Placement: New Business
Action Requested: Discussion
title
City Center - Settlement Plan Business Conditions Update
body
Submitted By: Jennifer Davis, Project Manager, Community Redevelopment Agency
Executive Summary (General Business): In November 2020, the City Manager recommended to City Council that the City of Port St. Lucie would be the most likely entity to successfully redevelop City Center. Twenty-two (22) of the City Center parcels (hereinafter referred to as “Parcels”) have been under the control of a Securities and Exchange Commission (SEC) court appointed Receiver since November 2015. The Receiver retained the commercial real estate firm of Avison Young to market and sell the Parcels to one buyer. On two (2) separate occasions during that time, the Court approved the Receiver entering into contracts with private developers, each of which failed to move past the due diligence period and close. This was largely due to the financial circumstances associated with the whole of the property. With approval from City Council, in March 2021 the City Manager presented a Purchase and Sale Agreement to the Receiver for the City to purchase the Parcels with the goal of retaining certain parcels for public use. Similar to the approach with Southern Grove, the City intends to evaluate the highest and best use of the remaining parcels for marketing and sale to private developers to complete the redevelopment of City Center. At this time, the City is providing an update related to the business conditions and settlement terms associated with the acquisition of the Parcels.
Presentation Information: Russ Blackburn, City Manager, will provide a brief presentation
Background: The City Center project, located at the southeast corner of U.S. 1 and Walton Road, began in 2005 as a public private partnership to redevelop the outdated Village Green suburban shopping center into a traditional town center with a mix of uses. The vision for City Center is contained in the redevelopment plan for the Original CRA and reflects that City Center would be the central gathering place for eastern Port St. Lucie. A detailed history of the ownership and related events associated with the intended redevelopment of the property since inception is contained in the agenda item presented to City Council on November 9, 2020 (City Center Update 2020-893 <https://psl.legistar.com/LegislationDetail.aspx?ID=4688181&GUID=BF0C7B4F-F893-4989-B381-6CBED6B880C5>; link provided for reference).
At the November 9, 2020 meeting, the City Manager was authorized by the City Council to negotiate a Purchase and Sale Agreement to acquire the Parcels from the SEC Receiver. Upon receiving notice of the City’s intent to purchase the Parcels, the St. Lucie County Tax Collector offered to help in facilitating the negotiations with the tax certificate holders and taxing authorities. This approach was in lieu of the Tax Collector enforcing Section 196.295(1), Florida Statutes, which requires that the taxpayer (owner of the property being conveyed to the government unit) place in escrow with the county tax collector an amount equal to the current taxes prorated to the date of transfer of title, to be used to pay any ad valorem taxes due. The statute further provides that, in the event fee title to property acquired is by a governmental unit exempt under Chapter 196 by any means except condemnation or is acquired by any means except condemnation for use exclusively for federal, state, county or municipal purposes, the taxpayer is required to pay all taxes due from prior years.
In the months following, the Tax Collector, City Manager and City staff conducted several meetings with the majority tax certificate holders and taxing authorities. These meetings were successful in negotiating with the tax certificate holders and taxing authorities, with all outstanding taxes, penalties, interest, and tax certificates being satisfied as part of the City’s purchase of the Parcels. As a result, once the City takes title to the Parcels, the City’s only outstanding debt on the Parcels will be the annual SAD payments, a fee the City has continued to pay as part of the annual budget process. This settlement also translates to a much more favorable development opportunity, at such time as some of the parcels are sold for redevelopment purposes. Updates to the stipulated business terms and conditions with the taxing authorities and the tax certificate holders are outlined below, and were discussed at the April 28, 2021, Special City Council Meeting (April 28, 2021 Special City Council Meeting: City Center Update - Settlement Plan Business Conditions 2021-353 <https://psl.legistar.com/LegislationDetail.aspx?ID=4923205&GUID=53FB83D3-1217-4C7E-A098-99DA7F32A4D4> <https://psl.legistar.com/LegislationDetail.aspx?ID=4923205&GUID=53FB83D3-1217-4C7E-A098-99DA7F32A4D4> ; link provided for reference).
Issues/Analysis: Prior to making the recommendation in November 2020, City staff worked for several months to analyze the approach in moving forward with the development of City Center for governmental/civic use and redevelopment. Several of the Parcels currently support public functions held near the Event Center by way of a License Agreement between the Receiver and the City. These parcels are highly utilized during cultural and civic events and include areas in and around the public plaza, fountain, and Event Center itself. City staff also firmly believe there is current market demand to assemble some of the Parcels for private development, though the full build out development may take longer. In Summer 2020, the City secured a planning consultant, Kimley-Horn, to assist with a Small Area Plan for City Center. Kimley-Horn completed the Conditions and Needs Report function of their scope of work before being asked to pause activities, pending the outcome of the City’s acquisition efforts. The report identified specific constraints and needs to improve City Center, including prioritized listing of needs related to housing, recreation, transportation, tourism, and identity. Their planning efforts included public outreach in the form of stakeholder and public meetings, along with a well responded online survey. In addition, staff engaged a financial consultant, PFM Financial Advisors, to review the feasibility of private development given the current financial obligations and market climate. Assumptions for this analysis were based on the most recent development proposals submitted to the SEC Receiver for City Center. The financial consultant prepared a project proforma, identified supportable assessments, and prepared a cost benefit analysis of retained public lands. A copy of both deliverables are attached for reference.
