The Inspector General Lawsuit – Myths and Reality

It’s been over two years since a group of Palm Beach County municipalities sued the county to avoid paying their share of the Inspector General’s budget. While the litigation drags on (a court date has been set for next January), the Office of Inspector General has been starved of funds and unable to continue staffing beyond 60% of her projected levels.

The public statements made on behalf of the litigants is that it is “all about the money”, and they believe the county has no right to require them to pay for the OIG services, in spite of the clear intention of the referendum passed by 72% of the voters.

This is not to say that the litigants do not chafe at the very idea of external oversight. Challenges to the authority of the OIG have taken other, less public avenues, like limiting the OIG jurisdiction with “definitions” of waste, fraud and abuse, instituting rules for public employee dialog with the OIG, and impeding access to meetings and documents.

Although West Palm Beach is considered the “ringleader” of the lawsuit, and many of the cities say they are following their lead, central to the action is the law firm of Corbett, White and Davis, P.A., and WPB City Attorney Claudia McKenna. Corbett, White and Davis represent the League of Cities, and twelve of the county municipalities, five of which are participants in the lawsuit. Principals Trela White and Jennifer Ashton shared the League Counsel seat on the OIG and Ethics Ordinances drafting committee and mounted a serious but unsuccessful effort to include the “waste, fraud and abuse” definitions in the ordinances. White/Ashton were voting members when the committee approved the funding methodology that is now being challenged in the lawsuit. McKenna was present for many of the committee meetings, and although she did object to the funding approach in a statement, it was no surprise to her how the funding was to work or why the method was selected.

Although it has been assumed that the West Palm Beach City Commission voted to participate in the lawsuit, a vote may not have been taken. In October of 2011, CWD principal Keith Davis wrote a memo to the “Mayor and Council Members”, outlining the purpose of the lawsuit, and making the case that the IG funding mechanism is an illegal tax under Florida law, and inconsistent with the charter amendment. The memo, which was obtained by West Palm Beach activists through an open records request, further stated that it constituted double taxation (ie. residents are paying twice for service) and that the municipalities have lost control of their budget.

This letter was referenced by City Attorney Claudia McKenna in a memo on October 27, where she listed eleven cities that had joined or were expected to join the lawsuit and recommended that WPB should join as well. It starts with

As we have discussed with each of you individually, for the past several months the City Attorney’s office has been in discussions with City Attorneys representing numerous municipalities within the County.”

and concludes with: ”

Unless the office receives an objection regarding challenging the funding, the City Attorney’s office will join the City of West Palm Beach as a plaintiff in the lawsuit.”

Myths and Reality

In the Davis memo a rationale is presented which is a mixture of truth, misdirection and mischaracterization of the content and intent of the IG ordinance (the “myths”). Although it will be a court that decides what is truth and what is not, here are the statements and some things to consider. We report and you decide.

Myth 1: The current IG funding mechanism is an illegal tax on a municipality. Since it is not a user fee (no direct tie from fee to service provided) or a special assessment (no benefit to real property), it must be a tax – which the county cannot levy on a municipality. The fact that the voters approved it does not make it legal.

Consider: The voters of each municipality passed the charter amendment that extended the IG over their cities, including the responsibility to pay for it. Oversight consists of infrastructure (such as a call-in line to report wrongdoing), and periodic review of city contract activity and decision-making. The level of effort in a given year depends on the amount of activity that requires scrutiny, and is not fixed. It is “there for you” much as a hotel swimming pool is part of the room fee, even if you don’t swim in it. The fee is objective (based on LOGER activity). A case can be made that it is a fee and is not illegal.

Myth 2: The current IG funding mechanism is inconsistent with the charter amendment (which calls for an amount 0.25% of contract activity) because it uses the LOGER system which looks at other things besides contract activity.

Consider: The ordinance drafting committee devised a formula to extract relevant contract activity from the LOGER system and IG funding is not related to “other” LOGER activity. Furthermore, it is backward looking to smooth out spikes in activity, and excludes “extraordinary” contracts such as the operation of the Lake Worth power plant.

Myth 3: Assessing a contract fee as suggested in the ordinance would be an illegal tax as well because funded activities do not directly relate to the vendor paying the fee.

Consider: This is not the current method, but if it was, see myth 1 above.

Myth 4: It is double taxation – municipal residents are already paying for the county’s share of the IG funding alongside those in unincorporated areas, in addition to municipal taxes to support the city share of the budget. A taxpayer receives the same share of IG services wherever they live so city residents pay twice.

Consider: IG activity is related to the business of government. The county government and its 10,000 employees and $4B budget requires oversight, and all county taxpayers fund this through county millage. Each municipality has its own separate government, also requiring oversight (the unincorporated areas do not). The city share of IG funding covers city government, not county, and it is a separate activity and a separate expense.

Myth 5: The Municipalities have lost control over their budgets because the county can raise the fee without input from the cities, compromising their home rule “exclusive right to appropriate funds as they deem necessary in the responsible operation of government.”

Consider: Next year budget allocation to the cities are taken from current year LOGER. The municipalities can look at this as easily as the county, so they are not blind-sided. Furthermore, a provision of the IG ordinance requires IG budget review by a representative panel from the League of Cities. This occurs yearly in front of the county commission, and to date, no budget objections have been registered.

Likely Outcomes

The current leaders of West Palm Beach and the 13 other suing municipalities are dug in on their position and not likely to end this lawsuit voluntarily. Perhaps it will be decided by the court in January. If not, remember that the municipal elections are coming in March. We will make every attempt to identify the challengers who would end this lawsuit and require the municipalities to pay their share of the IG funding. We believe then ethics-minded citizens will rally around these candidates, much as 72% of the voters supported the extending the IG jurisdiction over the cities. It already worked in Wellington and that city withdrew from the lawsuit when the challengers won election. We will never erase the stain of “corruption county’ until obstruction by public officials is stopped.