"BOYS WILL BE BOYS"
"The core of the Good Ole Boy's world is with his buddies, the comfortable, hyperhearty all-male comardery, joshing and drinking and regaling one another with tales of assorted exaggerated prowess," Time Magazine.
The Brevard Good Ole Boy network is not limited to boys or politicians. Girls, too, are often key players partying and rejoicing with the group which also includes some lawyers, developers, organizations, and even puppets. The prime requirement is to be in a position of power and use that leverage to benefit the group and ultimately themselves, often at the expense of others.
A prime example is the action of some Brevard County Commissioners. In the last few years they have methodically stripped Brevard's cities of some of their County buildings and moved to Viera. This effects neighboring businesses, as well as the quality and convenience of service that they provide. As a result the County Commission is increasing urban sprawl the opposite of what experts recommend. Communities should be evolving where cars are needed less. For example, Viera, with its new town center concept, is designed to make sure the residents live, and conveniently work and play in their own community....but not outside. The Brevard County Commission is in effect stripping our communities to provide anchor buildings for one of the County's wealthiest developers. These elected public servants should be serving your interest, rather than the private interests of developers and builders.
The power brokers that are steering the County say that they have a vision for the future. They want to promote growth, bring in more industry, and businesses proposing more jobs and bigger profits. A reasonable amount of growth is stimulating, but Brevard is one of the fastest growing Counties in the United States. The same Commissioners that promote growth, voted for impact fees and higher taxes to pay for the added demand on our water, roads, drainage, landfill and other services. Ask yourself, how soon do you want your community to resemble Ft. Lauderdale or any other congested city. Do the people in those cities have a higher quality of life? Who truly benefits from this growth and development?
Politicians depend upon people forgetting. They know that they can erase many past memories of bad deals, dirty tricks, and increasing taxes with enough campaign money, ads, posters, bumper stickers, and smiling TV appearances at election time.
BREVARD COUNTY COMMISSIONERS
Districts 1 - 5
Four Year terms - an election every two years
Nov 19, 1990
2-Karen Andreas (replaced Roger Dobson)
(Mrs. Michael Andreas)
(Mrs. Stephen Salvo, formerly Carol Brown)
4-Sue Schmitt-Kirwan (reelected)
(Mrs. Donald Kirwan)
Nov 22, 1988
1-Truman Scarborough (replaced Charlie
3-Carol Senne (replaced Andrea Deratany)
5-Thad Altman (reelected)
Nov 18, 1986
2-Roger Dobson (replaced Theo York)
4-Sue Schmitt (reelected)
Nov 20, 1984
1-Charlie Roberts (replaced Gene Roberts)
3-Andrea Deratany (replaced Val Steele)
5-Thad Altman (replaced Joe Wickham)
Nov 18, 1982
YOU CAN TAKE THE BOY
OUT OF THE NETWORK,
BUT YOU CAN'T TAKE THE
NETWORK OUT OF THE BOY
This (financial adviser's) advice "was quite a breath of fresh air for County taxpayers and certainly a bombshell for those committee folks who had pressed for refinancing. Which would have meant another hefty fee for their old buddy, County Bond Counsel Bob Nabors, former Brevard County Attorney and law firm colleague of Guthrie," wrote Allen Rose of the Orlando Sentinel on January 27, 1992.
Any workings of government are intricate at best. When making decisions concerning complicated matters, County Commissioners must rely on information that is supplied to them. This is especially true when is comes to the funding of immense County projects, and the County borrows the funds by selling bonds through an underwriter.
In order to keep track of all the necessary details, the County hires consultants to handle the transactions and to advise them of the best actions for County Commissioners to take to benefit the taxpayers.
Brevard County had been using Bob Nabors and his law firm Nabors, Giblin, Steffens, and Nickerson of Tallahassee for bond counsel and Toby Wagner and his firm Southeastern Capital Group, Inc. of Orlando for financial adviser.
Such consultants are highly paid for their services. From 1987 through 1991, Bob Nabor's firm was paid over $488,129, of which nearly $57,000 was for just one closing - the lease-purchase of the Government Center. (See Chapter 5) His services were paid for by Clerk of the Court Ray Winstead and his fee was negotiated by County Comptroller Doug Martin of that office. Toby Wagner's firm, Southeastern Capital Group, Inc., earned over $226,712 for 1987 through 1991, and over $31,000 on the Government Center closing.
But when you compare these figures to what the Brevard County School Board paid its bond counsels and financial advisers for closings during that same period, it appears that these two gentlemen were more highly paid than they should have been. Bob Nabors'm was paid up to 39% more, and Toby Wagner's firm up to 20% more than comparable firms advising the School Board.
So why would the Board of County Commissioners hire consulting firms who would be charging more for their services than similar firms? Carol Hayes of The Reporter writes, "Prior to 1986 the firm of Nabors Potter, McClelland, Griffith, and Jones served as attorneys for Brevard County for almost twenty years. Nabors subsequently withdrew from the firm and opened offices in Tallahassee, where he continued to handle the County's lucrative bond business.
"In 1986 the County converted to an in-house legal staff. The conversion was the fulfillment of campaign promises made by successful Commission candidates in 1984. The former Nabors' firm had received criticism because its partners on occasion represented the County, developers, and property owners simultaneously.
"The ties that bind: Although the County discontinued the services of the old Nabors' firm and set up its own legal department, three former associates of the firm found their way back into County employ within three years: Robert Guthrie, the present County Attorney, Ken Crooks, his assistant, and Frank Griffith, who is the attorney for the Constitutional officers. Griffith was a former law partner of Nabors. In his present capacity he represents the Clerk of the Court, to whom the Comptroller and Finance Director are accountable."
In the words of Scott EllisÙ of Melbourne, "The clear appearance of cronyism existed."
In October of 1991 Allen Rose of the Orlando Sentinel uncovered that Toby Wagner's firm had been fined and penalized in September by the National Association of Securities Dealers, which functions with the Securities Exchange Commission as a watchdog over the securities industry. "Toby Wagner of Southeastern Capital Group, Inc. has been fined $25,000 for a number of violations regarding the operation of his firm. He also must requalify as a general securities principal by taking and passing the examination for that position. In addition Charles LeCroy, a registered representative who has served as president of Southeastern Capital, has been fined $10,000."
Not only was the Board of County Commissioners hiring consultants without competitive bids and paying them more than comparable firms, Bob Nabors' firm did not have a contract with the County, and Toby Wagner's firm was overpaid based on an expired contract.
Surprisingly, the overpayment to Wagner's firm went undetected, even by Brevard County's independent auditing firm, Berman, Shapiro, Crawford & Company. On November 16, 1991, John Nagy of Florida Today broke the story of the overpayment based on information found by a concerned taxpayer investigating County budget items.
Finding the overpayments embarrassing, the Board of County Commissioners requested reimbursement from Clerk of the Court Ray Winstead since Comptroller Doug Martin, of his office, had made the payments.
Florida Today ran an editorial, "Competitive method best for hiring firms." This subject was placed on a County Commission agenda for discussion. During the County Commission meeting November 19, 1991, concerned taxpayers voiced their opposition to the continued use of the two firms.
In two separate meetings the Board appointed a Financial Adviser Selection Committee and a Bond Counsel Selection Committee to make a recommendation based on the firms' proposals for the services. Coincidentally the same people were on both committees: Commissioner Sue Schmitt-Kirwan, County Attorney Bob Guthrie and County Administrator Tom Jenkins.
"These are mostly the same people who were involved before," objected Floyd Rogers of Melbourne at a Board meeting. He urged the Board to not consider anyone who had been to the bond closings in New York City. The closings had generated a great deal of controversy when it was discovered that County officials and advisers' travel expenses and stays at the Helmsley Palace Hotel had exceeded $35,000. (See Chapter 2)
To lend objectivity to the Bond Counsel and Financial Adviser Selection Committees, Floyd Rogers wanted to see Commissioners Truman Scarborough and Karen Andreas appointed along with three citizens. "Those with a different perspective would break the cycle of the same ones always recommending the same ones," he said.
It appeared to many that this Selection Committee was on its way to selecting the same firms they had selected previously. And yet Florida Statutes state that the Board of County Commissioners should avoid even the appearance of impropriety.
In an effort to give the taxpayers some protection in the future, at this November 19th meeting, taxpayers asked Commissioners to pass an ordinance prohibiting local candidates from accepting campaign contributions from underwriters, bond counsels, or financial advisers. No action was taken by the Board.
Even after all the negative publicity surrounding the overpayment to Toby Wagner's firm, Brevard County continued to use the firm as Financial Adviser through December at a cost of $2,722.50 for 16.5 hours @ $165/hour.
In a later meeting, by a 3 - 2 vote, the Board decided to temporarily cease using the services of Bob Nabors as Bond Counsel and to issue a Request For Proposals for a new Bond Counsel. Commissioners Truman ScarboroughÙ , Karen Andreas, and Sue Schmitt-Kirwan voted yes. Commissioners Carol Senne and Thad Altman voted no, wanting to retain Bob Nabors without any competitive bidding.
After the Commission meeting, County Administrator Tom Jenkins sent out Requests for Proposals for the financial adviser, to be returned by January 22, 1992.
However, it took County Attorney Bob Guthrie's office almost two months to get the proposals mailed out for Bond Counsel. A delay of this nature would only work to the advantage of his former employer, Bob Nabors' firm, as they would have more time to prepare and also be in the best position to receive the contract if an emergency arose. At least one Commissioner, Truman Scarborough, agreed, "I think someone's playing a game to throw the business to the good ole boys."
