Another Fine Mess
Written by Mark Sell, BT Contributor
North Miami passes a budget, but where exactly is the money?
N orth Miami's fiscal reckoning may have arrived, with a warning letter from a fired budget director's employment lawyer accusing the city of playing shell games with public money to hide growing budget deficits.
City manager Larry Spring, deputy city manager Arthur "Duke" Sorey Jr., and the city face a potential whistleblower lawsuit pertaining to a $20 million budget gap over two years. The letter was triggered by the September 20 firing of assistant budget director Terry Henley, who his lawyer says refused "hush money" to go quietly.
Henley's lawyer, William Amlong of Fort Lauderdale, wrote city attorney Jeff Cazeau on September 21, alleging that Spring and Sorey had pushed through "what looks like a $70 million balanced budget, but one that really conceals $7 million to $20 million in deficits."
His letter says Henley was fired "after he vehemently objected to the cowboy-style budgeting approach embraced by Messrs. Spring and Sorey."
The city council passed the 2018-19 budget on September 17. At 9:30 a.m. September 18, according to the letter, Sorey gave Henley the option to go quietly with six weeks' severance. Henley visited Amlong and returned to his city hall office September 20, refused Sorey's offer, and was fired for "incompetence," after five years of increasing responsibilities. His computer was locked (Amlong's letter warns the city not to touch his data), and seven police officers escorted him out.
"What they need to do is unfire Terry Henley and visit the budget with real numbers," Amlong tells the BT. "This will be a whistleblower suit if they don't put him back. I should hope that the city, which is already in debt, doesn't incur a whole lot more attorney's fees to keep this guy out of work."
Spring fought back hard September 24 in a letter to the city council, saying repeated audits revealed "ZERO findings of malfeasance on my part or that of my staff," welcoming an external audit, and harshly attacking Henley's job performance.
In April, Amlong's firm secured a $931,587 whistleblower verdict against the City of Miami on behalf of Victor Igwe, the city's former top auditor. Igwe alleged he was ousted in retaliation for uncovering shady financial maneuvers and for cooperating with a Securities and Exchange Commission investigation into a 2009 $153 million bond issue. Subsequent charges led to a fiscal meltdown. (Spring, who was not charged in the matter, was Miami's chief financial officer from 2007 to 2011.) The city settled with the SEC for $1 million.
Amlong's September 21 letter claims that Spring and Sorey hid deficits over Henley's objections by shifting moneys from restricted funds, such as water plants and storm water, into the general fund to plug gaps.
Writes Amlong: "While this kind of spending is reckless, it is also invisible."
With the budget director's position vacant, Henley reported directly to Sorey, and Amlong says that Henley "wisely" declined two offers of promotion to the job in order to keep his civil service protections.
Commissioner Scott Galvin, in an e-mail, says, "Henley's accusations are serious and I will treat them that way. I support bringing in an independent auditor to verify the budget as we know it. Certainly, Spring has the right to counter Henley, and Henley has the right to plead his case to the Personnel Board."
Copies of Amlong's letter and accompanying documents spread across town shortly after the letter was sent, were posted on Facebook, and galvanized residents.
Will the issue come directly before the State of Florida, which in April returned a tough audit of the city's operations from 2012 to 2014?
Will the governor appoint an oversight board? If not, who can the city trust to revisit the budget? Will hiring freezes, service cuts, and layoffs follow?
The BT shared the letter's contents and supplemental material with Merrett R. Stierheim, long cited as Florida's dean of public administrators with nearly 60 years of public service.
"The governor ought to act now," Stierheim tells the BT, emphasizing that he has no wish to get involved. The city must declare a fiscal emergency, which would empower Gov. Rick Scott to appoint an oversight committee. The timing is troublesome, as Scott is in a tight race to unseat Democratic Sen. Bill Nelson on November 6.
"It isn't a pretty picture at all -- with many similarities to Opa-locka and the City of Miami," says Stierheim.
Stierheim -- until recently the "go-to" source to fix demoralized or dysfunctional governments, including the Miami-Dade School Board and Miami-Dade County -- helmed an oversight committee to turn around the City of Miami in 1996, which unlocked a $68-million shortfall and created a rescue plan after "two straight months of 16-hour days." In March 2017, he stepped down from a pro bono oversight board for Opa-locka, citing systemic dysfunction in the city.
According to Amlong's letter, North Miami's budget "overestimates income and underestimates both 2017 and 2018 expenses" by $20 million, including:
• $11 million in a general funds deficit, some of it filled by pulling $3 million from the city's unallocated reserve, or savings account, reducing it to $7 million;
• $7 million in monies spent on Hurricane Irma repairs that FEMA has yet to reimburse but weren't deducted from the city's reserves (if so, that would bring the city's reserves to zero);
• $2 million received from Costco in connection with its 99-year North Miami SoLeMia lease, which, "(contrary to what Mr. Spring told the City Council Monday), was used to balance the city's 2017-18 budget," Amlong writes. (Costco is preparing to move from its current location in mid-November.)
The letter claims that Henley had been clashing with Spring and Sorey over the past two years, resisting pressure to hide budget gaps by making the numbers look better than they are.
The pattern carried over to the present budget year to cover widening deficits. Finally, on September 12, shortly before the final budget hearing, Sorey issued a reprimand to Henley for "inability to adjust budgeted items downward based on the current fiscal year usage, as well as a lack of leadership."
"Mr. Sorey made it clear to Mr. Henley that he is not worried about any personal repercussions for the financial debacle into which he and Mr. Spring are steering the city," Amlong's letter states, adding that Sorey "felt sorry for Mr. Henley because he was going to be 'the fall guy on this one.'"
Stierheim urges a close look at the last two years of North Miami's external audits, particularly "material defects" and "audit exceptions."
"That is the first step I would take to correct North Miami's problem, or at least get a handle on it," he concludes.
Feedback: This e-mail address is being protected from spambots. You need JavaScript enabled to view it