with this as quickly as we can. We owe this to the residents of Miami. We owe it to ourselves. Ms. Mirtha Guerra Aguirre: My name is Mirtha Guerra -Aguirre, and I'd just like to say something. I think we're looking at here at the selection of maybe the same professionals for two jobs. But the audit is a review of the records after the end of the year. And I don't think the City of Miami will be closing its books for another two or three months. Commissioner Plummer: Yeah. Ms. Aguirre: Because that's the problem. The City's books are not closed now. So the final audit of the City could not be done now. So, you know, the selection of the auditors could be... could take a month. And that would be acceptable, because anyway, the audit is not going to be ready. But we also need to consider, maybe, the selection of a certified public accounting firm to review the internal controls, you know, which is what Merrett Stierheim needs, is some help right now, looking at the controls, and what just happened with the City. And I think what we can do is have maybe a two-part proposal. Vice Mayor Gort: Let me ask you a question. My understanding - and I don't know if this is true - we can request help from the Federal government to send... Ms. Aguirre: We didn't know that. The City probably knows more about how to get gvants from the Federal government than, you know, the audit people. Vice Mayor Gort: No, no, I'm talking about specialists to come down and look at the City finance, and help the Manager look at it. Ms. Aguirre: Right. 48 October 7, 1996 Vice Mayor Gort: Can we do that? Ms. Aguirre: The Manager... Go ahead. Mayor Carollo: OK, Mr. Manager. Ms. Aguirre: I think... Mr. Mayor, I think it's unrealistic to think that in two weeks, a week and a half, the proposals and the decision... I think in a month, we could have the selection of the auditors complete. But by the time it gets out in the paper, and in the major firms apply, you know, we have a meeting, we have to think two or three weeks for that. And one of the things that the auditors... also is we have to make sure that 50 percent is handled by a minorityrirr.i.... by several minority firms. So unless... You know, we have to interview, usually, three o;: fc,,i minority firms... Mr. Sanchez: Not necessarily, because before... Excuse me. Before, we used to hire a whcic package. They... The big six or the principal auditor will come up and will make some sort of contract with other firms. When we selected the firm last time, we did it independently. In other words, we recommended Deloitte independently and completely of Sanson and Jacomino, who was the Cuban firm, or the ladies'... women's firm or the black firm. So I think the other three firms have been hired. They.,. I don't know if we have to go through the whole process of interviewing three, four, five different firms. Vice Mayor Gort: OK. Thank you, sir. Mayor Carollo: Thank you. Vice Mayor Gort: What is the wish of the... Mayor Carollo: Mr. Manager. Mr. Stierheim: May I ask Mr. Montalbano, whose judgment and knowledge in this area I have great respect for? He's a former Finance Director at Metro, and St. Petersburg. And Dicl_, would you try to provide some assistance here? Mr. Dick Montalbano; Certainly. Dick Montalbano. I'm... Mr. Stierheim: He's also pro bono, I might add. He's been working with us. Mr. Montalbano: Certain of Merrett's task force, on Friday... certain members of the task force, including Roger Carlton and George, met with the Finance Director for Miami Beach and the Deputy Finance Director for Dade County, specifically talking about a coordination for audit. And the concern we all had was, it is year end. You have an entire new system that's been brought up. What are the internal control procedures over all the transactions as it relates to your new system? What are the overall internal controls as it relates to the day-to-day operation of the City? And then to assure a clean closing of last year's... We've made a provision by your staff to make sure that we don't roll over the accounting data from the old system into the new system until the audit is completed. And we know this will take several months, but at le:a. maintain the integrity over the new system. In fact, it was... Not looking at th.e l.,V_al I perspective, but just being fair, it was our suggestion that perhaps going to the last s .lection process, because it's going to take a while, looking at putting together an RFP. We believe that all the firms have to do