The Orlando Sentinel reported, "Toby Wagner is the same guy who Brevard Commissioner Carol Senne took in tow recently to help her lobby against a March referendum on whether to renew the County's lease at Viera. She and Wagner claimed that a pullout would seriously harm Brevard's credit rating."
In a January 2, 1992 letter to County Finance offices, Toby Wagner wrote that he had "not billed the County for services rendered with regard to the 56 hours worth of work on the Appropriation/Non-appropriation question at the Government Center." At $165/hour that charge could be as much as $9,240. Does this 56 hours represent the hours Mr. Wagner spent accompanying Commissioner Senne around the County without Board approval?
On Monday, January 13th, 1992, the Jacksonville bond counsel firm of Squire, Sanders, and Dempsey met with Thad Altman to indicate their interest in completing a proposal for the bond counsel position. Altman told the attorneys that it was unlikely that the Board would hire anyone else but the number one choice of the Selection Committee. He indicated that it was his personal view that the Selection Committee would recommend Bob Nabors' firm because he believed Sue Schmitt-Kirwan had control of the committee and that she wanted Bob Nabors as the bond counsel. It was his opinion that Bob Nabors had gotten a bad wrap in the press lately and deserved another chance.
The attorneys of the Jacksonville firm perceived that Thad Altman was just being totally honest with them and it appeared that the decision on who was going to be hired had already been made. If enough firms were told the same thing, few would expend the time or money to submit proposals. As a result, Bob NaborsÙ would just by his presence be the firm that would be hired.
On Wednesday morning January 15, 1992, Commission Board Chairman Thad Altman called an emergency meeting of the Board for the next day to consider action on selecting an adviser and bond counsel to perform an emergency bond refinancing. Around noon County Attorney Bob Guthrie and County Administrator Tom Jenkins, two of the three members of the Selection Committee, stated that they were going to recommend that the Board hire back Bob Nabors and Toby Wagner with no competitive bidding because of the urgent need. Bob Guthrie felt the County should use these two firms because County officials were used to working with them.
When concerned taxpayers got wind of the emergency Board meeting and its purpose, they rallied to protest at the meeting. WESH NBC Channel 2, WCPX CBS Channel 6, and WFTV ABC Channel 9 planned to cover the meeting with reporters and cameras rolling. Just 24 hours before it was scheduled to start, the emergency had evaporated, the meeting was canceled, and the topic was shifted to the regularly scheduled January 21st Commission meeting. What happened to the emergency?
At that meeting, two bond underwriters, Alex Brown & Sons Inc. and Lehman Brothers, spoke before the Board on the available low interest rates, recommending the County to move as quickly as possible to refinance some bonds. Commissioner
Scarborough reminded County Administrator Tom Jenkins that the Underwriter Selection Committee had selected ten underwriter firms that could be competively checked for best pricing and services before an underwriter was to be hired.
Commissioner Scarborough told the Board he saw no reason for a panic, that no one could know what interest rates would do. He also indicated the Board should not act hastily and should proceed on the course of competitive bidding for underwriters, bond counsel, and financial adviser as they had promised the public.
Commissioner Altman responded by threatening Commissioner Scarborough with the fact that if this delay cost the taxpayers millions, he wanted the public to know Scarborough was to blame. The Board decided to have the Financial Adviser Selection Committee make a recommendation at the next meeting on January 27th.
Allen Rose of the Orlando Sentinel wrote about the surprises the January 27th Commission meeting held, "When the commission met at 5 p.m. the refinancing question was on the agenda but there was no backup material available either to the public or on the desks of the Commissioners for use in consideration of this issue. Taxpayer activist Glenda Busick noted this, and persisted in asking a staffer from Jenkins' office for that data and obtained a copy of the Capital Market Consultants letter, all other copies of which were at that moment being held by Jenkins at the front of the commission chambers."
In the letter, Capital Market Consultants, Inc. (C.M.C.), serving as the County's interim financial adviser, counseled the County to wait until the April auction of the U.S. Treasury to consider refinancing bonds, if that was indeed what they wanted to do. It was their opinion that these refinancings might not provide adequate savings to the County for all the time, effort, and expense involved. They also pointed out that the 1986 Tax Equity and Fiscal Reform Act placed restrictions on the number of times that bond issues could be refinanced. So any bonds already refinanced once, could only be refinanced one more time. Or any bonds refinanced twice could not be refinanced at all.
Allen Rose continues, "Busick supplied a copy to Scarborough during a break in the meeting. At which time Jenkins approached Scarborough and offered him a copy of the letter. Truman didn't need it. He was already reading it, thanks to Busick. One has to wonder how long copies of that letter might have remained in Jenkins' possession, while some of the commissioners were unaware of its existence, had Busick not demanded that it be produced."
The letter from the Capital Market Consultants (C.M.C.) went on to say, "C.M.C. makes this recommendation recognizing that its fee will be significantly reduced by this course of action. However, we feel that it is the most honest advice we can give to Brevard County and is in the best interest of its ratepayers."
Orlando Sentinel writer Allen Rose thought this advice "was quite a breath of fresh air for county taxpayers and certainly a bombshell for those committee folks who had pressed for refinancing. Which would have meant another hefty fee for their old buddy, county bond counsel Bob Nabors, former Brevard County Attorney and law firm colleague of Guthrie."
At the January 27th meeting the Board was once again urged to put citizens on these selection committees. Taxpayers reminded the Board that the Capital Market Consultants in their letter recommended "actively engaging the investor community and the Brevard County citizens in discussions of the County's plans for past and future financing." Commissioner Schmitt-Kirwan commented that the selection committees would not be changed.
Despite all the news that occurred at this meeting, the next morning Florida Today only ran a one paragraph article about the County's decision not to refinance bonds at that time. When contacted to see if there would be further coverage regarding the Capital Market Consultants letter, they replied they would not pursue it.
The fact that the Capital Marketing Consultants letter was not in the agenda information packet for the public, or even some of the Commissioner's packets, insinuated it could have been embarrassing to Tom Jenkins, Sue Schmitt-Kirwan, Bob Guthrie, Thad Altman, and Carol Senne, all of whom were pushing for this emergency to refinance County bonds. More than six months later a true refinancing emergency has yet to arise.
What is becoming more and more obvious to the taxpayers educating themselves on the subject is that sometimes bond refinancings are of more service to the underwriters, financial advisers, and bond counsels than to the taxpayers. Once the total cost of issuance is deducted, lucrative fees could outweigh savings for the County.
For example: one refinancing the County was considering would have a total cost of issuance of around $600,000 payable immediately (with underwriters earning approximately $300,000). It would carry an approximate interest savings of $1.5 million, thus saving the taxpayer $900,000 spread out over years. This interest savings is too low to warrant a refinancing according to the Capital Market Consultants firm. "We like a 5% level of savings," they said. "This would protect the County from reacting to every investment banker churning up business by putting forth a 'must do now' idea."
Capital Marketing Consultants urged the County to embrace a financial strategy designed to improve the County's long term debt rating instead of continuing to rely upon municipal bond insurance to sell its securities. The firm cautioned that the ratings process requires a long term commitment to fiscal prudence, but promised that an improved credit rating would bring the following benefits:
• A reduction in the fees and expenses associated with bond issues.
• An increase in the County's control over its own fiscal destiny.
• An increase in the County's ability to finance on its own credit.
• Freedom from the need to buy municipal bond insurance to sell County securities.
In January 1992, to the delight of the concerned taxpayers, the Board approved Capital Market Consultants, Inc. (C.M.C.) as the County's new financial adviser. However, the Bond Counsel Selection Committee of Commissioner Sue Schmitt-Kirwan, County Administrator Tom Jenkins, and County Attorney Bob Guthrie once again chose Bob NaborsÙ as bond counsel.
Final Score: Taxpayers 1, Good Ole Boys 1.
+• Did the thought of TV cameras and a room full of angry taxpayers put too much heat on the issue of bond refinancing for the Board to push something through as an emergency?
• How long had these apparent improprieties been going on?
• How many other ways could the good ole boy network come into play?
ON A COUNTY BUDGET
"Taxpayer advocates are calling it abuse, waste, and worse tonight. County officials have made it a practice to travel to New York in the finest style on the pretext of signing documents to finance County projects," began Dan Billow, of WESH NBC Channel 2, as he opened his 11:00 p.m. news story on October 31, 1991. "One County official said the trips are tradition. The Brevard County Government Center may become as much a symbol of scandal, corruption, and excess as the notorious Leona Helmsley's Palace Hotel."
As early as 1989 the Orlando Sentinel was running stories about visits to the lavish Helmsley Palace Hotel in New York City by Brevard County officials while closing bond issues with financial advisers. However, the local daily newspaper, Florida Today, failed to pick up on the story until much later. From 1989 to 1991 Brevard County's New York Helmsley Hotel and travel expenses had cost taxpayers over $35,000.
Carol Hayes at that time was a taxpayer advocate who had not yet been employed by The Reporter newspaper. She attended the September 1989 budget hearings and questioned Helmsley Palace Hotel bills that were incurred in June of that year. Finance officials responded only to assure taxpayers present that the County paid for none of these hotel and travel costs. Frustrated by the lack of a satisfactory response, Mrs. Hayes approached the Florida Today newspaper hoping for some assistance in uncovering answers. Even though the paper had yet to cover the Helmsley visits, she was told this was old news.
