Studer Community Institute

Contract questions arise in Gulf Breeze

March 9, 2015
/ Carlton Proctor
/ community-dashboard

It started because former Gulf Breeze Mayor Beverly Zimmern wanted to be able answer questions from constituents about the contract between former mayor Ed Gray and the city of Gulf Breeze regarding a municipal loan pool. Zimmern, according to City Manager Edwin “Buz” Eddy, asked Pensacola-based accounts Saltmarsh Cleaveland & Gund to do a performance audit of the contract between Capital Trust Agency, Gray’s entity, and the city. Zimmern, who stepped down as mayor in early January, could not be reached for comment. The bonds are used by other communities to finance municipal projects, and Gray’s firm is paid to manage those bonds. The News Journal has been covering this story. Read the latest story here. Though the audit found that the city likely overpaid Gray for financial services by some $338,000 in fees, it appears unlikely the Council will pursue recovery of the money. "It's my perception from meetings we've had so far that there does not appear to be majority of council that feels it appropriate to pursue action to recover any of the funds paid to (Gray)," said Gulf Breeze Mayor Matt Dannheisser. Gulf Breeze City Manager Edwin "Buz" Eddy echoed Dannheisser's remarks regarding the mood among council members. [sidebar] While attorneys work on a new contact between Capital Trust Agency and Municipal Advisory Service, the controversy has prompted changes in the way City Manager Edwin ‘Buz’ Eddy is paid. Prior to Feb. 1 of this year, Eddy received $130,000 annual salary as city manager from the city’s general fund. Eddy also was paid as a consultant to CTA and as a consultant to another City of Gulf Breeze entity, Gulf Breeze Financial Services. However, City Council has changed that three-source arrangement. “While part of my compensation came from (Capital Trust) prior to Feb. 1, it never resulted in a salary out of the norm for a city manager to earn," he said. “It’s all the same money to me. "Now, I'm paid with a normal paycheck just like all the other Gulf Breeze employees." [/sidebar] "My sense of the council right now is that rather than try to get that money back, we restructure the contract between (the city) and (Gray)," Eddy said. District 2 State Rep. Mike Hill’s constituency includes part of Gulf Breeze. He said he was aware of inquiries into the ties among Gray, Capital Trust Agency and the city “way back when I was running for office in 2013. I had no idea of the extent of it. “The amount that they say he was overpaid, that definitely should be paid back expeditiously to the citizens and any investigation now needs to be thorough and complete.” Hill said there is a joint legislative auditing committee that could look into the process, but that He wants to see the current investigation completed before he would consider requesting that that entity review the matter. “I think it’s my responsibility to keep my eye on it as a representative,” Hill said. “I have been charged to be good steward of the taxpayer’s money. I know the City of Gulf Breeze is doing its own investigation. I would like to see that be a thorough and complete investigation as well, making sure any and all questions are answered.” Contract language key in matter Gray’s company has for the last 12 years been paid under contract to essentially sell bonds to finance municipal projects in other communities. The revenue that process generates then goes to Gray and the city. The contact calls for Gray's firm to receive consulting fees and payments when bonds are issued under the agency’s Community Loan Program. Between October 2002 and September 2014, Gray was paid a total of $1,524,721 in fees for in compensation for consulting services. On Jan. 7 of this year Saltmarsh presented its findings to the Gulf Breeze City Council. In that report, Saltmarsh noted ambiguity in the contract language. Under Saltmarsh’s interpretation of Section 7 of the contract, the city overpaid Gray’s firm — about $28,235 per year for 12 years. Dannheisser said there is disagreement among council members over how to interpret the contact's language in Section 7. [sidebar] The contract clause at issue Section 7 reads as thus: Compensation: For the services rendered pursuant to this Agreement CTA agrees to compensate Contractor (MAS) as follows: (a) A based amount of $12,500.00 annually, to be paid in even monthly payments of $1,041.67 on or before the last day of each month during the term of this Agreement; and (b) An amount to be paid on or before the last day of each month during the term of this Agreement equal to the sum of $10.00 per each $1,000,000.00 par amount of outstanding bonds for each bond issuance of CTA. The preceding sentence nothwithstanding, regardless of the amount of bonds outstanding for credit enhanced and non-credit enhanced issuances, the minimum amount that CTA shall pay unto Contractor (MAS) for the compensation contemplated in this paragraph shall be $500.00 per month. [/sidebar] Gray’s interpretation is that the minimum amount that his firm should be paid is $500 per bond issues per month. Saltmarsh, Cleaveland & Gund’s finding was that the minimum monthly fee paid to Gray’s firm should be $500 per month regardless of the number of bond issues. “If you read contract one way, Ed Gray was compensated adequately,” Eddy said. “If you read it another way, he received $28,000 a year improperly.” Gray maintains the contract’s language is unambiguous and he has not been overpaid. “This is a contract that was drawn up in 2002, and has been a continuing working document for nearly 13 years,” he said. “And, you know, all of a sudden, after a lengthy period of time, the language of the contract was interpreted as ambiguous. “And then here comes all the discussion,” he said. Gray said he is confident the contract has been executed properly over the years, though “certainly after 12 or 13 years, any document should be looked at and revised.” Despite the differences among council members, Dannheisser says that the city is “continuing to evaluate the matter, and I don't think there's been a final resolution." Arrangement keeps Gulf Breeze taxes low Gray said it is in City of Gulf Breeze's interest, and his, to continue the contract. “The contract been good for me, the (Capital Trust agency) and citizens of Gulf Breeze,” Gray said. “The contract stipulated that I don’t get anything unless we're successful in achieving revenue for CTA. It's an incentive-based contract. “The good news is I've done very well. I've made quite a bit of income from this contract, and, correspondingly, the city has also done well. So it's been a win-win. But it’s also time to look at the contract again and revise it.” Attorneys for both sides are doing just that. While the language of the contract may or may not be in dispute, there is little negativity surrounding the money the City of Gulf Breeze receives each year for its part in issuing bonds through Gray’s firm. Capital Trust pays into the City of Gulf Breeze's general fund about $825,000 a year — about 13 percent of the city's entire annual revenue. Dannheisser said in the early stages of the contract with Gray’s firm, proceeds paid to Capital Trust were transferred to the city and used for capital improvement projects. Lately Capital Trust proceeds have been used to augment the city’s operating expenses. As a result of the annual contribution Capital Trust makes, Dannheisser said the City of Gulf Breeze has maintained one of the lowest ad valorem tax millage rates in Florida. Ad valorem taxes on real property are calculated based on millage rates set by authorized governing bodies. A mill is equal to $1.00 per $1,000 of the assessed value of property. The assessed value of each property is determined by an elected Property Appraiser. For example. A home located in Gulf Breeze city limits, assessed at $125,000 (and eligible for a $25,000 Homestead Exemption) would pay the city ad valorem taxes in the amount of $197; calculated by multiplying the city's 1.97 mills by $100,000. In addition, Gulf Breeze residents also would pay Santa Rosa County taxes, and School Board taxes at millage rates set by those authorities. By comparison, property owners residing in the City of Pensacola, pay ad valorem property taxes based on a current millage rate of 4.2895, more than double Gulf Breeze's millage rate.. Dannheisser said it is his goal as mayor to continue keeping the city's millage rate at 2 or below.

Back to Blogs

Contract questions arise in Gulf Breeze

Recent Posts