HomeMy WebLinkAboutSubmittal-Stephen HerbitsFlagstone Extension
Remarks to the City of Miami Commission
April 23, 2009
Statement
By Stephen Herbits SUBMITTED INTO T
Apartment 904 PUBLIC RECORD FOR
1000 Venetian Way
Miami, Florida 33139 ITEM �3
I am asking the Commission to reject the proposed Fourth Amendment
requested by Flagstone Group for its Island Gardens Project and to issue a new
RFP for the use of one of the last public spaces left in Miami's center.
My comments apply to Flagstone's desire to change its agreements with the City
and. does not in any way imply criticism of the past agreements.
Granting sixty more months and financial concessions to the Flagstone Group,
who has failed to meet its commitment to the city for these many years, is the
equivalent of giving Flagstone a no -cost option, a benefit to one company while
others are denied the opportunity to present what they may believe to be a better
project for the city, its economic development, its taxpayers, and its residents.
Let there be no mistake about it. Flagstone's failure to meet the terms of the
initial agreement occurred long before the current financial crisis, and at a time
when development in Miami was robust and credit was readily
available. That failure should hardly be rewarded with reduced and extended
rent payments and an extension of time about as long as the time they have had
to arrange financing in the first place. .
More importantly,. the separation of the Marina from the upland development is
a material modification of the original bid and as such may be prejudicial to the
original bidders. I have reason to believe that: at least one of the original bidders
would be interesting in an, opportunity to bid again.
Further, to tie the current design of the marina to Flagstone's unique upland
project could create significant future problems if Flagstone defaults on the
upland portion.
Those who suggest that re -bidding this project would delay it by one to two
years are ignoring the following:
OF- oo289- SubMIftal- Sfephen Her%its
First, it is Flagstone itself that is asking to delay the project for five years,
while failing to provide guarantees that they are ever going to complete
the project. Flagstone itself claims that other than the marina, it is years
away from starting and finishing ninety-five percent of the project
components.
Second, when the project was conceived in 2001, it was bid and decided
in one year.
Third, the entire context of this project— economic, financial, downtown
housing, business and tourist development, sports and cultural
opportunities, tax -pressures, a large number of failed or suspended
projects and other circumstances —has produced an entirely new set of
circumstances for the use of Watson Island since the original RFB was
bid, decided and failed. [Please see Supplemental Statement]
It stretches credulity for Flagstone to ask for a reduction in rent, to ask for five
more years, to ask for exclusive future rights for the non -marina twenty-four
acres, and at the same to deny the production of what should be public
documents. Who is the lender? Where is the Term Sheet? Where are the alleged
closing statements? Where are the guarantees? Flagstone claims that there are
demands from the equity partner and lender for rights to the public property for
yet another sixty months. Where is the evidence of those demands?
Approval of this Amendment is special, preferential treatment beyond the pale.
Any reasonable approach in lieu of granting this extension would be to permit
other developers an opportunity to demonstrate their abilities to obtain the
needed credit to develop Watson Island on an even earlier schedule, and perhaps
with a project more suited to Miami's changed circumstances and its financial
benefit. I ask you therefore to reject this extension.
Only through opening what is probably Miami's most precious piece of
remaining public land to new ideas after all this time will the city be able to
make an informed decision for its use and value.
I ask the commission to reject the Amendment and consider the project.
Thank you.
Submitted Into the ptjblic'
recoLin onnecti with
itemon _-
Priscille A. 'Thompson 2
City Clerk
Flagstone Extension
Remarks to the City of Miami Commission
April 23, 2009
Supplement
By Stephen Herbits
Apartment 904, 1000 Venetian Way, Miami, Florida 33139
In asking the Commission to issue a new RFP for the use of one of the last
public spaces left in Miami's center, it should consider the context of Watson
Island in 2010, not 2001.
That context has changed in almost every respect — economic, financial,
downtown housing, business and tourist development, sports and cultural
opportunities. Miami's world is very different from the time when the original
RFP was bid, decided and the winner failed to meet the terms of the RFP and its
Three Amendments.
As you will see, my comments to follow apply to the issues raised by the end of
Flagstone's current project and its proposed Fourth Amendment, creating new
benefits and time -lines. It does not in any way imply criticism of the past
agreements themselves.
What has happened since 2001 when Flagstone's project was first proposed?
1. The local economy has taken a serious downturn.
Given the economic environment, are economic and tax benefits
assumptions utilized in agreeing to the initial proposal still valid? For
instance, was the decision on the rental fee based on general economic
conditions, retail and hotel occupancy rates at the time? After more
than eight years, would the change in economic conditions warrant a
review of interim and post construction rents to determine the
desirability of new rent levels or an escalator clause to index fees for
inflation? Certainly we face a period of increased inflation following
the national economic turnaround.
2. Local residential real estate is sharply overbuilt with significant
inventory, with hotel occupancies down 12% and income per room
reduced.