Again in the 1991 budget hearings, County officials were questioned about Helmsley Palace Hotel visits, this time by Melbourne taxpayer Floyd Rogers. He requested in particular an itemized listing of hotel and travel costs on the Government Center 1989 closing, which Chairman Sue Schmitt-Kirwan agreed the Board of County Commissioners would provide.
The Board did not provide Floyd Rogers with these expenses. It was obvious to many that the lack of action by the Board fell into the category of suppression of public records.
At the time of the request, County Administrator Tom Jenkins said that closing costs were factored into the annual lease payments and spread over 25 years. But if travel expenses are included in closing costs and amortized over 25 years, don't the taxpayers still pay for them? And the interest on them, too?
Floyd Rogers persevered for disclosure of the elusive expenses for the visits to the Helmsley Palace Hotel. After several attempts to extract the information from the Clerk of the Court Ray Winstead's office and writing the State Attorney Wolfinger'sÙ office, some of the Helmsley receipts were finally unearthed. In October of 1991, Floyd Rogers tried to show both reporter John Nagy, and editor Lenore Beecken, at the Florida Today newspaper the value of the story supported by the receipts. But they told him it was not something they were interested in, just as the paper had told Carol Hayes two years earlier. When I asked Lenore Beecken to verify that fact she said, "John Nagy and I have no comment..."
Carol Hayes was also working to bring all the facts forward for taxpayers. She joined the staff of The Reporter newspaper, a weekly based in Rockledge, as a reporter. Supplied with Floyd Rogers' information and more, she broke the story in Brevard County October 31, 1991.
Subsequently, all three network television affiliates ran stories on their evening news broadcasts. Bob Tucker at Channel 6 commented, "Records show that eight employees spent more than $13,000 on a two day trip in April. They stayed at the Helmsley Palace, one of the city's poshest hotels, at over $300 a night."
Ross Cavitt at Channel 9 described the Helmsley Palace Hotel visits as "living high on the hog."
Unable to overlook the story any longer, the Florida Today newspaper was now obliged to run the story. So on Saturday, November 2, 1991, more than two years after being informed about it, they ran their first story written by John Nagy.
The media attention continued as District 2 County Commissioner Karen Andreas placed bond closing expenses on the November 5, 1991 County Commission Meeting agenda. In reaction to the public outcry, she called the County's expenses "outrageous." As an agenda item, the issue could be addressed by concerned taxpayers requesting speaking time of the Commission.
The three TV stations, WESH NBC Channel 2, WCPX CBS Channel 6, and WFTV ABC Channel 9 followed up on the story by attending the Commission Meeting, joined by George Draper from WTAI 1560 AM, and Rosalind Postell from WMMB 1240 AM radio stations.
Despite the enormous public interest, this was placed as item 162 out of 167. It was hours of droning details before the bond closing expenses issue was brought to the floor. Taxpayers patiently awaited their opportunity to address the Board about the issue and the media restlessly awaited to record the Board's response. As the Board reached the item on the agenda, Commission Chairman Sue Schmitt-Kirwan informed the public that additional information was needed so they would not take public comment. Exasperation erupted in an outburst of disapproval. Chairman Sue Schmitt-Kirwan repeated there would be no public input on the issue.
Taxpayers were in no mood to be cast aside once again. And I was one of them. The issue of truth in government spending had now become one of freedom of speech. I rose from my seat, walked down the aisle toward the public podium and spoke to the Board, "This was put on the agenda, we filled out the cards to speak and we want to speak." Chairman Schmitt-Kirwan, surveying the faces of the taxpayers and the cameras of the media, gave in and allowed those registered to speak. Those addressing the Board requesting no further trips to stay at the Helmsley Hotel were: Mary Kilgore, Rockledge; Jessie Fleming, Port St.John; Floyd RogersÙ , Melbourne; Annette Neuhaus, Cocoa; and Dale Martin, Merritt Island.
Following the taxpayers' vehement comments, the Board refrained from any discussion of the heated topic until a December 3rd Meeting, giving their staff time to investigate the matter. Board critics claimed the roughly one month delay to discuss the problem publicly was in the hope that the public would become less angry and vocal. It didn't work.
"Once the Helmsley Palace Hotel visits became public, many taxpayers were shocked and outraged to find out how several of their County officials were wasting their tax dollars on air travel to New York and stays at a lavish hotel," said Nancy Higgs of South Melbourne Beach.
While analyzing the hotel and travel bills, it was uncovered that the County's hotel and travel expenses went through a third party, the County's Financial Adviser, Southeastern Capital Group, Inc. During the media's investigation, several key points came out showing the needlessness of the visits:
• bond closings could have been handled locally in an afternoon.
• no more than three County officials are actually needed for a closing.
• there was no established bond closing policy.
First of all, research conducted by Carol Hayes of The Reporter newspaper reveals that a quick, local bond closing is not only feasible but routine for the cost conscious. According to former County Attorney Bill Curphey, closings can occur in Brevard County. And according to Mark Cook, former aide to County Commissioner Sue Schmitt-Kirwan, average closings take less than an hour to transact. Neighboring Indian River and Volusia Counties routinely close their bonds locally in thirty minutes time. Yet Brevard County officials require a two night stay at the Helmsley Palace Hotel in New York City.
The investigative work of Allen Rose of the Orlando Sentinel augments that of The Reporter, outlining the bond closing practices of the Brevard County School Board. Unlike the County Commission, the financially strapped School Board held their closings of bond issues and certificates of participation for lease-purchases for the last three years in Brevard County. Also unlike the County Commission, who paid their Bond Counsel ex-County attorney Bob Nabors' travel expenses, the School Board did not pay the travel expenses of their bond counsel when he bundled up the papers and brought them here. And when it was inconvenient for former school board president Dr. Larry Williamson to attend a signing, the School Board's Bond Counsel took the papers to Williamson's dental office in Titusville for his signature. "They always accommodated me and I appreciated it." Williams said. "I'm not going to knock anyone else but I never would have gone to New York to sign papers."
Brevard officials said they have always stayed at the Helmsley Palace Hotel because it is close to where they meet for the bond closing and it is in a safe neighborhood. According to Clerk of the Court Winstead, "If you want to stay in a safe district, you want to stay in one of four or five hotels. Other hotels cost just as much as the Helmsley, within $5 or $10." He informed WESH Channel 2 TV that they did the closing the most economical and best way possible. To WCPX Channel 6 TV he stated they didn't waste any money. And Ray Winstead told WFTV Channel 9 TV that the Helmsley expenses were reasonable and that $275 a night is about average for New York. But what the taxpayers were not told was that if the County officials had really needed to be in New York overnight and had stayed just four blocks away at the Holiday Inn Crowne Plaza, taxpayers could have paid less than half that - $113 a night.
Expenses for travel outside the County for the three bond transactions in 1989 through 1991 totaled over $35,000.
$24M CERTIFICATES OF PARTICIPATION CLOSING
The $24 million Certificates of Participation (COP) issue for the Government Operations Center was closed in New York at a cost of over $1 million.
Bond Counsel Bob Nabors' firm was paid almost $57,000 and Financial Adviser Toby Wagner's firm was paid over $31,000 for this transaction.
Staying at the Helmsley Palace Hotel for this closing at taxpayers' expense were:
• County Commissioner Carol Senne.
• former County Commissioner Roger Dobson and his wife.
• County Administrator Tom Jenkins.
• Clerk of the Court Ray Winstead.
• County Comptroller Doug Martin.
• County Attorney Bob Guthrie.
• Assistant County Attorney Ken Crooks.
• Financial Adviser Toby Wagner, President of Southeastern Capital Group, Inc.
Bond Counsels Bob Nabors and George Nickerson attended and billed the County $2,812.26 for air fare and Helmsley Palace Hotel expenses. Dobson, who was Chairman of the Commission at that time, said that he paid his wife's expenses.
"The social aspects of the trip were memorable," commented Ken Crooks in a letter to Toby Wagner, in which he thanked the company for the "gracious treatment" and told Wagner "Your efforts on my behalf were appreciated and will not be taken for granted...." Crooks was only able to fly up and back for one day because of other business commitments. The others stayed two nights.
$29.8M UTILITY BOND CONVERSION
According to The Reporter newspaper, $9,774 was spent for travel and rooms for those who attended the next bond closing, the $29.8 million Utility Bond Conversion in February of 1990.
Bob Nabors' firm was paid over $37,000 and Wagner's firm was paid over $30,000 for this transaction.
At least seven stayed at the Helmsley Palace Hotel on this trip:
• Commissioner Carol Senne
• County Administrator Tom Jenkins
• County Attorney Bob Guthrie
• Clerk of the Court Ray Winstead
• County Comptroller Doug Martin
• Financial Advisers Toby Wagner and Ben Benham, Southeastern Capital Group, Inc.
Bob Nabors' firm, acting as bond counsel, was reimbursed $2,799 for travel expenses.
$22.5M SERIES 1991 REVENUE BOND CLOSING
According to County records, taxpayers paid $12,777 for airfare and rooms for County officials who attended a bond closing. An additional $2,000 was paid for unidentified expenses. Rooms occupied at the Helmsley Palace Hotel were $330 a night, including taxes.
Bob Nabors' firm was paid over $47,000 and Toby Wagner's firm was paid over $50,000 for the three transactions.
