HomeMy WebLinkAboutExhibit AtMg 4Thtmi
THEODORE P .GUBA, CPA, CIA, CFE
INDEPENDENT AUDITOR GENERAL
July 10, 2015
Honorable Members of the City Commission
City of Mierni
3500 Pan American Drive
Coconut Grove, FL 33133-5504
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EXHIBIT
7.)
Telephone (305) 416-2044
E-Mail: tguba@miamigov.com
Re: Audit of Bayshore Landing, LLC. for the Period October 1, 2011 through September 30, 2013
Audit No. 15-004
Executive Summary
We have oca-mpleted an audit of records and selected financial transactions of Bayshore Landing, LLC
(BL), primarily for the period October 1, 2011 through September 30, 2013. The audit was performed
to determine whether BL complied with the applicable sections of its Lease Agreement with the City of
Miami (City). During fiscal year 2012 (FY 2012) and FY 2013, BL made percentage rent payments
totaling $834,467 and $852,708, respectively. Percentage rent payments for FY 2012 and 2013 were
based on prior year reported total. Gross Receipts of $7.5 million (FY 2011) and $7.6 million (FY 2012),
respectively.
Overall, w>e have concluded that procedures and compliance with the Lease were generally adequate
and being adhered to with the exception of certain calculations of Gross Receipts and minimum rent
payments , reported non-compliance with Florida statutes regarding the application of sales and use tax
and allocaation of electricity charges, unsafe structural conditions at the Marina that were since corrected,
and five () wet slips that are not currently being rented. Improvement is needed to ensure that BL's
gross reven ue, which is the basis for the percentage rent payments, is reported accurately, Also, BL's
internal controls need to be enhanced to ensure that minimum rent payments are properly calculated.
As a result of differences in calculations of Gross Receipts and minimum rental payments, BL
owed the=City $126,887 in additional rent (see Schedules 3 and 4 on pages 7 and 8, respectively).
Prior to thne conclusion of our audit, BL remitted payments totaling $34,685, leaving a balance due of
$92,202.
In addition, we noted that BL should: comply with state statutes regarding the application of sales and
use tax arm! allocation of electricity charges to boat owners/tenants; and, explore ways and means to
rent five (t) wet slips that are currently not being rented.
OFFICE OF INDEPENDENT AUDITOR GENERAL/444 S.W. 2ND AVENUE, 76' FLOOR/MIAMI, FLORIDA 33130-1910
It should be noted that during the course of the audit, BL entered into an agreement to transfer its rights
under the Lease to another party. This transfer closed on May 20, 2015. Consequently, we are in the
process of performing an additional audit covering the period from October 1, 2013 through the closing
date of the transaction. We also plan to audit certain transactions for periods prior to October 1, 2011
due to BL's differences in calculations of Gross Receipts and incorrect rent payments due to the City
noted in this report.
We wish to express our appreciation for the cooperation and courtesies extended to us by the BL
management and accounting staff as well as the City's Department of Real Estate and Asset
Management while conducting the audit.
