BRADENTON, Fla. – A small south Florida city already teetering on insolvency faces acceleration of the bonds held by its largest creditor.
The problem is that Opa-locka doesn't have an audit for fiscal 2015 or periodic financial statements, and the omission is a default on $8.6 million in privately placed bank loans with City National Bank of Florida, a state-appointed Financial Oversight Board learned Tuesday.
Opa-Locka has "made all payments required on the notes and there is no payment default under the provisions of the documents," according to a letter drafted by the Division of Bond Finance.
The city has received letters from the bank's law firm, Weiss Serota Helfman Cole & Bierman PL, containing 30-day notices that it will call the full amount of the loans payable, according to the panel's chairman, Melinda Miguel.
"The gravity of this may not have been explained" during past discussions about the debt, said Miguel, who is Gov. Rick Scott's chief inspector general.
Proceeds of the outstanding debt, originally issued as $3.5 million of tax-exempt capital improvement refunding notes and $5.1 million of taxable notes, were used to finance new city hall facilities.
The default is just one of many pressing fiscal problems facing the city in Miami-Dade County, which requested an emergency declaration from the state.
Scott agreed to provide assistance, and appointed a nine-member oversight panelin June.
Opa-locka's current fiscal problems – and second state emergency declaration since 2002 - are developing amid a federal corruption probe.
The Securities and Exchange Commission is also investigating whether Opa-locka properly disclosed its financial condition when some of the debt was sold.
The bonds discussed Tuesday are secured by liens on communications and public services tax revenues that are deposited into accounts for automatic withdrawal by the bank when principal and interest payments are due, said finance director Charmaine Parchment.
There is no lien on city hall itself, and there is no reserve requirement, according to officials.
The city has been criticized for dipping into the bond account to make unrelated payments.
However, Yvette Harrell – who was named the city's full-time manager during Tuesday's meeting – said that the city retained the right to use excess communications and public services tax revenues.
"We can take the money and use it for general purposes," she said.
Harrell also told the oversight panel that she met with bank officials about the city's default, which occurred because the city has not provided required financial documents.
She said that the bank's attorney characterized letters to the city as "a wake-up call."
"They are concerned about their investment," Harrell said. "We conceded that until they get the documents we will not move the money."
Eddie Dominguez, spokesman for City National Bank, told The Bond Buyer Tuesday that the bank agreed to the financing with Opa-locka to "fund capital improvements and achieve its goals and aspirations as a community.
"City National Bank remains open and willing to work with the city and the State Oversight Board to resolve this matter," Dominguez said.
Opa-locka's finances are in substantial disarray. The city scrapes together funds each month to make payroll.
Merrett Stierheim, who was appointed to assist the city unravel is finances recently, told the oversight panel Tuesday that after reviewing the city's available audits red flags have been raised about the city's problems since fiscal 2012.
Stierheim attributed the problems to a breakdown in ethics, accountability standards, and professional management.
"Call it a climate," he said.