• Commissioner Sue Schmitt-Kirwan
• Commissioner Thad Altman
• Jeff Cole, Aide to Schmitt (and former Florida Today reporter)
• Assistant County Administrator Pete Wahl and his wife
• Clerk of the Court Ray Winstead
• Walter Carpenter, Executive Assistant to Winstead
• County Comptroller Doug Martin
• Financial Advisers Toby Wagner and Ben Benham, Southeastern Capital Group
Bond Counsel Mark Mustian, of Nabors, Giblin, Steffens and Nickerson, stayed at the Mariott Marquis Hotel on Broadway.
Who determines which Brevard County Officials will attend a bond closing? In response, Clerk of the Court Winstead replied, "The Clerk determines the individuals who will attend from his office. Brevard administration and the Board determines who will attend for the Board."
Commissioners Scarborough and Andreas both stated that County Comptroller Doug Martin, who works for Clerk of the Court Ray Winstead and not the Board, would call them and invite them to the bond closings. Since Commissioners Scarborough was elected in 1988 and Andreas in 1990, neither has attended County bond closings. When Truman Scarborough served as the Mayor of Titusville, he did attend one closing for the City of Titusville which was held in New York. Referring to it he said, "For that particular closing there appeared to be no reason whatsoever for me to be in New York City."
Mark Cook, former Aide to Commissioner Sue Schmitt-Kirwan, said about eight years ago he was told by Commissioner Schmitt to attend a bond closing in New York. He recalled a first class, all expense paid trip for about half a dozen. When he raised questions about staying at the Helmsley Palace Hotel he was told "it was the only safe hotel" in New York City. He still thinks it is "absolutely ridiculous" for a group to stay at such a luxury hotel at the public's expense. "I must have asked too many questions," he laughed. "I was never sent to another closing. Only the County Comptroller and the County Attorney really seem to have anything to do at a closing. The meals are fantastic and the Broadway shows are great!"
And when it comes to how many people were required to attend the bond closing for signatures, the answers also differ.
• Finance Manager Steve Burdett said only two County employees are needed to sign the documents.
• County Attorney Bob Guthrie told Florida Today four people.
• Clerk of the Court Winstead told WCPX Channel 6 TV and WFTV Channel 9 TV that as many as eight people were needed.
• Assistant County Administrator Wahl said his presence was required because he "provided administrative support to the chairman and vice chairman and in the actual closing, assisted in moving paper."
• Even with a County Attorney and a Bond Counsel in attendance, Commissioner Schmitt-Kirwan said she took her assistant Jeff Cole because "I want to make sure what I'm signing is a legal document." She also wanted to assure the documents for accuracy.
• Thad Altman said, "I was told I had to go. The vice chairman has to go in case the chairman gets sick or their flight is delayed or they get mugged. If there's a glitch, it causes problems." However, no vice-chairman attended the February 1990 bond closing.
• WESH Channel 2 TV quoted Clerk of the Court Ray Winstead that the group of eight "assisted in handling a multitude of papers and ran errands to get things done. I think we did it in the most economical and best manner possible."
According to Clerk of the Court Ray Winstead, "The paperwork associated with a bond closing is continuously reviewed and revised up to and including the date of closing....It is not unusual to substantially modify some documents during the closing."
Statements like this concerned Commissioner Scarborough, who is an attorney, "It makes me nervous to think that documents are being changed at the last minute after the Board has already approved the packets."
County Comptroller Doug Martin said that "last April's trip was a successful effort to save taxpayer's money by refinancing bonds at a lower interest rate." Angry taxpayers say that is the Board's job to convert old bond issues borrowed at higher interest rates to lower interest rates when possible and does not entitle them to expense paid trips to New York. That the money they wasted going to New York has nothing to do with saving interest dollars.
Clerk of the Court Ray Winstead by law is custodian of County funds. The Board was reminded on November 5, 1991 that Ray Winstead had challenged the County Commissioners
for improper expenditure of funds in reference to giving refunds on water hook up fees to Port St. John residents. This challenge was taken before the Florida Attorney General and Clerk of the Court Ray Winstead lost. The Board was asked, "Is Ray Winstead's office immune to challenges of misappropriation of funds?" Some taxpayers wanted to know, "Will the County Commissioners find out if Winstead's office had misappropriated funds in bond and COP closings?" The Board took no action.
John Nagy of Florida Today found where $1700 of County money was used to pay miscellaneous travel expenses billed by the financial adviser. No receipts for the miscellaneous expenses could be found in the County's financial records. Many of the Helmsley Palace Hotel bills reviewed contained charges which were crossed out, implying that the County did not pay for these items. Toby Wagner, the County's financial adviser, paid for the total costs on all bills. Frequent requests to the Board for canceled checks, disclosure statements or IRS forms to see that these miscellaneous expenses were paid back to Toby Wagner's firm by County officials have been ignored. These crossed out items include:
• Long distance calls made by Thad Altman, Carol Senne, Jeff Cole, Doug Martin, Tom Jenkins, Pete Wahl, Ray Winstead, Bob Guthrie.
• Local calls made by Roger Dobson, Thad Altman.
• Harry's Bar bills charged by Pete Wahl ($27.17), Doug Martin (40.45 & $28.27), Tom Jenkins ($9.20).
• Room service charges by Pete Wahl ($7.00), Ray Winstead ($44.39 & $20.82 & $21.36), Carol Senne ($10.28 & $10.28).
• Restaurant charges made by Sue Schmitt-Kirwan ($70.40), Jeff Cole ($79.76), Doug Martin ($111.88 & $20.63).
• Movie charges made by Bob Guthrie ($60.16), Ray Winstead ($30.08).
• Valet charges made by Ray Winstead ($19.00).
Toby Wagner's firm, Southeastern Capital Group, Inc., went out of the bond business after it was found to be out of compliance with regulations of the National Association of Securities Dealers (N.A.S.D.), which acts as a watchdog for the Securities Exchange Commission (S.E.C.). No one could be reached by phone for comment.
Research by John Nagy revealed, "'There weren't any shopping sprees and no big parties,' said Commissioner Carol Senne, 'We worked hard.'" But Commissioners and other County officials said bond underwriters host large dinners and at times offer tickets to Broadway shows and sporting events.
"I've never been to a play, but I went to a hockey game to see the New York Rangers. They were playing so sorry, we left at half time," Clerk of the Court Ray Winstead said. Some taxpayers did not find this comforting.
Commissioner Thad Altman on November 5th told the public, "The Orlando Sentinel has written stories and done investigative reports years ago and I think the bottom line is that this is a necessary part of County government and that nothing came of it then."
On November 5th, I asked the Board, "Who determined that the Brevard Delegation would stay at the Helmsley Palace?" Thad Altman insisted that according to Bond Counsel Bob Nabors the closings of the COP's (lease purchase Certifications of Participation) and bond refinancings must be held in New York because of the extreme complexities involved.
Commissioner Altman said, "We're talking about tens of millions of dollars. I take a great deal of personal offense at anyone who considers these trips junkets. We have invited the media to go along. I make no excuses. I think this issue is being exploited politically. It is critical that we work very closely with bond counsellors and financial experts. Some type of reactionary group is going to jeopardize our ability to compete in the bond market."
Ray Winstead'sÙ written response to the question of who determines where the closing will be held was, "Brevard County has stayed in the Helmsley Palace for bond closings since the late 70's or early 80's. The Clerk is not involved in making the decision regarding closing location. This decision is made pursuant to an analysis of the complexities of the issue by the Comptroller, the Underwriters and the Board's Financial Adviser."
For the December 3rd meeting, the County's Tourist Development Council (T.D.C.) came to the aid of Commissioners Altman, Senne, and Schmitt-Kirwan by doing a survey of New York room rates showing that the Helmsley Palace Hotel had one of the cheapest rates at $230. Some Helmsley Palace Hotel bills, however, showed costs of $275; $330 with tax. Omitted were the Warwick @ $135 a night and the Holiday Inn Crowne Plaza @ $115 per night. The T.D.C. list failed to include four modestly priced hotels within a four block radius of the Helmsley. Using the figures given (with seasonal adjustments) in the current Automobile Association of America directory, the Helmsley falls close to the top of the list. During the meeting, Commissioner Altman used TDC's analysis to state, " Anyone who reads the report will see it completely exonerates the Board of any wrongdoing."
Carol Senne was quoted in Florida Today as saying, "It's a witch hunt. It's a non-issue as far as I'm concerned. I don't think the average person even thinks if we're going up to New York." This mentality of "I do not have to be fiscally responsible unless I think the average person is watching" is one of the main reasons the County is in its huge deficit spending spiral.
In reference to the June 1989 closing, Clerk of the Court Ray Winstead authorized the payment of over $200,000 worth of expenses. Surely Comptroller Doug Martin, would not request payment and Clerk of the Court Ray Winstead, would not authorize expenditures of this magnitude without receiving an
itemized list substantiated by receipts. But yet no receipts were on file as of October of 1991.
Some believe due to the public criticism of Ray Winstead'soffice participating in these expensive trips and not questioning and paying these bills, that his office thought the Board should be defending them more. As a result a friction seemed to develop. On November 21st, Comptroller Doug Martin wrote a letter to the Board of County Commissioners stating, "Commencing immediately the services that are not statutorily required will be terminated." This included:
1) Bond Issues - All functions associated with the development and sale of bond issues. All functions associated with the selection of underwriters, financial advisors and bond council. A replacement needs to be named to the "Committee to Select Underwriters" on which I currently serve.
2) Commercial Paper - All functions associated with the issuance of commercial paper. A detailed schedule of maturity dates and amounts will be prepared for the County Administrator to ensure that he has the necessary information for timely action.
