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HomeMy WebLinkAboutLimited Review Of City0ict-C1-07 11:35aRm Fram- T-156 PP.02 F-4a2 Audit Title: LIMITED REVIEW OF CITY'S PARTICIPATION IN THE EMPOWERMENT ZONE INITIATIVE PROGRAM AUDIT NUMBER 03-017 Date of Report: May 20, 2003. BACKGROUND: Miami -Dade County was designated an urban Empowerment Zone (EZ) effective January 1999. The objective of the EZ program is to rebuild communities in poverty stricken inner cities and rural areas by developing and implementing strategic plans. The plans are required to be based upon the following principles Creating economic opportunities for EZ residents. Creating sustainable community development • Building broad participation among community -based partners • Describing a strategic vision for change in the community. This initiative provides tax incentives and performance grants, and also focuses on supporting people in getting necessary job skills among other social needs. The Federal government approved 8 neighborhood targeted areas and the EZ Board of directors created a ninth (9th) targeted area, which is located in downtown Miami. The 9 targeted areas are Florida City, Homestead, Model City/Liberty City, Overtown, East Little Havana, Wynwood, Allapartah, Melrose, and downtown Miami. Six (6) of the 9 targeted areas are located in the City of Miami and 76% of those who live within the EZ are City of Miami residents. The Trust was established under Section 501(c)(3) of the Internal Revenue Code of 1954. A Board of Directors and the Executive committee oversees the activities of the EZ Trust and ensures that the strategic plans are implemented. The communities elect 44 4o-b W"'W4—WI l I .JJCam r16flIII representatives organized in neighborhood assemblies to ensure that neighborhoods are properly represented. The federal government pledged $100 million of Social Services Block Grant (SSBG) monies to be funded through the department of Health and Human Services and $130 million of tax-exempt bond financing. Private lenders pledged nearly $400 million over two years, $1 billion over ten years, 5,000 specific job commitments from the private sector with equivalent of $380 million in wage contributions. Additionally, the County pledged $100 million and the State of Florida pledged between $50 million to $100 million to match the SSBG funding. SCOPE AND OBJECTIVES: The scope of the limited review/examination was to determine how funding was allocated, the nature and extent of the economic benefits derived by the City, and also to determine whether all legislation passed and adopted by the City Commission in connection with the EZ initiative program was properly executed. The examination/review covered the period October 1, 1999, through September 30, 2002. The objectives of this limited review/examination engagement are as follows: . • To determine whether City Commission Resolution number 98-636 was transmitted to the Miami -Dade County Board of Commission by the City Manager as directed. • To determine how the empowerment zone resources are allocated among the targeted areas within the EZ. 4` ot..-11-07 11:35am Fran- T-155 P.04/10 F-4E2 • To determine the tangible public/community benefits derived from the disbursements of approved allocations for the empowerment zone projects within the City of Miami. • To determine the benefits to the City of Miami businesses and residents from the array of empowerment zone financial incentives. • To perform other procedures as deemed necessary. 46 Oct-01-07 11:36am From- T-15$ P1E/10 F-452 SIGNIFICANT FINDINGS: ECONOMIC DEVELOPMENT AND COMMUNITY DEVELOPMENT DEPARTMENTS RESOLUTION NUMBER 98-636 WAS NOT TRANSMITTED TO THE BOARD OF COUNTY COI itlISSIOJV BY CITY MANAGER AS DIRECTED. On June 23, 1998, the City Commission passed and adopted resolution number 98-636, which authorized and directed the City Manager to participate in the preparation of the Federal Empowerment Zone (EZ) Round II Application process, by assigning staff and services of a professional consultant, subject to the Miami -Dade County's (County) agreement with certain terms and conditions. The City Manager was directed to forward a copy of this Resolution upon adoption thereof and to request that the Miami -Dade Board of County Commission adopt a resolution agreeing to the said terms and conditions. Pursuant to Resolution number 98- 636, $100,000 was appropriated from Community Development Block Grant (CDBG) monies and was required to be used for consulting services. However, we noted that the Community Development department did not procure the services of a professional consultant that would have assisted the City, in preparing for the EZ Round II Application process, as directed by the Commission. Upon audit inquiry and based upon our review of the application/records submitted to the United States Department of Housing and Urban Development, it appears that Resolution number 98-636 was never transmitted to the County, as directed by the City Commission. Therefore, the County never considered nor agreed to the terms and conditions stipulated on the Resolution. 47 11:Ham Fror- 1.