AN ORDINANCE OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, AMENDING CHAPTER 2 OF THE CITY CODE, ENTITLED ADMINISTRATION, BY AMENDING ARTICLE VI THEREOF, ENTITLED PROCUREMENT, BY AMENDING DIVISION 3 THEREOF, ENTITLED CONTRACT PROCEDURES, BY CREATING SECTION 2-378, ENTITLED “INSPECTOR GENERAL CONTRACT FEE,” TO ESTABLISH AN INSPECTOR GENERAL CONTRACT FEE TO BE INCORPORATED INTO THE CONTRACT PRICE OF CERTAIN CITY CONTRACTS, AND TO PROVIDE FOR EXEMPTIONS THEREFROM; PROVIDING FOR REPEALER, SEVERABILITY, CODIFICATION AND FOR AN EFFECTIVE DATE.

On November 6, 2018, the City's voters approved an amendment to the City Charter, creating Article IX, which creates the City of Miami Beach Office of Inspector General (“OIG” or “Office of Inspector General”); establishes the functions of the office; provides the Inspector General with the power to subpoena witnesses, administer oaths, and require production of records, in order to conduct its investigations; and provides that the Inspector General's appointment, term, functions, authority, and powers shall be further established by Ordinance.

On February 23, 2019, the Mayor and City Commission adopted Ordinance No. 2019-4239, to implement the provisions of the newly created Article IX of the City Charter.

On October 16, 2019, pursuant to Section 2-256(b)(2) of the City Code, the Mayor and Commission appointed Joseph M. Centorino as the first Inspector General of the City of Miami Beach.

The purpose of the proposed ordinance is to create a framework for a dedicated City funding source to fund the activities and operations of the Office of the Inspector General.  By dedicating amounts that could only be used for the OIG, the ordinance would provide a measure of independence and predictability with regard to funding for the OIG. 

A draft of the proposed ordinance is attached as an exhibit to this Memorandum.  The ordinance is similar to the IG Contract fee established by Miami-Dade County pursuant to Section 2-1076 of the County Code, to fund the operations of the County’s inspector general.  Miami-Dade County’s IG contract fee is .25%.

The proposed ordinance would assess an “IG Contract Fee” on certain City contracts and purchase orders, consisting of a fixed percentage of the total amount of the contract.  The amount would be incorporated within the contract price, and the percentage deducted from each progress payment to the contractor.

The City’s FY2020 General Fund budget for the Office of Inspector General is approximately $1.450 million.  The Administration estimates that an IG Contract Fee of one half of one percent (0.5%) would generate approximately $550,000.  Accordingly, in order to cover the $1.45 million budget covered by the General Fund, the ordinance proposes an IG contract fee of 1.50%, which percentage would generate approximately $1,650,000.

Importantly, the proposed ordinance only provides the mechanism for identifying a dedicated funding source for the OIG. The actual appropriation of funds for the OIG, and the final budget for the department, is subject to an annual appropriation by the City Commission as part of the annual budget process.  Accordingly, if the amounts generated by the IG Contract Fee in any given year are insufficient to fund the budget the City Commission has proposed for the OIG in the next fiscal year, the City Commission would need to identify other sources of funding through the annual budget process to make up the difference.  Similarly, if the amounts generated by the IG Contract Fee in any given year exceed the amounts required to fund the OIG budget in the next fiscal year, such “surplus” amounts would be carried forward until appropriated by the City Commission.  In this regard, it should be noted that as the IG Contract Fee would only apply after March 1, 2020, there is a ramp up period, and the IG Contract Fee is unlikely to fully fund the OIG budget in the first two years following its adoption.  

The ordinance includes a number of exemptions for categories of contracts to which an IG contract fee should not apply, either because of the nature of the contract service being provided, or because implementation would present challenges.  For example, the ordinance exempts contracts with governmental agencies, including grants that may only be used for restricted purposes; contracts for specialized services, such as insurance, financial advisory services, legal, or audit services; contracts or purchase orders under the City’s bid thresholds (which would make implementation difficult), or “piggyback” contracts where the City’s contract incorporates the exact terms and conditions of a previously competitively bid contract.  Further, as the assessment is expenditure based, the ordinance clarifies that the IG Contract fee does not apply to revenue-generating contracts, such as leases, concession agreements, and management agreements.

Finally, the ordinance requires that after March 1, 2020, each competitive solicitation and covered City contract  include mandatory contract language implementing the IG contract fee and the Office of Inspector General’s powers as a matter of contract.  The mandatory contract language, coupled with the assessment of the IG Contract Fee, would serve to place every contractor on notice as to the applicability of the OIG to the contract, and to each contractor’s performance of work on behalf of the City.  The contract language would also provide the City with an additional remedy (i.e., a breach of contract action) for a contractor’s failure to comply with the broad right of access afforded to the OIG to review, audit, inspect and investigate all City contracts under the City Charter and City Code.