Sincerely,
Theodore P. Guba, CPA, CIA, CFE
Independent Auditor General
Office of the Independent Auditor General
cc: The Honorable Mayor Tomas Regalado
Daniel Alfonso, City Manager
Victoria Mendez, City Attorney, City Attorney's Office
Alice Bravo, Deputy City Manager/Chief of Infrastructure
Nzeribe Ihekwaba, Assistant City Manager/Chief of Operations
Fernando Casamayor, Assistant City Manager/Chief Financial Officer
Barnaby Min, Deputy City Attorney, City Attorney's Office
Robin Jones Jackson, Senior Assistant City Attorney, City Attorney's Office
Daniel Rotenberg, Director, DREAM (Department of Real Estate and Asset Management)
Stephen Bogner, Marinas Manager, DREAM
Mark Burns, Lease Manager, DREAM
Jose Fernandez, Director, Finance Department
Miguel Augustin, Controller, Finance Department
Demetrio Constantiny, Accounts Receivable Supervisor, Finance Department
Ann -Marie Sharpe, Director, Risk Management Department
Frank Gomez, Property & Casualty Manager, Risk Management Department
Robert W. Christoph, Bayshore Landing, LLC
Robert W. Christoph, Jr., Bayshore Landing, LLC
Bob Toomey, CFO, Bayshore Landing, LLC
Members of the Audit Advisory Committee
Audit Documentation File
Audit conducted by:
Audit reviewed by:
Mala Khilnani, CPA, CISA, Senior Auditor
Coral Vivolo, Staff Auditor
Lewis Blake, CPA, CIA, Audit Manager
Munirah Daniel, CPA, Senior Auditor
OFFICE OF INDEPENDENT AUDITOR GENERAL/444B.W. 2ND AVENUE, 7'' FLOOR/MIAMI, FLORIDA 33130-1910
AUDIT OF BAYSHORE LANDING, LLC
OCTOBER 1, 2011 THROUGH SEPTEMBER 30, 2013
AUDIT NO. 15-004
TABLE OF CONTENTS
SCOPE, OBJECTIVES AND METHODOLOGY 1
BACKGROUND 2
AUDIT FINDINGS AND RECOMMENDATIONS 2
FINDING 1: DIFFERENCES IN CALCULATIONS OF GROSS RECEIPTS RESULTED IN
UNDERPAYMENTS OF PERCENTAGE RENT TOTALING $65,126 3
FINDING 2: MINIMUM RENT DUE EXCEEDED ACTUAL RENT PAID RESULTING IN $61,761
DUE TO THE CITY 7
FINDING 3: NON-COMPLIANCE WITH FLORIDA STATUTES REGARDING ELECTICITY
CHARGES 9
FINDING 4: MARINA REPAIRS AND MAINTENANCE ISSUES 10
OFFICE OF INDEPENDENT AUDITOR GENERAL/444 S.W. 2ND AVENUE, 7th FLOOR/MIAMI, FLORIDA 33130-1910
SCOPE, OBJECTIVES AND METHODOLOGY
The scope of the audit was to determine Bayshore Landing, LLC's (BL) compliance with the rental
payment, insurance and maintenance provisions of its Lease Agreement (Lease) with the City of
Miami (City). The audit primarily covered the period October 1, 2011 through September 30, 2013
and focused on the following objectives:
• To determine whether BL rental payments to the City were consistent with: Gross
Receipts periodically reported to the City, sales and use tax returns reported to the State
of Florida, and bank deposits.
• To determine whether BL rental payments were accurate and remitted to the City in a
timely manner.
• To determine whether insurance policies were adequate and in compliance with Lease
terms.
• To determine whether BL maintained adequate internal controls.
• To determine whether BL is complying with the maintenance provision of the Lease
agreement.
• Other audit procedures as deemed necessary.
It should be noted that we plan to perform an audit of rent payments covering the period from
October 1, 2013 through the date of the lease agreement transfer. We also plan to audit certain
items for periods prior to October 1, 2011 due to calculation deficiencies noted in this report, related
to rent payments to the City.
We conducted this performance audit in accordance with Generally Accepted Government Auditing
Standards. Those standards require that we plan and perform the audit to obtain sufficient and
appropriate evidence in order to provide a reasonable basis for our findings and conclusions based
on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives. The audit methodology included the
following:
• Interviews and inquiries of appropriate personnel.
• Reviews of written policies and procedures in order to gain an understanding of the internal
controls.
• Observations of current practices and processing techniques.
• Tests of applicable transactions and records.
• Other audit procedures as deemed necessary.
1
BACKGROUND
The City of Miami (City) owns a 6.70 acre waterfront site in Coconut Grove at Dinner Key, consisting
of 2.14 upland (dry land) acres and 4.56 submerged acres. On September 30, 1985 the City leased
the property to Bayshore Landing, LLC (BL). Based on the commencement date of the Lease, BL
is currently in the twenty-ninth year of the fifty year Lease.
