The Blanche: Economic Development for the Developer Puts City Taxpayers on the Hook
Everybody's Dream is to Live Mortgage-Free
The City Council Has Another Dream: Pay Rent
Posted Sept. 29, 2015 10:50 am | (3 comments)
At the conclusion of last Monday's Integrity Development Partners (IDP) presentation, Rhett Holmes, IDP's kingpin, picked up his poster board graphics and hightailed it back to GA. The only graphic left behind was Wendell's Johnson's "Alternative Plan."
LAKE CITY, FL – On September 21, 2015, one week ago yesterday, the City Council, after months of backroom discussions with City Manager Wendell Johnson, approved entering into an agreement with Integrity Development Partners (IDP) and the newly incorporated Blanche Hotel Redevelopment, both LLC's, located at the same address in Valdosta, GA. The city of Lake City is now on the hook for millions, in a deal in which the contracts and amendments are still up in the air.
Kept Under Wraps
By design, only three people from the general public were at the IDP presentation for the $14,000,000 Blanche Renovation Project.
On Thursday, September 17, at 4:27 pm, City Manager Johnson contacted County Manager, Ben Scott, along with County Economic Development Director, Glenn Hunter, and invited the County 5 to Monday's Blanche meeting. Mr. Johnson emailed: "Please find attached presentation agenda. I would appreciate if you would let your commissioners know and I extend a personal invitation to all of them, to you, and to Scott [Ward]."
Attached to Mr. Johnson's email was the first page of the multi-page top secret PowerPoint presentation scheduled for Monday night.
Mr. Johnson was not as generous with the public.
With the approval of the City Council, City Manager Johnson had kept the Blanche presentation carefully under wraps. Of those in attendance, all but three did not work for the City, County, or were not on the City's Community Redevelopment Advisory Committee (CRAC).
The only County employees at the meeting were Economic Dev. Dir. Glenn Hunter and Art Butler, the County's Facilities and Maintenance Dir., who recently went on sick leave.
Other than the City Council members, it appears Mr. Johnson sent this information to no one.
The City's IT Department, Directed by Zack Moss, kept the agenda, which announced the Blanche presentation, off the City website until mid-Sunday morning. (See: Blanche on Lake City Docket: City Manager Johnson Fails to post Council agenda – Leaves public in dark)
The City agenda announced both the IDP presentation and the resolution authorizing the City to enter into the agreement with IDP. The City was not making the agreement available until the meeting. (See: page 3 of City agenda)
City Manager Johnson Polled the City
That is Against the Law
"... a city manager should refrain from asking each commissioner to state his or her position on a specific matter which will foreseeably be considered by the commission at a public meeting in order to provide the information to the members of the commission." (2012 Sunshine Manual, pg. 21)
Last Monday night, Mr. Johnson, when explaining the City's move into the Blanche, said, "I put some thought into it and I went to each Council member and asked for their input as to their views. Do we stay the course and just give the assurance, or would you like to move the City Hall over there? I believe the overwhelming census was -- a new city hall."
The Council voted unanimously, without one word of comment, to move City Hall into the Blanche Hotel.
City Manager Johnson Explained the Blanche Project
The Blanche timeline as presented by City Manager Johnson. IDP is the Construction Management for the project and expects to earn about $1.5 mil.
Mr. Johnson said the Blanche "is the central spine of the downtown;" it has continued to decline; engineering and asbestos reports have been prepared; in 2011 a Gainesville developer wanted to develop the Blanche using a combination of conventional financing and occupancy guarantees from the City and the County.
According to Mr. Johnson, the City Council approved a 1 million dollar grant at that time; the economy tanked – the deal fell off the table.
Mr. Johnson announced, "Tonight I’m prepared to give to the Council a negotiated development agreement." The master lease; the survey; tenant work letter are missing – “those things still have to be sorted out.”
Much important information is missing from the 12th hour agreements approved by the City Council. Any additions are pre-approved. The Council has given away its right of final approval.
Integrity Development Partners Kingpin, Rhett Holmes, Explained the Project: "None of this is final"
Integrity's Rhett Holmes
Mr. Holmes began, "We’re very excited about the opportunity... the economic impact and the revitalization of your downtown.... We’ve sat down with different folks within the city -- getting their feedback on it... None of this is final yet..."
