Old School Square accused of misleading public by Mayor

Mayor Petrolia stated in her correspondence with our supporters that “the information sent out by the management at OSS is misleading.”  We would ask Mayor Petrolia to clarify what was the information OSS shared with our supporters/her constituents that was misleading. 

Mayor Petrolia also stated that her decision to vote to terminate the lease with OSS was made based on a “multitude of issues that surfaced over the past several months.” In an effort to be transparent to the community, below please find a response to each item Mayor Petrolia stated was an issue. We do this so the citizens of Delray Beach can fully understand the alleged issues raised by Mayor Petrolia. The statements and facts listed below are readily supported with actual reporting and financial documents, audits, and correspondence with the City. These documents are available to the public upon written request. OSS is, and continues to be, a completely transparent organization that welcomes and encourages community engagement.

Mayor Petrolia claims:  

OSS is in “non-compliance with the lease agreement”:

• OSS is in material compliance with the lease and has materially provided all of the financial documentation and auditing information requested as of the date of this response with the exception of the 2020 independent audit, which is in progress.  We address this audit issue below. While it is true that there were delays, these delays were the result of circumstances that were beyond OSS’ control. 

There are “years of missing required financials”:

• There are currently no missing financials other than the audit for the year 2020 which is due, per the lease agreement (Article VI- Reporting Commitments, Section 6.1 c. “Not more than one hundred and eighty [180] days after the end of each fiscal year of Lessee during the term of this Lease, an annual audit of Lessee’s business operations, including management letters, and responses to management letters, if any, and Lessee’s annual income tax return [IRS for 990, 990-T or then current equivalent], which shall confirm Lessee has operated and is operating the Premises in compliance with the Operating Commitments.”) The ability to complete the 2020 audit by the due date has been hampered by the effects of COVID-19 and out of our control (auditor timeline below). The original auditors were unable to complete the audit due to COVID-19. Two separate Request for Proposal processes were required to find one that could timely undertake the 2020 audit and provide the audit in a timely manner. After selection of the new auditors, OSS was faced with a delay, yet again, when the new audit team also came down with COVID-19, further delaying the process. 
• Here is a breakdown of the auditor issues we’ve experienced for the past year and a half:

• March 2020- OSS’s auditing firm had to furlough the majority of their staff, forcing them to cut their client roster and focus only on their largest, highest paying clients. They decided they would not be able to complete the OSS audit on time, and decided to not undertake further matters. 
• March – May 2020 – OSS issued an RFP for a new auditing firm. It took two months to find a firm that could accommodate OSS during the pandemic.  Amongst the challenging conditions were a lack of adequate staff, inability to travel or work on-site, and other issues facing the industry at this time.
• May 2020 – Q1 2021 – OSS hired a new auditing firm in the height of the pandemic, but from the start they had issues. The firm requested payment up front, and then advised even though they felt it was critical to work on site/in person, they weren’t comfortable doing field work inside OSS’s offices. OSS offered to upload all financial records to an online portal so the auditors could examine the documents, but due to their auditing guidelines they refused that offer. OSS gave them a deadline for the audit, but they were unable to meet this deadline so OSS was forced to terminate them.
• Q1 2021 – OSS issued a second RFP for an auditing firm during the pandemic.
• June – July 2021 – OSS secured a new auditing team through this RFP process, but the majority of their staff came down with COVID in the midst of the audit, compelling them to temporarily suspend efforts, putting OSS further behind schedule. 
• August 2021 – The audit team returned in full health and finalized their draft of the 2019 audit, which was presented to the City Commission prior to the meeting on Aug 10. However that audit was not considered in the final vote that took place that evening, which terminated OSS’s lease. The OSS board of directors has already voted to accept the audit and the final document has already been submitted to the city. The 2020 audit was due at the end of March. Since that audit could not be done until the 2019 audit was completed, it is now in process and is expected within six weeks. 
• Beyond this audit, OSS is in material compliance with all reporting documentation.  