In accordance with the terms of the Lease, BL's predecessor redeveloped the waterfront property
formerly known as the Kelley and the Miley Property into a full -service marina complex known as
"Bayshore Landing Marina". BL provides "wet slips" and "lift slips" (where vessels are moored in
and above the water, respectively) to boat owners/customers for a stipulated rental rate. In addition,
BL operates a raw bar restaurant "Monty's" which is located on the ground floor of the leased
premises. BL also generates revenue from the rental of "retail facilities" (retail and office space).
Based on revenues generated from the Marina, restaurant ("Monty's"), and retail facilities (Mall) BL
is required to pay the City the greater of "Percentage Rent" or "Minimum Annual Guaranteed Rent",
as outlined in the Lease. During fiscal year 2012 (FY 2012) and FY 2013, BL made percentage rent
payments totaling $834,467 and $852,708, respectively. Percentage rent payments for FY 2012
and 2013 were based on prior year reported total Gross Receipts of 57.5 million (FY 2011) and
$7.6 million (FY 2012), respectively.
2
AUDIT FINDINGS AND RECOMMENDATIONS
CONCLUSION: Based on our audit of Bayshore Landing, LLC's (BL) compliance with its Lease
Agreement with the City of Miami (City), we have concluded that procedures were generally
adequate and being adhered to with the exception of certain controls over Gross Receipts reporting
and minimum rent payments that require strengthening, reported non-compliance with Florida
statutes regarding the application of sales and use tax and allocation of electricity charges, two (2)
observed unsafe structural conditions at the Marina that were since corrected, and five (5) wet slips
that are not currently being rented. Overall, improvement is needed to ensure that BL's gross
revenue, which is the basis for the percentage rent that they are obligated to pay the City, is reported
accurately. Also, BL's internal controls need to be enhanced in order to ensure that minimum rent
payments are calculated accurately. As displayed in Schedule 1 below, as a result of BL's
differences in calculations of Gross Receipts and minimum rental payments, BL owed the
City $126,887 in additional rent. Prior to the conclusion of our audit, BL remitted payments
totaling $34,685, leaving a balance due of $92,202.
SCHEDULE 1
Summary of Differences in Calculations of Gross Receipts & Additional
Rent Due to the City From Bayshore Landing, LLC for FY 2012 & FY 2013
Differences in Calculations of Gross Receipts
See Schedule 2 (page 6)
Additional Rent Owed Due to Differences in Calculations of
Gross Receipts
See Schedule 3 (page 7)
Additional Minimum Rent Due
See Schedule 4(page 8)
Total Additional. Rent Owed to City
Additional Rent Paid by BL on 1/30/15
Balance of Additional Rent Due to the City
65,126
61,761
126,887
(34, 685)
92,202
Details of our findings and recommendations follow:
FINDING 1: DIFFERENCES IN CALCULATIONS OF GROSS RECEIPTS RESULTED IN
UNDERPAYMENTS OF PERCENTAGE RENT TOTALING $65,126
The Lease stipulates that BL must pay the greater of "Minimum Annual Guaranteed Rent" or
"Percentage Rent", The percentage rental rate is based on the following components:
3
• Restaurant ("Monty's"): 8% of the annual Gross Receipts of the Restaurant up to one
million dollars ($1 million) and ten percent (10°I0) of the annual Gross Receipts of the
Restaurant in excess of $1 million.
• Retail Facilities (Mall): 10% of the annual rents received from the rentals paid by the
respective retail subtenants, licensees and concessionaires.
• Marina: 15% of the annual Gross Receipts collected from dockage rentals for boats on the
property.
The greater of Minimum Annual Guaranteed Rent or Percentage Rent payments are payable
monthly "in advance" on first day of each month. The amount of the Percentage Rent payable each
month is equal to the aggregate totals of Gross Receipts for the Restaurant, Retail Facilities and
Marina for the immediately preceding fiscal year multiplied by the applicable percentage rates (as
described above) divided by twelve (12).