Once in City ownership, the goal would be to retain certain parcels for public use and evaluate the highest and best use of the remaining parcels for redevelopment with qualified private developers to complete the original public purpose of the City Center project.
Financial Information: Pursuant to direction and authorization from City Council in November 2020, the City presented a Purchase and Sale Agreement (PSA) to the Receiver for the purchase of the Parcels. In summary, the PSA contemplates the City obtaining fee simple interest in the Parcels currently held by the SEC Receiver for a cash price of $400,000, with each party paying 50% of the closing costs. The purchase price was established to cover the Receiver’s costs associated with these parcels over the last five (5) years. Further, the Receiver would retain any outstanding revenues due from the Bealls Outlet lease up to the time of closing but, at closing, would transfer any future lease revenues and obligations to the City. The Bealls Outlet lease is set to expire in November 2021. The PSA outlines that the City must obtain approval from the SEC Court, and settle all outstanding debt owed to the tax certificate holders and taxing authorities. With the Tax Collector facilitating negotiations between the City, taxing authorities and tax certificate holders, the parties have all reached agreements and the Tax Collector will be drafting the stipulated agreements, which when executed will result in the satisfaction of the outstanding debt owed on the Parcels. The PSA is subject to approval by the SEC Court and provides for a 90-day inspection period with a closing 30 days thereafter. Staff proposes funding the acquisition cost out of cash reserves.
The 2020 Property Appraiser valuation provides an estimated market value of just over $5.929 million for the Parcels. A November 2020 appraisal of the Parcels provided for a valuation estimate between approximately $15 million down to a negative $25 million, depending on valuation method and application of outstanding taxes, assessments, and fees for the Parcels. A copy of the appraisal is attached for reference.
As of February 2021, the outstanding amount owed in delinquent real estate taxes, assessments, and fees for the Parcels totals approximately $47.707 million. This includes foregone SAD assessments paid by the City totaling just under $41.4 million (including interest). A summary breakdown of the delinquent taxes, assessments and fees is included as an attachment to this item.
The five (5) tax certificate holders would be owed approximately $6,329,643.66 with the sale of the Parcels. This amount represents principal, interest, penalties and fees. City staff met with representatives from the largest tax certificate holder of the Parcels, 5T Wealth, who were not only representing their own interests, but those of the four (4) other tax certificate holders. 5T Wealth negotiated directly with the other certificate holders during this process. Over a course of several meetings, an agreement with 5T Wealth was reached that contemplates a swap of 21 vacant City owned parcels (“City Parcels”), in exchange for a satisfaction of all the outstanding tax certificates held on the Parcels. The City Parcels came into City ownership in a variety of ways including the escheatment process; a list of the City Parcels is attached for reference. The value of the City Parcels is estimated to be just over $3.058 million; there is no cash being exchanged with the certificate holders. The settlement agreement with the certificate holders is pending execution.
As of February 2021, the outstanding taxes and fees, penalties and interest is $2,315,486.76 on the Parcels. The breakdown is as follows:
|
Agency |
Principal |
Est. Interest |
Est. Total |
|
City |
$430,799.20 |
$237,551.42 |
$668,350.62 |
|
County |
$427,304.80 |
$235,624.54 |
$662,929.34 |
|
School District |
$403,195.22 |
$222,330.02 |
$625,525.24 |
|
Fire District |
$163,010.44 |
$89,887.26 |
$252,897.70 |
|
Erosion District E* |
$6,022.93 |
$3,321.17 |
$9,344.10 |
|
Environ Signif Land Bond* |
$203.43 |
$112.18 |
$315.61 |
|
St. Lucie County Port Bond* |
$422.70 |
$233.09 |
$655.79 |
|
Children Services Council |
$26,894.73 |
$14,830.30 |
$41,725.03 |
|
Florida Inland Navigation District* |
$1,849.28 |
$1,019.73 |
$2,869.01 |
|
Mosquito Control* |
$12,370.64 |
$6,821.42 |
$19,192.06 |
|
S FL Wtr Mgmt District* |
$20,421.46 |
$11,260.81 |
$31,682.27 |
|
TOTAL |
$1,492,494.83 |
$822,991.93 |
$2,315,486.76 |
The City proposes to pay the fees associated with the smaller taxing authorities at closing, totaling approximately $64,058.83. These agencies are identified on the above table with an asterisk (*). Outside of those smaller taxing authorities, the City has successfully negotiated with St. Lucie County, the St. Lucie County School District, the St. Lucie County Fire District and the Children Services Council, each of which resulted in the following business terms to be incorporated into respective stipulated agreements, in lieu of cash at closing:
St. Lucie County: On June 1, the St. Lucie County Commission approved the business conditions for the Parcels, agreeing to forego the amount owed as of the date of the closing. In turn, and at such time as property is sold at City Center, the principal funds ($427,304.80) will be made available to the County for the widening of Midway Road or the Midway Road Turnpike Interchange. For the purpose of the County seeking grant opportunities for those projects, these funds can be identified as “match” funds, and the decision on the funding application will remain with the County. If an approved CIP or grant match requirement does not come first, the funds shall be distributed from the City to the County no later than ten (10) years from the date of the stipulated agreement, regardless of status of sale of City Center property. A copy of the fully executed agreement is attached.
