Bond Sale Vote Divided Board

A Citizens' official said the bond proceeds would only be drawn upon if the money is needed to cover future loss claims in the high risk account, which has about 400,000 policyholders. The bonds will also not affect the current assessment already charged on most insurance policies in Florida. The current assessment, which is an average of 1.4 percent, began in 2007 to pay off an $887 million deficit. It is scheduled to last 10 years.

"The current emergency assessment being charged for the 2005 storms will not be impacted by these bonds," said Christine Turner Ashburn, a spokeswoman for Citizens. "An assessment would be triggered only if we had a deficit. There are instances where we could draw on these bonds and the line-of-credit and repay with revenues not coming from assessment. In other words, this money could be used as a liquidity resource until reinsurance reimbursements are collected without an assessment ever being triggered."

The approval of the bond sale, however, was not universally accepted by the Citizens' board and took two separate votes before it was approved. The first vote resulted in a 3-3 tie after some members expressed concerns about how Citizens has handled the transaction, including how it chose the companies that would oversee the transaction.

Two members of the board were not on the conference call at the time of the first vote. A second vote was taken later that same day when board member Allan Katz joined the call, and the result was a 4-3 vote.

Board Member Carlos Lacasa, a former state legislator and budget chair for the state House, questioned the logic of Citizens' financial advisors. Lacasa said that Citizens should have been seeking bonds with a longer payback period in order to take advantage of lower interest rates that exist right now.

"We are in a low interest environment," said Lacasa. "I didn't agree with my colleagues on the board…I think we should be at a minimum of five years and perhaps as high as 15 years."

Contract Handling Comes Under Fire

The bond sale is not the only controversial move the Citizens' board has undertaken recently.

Citizens' officials in late January agreed to bid out a contract to manage its wind mitigation discount inspection program after criticism was raised about the initial contract awarded on an emergency basis in October to Jacksonville-based Inspection Depot.

James Malone, chairman of the Citizens' Board of Governors, said the contract was desperately needed after it became apparent that many Citizens' customers may be receiving discounts in error. Carriers who took over Citizens' policies told the company they were finding mistakes more than 50 percent of the time.

"Mitigation credits were spiraling out of control," said Malone.

The company hired in October was brought on to manage the re-inspection of up to 1,500 homes, with the potential to handle the re-inspection of all 450,000 homes that currently receive the wind mitigation discount. The estimated cost to re-inspect all the homes would be about $60 million.

Malone insisted said it was wrong to characterize the contract as potentially worth $60 million because most of the money would flow out to inspectors. However, the board decided to go through a competitive procurement process for a contract to oversee the entire program once the pilot phase was completed. This move followed negative news articles and a lawsuit from a rival vendor that wanted the work.

Chief Financial Officer Alex Sink — who appointed Malone — also had called on the board to agree to rebid the contract.

"I have always been a strong advocate for competitive bidding, because I feel that the taxpayers deserve that we get the best deal for the state," Sink wrote to Malone. "It is important that other companies be allowed to compete for this work through an open and competitive process."

Another contract that divided the Citizens' board had to do with whether or not they should enter into long-term office space contracts. The board voted in late January to spend $9 million on two leases for Tallahassee office space. The lease period will run for seven years with two five-year options for renewal that would cost an additional $16.3 million.

Lacasa maintained that it would be cheaper to build and own a building instead of spending millions in annual lease payments. However, top Citizens' officials noted that the last time the company looked at buying a building they were criticized by state legislators.

Chairman Malone also argued it would send the wrong message to have Citizens get into what he called "the real estate business." Malone said that long-term hope is that Citizens would shrink at some point in the future, which would lessen the need for additional space.