Then on November 25th, Clerk of the Court Ray Winstead and Comptroller Doug Martin wrote another letter to the Board saying the County finance department would only "act within the most exacting interpretation of the law and that commencing immediately they will be following Florida laws and statues." No longer would they issue the quarterly budget reports or administer the annual budget process.
Other citizens wondered why the County's independent auditing firm of Berman, Shapiro, Crawford and Company, whose annual salary is $185,000, did not question these expensive, nonessential trips.
All these questions, fueled the fire for a State Audit of the County's and Clerk's finances. (See Chapter 16)
On December 4, 1991 the Board unanimously approved a new bond closing policy that put a priority on a Brevard or Florida location for bond closings. Commissioners Altman, Sue Schmitt-Kirwan, and Carol Senne couldn't quite deny Commissioners all future trips. They insisted the Board make exceptions and allow trips for "highly technical" issues.
Where, who, and how many may go in the future will be determined by Commissioners at regular public meetings. During this meeting day, one speaker who filled out a card was not allowed to speak and Commissioner Altman had another speaker removed from the podium by a bailiff.(See Chapter 26)
The Miami Herald did an in depth report on the expenses involved in Bond Closings on January 19, 1992. "Big Ticket Dinners Still Seal Deals." They describe that these lavish parties happen at bond closings throughout America, costing the taxpayers untold dollars.
+• Can limiting the number of signatures on a bond closing document also limit the number of people required at the closing, thereby reducing costs?
• Why can't all bond closings be held in Brevard County? Is travel really necessary?
• By masking County travel expenses with third party billing, could unauthorized expenses be hidden as well?
On December 12, 1991 Orlando Sentinel columnist Allen Rose wrote, "Consider this: Former state Senator Tim Deratany lost in the last election to Patsy Kurth, a political novice who had never held elected office at any level, primarily because he was accused of taking junkets paid for by lobbyists. This was considered unethical. State Senator Bud Gardner is fighting similar charges for going on a hunting trip to Georgia.
"Would someone please explain to me why it is any less unethical for an elected official to take an unnecessary trip paid for by taxpayers?"
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HAS A BLACK LINING
Dean Witter in a report dated Fall 1989, states "lease financing is frequently used as an alternative to the issuance of general obligation debt, which requires voter approval and is subject to debt limitations. This is possible since, due to the annual appropriation mechanism, leases are not technically considered debt of the state or local government."
Basically a lease-purchase is similar to a lease in that payments are made on a regular basis; but if the lease is continued to maturity, the property is considered to be purchased. Although there is not a commitment to renew the lease each year, it is understood that this will occur. Instead of bonds funding the purchase, Certificates of Participation (COP's) are utilized.
Florida law requires voters to approve a long term purchase. This is done to protect the people from reckless borrowing. The County can switch to lease-purchase and avoid the requirement of voter approval emphasizing the renewal option and not the commitment it is known to be.
Lease-purchase financing using Certificates of Participation (COP's) was developed by underwriters and financial consultants in response to California's Proposition 13, which restricted local governments' ability to raise property taxes. Because of this law, California governments no longer had extra property tax money to pledge as collateral on bonds to finance long term projects. Underwriters and financial consultants who charge fees to sell the bonds, were earning much less money as the governments could no longer issue as many bonds. With the motivation established, they came up with a way for governing bodies to go into debt without having to get voter approval. COP's act just like multimillion dollar credit cards for governing agencies.
Little do the American people know how pervasive this credit card has become in the hands of their local and state officials. Since 1980, around $70 billion of lease backed securities have been issued. With underwriters, bond counsel attorneys, bond rating agencies, and financial advisers earning whopping fees to handle the paperwork involved. Just as an example, the total cost of issuance was over $1 million for the COP closing on the Brevard Government Center. This included:
• Bond Counsel Nabors, Fee $ 50,000
expenses $ 6,956
• Financial Adviser Wagner, Fee $ 25,906
expenses $ 5,710
• Closing Expenses $ 10,666
• Standard & Poor's Rating, Fee $ 7,500
• Trustee, Registrar, etc. $ 50,000
expenses $ 12,482
• Special Counsel, Fee $ 57,500
expenses $ 21,324
• Title Insurance Policy $ 60,301
• Printing and Binding Fees $ 22,477
• Underwriters Discount $ 354,782
• Municipal Bond Insurance $ 394,752
Total Cost $ 1,080,356
Standard and Poor's Corp. has made the comments that lease financing "is frequently used to avoid constitutional or other legal restrictions on general obligation debt, but also may be the most expedient and flexible financing method."
In essence, lease-purchase financing allows Florida taxing entities to incur annually renewable debt, thus circumventing Article VII section 12 of the Florida Constitution that requires public vote on long term debt.
Bob Nabors was Brevard County's former County Attorney for thirteen years. After he left Brevard County's employment, he started a law firm Nabors, Giblin, Steffens & Nickerson in Florida's state capital, Tallahassee. One of the functions of this firm is to perform as Bond Counsel for cities and counties. When these governments need to borrow money in the form of bonds or COP's, they need an attorney to perform the legal paperwork functions. Bob Nabors is considered an expert on lease-purchase financing and the one that facilitated Brevard County's Government Center's lease-purchase agreement. Bob Nabors' firm was Brevard County's bond counsel for this transaction, earning almost $57,000 on the COP closing in June of 1989. (See Chapter 1)
The American Bar Association Spring 1992 Newsletter states that between May 1, 1989 and December 15, 1991 approximately $900 million of lease-purchased COP's have been issued in Florida alone. Nabors' law firm was the bond counsel for over $678 million of these lease-purchases from 1989 to 1991 -earning him the label "the Father of Florida Lease-Purchase."
Besides educating cities and counties on how to lease-purchase buildings to circumvent the Florida Constitution, he also did a seminar to educate Florida attorneys on how to lease-purchase. On August 9, 1991, Nabors spoke before the Florida Bar Association. His lecture was entitled Certificates of Participation/Lease Purchase Transactions.
As well as lecturing on the subject, as of May 1992 Bob Nabors was registered as a paid lobbyist in Tallahassee. Eager to spread the lease-purchase concept around the State of Florida, it was in his personal interest to make sure no laws were passed to restrict them.
One lease-purchase bill was introduced before the Florida House calling for voter approval on Brevard County's Government Center's lease-purchase. This bill's prime sponsors were Representative Charlie Roberts and Harry Goode and Goode's aid, Patricia "Patti" Grogan back in May 1990. While they were fighting to uphold the Constitutional rights of all Floridians, Attorney Bob Nabors was lobbying to kill its passage on behalf of the Florida Association of Counties, according to a Florida Today May 29, 1990 article.
During that time, Bob Nabors testified before a Florida House Governmental Operations subcommittee that was considering Goode's bill. According to a Florida Today article dated April 12 he told them, "Voter referendum would kill future deals. It has far-reaching consequences to all local governments. Local governments could change their mind on the lease and move out of its facility."
Since 1989, Representatives Charlie Roberts and Harry Goode and his aid Patricia "Patti" Grogan have sponsored several bills before the Florida House of Representatives to mandate advertised public hearing notification and voter approval of all lease-purchases. The Florida House and Senate refuse to address this lease-purchase powder keg. Nothing has been done to protect the taxpayer from this debt abuse.
From 1988 to 1991, the Brevard County Commissioners and the Brevard County School Board have used lease-purchase arrangements to construct buildings and to obligate taxpayers to over $131 million of debt. With many schools in need of basic items, included in this total was construction for school auditoriums costing $9.5 million. As of July 1992, the School Board was considering the issuance of another $50.9 million in lease-purchases.
Now more about a Brevard County lease-purchase.
Due to the national significance of Brevard County's lease-purchase fiasco, Business Week magazine did a March 16, 1992 full page story entitled, "An End Run Around The Taxpayer." Allen Rose of the Orlando Sentinel broke this story. The article stated, "In 1989, politicians in Brevard County, Fla., decided they needed a new headquarters building for the county government. There was only one problem: Tax-sensitive county voters were unlikely to approve a bond issue to raise the money. What to do? The politicians opted for a novel ploy to bypass the voters. First they had a trustee, a state bank, issue $24 million worth of tax-exempt securities to pay for construction of the building. The County then agreed to make what amounted to yearly lease payments to the bank to pay the interest on the bonds. Unlike interest on conventional munis, lease payments are not a binding obligation on a municipality, so no voter approval is required."
The following is an evolution of how the Brevard County Commissioners methodically set the stage to lease-purchase the $24 million Government Center buildings without voter approval.
The Brevard County Commission passed its first Lease-Purchase Ordinance December 15, 1987. The ordinance limited the County to the lease-purchase of equipment with Certificates of Participation (COP's), a brand new financing mechanism that few people in Brevard County knew anything about.
January 19, 1988. The Board authorized the County Attorney and Bob Nabors' firm to get the financing mechanism (COP's) approved through the circuit court.
June 26, 1988. The State Attorney's office speaking for the taxpayer interest, pleaded before the court stating that property taxes are indirectly pledged for what amounts to long term debt. That lease-purchase is a device to avoid public referendum as guaranteed by the State constitution.
However, the County's Assistant Attorney and George H. Nickerson, Jr. of the law firm Nabors, Giblin, Steffens & Nickerson, argued that this mechanism would save the public money - that it involved "a simple lease with annual renewal options in favor of the County with no implied pledge of property taxes." And that the County's budget was protected from any liability from bondholders or other outside parties.
The Judge did not rule until March 1989.