a lot more due diligence before they propose, And then if you're going to go through this selection process, perhaps you need to do just a special purpose emergency hiring of a firm to come in and take a look at the internal controls and procedures, to safeguard 49 October 7, 1996 Ei the transactions of the new system, and sort of bridge the gap till you go through your formal process, if, for some reason, you can't work off of the prior selection. But I can assure you... Someone mentioned the pricing. It certainly would be... because we talked about pricing. Whatever pricing you saw in the past would be different for any new firm that has to come in, given the extent of... They're going to have to extend their procedures, reduce the threshold of materiality, and do a lot more work. Also, working with the Administration, as far as tht organizational structure of your financial operations. Commissioner Plummer: Mr. Manager, don't you have at this time the authority to hire any, on a temporary basis, CPAs that you might need? Mr. Stierheim: I've got to ask the Attorney. Commissioner Plummer: If not, then I would hope that the Mayor would hope that the Mayor would incorporate that in his motion. Mayor Carollo: He... I will incorporate it in the motion, but L. It would seem to me that he would, only if they would be hired as City employees, not as outside consultants. Commissioner Plummer: Not consultants, but to assist him in doing the checking of the paperwork that he needs to do. It's temporary. Mr. Stierheim: Yeah, the limitation... Mayor Carollo: Mr. City Attorney, it's your call. Does he or doesn't he? Mr. Jones: Well, if it's over... I mean, you have to approve it, certainly, if it's over f". =ive hundred dollars ($4,500). Anything below that, he could enter into. Commissioner Plummer: Oh, absolutely. Mayor Carollo: And this is going to be over forty-five hundred dollars ($4,500), I assure you. Mr. Jones: OK. So you can set... I mean, I don't know whether you want to set a limitation or what. Mr. Stierheim: I think the suggestion was a good one, that we go ahead and get somebody in right now. We have converted the entire system from a Famis system to the new system. It's supposed to come on line - I don't know - momentarily, and we can do the special audit on internal controls procedures, and so forth, actually working with some of our pro bono task force, and then go on the orderly process of retaining the external auditor. That's probably the best way. Commissioner Plummer: Fine. Call the roll. Vice Mayor Gort: Do you modify the motion? Mayor Carollo: OK. I modify the motion to state that. Vice Mayor Gort: Second? Commissioner Plummer: Fine. Vice Mayor Gort: OK. Any further discussion? Being none, all in favor, state so by saying aye.+ 50 October 7, 1996 3 i The Commission (Collectively): Aye, The following motion was introduced by Mayor Carollo, who moved its adoption: MOTION NO. 96-701 A MOTION DIRECTING THE CITY MANAGER TO DISENGAGE THE FIRM OF DELOITTE & TOUCHE AS THE EXTERNAL AUDITORS OF THE CITY OF MIAMI; FURTHER AUTHORIZING THE MANAGER TO HIRE CERTIFIED PUBLIC ACCOUNTANTS ON AN EMERGENCY TEMPORARY BASIS TO REVIEW THE INTERNAL CONTROLS AND PROCEDURES OF THE CITY IN ORDER TO SAFEGUARD THE TRANSACTIONS OF THE NEW FINANCIAL REPORTING SYSTEM; AND FURTHER DIRECTING THE MANAGER TO ADVERTISE FOR PROPOSALS IN ORDER TO ENGAGE THE SERVICES OF A CERTIFIED PUBLIC ACCOUNTING FIRM TO SERVE AS EXTERNAL AUDITORS OF THE CITY WITHIN TWO WEEKS OF THIS DATE. Upon being seconded by Commissioner Plummer, the motion was passed and adopted by the following vote: AYES: Commissioner Tomas Regalado Commissioner Richard P. Dunn, II Commissioner J.L. Plummer, Jr. Vice Mayor Wifredo Gort Mayor Joe Carollo NAYS: None. ABSENT: None. Mayor Carollo: OK. I have another motion that I'd like to make, Mr. Vice Mayor, before you bring the gavel back. Vice Mayor Gort: Yes, sir. Mayor Carollo: And the following motion that I'd like to make is such: A motion authorizing the City Manager, with the assistance of the City Attorney, to look for a firm that specializes in legal malpractice, and to look into any possible liability that might have been committed by Deloitte, Touche on the City of Miami, to look at that possibility, if there is any. I think we need some legal expertise from a law firm that specializes in this area of law to advise the City if there are any areas that this City has a claim against Deloitte, Touche for. Vice Mayor Gort: There's a motion. Is there a