There are “major renovations underway without proper authorization”:

• In July 2021, The City and the City Commission took up the “issue surrounding compliance and transparency” by Old School Square, based on misinformation surrounding the organization’s permission to renovate interior spaces within its Crest Theatre building, an historic building on the OSS campus. 
• The exact language within that lease states, “Lessee shall provide a sealed set of plans prepared by an architect to Lessor and Lessee shall have received the prior written consent of Lessor, which shall not be unreasonably withheld or delayed.  Issuance of a building permit by the City will constitute consent of the Lessor.”, meaning upon issuance of the building permit, OSS had the right to begin construction.  A timeline follows:
  • The permit was applied for 8/2/19
  • The permit was properly issued on 3/9/21
  • Construction started on 3/22/21.
  • Construction was forced to stop on 8/10/2021 when the City Commission voted to terminate the OSS lease.   
• The planning for the construction project was done openly and included design reviews from the City’s Planning & Zoning Department., Building Department, and Fire Department.  In fact, the architect had multiple communications with the Planning and Zoning Dept during the project’s design phase, and the Planning and Zoning Dept signed off on the permitted design.  
• Additionally, the City’s claims that they were unaware of this construction project is disproven by the fact that the OSS leadership team and previous board chair led personal tours of the theater with each member of the commission prior to renovation, highlighting along the way exactly what changes to the building they would see upon completion of the renovation project.
• Three months after construction began, the construction team was contacted by representatives of the City, who stated OSS had not provided the City proper notice required under their lease to do renovation work, and that the City had not consented for it to be done.  OSS responded by advising that the lease specifically stated that a building permit issued by the City constituted the city’s consent. OSS was then informed that because of a clerical error on the permit application form that left off the city’s name in the space provided for the “fee simple title holder”, there was no consent by the City.  This is in spite of the fact that the application error was corrected by the City’s permit clerk during the permit processing, and the permit was properly issued in the name of the City of Delray Beach as Lessor and OSS as Lessee. The fact that the permit was issued in the name of City of Delray Beach as Lessor and OSS as Lessee demonstrates the City’s knowledge and that this really should not have been an issue.  
• Nevertheless, OSS was informed that they would need to give a presentation to the City Commission, and the Commission would have to vote to allow construction to continue.  In the interim,  all work had to stop, which came at a substantial financial cost to OSS. The City would not schedule a presentation for its next commission meeting, so construction stood at a standstill for two weeks until the presentation could be made by the architect, with graphics showing the planned improvements. The commission expressed approval and voted unanimously to proceed with the renovation, so construction began again. 
• As part of this “new requirement” the City proposed a lease modification whereby any improvement over the sum of $65k (verify) would need to be approved by the City commission.  Again, at the time the permits were issued, nowhere in the Lease did it require City Commission approval for such renovations.
• Within days after the City Commission unanimously voted to proceed with the renovations, the City came back again to say they wanted the contractor’s payment bond to name the City as the owner instead of OSS as owner.  (The terms of the payment bond require the “owner” to pay the contractor per contract terms in order for the bonding company to step in and pay vendors should the contractor default.  Therefore, OSS was correctly listed as the owner on the bond since it was responsible for paying for the work).  This new demand was made even though OSS was also in compliance with bond provision in the lease, which states, “Lessee shall require its contractor to furnish and provide to Lessee and/or Lessor a Material and Labor Payment Bond for the construction of the Lessee Improvements (“Payment Bond”) as required by Section 255.05, Florida Statutes.”  Despite the fact that the city’s property was already protected by the bond held by OSS and the city had full assurance of the contractor’s proper performance and no obligations to pay for the work, the City demanded that OSS in its name obtain a bond in name of the City, which if issued would actually place liability on the city.  OSS’s attorney and bonding company had a conference call with the City attorney’s office to try to resolve the issue, but the City attorney’s office would not change their position.