November 17, 1988. The Commission approved bids to go out for a Central Government Operations Facility and a Consolidated Judicial Facility without holding a public hearing and without asking the voters whether they wanted a single-centralized-government-service-facility or several-community-service-outlets to serve their 67 mile long county. This significant topic was handled during a regularly scheduled Commission meeting without soliciting public input.
March 9, 1989. The Florida Supreme Court upheld the Circuit Court's Validation on the Brevard County's ordinance to lease-purchase up to $5 million of equipment using COP's.
March 21, 1989. County Commissioners Carol Senne, Thad Altman, Sue Schmitt-Kirwan, and Roger Dobson, gave a standing ovation of welcome to Bob Nabors when he arrived at the County Commission meeting. No explanation was made to the public. It can only be assumed that this ovation confirms the strategic role that Bob Nabors played in the masterminding of this lease-purchase arrangement.
At this same meeting, a representative from one of Duda's companies presented the Board with a model of the new proposed Government Center that would end up being built by a subsidiary of Duda's on donated land within Duda's new City of Viera.
June 20, 1989. The Board of County Commissioners approved a development agreement with Duda Lands, Inc. for the Government Center's development; their subsidiary, Central Brevard Development would develop the property.
At this June 23, 1989 meeting, County Commissioners Carol Senne, Thad Altman, Sue Schmitt-Kirwan, and Roger Dobson passed an ordinance on an emergency basis which drastically altered the original 1988 lease-purchase ordinance which had been approved by the Florida Supreme Court.
The mighty four voted to remove the ban on using property taxes, expanded the use of COP's to not just buying equipment but land and buildings and they upped the spending limit from $5 million so they could finance the $24 million Government Center.
Evidence indicates the first ordinance to lease-purchase equipment was just a ruse for the bigger Government Center lease-purchase because no equipment was ever leased under that ordinance prior to June 23, 1989.
County Commissioner Scarborough was the only dissenting vote against amending the ordinance. The paperwork that was approved by the Board that day had around 187 blanks. Several times, Scarborough commented that the Board should not be signing contracts with blanks. The mighty four paid no heed. It was not until mid-November that all the blanks had been filled in along with over 60 pages added.
Little did the public know that these contracts contained the provisions for the following:
1) the owner/trustee, First Union National Bank, would be exempt from paying the property taxes. A clause was included that if any taxes were found due that Brevard County taxpayers would pay them instead of the owner. These annual taxes amount to around $295,000.
2) Brevard County, the lessee, would pay all maintenance costs associated with the buildings, not the owner, which according to Brevard's Facilities Manager amounts to around $312,500 a year.
3) The builder would be exempt from paying $360,000 of impact fees when the buildings were finished.
4) The taxpayer would pay a third party, an owner/trustee, $50,000 to be the middleman to disperse the lease payments to the COP investors. Plus the taxpayer would pay all the owner/trustees' expenses, attorney bills, etc. that related to the lease-purchase transaction.
The fact remains that those responsible for this lease were unwilling to put the final version of the lease-purchase ordinance to the test. The Brevard County Government Center's COP's have never been scrutinized by the Courts and they are significantly different from those that Bob Nabors' firm got validated in 1988.
Officials said that savings from the sale of old County government buildings would make the rent payments. Commissioners Sue Schmitt-Kirwan and Carol Senne travelled around the County with their savings posters, proclaiming this and more. County Administrator Tom Jenkins said, "It will be funded through the current rental cost that we are spending primarily throughout Central Brevard."
Taxpayers don't know that the Commission financed the first year's lease payment without having to raise property taxes. That way in the 1990 election year, Commissioner Sue Schmitt-Kirwan (who was up for re-election), would not have to vote to raise property taxes to pay for the lease. This way their distortion that property taxes would not be raised to pay for the Center could be delayed until the next year, after the election.
In September 1991, these public "servants" raised property taxes an additional 3% to provide the revenue for the $2 million annual "lease" payments over the next 24 years left in the 25 year lease. This will amount to $48 million in property taxes for a project taxpayers were deliberately denied any voice in.
During the May 29, 1992 trial of Jim Ford vs. First Union National Bank, Commissioner Carol Senne admitted that she had a significant involvement in this whole lease-purchase arrangement. She was asked by Ford's attorney if property taxes were used to make the lease payments on the Government Center. Senne replied, "That is an accounting answer - I would say no." However, eight months earlier at the 1991 Budget Hearings, Carol Senne approved the millage increase to fund the lease.
June 27-29, 1989. Brevard County holds its COP closing of paperwork at the Helmsley Palace Hotel on Madison Avenue in New York City. Those in attendance were: Commissioner Carol Senne, Clerk of the Court Ray WinsteadÙ , Roger Dobson and his wife, County Administrator Tom Jenkins, County Comptroller Doug Martin, County Attorney Bob Guthrie, Assistant County Attorney Ken Crooks, Financial Adviser Toby Wagner, and Bond Counsels Bob Nabors and George Nickerson. The financial people make the reservations, pay the bills, host the events and receive thank-yous from some - then bill the County for everything and get reimbursed by the County Comptroller. This trip wasted around $12,000. (See Chapter 2)
Many Brevard citizens were starting to put this lease-purchase puzzle together and didn't like what they saw. A ground swell of opposition was building.
December 19, 1989. The Brevard County Commissioners allowed the first advertised Public Hearing on the lease-purchase of the consolidated Government Center. The County Comptroller and the County's other financial experts predicted financial disaster for the County if the issue was put to a referendum. Commissioners Carol Senne, Thad Altman, Sue Schmitt-Kirwan, and Roger Dobson voted to deny the public their constitutional right to vote. Commissioner Truman Scarborough voted to allow the public the vote.
Robert "Bob" White, of Melbourne representing the Home Builders and Contractors Association, told the Board, "it has been established beyond a shadow of doubt that it (lease-purchase) was legal, moral, and ethical" to do what the Board did and he applauded the Board for its decision. He stated it was "a very wise business decision..." He requested the Board to "stand its ground, reaffirm that decision and proceed with the facility (construction)."
Joe Wickham of Melbourne addressed the Board and said, "...whether people like it or not, that is the growth pattern for the County...I commend the Board for taking the stand...there is no alternative."
Meantime, after the complex was constructed and Brevard County officials moved in, the auditorium sprung a leak. Rains pushed the groundwater level up to the low end of the meeting room floor, causing the water to seep through the cracks. Charles Samuelson, an engineer with Universal Engineering Services on Merritt Island, said the slab was not designed to withstand the high groundwater level.
Workers began pumping the water from beneath the floor. Ultimately a drainage system had to be installed around the building.
Great dissatisfaction was continuing to swell among the taxpayers as more and more was learned about the deception and lies surrounding the financing and construction of the five Government Center buildings at Viera.
Because the lease has to be renewed each year, the renewal question came before the Board of County Commissioners in September of 1991. The public demanded that the Board put this question to the vote of the people because it was obvious now that the Board had committed the voters to a long term debt and to the use of property taxes to pay for it.
Commissioners Truman Scarborough, Karen Andreas, and Sue Schmitt-Kirwan voted to allow a public vote and Commissioners Carol Senne and Thad Altman opposed the public vote.
Without the approval of the Board of County Commissioners, Commissioner Carol Senne took Brevard County's financial adviser Toby Wagner of Southeastern Capital Group, Inc. and County Comptroller Doug Martin to meetings with Florida Today's Editorial Board and the Brevard Economic Development Council. At these meetings Carol Senne, Toby Wagner, and Doug Martin warned that the County would jeopardize its credit rating and financial reputation if the people were allowed to vote. Since then it has been learned that Toby Wagner's firm wanted to bill Brevard County for 56 hours of work done on the lease renewal subject. Toby Wagner's hourly rate was $165. Will this bill include costs for any of these meetings that Commissioner Senne took Wagner on without Board approval?
The financial lenders and underwriters threatened immediate reprisals if the vote went to the public on whether to renew the lease. Reduction in the County's credit rating was predicted.
• Sanwa Bank Ltd. promised to cancel the County's credit for its short-term loan program if the Commission allowed the vote.
• M.B.I.A. (Municipal Bond Investors Assurance Corporation) who insured the COP issues wrote the County that nonrenewal could ultimately result in an inability to obtain insurance.
• Analysts from the bond rating company, Moody's Investors predicted grim consequences if a vote was allowed.
• Analysts for the underwriting firm, Alex, Brown & Sons, Inc. of New York City said, "We believe that market participants will have a degree of reluctance to participate in Florida COP's and will have to be compensated in terms of interest rate in order to purchase."
In an October 21, 1991 letter to the County from Arthur Spector, a vice president for Goldman Sachs, a large bond underwriter, wrote "as a result of the negative publicity associated with the subsequent default of a highly rated security, the rating agencies will have every interest in dissuading issuers from taking this step in the future. Downgrading Brevard as an object lesson is an obvious strategy toward this end."
What this seems to say is the financial community would do all it could to threaten to downgrade Brevard's credit causing the Commissioners to not allow the vote. Because if Brevard County was allowed the vote, then it would set precedent throughout the United States, harming the salability of lease-purchase financing. This would decrease the number of lease-purchases that would be sold, thereby decreasing the amount of fees all these underwriters, rating agencies, financial advisers and bond counsels would earn. MONEY WAS THE GUIDING FORCE. They could not allow this to happen.
Commissioner Altman said, "The Financial Community does not need Brevard County. We need them."
