R9P - Update on Marina Lease Audit

Discussion Items - R9 P

COMMISSION MEMORANDUM

RECOMMENDATION

The City Manager, the Inspector General and the City Attorney should be prepared to provide an update on the Audit, as appropriate.

BACKGROUND/HISTORY

On April 17, 2025, the Office of the Inspector General issued Report No. 25-08, a copy of which is attached to this Memorandum, after completing a 15-month audit of the Miami Beach Marina Lease Agreement. The Marina is operated by Suntex Marina Investors LLC and its affiliated entities, who have leased the property from the City since 1983. The audit reviewed compliance with lease provisions, gross receipts reporting, subtenant management, and financial submissions from the Marina operator.

The OIG’s audit identified areas where reported revenues and lease compliance deviated from expectations, resulting in potential financial impacts to the City. Suntex submitted a formal rebuttal to the OIG’s findings, disputing various conclusions and citing its longstanding course of dealing with the City and adherence to the lease terms.

SUMMARY OF SIGNIFICANT OIG FINDINGS • Revenue Reporting Discrepancy: The OIG cited a $6.5 million difference between revenues reported to the State of Florida and those submitted to the City. Of this amount, $1,621,000 represented related-party rental income which is reportable for sales tax purposes but excludable from gross receipts. Of the remaining $4,833,098, $2,395,000 related to sublessee expense reimbursements which Suntex claimed should be excluded based on past practice, as well as $2,488,098 for which no adequate documentation was provided. • Parking Sublease Issues: Revenues from a third-party parking operator were also underreported according to the OIG’s findings. • Audit Report Language Deficiencies: Independent audit reports lacked required certification language regarding review of sales tax and federal returns. • BTR Compliance: Several subtenants operated without active Business Tax Receipts. • Billing Variances: Dockage rate changes were implemented without proper authorization and resulted in minor overbilling. • Sales Tax Application: Allegedly incorrect sales tax rates were charged on commercial rent.

SUMMARY OF SUNTEX RESPONSE In its response dated March 7, 2025, a copy of which is attached to this Memorandum, Suntex generally disputed the conclusions drawn by the OIG, asserting the following:

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Fuel sales are expressly calculated separately under the lease and were properly reported. Expense reimbursements from subtenants were non-profit pass-throughs and excluded in accordance with past practices. All parking revenues received by Suntex were subject to appropriate City payments. Audit certification omissions will be rectified in future submissions. BTR tracking improvements have already been implemented. Rate discrepancies reflected slip-level variability and City-encouraged flexibility inherited from previous operators.

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ANALYSIS

FISCAL IMPACT STATEMENT

N/A

Does this Ordinance require a Business Impact Estimate? (FOR ORDINANCES ONLY)

If applicable, the Business Impact Estimate (BIE) was published on: See BIE at: https://www.miamibeachfl.gov/city-hall/city-clerk/meeting-notices/

FINANCIAL INFORMATION

CONCLUSION

Applicable Area

Citywide

Was this Agenda Item initially requested by a lobbyist which, as defined in Code Sec. 2-481, includes a principal engaged in lobbying? No

If so, specify the name of lobbyist(s) and principal(s):

Department

Office of Mayor Steven Meiner

Sponsor(s)

Mayor Steven Meiner

Co-sponsor(s)

Condensed Title

Disc/Update on MB Marina Lease Agreement Audit by Inspector General. (Meiner)

Previous Action (For City Clerk Use Only)

Continued from 7/23/2025 - R9 U