-156 PAC/10 F--g2 Recornrnendation The Agenda Office has implemented a process for monitoring the implementation of all Commission directions. Response and Action plan None_ 48 QGt-61-0T 11:36arrm Fromm - T-153 P.07/10 F-452 MIAMI DADE EMPOWERMENT ZONE TRUST EMPOWERMENT ZONE (EZ) RE$OVRCES ARE ALLOCATED EVENLY AMONG THE AREAS WJJIIIN TIDE .?Z AND NOT ON THE BASIS OF POPULATION SIZE. Our review of pertinent records disclosed that resources were allocated evenly among the targeted areas in the EZ during the review period. We noted that 6 of the 9 targeted areas are located in the City of Miami and 76% of those who live within the EZ are City of Miami residents. However, EZ records indicate that the targeted areas within the City of Miami were allocated approximately $11 million (or 48%) of the S25 million received during the audit period. The President of the EZ Trust stated that an additional $10 million of County surtax monies was allocated for projects in the Overtown area. Surtax revenues are documentary stamp fees paid by developers. A more -equitable and fair allocation process would have considered population density of the targeted areas within the EZ. Recornrz endati We recommend that the Trust consider population density in its fixture allocation of resources. R soonse and Action Plan The EZ Trust President stated that the (EZ) Round II Application was approved on the basis of equal allocation of all resources among the targeted areas, 49 Oct-01 -07 11:Hwri Pram- 7-166 P.Ge/1O 1F-452 THE TANGIBILE PUBLIC/COMMUNITY BENEFITS DERIVED FROM THE DISBURSEMENT OF APPROVED ALLOCATIONS FOR THE EMPOWERMENT ZONE /.1ECTS WITHIN THE CITY OF MIAMI. The EZ Trust records reviewed indicated that the Trust received approximately $25 million of federal and state funding during the period October I. 1999, through September 30, 2002. The records reviewed also indicated the targeted areas within the City of Miami were allocated approximately $11 million (or 48%) of the $25 million received. We were provided with a listing, which disclosed specific resolutions that approved certain amounts to be allocated and/or disbursed to various vendors/organizations for projects located in the targeted areas within the City. The aggregate amount on this listing is approximately $6.4 million. The listing includes approximately $1.7 million appropriated and/or disbursed for 5 projects that were described as Northside/Poinciana developable sites. According to the excerpts, these projects would have substantial impact on all EZ residents. The purpose (benefits) of the allocations and/or disbursements includes but not limited to landscape beautification programs, business counseling, summer youth program, land use planning, educational workshop, working capital, marketing/public relations, surveys, and facades. Due to the limited nature of this review engagement, we did not verify whether the amounts shown were actually received by the vendors/organizations and used for the purposes stated. Additionally, the President of the EZ Trust stated that an additional $10 million of County surtax monies has been allocated for projects in Overtown. Surtax revenues are documentary stamp fees paid by developers. The nature of the projects that benefited was not verified due to the limited nature of this review engagement. Recommendation None. Respgpse_ and Action. Plan None. Oct-01-07 11:37am From- T-158 P.00/10 F-452 THE BENEFITS TO THE CITY OF MIAMI ,BUSIN 'SS�'S AND 'SIDENTS FROM THE ARRAY OF E' lPOWERMENT ZONE FINANCIAL INCENTIVES: The primary objective of the EZ program as noted on the EZ application was to rebuild the poverty stricken inner cities and rural areas of Miami -Dade County by developing and implementing strategic plans that would create economic opportunities, financial incentives, tax incentives and attract performance grant monies. TAX EXEMPT BOND FINANCING. • We were informed that no Revenue bond funding had been closed as of April 17, 2003, However, the President of the EZ Trust stated' in a written memorandum that industrial revenue bond totaling $30 million has been approved for the Dupont Hotel and preliminary approval of additional $25 million has been granted for the Everglade Hotel both located in the City of Miarni, SOCIAL SERVICES BLOCK GRANT ,MONIES. • The Trust has not received any social services block grant monies. TAX DEDUCTIONS ALL O WED . • Upon audit inquiry, we were informed that the EZ Trust does not generate and/or maintain information/data pertaining to tax deductions that were allowed by the Internal Revenue Services (IRS) in connection with environmental clean-ups made within the EZ area. Additionally, no information/data was maintained for tax deductions that were allowed by IRS for the hiring of EZ neighborhood residents, and for Section 179 business tax deductions for qualified zone property. We made an attempt to obtain these information/data from the IRS, however, we were informed that the information requested were not tracked and/or maintained by EZ neighborhoods. 51 Oct-01-P7 11:37am From- T-15E P.1O/10 F-462 EMPOWERMENT ZONE'S PERFORMANCE REPORT .AND/OR COMPLIANCE WITH TJiE IMPLEMENTATION OF OTHER MAJOR COMPONENTS OF TII STR4 TEcIC PLANS. • An annual report issued by the Empowerment Zone Trust (EZ) and the Enterprise Community indicated that the EZ Trust remains committed to the goals and objectives of HUD application. However, the report noted that its approach has been modified as a result of limited funding and now leverages its initial capitalization as equity. ANNUAL EXTERNAL AUDITS. • The EZ's financial statements are included as part of the Miami -Dade County -wide financial statements and audited by a major accounting firm. There is currently an. on- going stand alone audit of the EZ Trust. However, we noted that the United States department of Housing • and Urban Development perforrned a limited review of the Empowerment Zone and the Enterprise Community programs during the period June 11 through June 14, 2002. Recommendation None. Response and Action Plan None. 52