The city stands to lose about $188,000 it paid for unnecessary insurance on the buildings that house Florida International Museum, the City Council learned Thursday.
"I don't want to eat that expense," council member Bill Foster said. "How did this happen?"
The city owns the former department store buildings and parking garage between Second and Third streets and First and Second avenues N. It leases the site to the non-profit museum.
The lease called for the museum to insure the buildings, but it allowed the museum to include the coverage in the city's insurance policy to get a better rate. Last year, the coverage cost $11,600, with the buildings' value estimated at $4-million, about what the city paid to acquire the property.
This year, the insurance company insisted on covering the "full replacement value" of the buildings, or what it would cost to build identical buildings on the site if they were destroyed, Economic Development Director Ron Barton said.
That amount was determined to be $37-million. With general post-terrorism rate increases, that brought the insurance premium for this year to $228,067.
That's where someone in the city bureaucracy made an error. No one noticed the huge increase, and no one told the museum, and the city paid the bill.
If the high premium had come to light sooner, the city could have done what the City Council authorized Thursday: drop coverage on the buildings entirely. The city can get a $40,000 refund for the rest of the year.
The coverage is simply not worth it at a time when the city and museum have openly talked of tearing some of the buildings down, Barton said. The museum is thinking of moving to the northern half of the site to free the southern half of the block for redevelopment.
The council unanimously asked Mayor Rick Baker's administration for a report explaining how the mistake happened and whether the museum would share the cost.
Also Thursday, the council reduced the stormwater utility fee between 8 percent and 37 percent for multi-family residential properties that have their own stormwater management systems, depending on several factors.