We performed a reconciliation of all cash obtained by BL to the Gross Receipts that should have
been reported to the City in order to determine whether BL paid the correct amount of Percentage
Rent. In doing so, we obtained all bank deposits and made adjustments for accrual (timing)
differences with respect to accounts receivable, advance rent, and deposits in transit. In addition,
we made adjustments for various items that should be excluded from Gross Receipts including
sales and use taxes collected, service charges (gratuities/tips), and other non -revenue items such
as security deposits. When performing the reconciliation, we discovered a shortfall between the
total reconciled Gross Receipts and the Gross Receipts that BL previously reported to the City. We
further discovered that the differences were attributed to credit card fees, electricity utility charges,
unsupported security deposit amounts, and advance rent.
With respect to the credit card fees, these amounts represent business expenses to BL and are not
allowed to be used to offset Gross Receipts. With respect to the electricity utility charges, we
reviewed a BL "Dockage Application and License Agreement" and noted that although boat owners
are charged both a dockage fee and an "Electric Charge" for a wet slip's electricity utility usage at
the Marina, the electricity charges were not included as a part of reported Gross Receipts to the
City. Rather, BL informed us that they classified the charges as pass -through expenses to tenants.
According to the Lease, Gross Receipts is synonymous with "Gross Sales" and includes all income
to BL collected or accrued from all business conducted on the Property, "...Including, but not
limited to, the rental of space, the sale of food and beverage, goods and services, or from any
source whatsoever." Therefore, since the "Electric Charges" are another source of income, BL
was required to report the revenue obtained from the electricity utility charges as Gross Receipts.
When we compared our reconciled fiscal year 2012 (FY 2012) Gross Receipts collected to the
Gross Receipts amount reported to the City, there was a short -fall of $268,581 (or-3.5%). In
addition, when we compared our reconciled FY 2013 Gross Receipts collected to the Gross
Receipts amount reported to the City, there was a short -fall of $302,170 (or-3.5%). (See Schedule
2 on page 6). Based on the weighted -average of Gross Receipts reported to the City and the
applicable rental rate percentages for the Restaurant, Retail Facilities and Marina, BL owes the City
an additional $65,126 for the audit period (see Schedule 3 on page 7). We noted that with the
exception of the sums due as a result of the differences in calculations, all other monthly rental
payments were timely made.
4
RECOMMENDATION 1.1: (BAYSHORE LANDING, LLC)
We recommend that BL enhance its internal controls procedures so as to ensure that all "Monthly
Gross Revenue Reports" and percentage rent payments to the City are accurately calculated
consistent with the Lease and timely remitted to the City. In addition, we recommend that BL
immediately remit the additional percentage rent of $65,126 due to the City. Prior to the conclusion
of our fieldwork, BL submitted two checks totaling $34,685 as payment for what they calculated as
unaudited rent underpayments to the City, leaving a balance due to the City totaling $30,441.
• BL Response: (Note: BL disagreed with our finding that additional percentage rent is due
to the City —see Audit Rejoinder below).
• Implementation Date: Not applicable
AUDIT REJOINDER: This audit employed different methodologies and procedures from prior
audits, which resulted in differences in calculations of Gross Receipts pertaining to utility charges
and credit card fees. Although audit procedures used in prior years did not result in these same
disclosures, this does not preclude the City from enforcing the terms of the Lease pursuant to our
audit findings. Therefore, we take the position that the additional percentage rent is due to the City
based on the differences in calculations of Gross Receipts. Consequently, we will continue and
complete our audits for periods prior to and subsequent to this audit. We will also refer this matter
to the City Attorney and City Manager for final resolution.
RECOMMENDATION 1.2: (DEPARTMENT OF REAL ESTATE AND ASSET MANAGEMENT)
We recommend that the Department of Real Estate and Asset Management (DREAM) review the
Monthly Gross Revenue Reports submitted by BL, along with supporting documentation, to ensure
the correct amount of Gross Receipts and corresponding rental payments are being calculated,
reported, and remitted to the City in a timely manner.
• DREAM Response: DREAM does and will continue to review the Revenue Reports and
ensure that they are sent in accordance with the lease, Additionally, DREAM is currently in
the process of purchasing, and subsequently utilizing YARDI, a real' estate computer
program that will implement and monitor lease payments, timely and correct reporting, and
recurring and non -recurring lease events and provisions.