The Board of County Commissioners met in special session October 29, 1991 at 2 p.m. to decide whether to allow the public their constitutional right to vote on whether the lease should be renewed on the Government Center buildings. The speakers that addressed the Board seemed to break along the same two camps that spoke previously on December 19, 1989. The simple taxpayer was up against special interest groups such as the Chambers of Commerce, Economic Development Councils, and Brevard County Homebuilders and Contractors Association. After dangling the yes vote carrot before the public with her previous vote, Commissioner Sue Schmitt-Kirwan yanked it back and reversed her vote to side with those opposed to giving the public the right to vote.
The taxpayers' attempt at obtaining their right to vote shook alot of doors. The Spring 1992 issue of the American Bar Association newsletter writes over a three page story describing the ramifications of lease-purchase financing and Brevard's attempt at this vote. The article was entitled, "Lease-Purchase Financing - Will Political Pressure Kill the Golden Goose?"
This article instructed attorneys how to make lease-purchase projects more essential. "Because the issuer retains the right to terminate the lease each year, the facility financed by the lease must be so essential to the issuer that the issuer could not function properly without the project." To do this the article described two concepts: (1)" entering into a single lease-purchase for multiple facilities, so that in the event of termination of the lease an issuer losses its use of all the facilities, and (2) "entering into a master lease-purchase agreement, pursuant to which all of an issuer's lease-purchases are governed by one lease-purchase agreement, again so that the issuer cannot selectively fail to appropriate for individual projects." Nice guys. This boxing in of the county issuer leaves the taxpayer with no alternatives and no way out of the situation.
Originally presented as a "simple lease," with an annual "option to renew," the bond attorneys and the financial community only later implied that it was a lease that must be renewed.
+• The Government Center cost $18 million to construct. Why did the Board of County Commissioners borrow $24 million? How was the difference spent?
• Should the people be allowed to vote whether the Government Center lease should be renewed?
• Information for the above evolution was gained through County Commission Meeting Minutes, a trial transcript, County public records, and November 7, 1991 and June 11, 1992 articles written by Carol Hayes for the Rockledge newspaper, The Reporter.
These citizens asked the Board of County Commissioners for their constitutional right to vote on long term debt at the October 29, 1991 Commission meeting:
Graydon Corn, Mims
Robert Phelps, Scottsmoor
Glenda Busick, Melbourne
Mary Kilgore, Rockledge
T.R. Garrod, Titusville
Mary Garrod, Titusville
Dale Martin, Merritt Island
William Kendrick, Canaveral Groves
Floyd Rogers, Melbourne
Marilyn Heinrich, Melbourne
Collette Cannon, Cocoa Beach
Ida Blickley, Titusville
Mara Cellana, Merritt Island
Joseph Popeck, Merritt Island
Jesse Fleming, Port St. John
Peter Kostrzewa, Turtle Coast Siera Club
Bea Polk, Titusville
Carl Gorton, Merritt Island
David Exley, West Melbourne
Pam O'Kell, Titusville
Scott Ellis, Eau Gallie
Swinton M. Burroughs, North Indialantic
Eileen Lamont, Melbourne
Keith Sullivan, Merritt Island
Annette Neuhouse, Cocoa
Joe Griffin, Cocoa
Charles Fletcher, Melbourne
Stanley Lewand, Satellite Beach
These individuals representing special interest groups addressed the Board opposing the public's right to vote on long term debt:
Peter DiLavore, the Melbourne Association of Realtors
Val Steele, former County Commissioner
Ted Fuhrer, Chairman of the Brevard Economic Development
Bob Willie, Chairman of the Brevard Business Coalition made up of the Cocoa Beach Chamber of Commerce, Melbourne-Palm Bay Chamber of Commerce, Brevard Manufacturers' Association, St.John's Foods Producers Association, and the Brevard Homebuilders and Contractors Association
Robert "Bob" White, past president of the Brevard County
Homebuilders and Contractors Association
Brad Cox, Chairman of the Cocoa Beach Area Chamber of
Gary Cleland, who works for the Cocoa Beach Economic
Sue Munsey, President of the Cocoa Beach Area Chamber of
Larry Malta, President of the Melbourne-Palm Bay Chamber of
Pat Tweed, President of the Melbourne Area Association of
Stan Budesa, Executive Director of the Convention and Visitors
Bureau of Palm Bay Area Chamber of Commerce
Fred Gay, Cocoa
Wes Houser, Merritt Island
Ernie Briel, Melbourne-Palm Bay Economic Development Council
Debra Carroll, Mortgage Bankers Association
Kyle DeLung, Cape Kennedy Board of Realtors
"AIRBOATERS - A FLAP OVER DEVELOPMENT: Local residents, airboat club members, and environmentalists met last month to survey the area around Brevard County's Lake Winder, home of a massive development called Viera. Developers say it's a good project, with convenient facilities and east access. Critics call it Brasilia-an isolated monument to political deal-making. The maps being surveyed above (refers to a front page photo) show much of a proposed airstrip's location to be in a 25 year floodplain - the same floodplain airboaters complain of being harassed in by Viera owners, " wrote columnist Nicole Duplaix for Florida Environments Newsmagazine.
HUGE DEVELOPMENT DRAWS COUNTY SEAT,
Want to make a killing as a developer?
Start as a farmer. Convert 38,000 acres of greenbelt and floodplain to houses, but don't hurry. Zone it for Agricultural Pursuits: leave a sod farm and a few cattle to keep taxes down. Divvy up your project into separate DRI's, (Development of Regional Impact) small ones, that will fly through permitting with no problem. Avoid fancy estate homes, just sell offices and single
or multi-family cookie-cutter units for a maximum return on your money. Project a long sell-out over 50 years, with 171,000 new residents.
How do you attract buyers to your new Brasilia? Make it irresistibly convenient. Use the New Town concept. Have everything right there, within walking distance: County Government Center complex, School Board, Courthouse, hospital and medical center, community college. Add to that a mega mall, transit system, the Marlins' spring training camp, a 56-acre zoo, an airport - something for everyone.
Then, link it together with an expressway to Orlando and the beach. That means multi-millions in infrastructure, roads and support services. Which, to politicians, means jobs - a strong selling point. Too good to be true? It's all happening in Brevard County now thanks to Duda and Sons.
It's called Viera, the Slovak term for "faith." Critics say Brevard voters may need a lot of it to swallow this one.
Glenda Busick, vice president of Brevard Citizens for a Better Government, describes her group as "common grassroots." "Duda has gone too far. We're mad as hell and we want full taxpayer participation in County matters."
The object of their ire is the new $23.8 million County Government Center, the cornerstone of Viera's New Town concept. The center was built on Duda-donated land by Duda's subsidiary company, Central Brevard Development Inc., and financed by a lease backed bond issue.
Residents claim the lease-purchase was a way to bypass voters by avoiding a referendum. Since payments are appropriated annually by the Commissioners, no referendum is required on 25 year lease-purchases of essential government buildings. (And who authorized the move from Titusville, the County seat, they ask?)
Then the brand new building sprouted a serious leak right under the Commission Chambers. Embarrassed, stung with national media coverage and growing discontent in an election year, the Commissioners tried to put the annual $2 million lease payment to a referendum last March. "Not allowed!," squawked the municipal bond heavies who threatened to downgrade Brevard's bond rating and refuse future issues. The Commissioners then canceled the after-the-fact referendum.
Lake Winder, on the St. Johns River, is circled with low-lying marshes reminiscent of Kissimmee's precious restored oxbows. But here the surface heaves with every exotic weed that thrives in nutrient-rich waters. Worse, Lake Winder is less "visible" than green Apopka or Okeechobee, and suffers from an out-of-sight-out-of-mind predicament. You can only reach it by boat, preferably airboats that glide over the slime.
St. Johns airboaters and fishermen are horrified at the explosion of floating weeds on Lake Winder, along Viera's western boundary. Poor stormwater runoff management on Duda's cattle and sod farms is responsible, they say.
Jack Maloy, Duda vice president and Viera's mastermind, does not agree. "There is no water quality problem to our knowledge, and D.E.R. monitors that regularly. We trimmed the herd of 20,000 cattle on the property down to 4,000 when we went into the real estate business ten years ago and converted the pastures in pine stands. The sod farm is six miles from the river and is irrigated by a closed recirculation system of treated effluent from our sewage treatment plant."
Locals say they approach Duda's riverfront property cautiously...local sheriffs have arrested quite a few for trespassing in canals they've fished for decades. "This is state land, not private property," the boaters claim. Survey and zoning maps indicate that Duda's surrounding property is located within the 10 to 25-year floodplain and, along the river's edge, well below that. "If the high water line survey is accurate, we have every right to be here," they maintain.
Duda's recent permit application to build an air strip immediately east of Lake Winder specifies: "The property is located within the 25-year floodplain."
Where will Brevard, famous for its water wars, pump another 19 million gallons of water a day to green its lawns? Not from Lake Winder or Lake Washington further south. "Not from Osceola's Bull Creek Wildlife Management Area," ruled the St. Johns River WMD Governing Board last month, in spite of Director Henry Dean's pleas to the contrary.
However, future Viera residents need not pray for rain. Duda solved their problem by going to nearby Cocoa which used a high-tech aquifer storage and recovery (ASR) system. "And one day, if need be, we can build our own ASR system to meet Viera's requirements," adds Maloy. As the former Director of the South Florida's Water Management District, he knows how to insure his water supply.
The above article has been reprinted from the Florida Environments Newsmagazine courtesy of the publisher, Florida Environments Publishing Inc. of High Springs, Florida, all rights reserved.