• On July 28, OSS was notified that until the bond naming the City was provided, no more inspections would be made by the building dept. To allow construction to begin once again, the contractor was directed to provide a rider which added the City’s name on the bond. That was done and transmitted to the City attorney on Aug 2.  
• OSS was sent yet another bond form and told the bond had to be on a different form, and that the City now wanted a bond to be provided by OSS instead of the contractor. Further, they stated OSS had to comply with the City’s Land Development Regulation 2.4.10 which refers to financial guarantees that developers provide to the City when building streets and installing water and sewer systems (clearly not applicable to a building renovation project). This was contrary to the lease stipulation that states, The Payment Bond must be issued by an insurance company or surety company reasonably acceptable to the Lessor and comply with Sections 255.05 and 713.23, Florida Statutes.” The City’s subdivision bond does not comply with these Florida Statutes.
• Even if we WERE building a  subdivision, our options for payment as per Section 2.4.10, allow the financial guarantee to be provided by either by 1) a surety bond, 2) depositing cash into the city’s bank account, or 3) providing a letter of credit.  Again, to try to satisfy the city, OSS offered to put 100% of the balance of the construction funds in the city’s escrow account. This offer was refused by the City attorney’s office despite being allowed by 2.4.10 of the LDR. 
• Not only are all of these requests not required as per OSS’s lease with the City, but none of them were required in the previous construction project on OSS’s campus, which was conducted on their museum just a few years ago.

There are “issues by the city’s internal auditor revealed a lack of diversity in programming”

• We provided a diversity report that illustrated exactly the opposite, which we are happy to share directly to anyone that requests it, but here are the key facts regarding OSS’s diversity in programming: 

• Social Cause Arts– OSS produced BLM promotions to support our community at a time of severe social unrest. The Museum also celebrated Black History Month by creating videos featuring two African American artists that are involved with the museum, discussing their inspiration and why their art is important culturally. 
• Free “Amplified” virtual concert series- OSS produced and filmed 23 and counting live performances of various acts on the Crest Theatre stage, with the intention to begin introducing music back to our community during a time where local, state, and government restrictions forbid live performance with an audience or gathering. Each of the released concerts obtained a local viewership of 40,000 in addition to our national distribution streaming these concerts to 40 states for a total viewership of 15 million.
• Summer Camp– Created a virtual summer children’s camp with South Florida Children’s Theater.
• Community Programming-  When the City was unable to hold the holiday village due to the pandemic, OSS Director of the Cornell Art Museum curated a contemporary holiday art exhibition that included work from artists from Louisiana, Florida, New York, and Santa Fe on an almost non-existent budget.
• Arts Adaptation– OSS Director & Curator of the Cornell Art Museum is participating in virtual training sessions sponsored by other institutions – artsy, the AAMC and Art Basel, focused on adapting exhibitions in a socially-distanced world, digital engagement, and diversity and inclusion through the arts.
• Hunger Relief- Participated in Palm Beach County Food Bank’s Empty Bowls to promote awareness for hunger in the Delray community. OSS is hosting their VIP appreciation event in November and has helped them in past years as well, creating a display of artist-created bowls to sell through the OSS store to benefit them.
• Childhood Literacy- partnered with Page Turner Adventures to create 127 hours of episodes – reaching 600 libraries nationwide in 40 states, equating to roughly 600,000 students. OSS also gave that program in its entirety to all of the Delray Beach Schools for free (total give: $50,000 in retail value).In 2020 we continued our partnership increasing our programs to include STEAM/STEM programming, Social Emotional, Stress Reduction techniques for students and teachers, Test Taking strategies, Arts & Crafts, Storytelling and the creation of a virtual musical performance utilizing South Florida Children’s Theatre actors and actresses. The 2020 program added another 150+ hours of programming reaching over 1,500 libraries nationwide, equating to roughly 2.5 million students.