• Implementation Date: Immediately
RECOMMENDATION 1.3: (FINANCE DEPARTMENT)
We recommend that the Finance Department (FD) bill BL for the additional rent due of $30,441
($65,126 less $34,685 previously remitted by BL).
• FD Response: We will bill BL for the additional rent due.
• Implementation Date: Immediately
5
SCHEDULE
DIFFERENCES IN CALCULATIONS OF GROSS RECEIPTS
RECONCILIATION
OF BANK DEPOSITS
TO GROSS REVENUE
„„ K DEPOSJTS ( C
Total Adjusted Bank Deposits (CASH)
Net Adjustements for changes in
Accounts Receivable, Advance Rent,
and Deposits -in -Transit:
Less: Sales & Use Taxes Collected
Less: Service Charges (Tips)
Less: FICA
Credit Card Proc, Fees
Add: Credit Card Fees (Amex Rest.)
**'Electricity Utility Charges
Less: Deposits (Non -Revenue Items)
Total Reconciled Gross Revenue
Gross Revenue Reported to City
Differences In
Calculations of Gross Receipts
Prepared By
OIAG
$ 8,634,326
169,208
FY 2012
Prepared By Difference
BL
8,634,326
172,596 $ 3,388
Prepared By
OIAG
$ 9,879,109
(37,709)
(710,872) 710,284) 588 (782 498)�
FY 2013
Prepared By
BL
9,879,109
(25,060)
(754,918),
(128,858) (128,858) 0 (149,541) (149,541)
0 (108,415) " (108,415} D (125,970)
37,182 35,615 (1,567) 44,850
0 (165,294) (165,294) 0 (2'16,901)
(118,105)
(84,169)
7,916,817
7,648,236
$ (268,581)
(104,207) (20,038)
7,625,479
7,648,236
$ 22,757 ( $ (291,338)
44,850
(80,856)
8,873,355 8,533,463
8,571,186
$ (302,170)
8,571,186
37,723
Difference
$ 12,649
27,580
(125,970)
(0)
(216,901)
(37,249)
$ (339,892)
** The above reconciling Items for "Credit Card R-oc. Fees" and " Dectiricty Utili y Charges" w ere plugged into the reconciliation by BL to
explain the difference in Gross Revenue reported to the Gty; how ever, these items are not allow able as reductions to Gross Revenue and
should have been reported to the City.
6
SCHEDULE 3
CALCULATION OF ADDITIONAL RENT OWED THE CITY OF MIAMI BY BAYSHORE LANDING,
LLC DUE TO DIFFERENCES IN CALCULATIONS OF GROSS RECEIPTS
Difference Between Reconciled FY 2012 Gross Receipts and
Gross Receipts Reported to the City
Raw Bar
Mall Revenue
Marina Docakge
Gross
Receipts
77.2%
........... .
9.0% ....,:
13.8%
100.0%
Prorated
Differences of
Gross
Receipts
$ 207,245
24,192
37,144 i
$ 268,581
7% Sales Tax'
Sub -Total: FY 2012 % Rent Due
$ (268,581).
Additonal Rent
Owed City for
FY 2012
10% $ 20,724
10% 2,419
15% 5,572
28,715
�
2,010��yA __.......
. ..................
$ 30,725
Difference Between Reconciled FY 2013 Gross Receipts and
Gross Receipts Reported to the City
Raw Bar
Mall Revenue
Marina Docakge
%o Gross
Receipts
Prorated
Differences of Applicable
Gross
Receipts
78.9% $ 238,397 ..
8.3% ..,. 25,108
12.8% 38,665
100.0% $ 302,170
10%
10%
15%
$ (302,170)
Additonal Rent
Owed City for
FY 2012
23,840
2,511
5,800
32,150
2,251
7% Sales Tax,
Sub -Total: FY 2013 % Rent Due.
