CAPE CORAL, Fla. (WINK) – The city of Cape Coral is responding to allegations about its building division not following state law.

“A lot of misinformation out there and a lot of concern,” said Michael Ilczyszyn, Cape Coral’s city manager. “Cape Coral is a professionally run, compliant and accountable organization.”

Last month, State lawmakers and the Cape Coral Construction Industry Association claimed the department violated state law by misusing funds intended solely for building code enforcement.

Rep. Mike Giallombardo (R-Cape Coral) said builders asked him for help.

“I have had many, many, many, many complaints,” Giallombardo said. “The permit process, I will tell you that the permit process in Cape Coral, it’s like you might as well be in an HOA. Cape Coral is one big HOA, and builders are tired of it.”

On Friday, Cape Coral published hundreds of documents in response to allegations of discriminatory practices, mismanagement, and inappropriate spending.

Ilczyszyn sat down with WINK Investigates on Friday to discuss their findings.

“Our goal today with releasing this information is to show that all the concerns that that organization had are founded in sound internal controls on the finance side and best management practices on the building side,” he said.

Florida Statute 553.80 mandates that building department funds be used solely for building code enforcement.

Giallombardo said he believes the city has been using building department funds to cover expenditures on hurricane overtime, fire department expenses, payroll for scanning clerks, a $10 million issue related to a failed building purchase, and nearly $3 million in unexplained fund transfers.

Giallombardo said he’s concerned because, in his view, “the building fund is depleted,” and he believes that’s contributing to long wait times for permits.

“I’ve had builders come to me because they can’t get through a process which costs them millions of dollars. It’s not, you know, hundreds of thousands of dollars. So, for a small business, I mean, it hurts….” said Giallombardo.

“Any claim that is either unsupported or baseless and creates distrust in government only hurts our local economy. It hurts contractors. It hurts realtors. It hurts businesses. It hurts our community,” said Ilczyszyn.

Giallombardo said an audit is imminent and the process will begin soon.

“I don’t know what else to tell them. It’s going to happen. They’re going to get audited. The findings are going to come out. And if they said that they’ve done nothing wrong, then they’ve done nothing wrong,” said Giallombardo.

When asked if any claims made were founded, Ilczyszyn explained that many are questions about compliance with existing practices.

“A lot of them are actual things that we did, that they’re questioning. Are they compliant? And so, it’s almost as if they are asking somebody else to see if we are compliant,” said Ilczyszyn. “We live in this world every year, every week, different processes here, different ledgers, there, different funds. And so this is not uncommon for us to be able to have to justify what are we doing and why are we doing it.”

On the city’s website, under the open government tab, Cape Coral has posted their internal review findings report.

Internal Review Findings Report

Assertion 1: “The City has potentially violated Florida Statute 553.80, which mandates that building permit fees must be reasonable and may only fund the cost of operating the building department.” The city says the Interfund Service Fee isn’t a shady money transfer, it’s the Building Department paying its fair share for things like IT, HR, finance, and other citywide services it uses. They also say the fund isn’t in deficit.

Assertion 2: Building permit fees are being diverted to unrelated expenses. The city says it was allowed by state law to use building permit fees to cover fire inspections tied to new construction and did so legally from 2019–2022. In 2023, it moved those costs to the Fire Department and says this change was fully disclosed.

Assertion 3: Arbitrary and inconsistent project valuations result in inflated permit fees. The city says it followed the law by adjusting a permit’s value when a contractor severely under-estimated the cost of a commercial build-out, raising it from $8,000 to $146,440 using standard industry methods. The contractor later claimed the low number was a typo, but the city finalized the valuation and issued the permit.

Assertion 4: Discriminatory treatment of contractors utilizing state-authorized private providers. The city says it follows state law on private plan reviewers and even gives 33–49% fee discounts plus faster review times for those who use them. Because of this, the city says there’s no evidence that contractors using private providers are being treated unfairly.

Assertion 5: Preferential treatment of certain builders creating uneven playing field. The city says there’s no proof that any builders get special treatment and that permits are handled in the order they’re received. In their response, they say, “This assertion is baseless, and without legal merit, and there is absolutely zero evidence discovered that validates the notion of preferential treatment for “certain builders” in the City.”

Assertion 6: Aggressive enforcement tactics undermining trust The city says it’s simply enforcing building rules, like requiring Certificates of Occupancy and addressing expired or inactive permits, to keep people safe, not acting “aggressively.”

Assertion 7: The Interfund Service Fee has increased from $572,000 in 2014 to nearly $2.5 million today and over $3 million projected for 2025–26. CCCIA asked for a breakdown of charges and say they never got it. The city says the Interfund Service Fee properly charges the Building Fund for shared city services. It also says the cost-allocation method is “well-documented and justified.”

Assertion 8: There was a “dramatic increase in the fund transfer.” The city says, when the Golf Course and Sun Splash no longer used city services, their overhead was spread to the remaining funds, including the Building Fund, which only pays its fair share of costs for enforcing the building code. The city says the Building Fund is not covering unrelated expenses.

Assertion 9: In 2009, the city raised permit fees based on a study that included all Building Division staff and related department overhead, and the Interfund Service Payment is how those fees are allocated to the other departments. It states, “Shouldn’t the amount being transferred be equal to the dollar amount that was used to calculate the cost for the permit fee VS what the City does which is using the actual costs for those departments and billing the Building Fund a share of those costs?” The city says, “The suggestion to maintain interfund service fees at 2009 levels is arbitrary, and fails to account for actual costs. An attempt to acknowledge this claim to its fullest concept would suggest that the CCCIA believes the City should pay its employees the 2009 rate based upon values and operational costs in 2009, and that cost increase for, electric, fuel, and training, should not increase with market inflation. Such reasoning demonstrates a fundamental misunderstanding of budget management and cost escalation over time.”