Submitted Into the public
recor in connection with
item -7on
Priscilla A. Thompson
City Clerk
What revisions need to be made to original assumptions for hotel
occupancy rates and sales of timeshare apartments given the current
and anticipated drops in hotel occupancy and room rates and the
current multi-year housing inventories? Will the impact these revisions
have on increasing Miami's tax base still mean that the current project
is the best, and most lucrative use, of this land?
3. Upscale shopping areas are under stress, with the owner of Merrick
Park filing for bankruptcy.
What revisions need to be made to anticipated retail rentals and profits
given the current stress on high-end shopping facilities in the greater
Miami area? Can this project be profitable in the short and mid-term?
What is the impact on Miami's tax base going forward?
4. Miami's unemployment rate is among the highest in the nation.
What terms should the city apply given the dire unemployment crisis
facing its citizens, particularly given the opportunity to adopt
beneficial precedent -setting agreements involving local companies and
workers similar to those made for the Marlin's stadium?
5. Policies towards the promotion of small and minority businesses have
evolved, as represented most recently by the Marlin's stadium
package.
What terms should the city apply given the precedent -setting
provisions for small and minority businesses included in the Marlin
stadium deal?
6. The State, County and City are moving forward with one of its most
important infrastructure developments — building a tunnel between the
port and route I-395.
What potential savings to taxpayers would occur if the postponed
twenty-four acres were to be used for staging costs for tunnel
construction? Could staging costs be reduced? Are there better — and
more cost effective —uses of those twenty-four acres adjacent to the
tunnel?
Submitted Into the public
recurd in connectionith
item E-1 on--Z�-"o9 2
Priscilla A. Thompson
City Clerk
Will Flagstone demand that Miami build sound barriers to shield its
hotels and time-share residents from the sound of heavy trucks
mounting a 5.1 % grade from the tunnel to the McArthur Bridge? How
much will that cost? Who will be responsible for those costs — Miami's
taxpayers?
7. Heightened attention across the nation, and particularly in Florida, is
being given to environmental impacts.
Given new sensitivity to the environment, what reviews should be
undertaken and by what agencies, to preserve the health of the city and
particularly the bay? Just Monday, the Mayor announced a new plan
for building metering to help consumers use energy more efficiently. It
has been years since the design of Flagstone's projects — years in
which more and more buildings are going "green." It is time to give
new developers the opportunity to design a building more compatible
with the City's own goals.
Regarding public waters, there have been enormous developments in
environmental rules and guidelines at the local, state and national
levels since 2001. What new efforts might be made by developers to
preserve the health, beauty and use of Miami's principal body of water
in the bay while undertaking new, massive construction in the Miami
Basin?
8.
South Florida is in the midst of one of its worst droughts in history,
with the South Florida Water District enacting permanent restrictions
on water use.
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Given the prospects of long-term drought, will the city have any
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obligation to incur special or unique costs to provide scarce water to
this If the is to hundreds
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project? state about spend of millions of
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taxpayer dollars to purchase land currently used for sugar cane
cultivation in order to enhance the amount and quality of South
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Florida's fresh water, Will the city's taxpayers be reimbursed through
water fees that adequately cover the capital investment required to
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bring potable water to the project?
9.
Miami has developed or is in the process of developing other
important civic centers, such as the American Airlines Arena, the
Arsht Center for the Performing Arts, Museum Park, the renovation of
3
the Omni Center at 15th and Biscayne containing Miami International
University, and major housing developments on Biscayne between NE
9th and NE 20th Streets. All of these impact traffic, parking and safety
in the immediate vicinity of Watson Island.
Given costs going forward, what adjustments to fees and rates -- and
provision for reimbursement to taxpayers for extraordinary costs due
to this project — for massive adjustments that will be required to handle
causeway and mainland parking, traffic and security for a project
whose developers once claimed that 20,000 people could be at the
facility at any one time.
Under current circumstances, what costs have been built into the city
budget for the extraordinary expenses of bringing other utilities,
sewage, fire protection and security to this project in the middle of the
bay? Are these costs in proportion to the services provided elsewhere,
or is Flagstone getting unusual benefits?
I O.Jungle Island on Watson Island has failed, resulting in tens of millions
of dollars of losses to taxpayers.
What specific lessons have been learned from the failure of Jungle
Island on Watson Island, specifically related to tax and other
concessions made to encourage this project? Should the city permit the
construction of the mega -yacht facility before the rest of the property
without specific provision of fees to indemnify the city if it is forced to
take the facility back if it fails?
Given the eight and one half years that have elapsed, is it now time
to include an escalator clause for current and post -construction lease
fees rather than the reduction in rent proposed? The value of the initial
agreement has already been diminished by the failure of the developers
to start the project when promised. They should hardly be rewarded for
this failure.
Given all of these circumstances, the Commission should not grant a Fourth
Amendment to a failed developer. It should take this opportunity to bring
Watson Island up to meet the needs of Miami and its current and future
circumstances.
Submitted Into the public
record in connection with
item VE 7 --on 4-Z3-Oq 4
Priscilla A. Thompson
City Clerk