Grand Total: Additional Rent Owed to City by BL
34,401
$ 65,126
FINDING 2: MINIMUM RENT DUE EXCEEDED ACTUAL RENT PAID RESULTING IN
$61,761 DUE TO THE CITY
The Lease stipulates that Bayshore Landing, LLC (BL) must pay the greater of "Minimum Annual
Guaranteed Rent" (Minimum Rent) or "Percentage Rent". The Minimum Rent amount is the
average of the immediately preceding three (3) years rental payments to the City.
7
Rent%
Accordingly, we recalculated the Minimum Rent due to the City for fiscal year (FY) 2012 and FY
2013 and compared the Minimum Rent due to the amounts actually paid by BL during those years.
Based on our analysis, we noted that BL underpaid the City in FY 2012 and FY 2013 resulting in
additional rent due to the City totaling $61,761 (see Schedule 3 below for the, details of our
calculations and analysis).
SCHEDULE 4
CALCULATION OF ADDITIONAL MINIMUM RENT OWED TO THE CITY
BY BAYSHORE LANDING, LLC FOR FY 2012 & FY 2013
FY 2012 Minimum Rent Calculation:
Additional Rent
Owed To City
Actual Rent Paid by BL (FY 09 thru FY 11)
Minimum Rent Due (3-year Average)
Minimum Rent Paid To City
$ 2,509,933
836,644
779,876
Additional Minimum Rent Owed for FY 12
56,768
FY 2013 Minimum Rent Calculation:
Additional Rent
Owed To City
Actual Rent Paid by BL (FY 10 thru FY 12)
Minimum Rent Due (3-year Average)
Minimum Rent Paid To City
Additional Minimum Rent Owed for FY 13
$ 2,405,747
801,916
796, 923..,I
4,993
TOTAL ADDITIONAL MINIMUM RENT DUE TO CITY
FOR FY 2012 & FY 2013
1,761
RECOMMENDATION 2.1: (BAYSHORE LANDING, LLC)
We recommend that Bayshore Landing, LLC (BL) enhance its internal controls procedures so as to
ensure that correct rental payments are calculated in accordance with Lease provisions. In addition,
we recommend that BL immediately remit the additional rent of $61,761 due to the City for
underpayment of Minimum Rent in FYs 2012 and 2013.
• BL Response: (Note: BL disagreed with our finding that additional rent is due to the City -
see Audit Rejoinder below).
• Implementation Date: Not applicable
8
AUDIT REJOINDER: This audit employed different methodologies and procedures from prior
audits. Although audit procedures used in prior years did not result in these same disclosures, this
does not preclude the City from enforcing the terms of the lease pursuant to our audit findings.
Therefore, we take the position that the additional minimum rent is due to the City, in accordance
with the terms of the lease. Consequently, we will continue and complete our audits for periods
prior to and subsequent to this audit. We will also refer this matter to the City Attorney and City
Manager for final resolution.
RECOMMENDATION 2.2: (DEPARTMENT REAL ESTATE AND ASSET MANAGEMENT)
We recommend that the Department of Real Estate and Asset Management (DREAM) enhance its
internal controls procedures so as to ensure that correct rental payments are calculated in
accordance with Lease provisions. The procedures should include recalculating the rent due,
comparing recalculated amounts to rental payments remitted by BL, and implementing a
mechanism to ensure BL is immediately billed for any shortages in payments remitted to the City.
• DREAM Response: DREAM does and will continue to recalculate the rent amounts paid
in accordance with the lease. Additionally, DREAM is currently in the process of purchasing,
and subsequently utilizing YARDI, a real estate computer program that will implement and
monitor lease payments, recurring and non -recurring lease events and provisions.
• Implementation Date: Immediately
RECOMMENDATION 2.3: (FINANCE DEPARTMENT)
The City's Finance Department (FD) should bill BL for the additional rent due in the amount of
$61,761 for BL's underpayment of Minimum Rent due to the City for FYs 2012 and 2013.
• FD Response: We will bill BL for the additional rent due.