Assertion 10: Starting in the 2019–2020 budget, the Building Fund was charged separately for the City Clerk as part of the Interfund Service Fee, which increased overall fees. Questions remain about why the Building Fund still pays $70,209 for the City Clerk even though the city no longer handles licensing. The city responded, “This assertion demonstrates a continued unfamiliarity and misunderstanding of common accounting principles and established City operational framework.”

Assertion 11: The city re-distributed costs without calculating the actual costs related to enforcing the building code per State Statute. The city says, “This assertion demonstrates a lack of understanding of how a Cost Allocation Plan is developed and how it is applied across funds.”

Assertion 12: In 2020, permit fees were cut 25% to comply with state law, but the city plans to remove the reduction and potentially raise fees for 2025–26, even though the required study and utilization report have not been completed or published. The city repealed the 25% building permit fee discount from 2020, effective January 1, 2026, returning fees to 2009 levels, and says this action complies with state law

Assertion 13: “$10m was transferred out of the Building Fund during FY 2022 (entered as a monthly xfer of $833,333). This was done without discussion with the Building Industry Oversight Committee.” The city said they transferred $10 million from the Building Fund for a Building Division relocation, kept the committee informed, and returned unspent funds by FY 2025 to comply with state law.

Assertion 14: A rejected plan and a $10M Transfer out for future Building Capital Project. The city says the proposed $588,000 remodel to keep the Building Division in place and save $63,000 in trailer rent was not approved by Council, so the plan was dropped and the division will move back into a reconfigured City Hall workspace instead.

Assertion 15: “What is the total maintenance fee to the City and how is it being allocated to the departments? In addition, we paid for maintenance on a system that was not up and running for the industry to use.” The city says, “The annual maintenance is part of the full cost allocation and the Building Fund’s portion is paid utilizing the Internal Service Fee.”

Assertion 16: A review is requested of contracts and cost allocations for outside agencies supporting EnerGov, as multiple departments have faced major implementation issues. The city responded, “A copy of the contract was never requested, but the City would have provided the contract without reservation.”

Assertion 17: The CCCIA says, “In 2019-2020 fiscal year we were charged $67,000+ for a vehicle. We thought it was for building inspectors. In a recent meeting the building official happened to comment that it was for a truck for Fire! Why are we paying for this?” The city says the vehicle was originally purchased for the Fire Inspector and then was transferred to the Fire Department. At that time, the Fire Operations Fund reimbursed the Building Fund for the vehicle’s fair market value.

Assertion 18: Claims there was not a true forensic accounting audit in 2023. The city said the City Auditor conducted an independent audit of the Building Fund with ongoing communication and meetings with CCCIA and addressed CCCIA’s questions before a follow-up meeting was ultimately canceled by CCCIA.

Assertion 19: “In FY 2023, we are budgeted for $264,910 for Building Fire Expense and they cannot tell us what this is for. Where does that money go? The Fire Dept. says they do not get it.” The city states, “Any fire related costs charged to the Building Fund were directly related to fire inspections associated with new commercial construction.”

Assertion 20: After Hurricane Ian, the city waived permit fees for emergency and repair work, but the Building Fund still covered all related costs, including overtime (even for non-code work) and reimbursement from state or federal funds has not yet been received. The city said, “The intimation that waiving fees automatically shifts the cost of compliance is without any legal merit and is a false assertion,” and “All overtime and emergency pay related to Hurricane Ian recovery charged to the Building Fund resulted from work that was directly performed by Building Division employees.” They say timing of reimbursements can vary.

Assertion 21: Reimbursement to send employees to Sarasota County for the hurricanes has not occurred. The city says they have filed claims for reimbursement.

Assertion 22: The city has hired two Floodplain Managers, purchased Forerunner software, and used outside services to meet FEMA requirements, but all these costs are being charged to the Building Fund even though the work and software benefit more than just building code enforcement. The city said, “The Florida Building Code includes multiple sections related to floodplain management.”

Assertion 23: Asked for documentation and accounting for “Current Encumbrances”. The city says these records have been “consistently produced.”

Assertion 24: In 2024–25, the Building Fund lost money each month while still paying for outside services from CAP, even though city staff could handle the work The city says after Hurricane Ian, the city used third-party inspectors, including CAP Government, to keep up with repair inspections. By FY 2025, CAP is the only outside provider, handling about 6% of inspections due to staffing shortages.

Assertion 25: “2025-26 Proposed Budget: Due to the deficit in the Building Fund, staff has proposed in the next fiscal year budget, taking $4 MIL plus from the Capital Project fund to balance the budget (make up the shortfall), in addition to removing the 25% fee reduction that was put in place in 2020.” The city says the claim that $4 million was transferred from the Capital Projects Fund to balance the budget is “incontrovertibly false and without any merit.” Instead, $9,068,681 in unspent funds for the Building Division relocation was returned to the Building Fund at the end of FY 2025 to comply with state law.

Assertion 26 is an analysis of Fund Reports by Chris Moran, CPA, covering 2014-2023. In response to claims of delays in permitting, Ilczyszyn stated, “We were issuing permits weeks ahead of Lee County, and they knew this.” He reiterated the city’s commitment to providing efficient services to the building industry. Giallombardo said the audit process will start soon.