For further information on the effects of development on flood plains, please read the National Geographic July 1990 article written by Nicole Duplaix. This 25 page story documents how the Federal Government won its lawsuit against the South Florida Water Management District and the Florida Department of Environmental Regulation for allowing agricultural runoff to damage Loxahatchee Refuge and Everglades Park. This first of its kind lawsuit resulted in a ruling that the South Florida Water Management District has to purchase approximately 35,000 of marshes from farmers, ranchers, homes and businesses in order to restore the Everglades marshes and wetlands to their natural state.
Private law abiding citizens like Jerry Henson and John Davis both of Cocoa, have been arrested at different times by Sheriff Jake Miller's deputies on what they believe to be state owned land near the St. Johns River.
Jerry Henson was arrested for trespassing by Deputy Sheriff Eugene Hope and one of Duda's personnel on land between Lake Winder and Lake Washington. He had to spend a night in jail and his airboat was confiscated. Jerry Henson's attorney demanded that the Duda's prove they owned the land. After the fourth trial, the judge dismissed the case because in Henson's words, "Duda could not prove they owned the land."
John Davis was cited for trespassing by Deputy Sheriff's Eugene Hope and Randy Goodyear off the St. Johns River, south of Lake Winder. After three trials his case was dismissed. He demanded that Duda prove they own the land, but they could only provide tax deeds. He refused to sign a document saying that he would not go onto Duda land again, saying, "it is quite questionable as to where state land ends and Duda thinks their property begins".
After Davis's case was dismissed over fifteen other trespassing cases were dismissed.
However, airboaters continue to say that money is being wasted by Sheriff Miller's deputies who "patrol and protect the disputed property lines between the state owned St. Johns River and the property lines that Duda and others claim as private.
+• With law enforcement budgets so tight, why are Sheriff's Deputies used to patrol the St. Johns River and its lakes? How much of Sheriff Miller's budget has been spent the last ten years patrolling the boundaries of private property along this river and lakes?
• How much money and time has been wasted in the Brevard County Court System trying these questionable trespassing cases?
• Once the word spreads that a people are being arrested for trespassing on the St. Johns, doesn't this intimidate others to not enjoy the river and its lakes?
• Why can't the State survey these lands and decide who owns what and mark the property lines accordingly?
THE SINS OF THE
COMMISSIONERS ARE VISITED
ON THE TAXPAYER
"Circuit Court Judge C. Vernon Mize, Jr. upheld Brevard County Property Appraiser Jim Ford's ruling that First Union National Bank is the actual owner of the Central Government Complex and does not qualify as a tax exempt entity under Florida law. Mize ruled that the complex is subject to property taxes for 1990 and 1991." wrote Carol Hayes in The Reporter Newspaper on July 2, 1992.
County Property Appraiser Jim Ford questioned whether the new Government Center at Viera should be eligible for the tax exempt status government owned buildings enjoy. It was financed through Certificates of Participation held by a private bank, making the County a lessee and not an owner. Legal opinions from the State Attorney General, the State Department of Revenue and the attorney for the State Association of Property Appraisers, all supported Ford's position. However, several County officials, some School Board members, and the County's financial consultants, Bob Nabors and Toby Wagner, disagreed.
In 1989 Brevard County Commissioners Carol Senne, Thad Altman, Sue Schmitt-Kirwan and voted to build a new centralized government center in the Viera community, and to finance it through an unusual lease-purchase agreement. Commissioner Truman Scarborough voted against it.
Building such a complex was costly, requiring the County to put the taxpayers into debt for a long period of time. And Florida law guarantees that residents have a constitutional right to vote on long term indebtedness. To save themselves from taxpayers' scrutiny and circumvent this law, a lease-purchase agreement was utilized in which the County would lease the buildings for twenty-five years, spreading their cost over the life of the lease. Done without referendum, the Commission succeeded in getting their new government center - without asking the voters whether they wanted a centralized government complex or if they wished to go in debt to pay for it.
When Property Appraiser Jim Ford's office placed the property on the tax roll for 1990, First Union National Bank appealed Ford's decision to the Property Appraisal Adjustment Board.
Commissioners Carol Senne and Thad Altman, and School Board members Vera Walker and Bobby Bechtel sat on the board at that time. The Property Appraisal Adjustment Board's attorney was Bob Guthrie who is also Brevard County's Attorney and had worked at Nabors law firm. He advised them to exempt First Union Bank from paying any taxes. Some see a conflict of interest with Guthrie representing both Boards at the same time.
Commissioners Senne, Altman and School Board members Vera Walker and Bobby Bechtel agreed with Guthrie and voted against Ford's decision. Commissioner Truman Scarborough agreed with Jim Ford's opinion that the Bank was not exempt and was the only dissenting vote.
Meanwhile, Attorney Bob Nabors and Brevard County Lobbyist Guy Spearman tried to persuade the legislature to change state law to make property similarly financed through Certificates of Participation exempt from property tax, but failed.
A new Property Appraisal Adjustment Board reviewed the issue again in 1991; accepted Guthrie's advice, and once again rejected Ford's position that the property was taxable and that the First Union Bank was the owner of the property. Commissioners Sue Schmitt and Carol Senne, and School Board member Lynn Demetriades were the board members who voted to exempt First Union National Bank. Commissioner Karen Andreas and School Board member Pat Manning agreed with Ford.
Twice County Commissioners and School Board members had denied Ford's position to place the Government Center buildings on the tax rolls. And yet, if First Union National Bank were required to pay property taxes, the financially strapped School Board alone would gain an estimated $6 million over the life of the twenty five year lease.
"When I first brought this up, part of my reasoning was that if the building was taxable and we were not collecting that money, over the life of the lease the school system could lose approximately $6 million they were legally eligible for," Ford told the Orlando Sentinel.
Several other taxing agencies, such as the St. Johns Water Authority and the Florida Inland Navigational District, would benefit from adding the Government Center to the tax rolls.
This deadlocked disagreement resulted in Jim Ford's office suing First Union National Bank for payment of back taxes. With more than thirteen years experience as Brevard County Attorney and now in private practice, Bob Nabors had his law firm of Nabors, Giblin, Steffens & Nickerson, defend First Union National Bank against the Property Appraiser's office.
During June 1992 Circuit Judge C. Vernon Mize, Jr. ruled in favor of the Property Appraiser's office, agreeing that First Union National Bank, as Certificate Trustee, was the owner of the government center buildings and was not exempt from paying property taxes.
Just when you think the taxpayer has been saved you discover that we have been betrayed.
The original Lease-Purchase agreement signed June 23, 1989 by the Board of County Commissioners contained about 187 blank spaces. Commissioner Scarborough when he voted no to this agreement, commented several times that the Board should not be making decisions nor signing documents with blank spaces. It was not until mid-November that the Commissioners received a complete set of signed documents with all the blanks filled in.
A twist in the lease-purchase agreement came to light during the May 1992 trial. It was discovered that during the June 1989 New York financial closing for the Government Center, Assistant County Attorney Ken Crooks, (also a past attorney for Nabors law firm) called the Property Appraiser's office and asked whether the Government Center would be exempt from taxes under a lease-purchase arrangement. He was again told that they believed it would be taxable because the County would not own the property.
A clause was included in the lease-purchase contract stating, "any Real Estate Taxes with respect to the project (government center) and all other amounts, liabilities and obligations which the Lessee (Brevard County) assumes or agrees to pay to Lessor (First Union)...."
To the shock and dismay of taxpayers, who were not consulted on the complex that put them into $50 million of debt, they are now responsible for an additional estimated $12.8 million property tax bill over 25 years.
Commissioner Karen Andreas and Truman Scarborough see the bottom line as another item added to an already overloaded budget. "It is a shame this deal was structured in such a way that taxpayers are now bearing the burden for this building," said Andreas, who opposed construction of the facility without a referendum vote.
ADDING INSULT TO INJURY:
Due to an agreement between Brevard County and First Union National Bank, the County is responsible for all of First Union's attorney fees and out of pocket expenses on any items relating to the lease-purchase. This means that Brevard County taxpayers will now pay all the legal fees of Nabors, Giblin, Steffens & Nickerson, P.A., who defended First Union National Bank against Brevard's Property Appraiser's office. As of July 1992, First Union National Bank had asked the County to reimburse legal expenses of $9,400 relating to this case.
At the July 21, 1992 County Commission meeting, Commissioner Truman Scarborough asked his colleagues to give up the fight and save attorney fees. "It's premature to discuss it today, but I'm certainly going to vote to appeal the ruling when it does come down," Commissioner Sue Schmitt-Kirwan said. If the decision is appealed, the taxpayer could be again paying Nabors to defend an issue which serves to assist him in selling the lease-purchase concept to other counties throughout the state.
WHO SAID $8 PER SQ.FT.?
Brevard County is paying approximately $2 million per year on the space they are leasing at the Government Center in Viera. When taxpayers were told they pay approximately $8.00 per square foot to rent the 250,000 sq.ft., it is not the whole story. This figure does not include maintenance costs of approximately $1.25 a sq.ft. and around $1.18 per sq.ft. for property taxes. The total price to rent the space is around $10.43 per sq. ft. and when you also factor in that it is more space than is needed, the cost goes still higher.
Rented office facilities of equal quality and area, when leased for long periods, are available for less than $8.00 per square foot and the owner is responsible for the maintenance costs and the property taxes.
The more you learn about the lease arrangement of the Brevard County Government Center, the more it shows to be a bad deal for the taxpayers and a good deal for someone else.