• Implementation Date: Immediately
FINDING 3: NON-COMPLIANCE WITH FLORIDA STATUTES REGARDING
ELECTICITY CHARGES
Non -Compliance with Florida Sales & Use Tax - Florida statutes require sales taxes to be
remitted on the total rent paid for the right to use or occupy commercial real property, unless the
rent is specifically exempt, Payments for separately stated services that are required under the
lease or license are part of the taxable total rent paid.
We noted that electricity service to BL wet slip renters and upland (retail facilities) tenants is a
"separately stated" item defined in BL license and lease agreements. In addition, wet slip renters
are charged electricity service based on BL rate sheets rather than by actual usage via the meter
or some other allocation method. However, we noted that when a wet slip renter's total rent is
computed, the applicable sales tax for the electricity charge is not computed and therefore not
9
included in total rent. As a result, BL is not remitting the required sales tax on electricity it charges
its owners/tenants, which is not in compliance with Florida statutes.
Non -Compliance with Florida Administrative Code §25-6.049 - The Florida Administrative Code
requires that any fees or charges collected by a customer of record (i.e. BL) for electricity billed to
the customer's account by the utility, whether based on the use of sub -metering or any other
allocation method, shall be determined in a manner which reimburses the customer of record for
no more than the customer's (BL's) actual cost of electricity.
However, we noted that BL reportedly bills wet slip renters and upland tenant's amounts that may
exceed actual costs of electricity, which is not in compliance with the Florida Administrative Code.
RECOMMENDATION 3.1: (BAYSHORE LANDING, LLC)
BL should take steps to ensure that sales and use taxes are computed correctly in accordance with
Florida statutes and are paid (and properly remitted to the State of Florida) on electricity service it
charges vessel owners/upland tenants.
• BL Response: (Note: BL disagrees with certain of our findings regarding sales and use
tax payments on electricity charges — see Audit Rejoinder below)
• Implementation Date: Not applicable
AUDIT REJOINDER: The lease requires BL to "comply with all laws, ordinances,
regulations... pertaining to the property and operations thereon". We will also refer this matter to
the City Attorney and City Manager for final resolution.
RECOMMENDATION 3.2: (BAYSHORE LANDING, LLC)
In order to comply with Section 28 of the lease agreement between BL and the City, BL should take
steps to ensure that the provisions of the Florida Administrative Code are adhered to when billing
electricity charges to vessel owners/upland tenants.
• BL Response: BL has modified its dock slip agreements to address this issue. BL promptly
paid rent to the City with respect to any over payment of utility charges made by dock users.
• Implementation Date: Implemented
FINDING 4: MARINA REPAIRS AND MAINTENANCE ISSUES
Paragraph 25 of the lease agreement (Lease) between the City of Miami (City) and Bayshore
Landing, LLC (BL) stipulates that BL shall
"...at its sole cost and expense, maintain the grounds and the interior and exterior of the
buildings. The company further agrees to maintain the buildings and property in a condition
of proper cleanliness, orderliness and state of attractive appearance at all times. If the
buildings and property are not kept reasonably clean and attractive in appearance, the
10
company shall be so advised. Corrective action shall be taken by the Company within seven
(7) days' time. In the event such action is not taken, the City shall have the right to make
repairs or cause the Property to be cleaned and the company shall then be required to
reimburse the City within thirty (30) days for said cost and charges."
We inspected the marina during site visits on October 28th, November 17th and December 23rd
2014.
During our inspections we noted the following conditions:
o The North Pier 3 slab was undergoing repair work due to a collapsed pier (see Photo #1
below). At the time of our visits, the pier undergoing repair was closed to public access due
to a collapsed pier, as were the two slips on either side of the pier undergoing repairs (slips
516 & T2A—see Diagram on the next page). BL applied for a permit with the County's
Department of Environmental Resource Management (DERM) on August 11, 2014,
However, its issuance was delayed due to a required City Building permit. BL experienced
a delay due to City procedures which require the same engineer to sign off and seal both
the structural plans and calculations. BL had mistakenly used two different engineers to
submit signed and sealed calculations and structural plans to the City's Building
Department. One engineer signed and sealed the calculations and another engineer signed
and sealed the structural plans. It should be noted that the pier has been repaired.