• If our diversity in programming needs to be further discussed, let’s review some of the various artists and entertainment we have produced for our patrons and community. Here is a listing of some of our most recent artists.

National Names:

Tito Puente JR. 
Gloria Gaynor 
Mary Gaines Bernard (Donna Summer’s Sister)
The Wailers
Juian Marley
Vanilla Ice
2 Live Crew 
DJ Laz
Stevie B
Collie Buddz 
Nattali Rize 
Havana Cuba All-Star
Tony Succar 
Taj Mahal 

Local Artists:

Roosevelt Collier
Jay Blue Band
Los Wizzards
Xperimento
The Resolvers
Jason Joshua and The Beholders

There is a “lack of semi-annual reporting”

• Old School Square reports quarterly to the CRA
• We have turned in our internal reports from 2015-2021 to the City for use as our quarterly reporting

That “a current board member (absent any bid process) is performing the $1.4 Million renovation”:

• 100% of the funds for the renovation were provided by a private donor, NOT city tax dollars.  The donor exercised her right to stipulate the contractor to be used, and it is perfectly legal to do so.
• OSS has a conflict of interest policy to protect OSS’ interest when it is contemplating entering into a transaction or arrangement that might benefit the private interest of an officer or director.  When any potential conflict of interest arises, the policy sets out a procedure for the board’s consideration.  This procedure includes a formal board discussion of the disinterested directors (without the presence of the interested party) to determine whether the transaction or arrangement is in the Organization’s best interest, for its own benefit.  This procedure was followed by the board of directors.  The board voted unanimously to approve.  OSS has already provided the meeting minutes to the City that confirms a conflict of interest vote was taken, and the donor attended the July 13 City Commission meeting and told the Mayor and all of the commissioners this herself.

A “$300,000 golden parachute was allegedly given to a former OSS director (verification pending)”:

• There has NEVER been a “golden parachute” given to anyone at Old School Square. 
• Old School Square has never paid $300K to a director.

Old School Square “pays no rent, is not responsible for building maintenance, grounds upkeep or major system repairs or replacement (a/c, plumbing, etc) and is additionally subsidized by $750,000 in tax dollars annually. A few years ago, that figure was $900,000.”:

• Let’s break this down:
  • The $9 million dollars in “subsidies” referenced above includes $2 million the city has spent on capital improvements to the city owned buildings. 
  • As per OSS’s lease agreement, the City is responsible for building maintenance, grounds upkeep or major system repairs or replacement (a/c, plumbing, etc). This has been part of our agreement for the past 30 years. They are the City’s buildings and the CIty’s grounds and upkeep of 100-year-old buildings is not cheap, but absolutely necessary for both safety and maintenance purposes.
  • The remaining “subsidies,” referenced are not hand-outs- they are GRANTS that we apply for and are granted annually. The grants provided are investments in the community that have been made by the CRA over the last 18 years through because the programs they support further the mission of the CRA. The grant funds offset some of the costs of putting on those programs. These CRA Grants provide less than 25% of OSS’s annual operating budget. Other revenues are derived from sponsorships (up 550.677% YOY), ticket sales, food and beverage, and fundraising, and outside cultural grants (NOT funded through City taxpayer dollars).
  • In addition to OSS, the City provides similar grants to the Spady Museum, the Delray Beach Historical Society, the Delray Beach Public Library, the Arts Garage, the Delray Beach Chamber of Commerce, and the Delray Beach Community Land Trust. 
  • The City has failed to mention that OSS has raised millions of dollars in private funds to renovate the campus buildings, which will ultimately significantly save the city on maintenance and system repairs costs since, through those private funds, we are covering the cost of new, modernized and updated systems.
• So yes, as per our 30 year lease agreement with the city, we do receive subsidies, as has always been the case. But that cannot be stated without understanding that Old School Square is Delray Beach’s greatest economic development driver, responsible for over $100M of economic activity in Delray Beach annually. (sourced from the Americans for The Arts, Arts and Economic Prosperity Study)
• The $1 per year rent is an original term that has been in place since we began our lease agreement on July 31^st, 1989.
• We don’t simply see the city as a crutch. Here are a few recent accomplishments as it pertains to fiscal responsibility, revenue growth, and income generation for the city:

• Sponsorship- YOY, OSS is up 550.677% in sponsorships from 2020, YTD for 2021 (we received $37,175k in sponsorship dollars 2020, and have received $206,590k YTD in 2021).
• CRA Grant- OSS satisfied their Pavilion Performance metrics of the CRA grant by the 3rd Qtr. of 2021
• Expenses- Their overall expenses were down 13.5% in 2020, which continues into 2021. Immediate savings have been over $150k per month. 
• Music Series- OSS secured 105 bookings in both Crest Theater and The Pavilion, since Oct 2020. This includes two periods of forced interruption on bookings while contracting policies were revisited, and still is more than 150% more than a typical year’s bookings.
• Virtual Studios- Immediately created a Green Screen Studios and White Infinity Site Wall as a means to both produce and present content for their own productions during COVID, but also to create a new source of revenue during the pandemic by marketing the space as a rental opportunity (HSM signed on for 60 episodes, Honda Classic training video, etc.)
• Attendance/Ticket Revenues- OSS Ticket Revenue goal for 2021 was 75k and they are already 1600% above YTD (by third quarter of 2021). Attendance goal for Pavilion was 3,000, and they were 775% over goal in the first three quarters of 2021.

“I am of the opinion, Old School Square should be a huge success, using fewer tax dollars while creating opportunities to bring people to the arts.”:

• The City will need to start from the ground up with empty, vacant buildings in order to even begin to attempt to rebuild what has taken us thirty years to create here, and that will come with a hefty price tag. Where do you think those funds will come from?
• The millions in private funds we have received to do the recent and ongoing renovations at OSS will need to be returned to the donor that bestowed the funds to our organization. Those funds were raised by, and given to, OSS the organization. The City will have to find a way to pay for the renovations to the museum and theater- which were previously fully funded with private dollars. Where do you think those funds will come from?
• If you were concerned about how your tax payer dollars supported OSS before, we encourage you to stay on top of how this decision will impact city tax payers to sustain and rebuild this campus.

“People should feel welcome, many don’t”:

• OSS strongly disagrees with this opinion statement, and we would say our community does as well. In fact, the majority of Delray residents see OSS as the “heart and soul” of their city, and a place where the community comes together for good times and bad, a place of support, a place of comfort. If there was any truth to the fact that people didn’t feel welcome here, why would the city choose to bring their 9/11 remembrance, Pulse NightClub, Marjory Stoneman Douglas rallies, Black Lives Matters rallies, and so many other important occasions that allow the community to come together in support of one another, to our grounds!?  

“The management at OSS is in need of an adjustment/overhaul and that’s exactly what I anticipate will happen following the decision made on Tuesday evening”:

• Old School Square IS Old School Square Center for The Arts, Inc. OSS does not exist without us. We are the very entity that saved the campus from being completely demolished 30 years ago by creating an organization to manage and operate it. We BROUGHT Old School Square to the vacant campus, along with ALL of the arts, culture, education, entertainment and community programming that exists there today. Everything our visitors and community members experience at OSS is because of our organization- the city has nothing to do with it.
• Our Organization was the catalyst for downtown redevelopment, at a time in the mid/late 80’s when our Downtown was nearly entirely boarded up. 
• Additionally, every asset within the campus belongs to OSS. It is not as simple as a “new management” team. The City will need to start from the ground up with empty, vacant buildings in order to even begin to attempt to rebuild what has taken us thirty years to create here. This is not “fresh management,” this is a complete rebuild of what took us 30 years to create and constantly improve upon.