St. Lucie County School District: On June 8, the St. Lucie County School District Board approved to forego the amount owed as of the date of the closing. In turn, the City will provide usage of the MidFlorida Credit Union Event Center to the School District, for use up to six (6) event days per year for a period of ten (10) years at no cost to the District. However, event days must be on a Monday, Tuesday, or Wednesday on the second, third or fourth weeks of the month, with mutual consent for events to be scheduled on a Thursday. In addition, the District may provide their own set-up and food with use of the warming preparation area or can seek those services by the Event Center for a fee. The event days cannot roll over from year to year and are based on St. Lucie County School year. A copy of the fully executed agreement is attached.
St. Lucie County Fire District: On July 14, the St. Lucie County Fire District Board approved to forego the amount owed as of the date of the closing. In turn, the City will transfer 4+/- acres of the existing City-leased 13 +/- acre site located along NW Millner Drive just south of Midway Road, in fee-simple title to the District. The St. Lucie County Fire District currently leases the 13+/- acres from the City under a 50- year lease agreement with a 25-year lease option; there are 59 years potentially left on the lease. The leased property houses their Administrative Complex and Maintenance Facility and the Fire District would like to use the 4 +/- acres carved out of the leased property to construct a new fire station at this location. The exact boundaries of the parcel will be determined, at a later date. A copy of the fully executed agreement is attached.
Children Services Council: On July 8, the Children Services Council (CSC) Board approved to forego the amount towed as of the date of closing. In turn, the City will set up a dedicated landing page on the City’s website for the CSC, will air CSC produced videos or promotional pieces (30 seconds - 3 minutes in length) on the City’s website and on the City’s government programming channel, and will incorporate the CSC into the presentation rotation for City University. A copy of the fully executed agreement is attached.
City of Port St. Lucie: In addition to the SAD payments paid over the years for City Center, the City is due just over $668,000 in taxes and interest. Abatement of the amount owed to the City is not necessary at the closing of the Parcels. Staff recommends that the City Council consider the value of what may be recognized through the identification and retention of additional parcels for governmental purposes at City Center, which will offset or even exceed what would be reflected in the outstanding taxes owed.
Special Consideration: The vision for this area today is relatively similar to what it was originally: a revitalized hub, with a mix of retail, civic, entertainment, office and public spaces. The City obtaining ownership of the Parcels will allow for a controlled, structured redevelopment of City Center, leaving the City to strategically retain certain parcels for public use and assemble other parcels for marketing to private developers. With all outstanding debt on the Parcels remedied as part of the proposed settlement plan, the City will be able to move forward with addressing redevelopment opportunities without having to address any outstanding debt with every transaction.
In addition, the City Center Redevelopment Agreement is still in effect, which identifies certain parcels for land swaps within City Center, provides for vested rights and identifies credits for water/sewer connections and City impact fees. Acquisition of the Parcels will transfer control of the benefits identified in the Redevelopment Agreement to the City as successor, thus allowing for more control over assemblage and disposition of current City parcels and the receiver-held parcels. The City controlling all of the parcels will add value to the whole of the property and allow the property to be more effectively redeveloped. Assemblage of the City and receiver-held parcels will also help to better distribute and absorb outstanding SAD assessments.
Once acquired, the City intends to initiate a master planning effort on City Center. City staff will bring back a detailed timeline of these activities once the acquisition of the Parcels is complete. In any case, the planning efforts will be strong in focus group activities, online surveys, and multiple opportunities for public engagement.
Location of Project: City Center is located at the southeast corner of the intersection of U.S. 1 and Walton Road.
Attachments: (1) Map of City Center receiver/City parcels; (2) Existing Conditions and Needs Assessment Report - KH; (3) City Center Financial Analysis; (4) March 2021 PSA - signed by the City; (5) City Center Parcels appraisal report; (6) City Center financial detail; (7) City Parcels for exchange - listing and maps; (8) updated City Center Q&A; (9) St. Lucie County Tax Collector Settlement Agreement; (10) St. Lucie County Settlement Agreement; (11) St. Lucie County School District Settlement Agreement; (12) Fire District Settlement Agreement; and (13) Children Services Council Settlement Agreement.
NOTE: All of the listed items in the “Attachment” section above are in the custody of the City Clerk. Any item(s) not provided in City Council packets are available upon request from the City Clerk.
Internal Reference Number: 5671
Legal Sufficiency Review:
Reviewed by Margaret M. Carland, Deputy City Attorney. Approved as to Legal form and sufficiency by James D. Stokes, City Attorney.