second? Commissioner Dunn: Second. Vice Mayor Gort: It's been moved and seconded. Any discussion? Being none... Commissioner Regalado: Yes. Yes, Vice Mayor. With... That motion could include individual persons who had some kind of responsibility on the same situation. Mayor Carollo: I would prefer at this point in time, Commissioner, to leave it at that, and %sic will certainly have plenty of time to look at other areas. Frankly, I think we all know what the S1 October 7, 1996 1i "AIN possibilities are of collecting on other individuals. For instance, I know some that have rc..;ently sold 55-foot yachts as early as a couple of weeks ago, at least their portion of it. So I would respectfully request that we leave the motion as that. We could always then ask them to acty►s:: us on any other individuals. Commissioner Regalado: Agreed. Vice Mayor Gort: OK. Any further discussion? Being none, all in favor, state so by saying "aye." The Commission (Collectively): Aye. The following motion was introduced by Mayor Carollo, who moved its adoption: MOTION NO. 96-702 A MOTION AUTHORIZING THE CITY MANAGER, WITH THE ASSISTAN,'..._ ' )F THE CITY ATTORNEY, TO SEARCH FOR A FIRM THAT SPECiALI:s,L_+ IN LEGAL MALPRACTICE AND TO LOOK INTO POSSIBLE LIABILITY BY DELOITTE & TOUCHE AS EXTERNAL AUDITORS FOR THE CITY OF MIAMI AND TO ADVISE THE CITY IF THERE ARE ANY POSSIBLE CLAIMS THE CITY MAY HAVE AGAINST DELOITTE Sr- TOUCHE. Upon being seconded by Commissioner Dunn, the motion was passed and adopted by the following vote: AYES: Commissioner Tomas Regalado Commissioner Richard P. Dunn, 11 Commissioner J.L. Plummer, Jr. Vice Mayor Wifredo Gort Mayor Joe Carollo NAYS: None. ABSENT: None. Commissioner Plummer: Aye, aye. I'm still with the 55-foot yacht here. Mayor Carollo: See, this is why I'm an S.O.B., Mr. Plummer. You know, I know too much. Commissioner Plummer: OK. That's "shortness of breath." Commissioner Dunn: Mr. Mayor. Mayor Carollo: I wish I would have had that crystal ball to have seen this one coming, though. October 7, 1996 .wwwwwwwwwwwwwwwwwwww-----www----------- - --------------------------------------------- 9. COMMISSIONER DUNN COMMENTS ON TENURE OF MERRETT STIERHEIM AS MIAMI CITY MANAGER AFTER OCTOBER 30, 1996 -- MAYOR CAROLLO SUGGESTS THAT COMMISSIONERS MLET INDIVIDUALLY WITH MR. STIERHEIM TO DISCUSS ISSUE. Mayor Carollo: Mr. Manager, do we have any further matters that need to be brought up at this point in time? Mr. Merrett Stierheim (City Manager): Not to my knowledge, sir. Commissioner Dunn: Mr. Mayor. Commissioner Plummer: See you on Thursday. Mayor Carollo: Yes, sir. Commissioner Plummer: Oh, I'm sorry. Commissioner Dunn: It may be a bit premature, but I don't think it is. I don't know low Manager feels about this, and my fellow Commissioners, and yourself, but based on the o6ginu, agreement with the City Manager, it was that he would serve until October the 30th. Mayor Carollo: Commissioner, I... You know... OK. I would love to bring... have him stay longer than that, to make sure there is a smooth transition, but that is quite, quite difficult, from what I understand. But maybe... Well, that's something that I think each of us should discuss with him, one on one, if we need a few extra days for a smooth transition to a permanent Manager. But they were pretty firm on that October 30th date. But each of you should talk to him. The last thing I'd like to say before we end this meeting is that there is no easy solution for any of us, you out there, or us up here. You know, we don't have a printing press to print money. You know, the last time that I heard that manna fell from Heaven was over thousands of years ago, and it wasn't in Miami. So by that, I'm saying that we have to look at all the options available. If we are going to reduce or bring in a new revenue, to find sixty-eight million dollars ($68,000,000), that's going to take a lot of sacrifice, a lot of work. And none of us up here are magicians. We can only do what is humanly possible to accomplish to get this City f( ward, moving forward, in the right direction. And, my God, that, we will do. It might take of of sacrifice. It might take a lot more scars on each and every one of us, particularly that, we will do, one way or another, with God's help. This meeting is adjourned. THERE BEING NO FURTHER BUSINESS TO COME BEFORE THE :TY COMMISSION, THE SPECIAL MEETING WAS ADJOURNED AT 1:13 P.M. JOE CAROLLO MAYOR ATTEST: Walter J. Foeman CITY CLERK Maria J. Argudin ASSISTANT CITY CLERK 53 October 7, 1996