Other than the meeting on February 24, 2015, (Blanche Hotel Train of Advisors Pulled into City Hall Last Night: Lots of Pictures - Not Much New) there were no public meetings between the Developer and anyone.
Most of the printing on the handout floor plans was impossible to read without a magnifying glass and problematic with one. The City's 1st floor area is the blue area. + Click to enlarge
Mr. Holmes said, "We’re always open to input and ideas." He was interested in "driving more and more people downtown." He hoped, "This will spur other developers and other people around the community to invest in their buildings."
The development scheme will remove all retail space from the Blanche. It brings no new business space downtown. It moves around the government workers that are already in the downtown.
Mr. Holmes continued, "The Blanche is in the New Market Tax Credit Area. That also generates several million dollars of tax credits that we are able to sell. If I remember correctly, there will be 7 or 8 million dollars in tax incentives coming in."
The tax incentives come into IDP and its business partners, not the City. Mr. Holmes pointed out that "the attorneys do very well."
Mr. Holmes wrapped it up, "When we get into it and decide we want to make some changes we can make adjustments along the way. When we get into it a little bit further and we get community feedback, we can adjust."
Finally, Mr. Holmes said, "The total cost [of the renovation] is down from the 17 mil. “We believe the cost will be 14-15 million dollars.”
Initially, in 2014, the cost projection was $13,675,000 and then settled in to $14 mil. When the City was looking to get a million dollars from the County 5, the renovation cost was boosted to $17 mil. (Blanche Hotel Developer Equity Skyrockets 850%: What is The Real Investment?)
Everybody's Dream is to Live Mortgage-Free
The City Council Has Another Dream: Pay Rent
Blanche: 2d floor + Click to enlarge
Presently, the City owns its City Hall. It pays no rent.
City Hall is approximately 30,000 sq. ft. According to Mr. Johnson, the City occupies about 22 to 24k sq. ft.
The City Council has committed the City to guarantee rent on 38,500 ft.² in the Blanche for seven years, at $35,000 a month, on a triple net lease.
The City is eliminating all the permit fees for the project. Mr. Johnson estimates that to be worth about $60,000.
The City is eliminating all impact fees and taxes for 10 years.
Not mentioned at the meeting, but buried in the 12th hour City/IDP agreements is the following: To the fullest extent allowable by law, abate or cause to be abated all advalorem taxes generated by the Project during the financing, construction and operations phases of the Project for a period of ten (10) years.
City Manager Johnson Weighs In:
"Asinine to walk away... It's now or never"
City Manager Wendell Johnson
Mr. Johnson said, "As a city, when you can get $7 million of subsidy, federal funding subsidy, on a project like this -- it's hard to walk away from that, folks. It would be asinine for the citizens of this community not to redevelop such a historical facility for such a useful purpose, for a long time to come... $7 million in federal subsidy -- now that's a pretty good deal."
Mr. Johnson continued, "One of the reasons you don't have the lease available tonight, the master lease, as a component of the development agreement, is because we are still tweaking some legal conditions."
Blanche: 3d floor + Click to enlarge
The City Manager explained his relationship with the Council members, "I have talked to each of these Council members about everything that's been going on -- trying to make sure that they are comfortable with it. They are not in the dark tonight, I'll tell you that. They have known everything all associated with the tax certificates... I've communicated with the developers about that. They know that IDP has the contract to buy this piece of property over here with that company. I'm excited about this. I believe it's one that we all should be excited about, because to me, it's now or never..."
Mr. Johnson said, "This is an opportunity that has been well thought out. There is still some thought to be put into it... I've done economic projects, but I've never done something like this. I take it serious, but I don't want anything for this community that's not good for this community."
City's Plans Kept Under Wraps for At Least 3 Months
City Manager Johnson said, "The City provided IDP, about three months ago, with a floor plan -- space plan -- needs assessment, for what we have in this building compared, as to what we feel we will need in that building across the street."
The City lost a golden opportunity to listen to the people regarding a renovation project for which the people will foot the bill. "Done deal" and "what's the point?" are circulating phrases.
It has been reported that the word on the street is one of disappointment, with many folks questioning the 12th hour unannounced move of the City into the Blanche and the disappearance of retail space from the Blanche.
The City Council's high-handed and unilateral action has taken much wind out of the sails of folks that actually give a damn about what happens in the downtown. That is too bad.
Lake City/Columbia County – the legend continues.