I request that until a public disclosure of a completed audit of Biltmore Hotel finances is made, the City not enter into any “Interim Agreement” with the Biltmore Hotel Management.

In 2003 the Biltmore Hotel Management, without adequate explanation and documentation, cancelled a debt of $500,000 it owed the City for 2001 rent.  The office of the State attorney, when asked if there was “probable cause” for a criminal investigation, said it would wait for City Hall’s audit of the Biltmore Hotel. It is doubtful this particular issue will be touched on in the audit.

The history of $500,000 owed the City is clear.  Early in October 2001, a few weeks after 9/11, the Biltmore Hotel Management, led by T. Gene Prescott, asked the Coral Gables Commission to forego due rent because, it argued, the hotel was going to suffer a large income loss as a result of the New York tragedy.  Instead of forgiving the payment, by Resolution No. 30189 of October 23, 2001 the Commission deferred the Biltmore debt payment; the hotel was required to pay the principal and interest in a plan to be negotiated later.

Shortly afterwards, the Biltmore offered to repay the deferred rent with its disbursement in a historic restoration project.  Asked to look into Coral Gables’ legal responsibility for such a project, W. Reeder Glass, the city’s consulting attorney on Biltmore Hotel matters, in a December 10, 2001 opinion stated the City was not responsible for any Biltmore hotel capital-type renovations and repairs according to the 1999 renegotiated Biltmore Lease.  He concluded the Biltmore Hotel lease “.... suggests clearly that the Developer has the capital improvement obligation for the Biltmore Hotel.” 

However, the commission ignored its lawyer’s opinion. By Resolution 30223 of December 11, 2001, it provided an alternative means of the Biltmore’s repayment.  The deferred rent could be used as 1/3rd of a “Restoration Fund” to be used in a “Restoration Plan.”  The far-reaching and for the Biltmore very generous change was moved by Commissioner Ralph Cabrera who with Commissioner Anderson and Mayor Slesnick voted for it.

On January 16, 2002, City Manager Brown and Seaway Biltmore, Inc. (Biltmore’s parent company’s) President T. Gene Prescott signed a “Deferred Rent And Restoration Agreement” which specified the maximum amount of deferred rent as $500,000; there was a schedule for a deferred cash repayment if the alternative repayment was not undertaken.  The Restoration Fund was to be three times the amount of deferred rent, or $1.5 million.  On March 28, 2002 Seaway notified the City it elected to take the ‘Restoration’ option “and will be submitting Developers Restoration Plan before June 30, 2002 for approval by the City.” 

The March 28 letter is the last record the City has regarding the Biltmore repayment plan. The City admits it doesn’t have a copy of the “Developers Restoration Plan,” or of its approval.  Requests to the Biltmore have not yielded any related documents either.   City Attorney Elizabeth Hernandez, queried about the issue, stated: “...the Biltmore has responded that they have no records responsive to your (Richard Namon’s) request.”   Without those documents, the City should have been repaid the $500,000 plus interest.  Instead the Biltmore claimed it fulfilled the ‘Restoration’ option and does not owe the city anything.

The Biltmore Hotel Limited Partnership Financial Statement of December 31, 2005 states: ”In lieu of paying the deferred rent, The partnership elected to commit future expenditures of $1.5 million to restore the hotel pursuant to a restoration Plan approved by the City of Coral Gables.  In 2003, the Partnership capitalized restoration expenditures in excess of $1.5 million and utilized the $500,000 deferred rent balance (recognized as a reduction of recorded property and equipment additions in 2003).” 

City records do not substantiate the above statement; the city couldn’t approve a Restoration Plan because there is no record of one.  The Biltmore did not fulfill the requirements of Resolution No. 30223; its claim of the $500,000 re-payment is not legal; it still owes the city more than half a million dollars, nine years of interest included.

How could this happen?  City commissioners visit the Biltmore for various reasons regularly.  How could the Hotel management claim $1.5 million in work without commissioners seeing physical evidence of it? 

City records provide an explanation.  The City Manager allowed the Biltmore Hotel to be “restored” twice on paper with the same funds.   A separate historic preservation project for the Biltmore Hotel was approved by the City Manager, undertaken, and completed in the same time as the proposed “Developers Restoration Plan.”  While administered by Biltmore Hotel management, the restoration was funded by two 2003 Federal Grants totaling $2,027,471!  Records furnished by the Finance Department for the two grants include city authorizations and requests signed by City Manager Brown and Prescott, president of the Biltmore management.  City records also include project descriptions, project details, progress reports, and funding payments.  There are supporting documents for the Federal funded program, but none for the “Developers Restoration Plan.”

There is no evidence that the Biltmore performed a city-approved “Developers Restoration Plan.”  The Hotel apparently used the federally-funded restoration project to claim it had fulfilled Resolution No. 30223.  City Hall seemed to have cooperated with the Biltmore Hotel Management in writing off the $500,000 in deferred rent; yet there are no documents legally justifying such action.

There is little evidence of appropriate Biltmore Hotel property oversight by the City under the previous City Manager.  That “modus operandi” with City Hall continued until Brown resigned in November 2008.  Prior to that date I was unable to obtain Biltmore Hotel yearly Financial Statements from the Finance Department.  Once the requested documents were provided, their examination indicated other important hotel management transactions that went unnoticed by City Hall.  Coral Gables has no records of insurance payments in 2006 and 2007 to the Biltmore Hotel totaling $8,219,294!  That information, in The Biltmore Hotel Limited Partnership Financial Statements, is the extent of the City’s oversight of Biltmore hurricane damage.  The insurance payments were to cover structural damage to the Biltmore Hotel sustained during two hurricanes in 2005.

Structural damage insurance payments require a property owner’s release, in this case the City through the City Manager and/or the Commission.  Those documents have either been illegally removed, destroyed or the release documents were improperly authorized.  They were not found in a public records request.

Normally the City should have managed the structural damage insurance payments to assure that needed repairs were made.  Unanswered are the following questions: what happened to the money, what structural damage was repaired, and whose money was spent if there were repairs to the structural damage?  City records provide no answers and neither does the Biltmore management. 

Again, grants for Biltmore Hotel restoration work may have played a part in the repairs.  From 2005 through 2007 the Biltmore management received $2,090,000 in grants.  Did some of those funds substitute for structural damage insurance payments?  Is it possible grant funds were used for work covered by insurance payments?

Coincidentally, the Biltmore Management started withholding financial documents based on “trade secrete or other proprietary information” after the above problems were discovered by my public records review of the Hotel’s financial statements and related City documents.

Clearly the City has had serious problems in record keeping and tenant oversight regarding the Biltmore Hotel.  The proper repository of City Records, the City Clerk’s office, does not handle other offices’ documents and therefore is not their custodian.  Many important City records are not in the City Clerk’s Office.

The lack of relevant financial records indicates serious fiduciary problems between the Biltmore Hotel Management and City Hall acting as the custodian of City properties for the benefit of Coral Gables residents.  Based on the foregoing information, I request that until a public disclosure of a completed audit of Biltmore Hotel finances is made, the City not enter into any “Interim Agreement” with the Biltmore Hotel Management.

Richard Namon
Coral Gables