Photo #1 — Collapsed Pier North Pier 3
11
Bayshore Marina Diagram
We noted that on August 15, 2014, an unsafe structure violation was issued to BL by the
City's Building Department for cracks in the Pier 3/Slip T2C concrete slab. The violation
stated that a portion of Pier 3 (Slip T2C—see Diagram above & Photo #2 next page) could
suffer structural distress due to the weight of an electric transformer placed on the pier. We
inspected the site on December 23, 2014 and observed that the transformer was still on the
pier. It should be noted that the transformer was a private electrical transformer, not an FPL
transformer, and although repair work was required, there were no signs of imminent
distress. BL was responsive to the City's request for repairs, and handled the work
expeditiously. This repair has been completed,
12
Photo # 2 — Unsafe Structure Violation
Finally, our review of marina operations disclosed the following issues:
• Five (5) slips are not rentable (Slips 408, 409, 410, 411 & 412 - see Diagram on page 12)
due to their configuration (see Photo #3 below and Photo #4 next page). According to the
Marina's General Manager (GM), the physical configuration of the Marina and the location
of the slips makes it difficult for boats to ingress and egress the slips (Note: The GM stated
that each linear foot of a boat requires two linear feet for ingress/egress). The GM stated
that if the slips were reconfigured North -South rather than East-West, three slips with lifts
could be created. For that to occur, Slips 500, 501 and 502 would have to be eliminated
(and a corresponding portion of the pier removed, and the income lost) in order to facilitate
ingress/egress. Alternatively, an 80 foot vessel that currently uses Slip 407 (see the vessel
in Photo #4) could be relocated so that all five slips (without lifts) could be rented by smaller
vessels. Each vessel would be approximately 25 feet in length for a total of 125 chargeable
feet. Ultimately, we were informed that such a reconfiguration would not be advisable due
to greater demand for slips with lifts and/or slips that can accommodate larger boats that
are at least 50 feet in length.
Photo # 3 — Unusable spaces (facing North)
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Photo # 4 —Unusable spaces (facing North-west)
RECOMMENDATION 4.1: (BAYSHORE LANDING, LLC)
BL has been proactive in maintaining the Marina, and has been responsive in correcting structural
conditions as needed, as described above. Going forward, we recommend that BL continue to
conduct and document periodic inspections of the property, and continue to be responsive to the
capital needs of the Marina. Such inspections and repairs will be increasingly important in keeping
the Marina in a competitive and profitable condition going forward.
The Marina's operators should develop a phased financial plan for capital repairs/improvements, to
sustain and improve the business going forward, and rehabilitate existing marina facilities.
To maximize revenue for both the City and BL, reconfiguration or the addition of more personal
dry/lift slips should be considered. The Marina has been proactive in sourcing new areas of revenue,
including the implementation of new technology in the form of personal dry/lift slips that increase
revenue, especially in the area where wet slips are currently at market. The new personal dry slips
do increase revenue in locations where market rents for the wet slips appear fully rented and
optimized.
• BL Response: (Note: BL disagrees with our findings and recommendations under
"Marina Repairs and Maintenance" - see Audit Rejoinder below).
• Implementation Date: Not applicable
AUDIT REJOINDER: We performed an inspection of the property pursuant to the terms of the
lease and take the position that the recommendations have merit, considering the long-term nature
of the lease.
RECOMMENDATION 4.2: (DEPARTMENT OF REAL ESTATE AND ASSET MANAGEMENT)
We recommend that the Department of Real Estate and Asset Management (DREAM) establish
procedures to inspect the property on a regular basis. We recommend that DREAM continue to
work with BL and take steps to ensure that BL maintains and improves the Marina, as required by
the lease.
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• DREAM Response: DREAM currently inspects properties annually, at minimum, on an
ongoing basis. With the additional deterioration that comes with age, natural wear and tear
from saltwater and sea -side conditions, DREAM will increase inspections to 2 (two) times
per year at a minimum.
e Implementation Date: Immediately
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