It’s Miami vs. Miami Beach in heated tussle over massive Watson Island plan

An out-of-the-blue decision by Miami commissioners that could pave the way for developers Jorge Perez and Stephen Ross to substantially expand a long-stalled shopping and hotel project on publicly owned Watson Island has raised a squall of opposition on both ends of the MacArthur Causeway — amid questions over whether city officials skirted public scrutiny to give the influential partners an inside track.

And it’s setting up what could be a protracted legal and political squabble between Miami Beach and Miami, in particular powerful Miami City Commission Chairman Marc Sarnoff, the expansion’s leading public proponent.

Leading the charge are Miami Beach city officials, a coalition of Beach civic and neighborhood groups formed expressly to fight the expansion, and a Venetian Islands resident who has sued the city of Miami for allegedly withholding public records on the deal. Beach officials say they, too, are ready to sue the neighboring city if necessary.

Another vocal critic, downtown Miami businessman and longtime Downtown Development Authority board member Jose Goyanes, says Sarnoff, whose district covers downtown and Watson Island, has blocked the semiautonomous agency from reviewing the proposal by Perez and Ross.

The critics note that the proposed expansion would put a shopping mall the size of South Miami’s Shops at Sunset Mall, a 700-room hotel and a 100,000-square-foot conference center on the edge of a small island with only one road on and off — an already congested causeway that’s also the main link to South Beach. Because the MacArthur will also become the principal entryway to PortMiami once the tunnel now nearing completion opens, some Beach residents and officials fear the causeway will be strangled in traffic.

But no one outside Miami City Hall knew about the Perez and Ross plan — in the works for nearly a year, according to the developers — until Miami commissioners tentatively endorsed the idea during a meeting last month. The meeting agenda gave no indication of the new proposal, which seeks to jump-start 12-year-old plans for the unbuilt Island Gardens resort, shopping and mega-yacht marina complex.

“It’s all being done in the dark,’’ said Lyle Stern, a Miami Beach commercial property owner and broker who organized the civic coalition. “There has been no due diligence, no public input, no urban studies.’’

Said Goyanes: “The fact is, it is public land and a sweetheart deal. You’re sticking a 500,000-square-foot shopping center in the middle of the bay. That’s not too bright.’’

Goyanes and other local business owners are concerned the expanded project could stifle the burgeoning downtown revival should the Related expansion lure away customers from new and planned retail centers, including Swire Properties’ massive, under-construction Brickell CityCentre.

In addition, a long-standing, state-approved development plan caps the total amount of retail that can be built in the designated district covered by the DDA, which comprises downtown, Watson Island and the neighboring Brickell and Omni neighborhoods. If the city shifts some of that allowable retail space to Watson Island, the DDA says, that would leave the rest of the district with less than 200,000 square feet of new space for stores, a relatively paltry amount.

In an emailed statement, Ross’ New York-based Related Companies said “extensive analysis” persuaded the developers that Watson Island is an “ideal’’ location for the shopping center. The statement did not address the claims of favored treatment, but noted that before anything happens, “many steps must be accomplished at various governmental agency levels.”

Sarnoff bristled at the suggestions of secretiveness and dismissed concerns over the impacts of the plan, most of which he contended were properly weighed when Island Gardens was originally approved by the city and by voters in a subsequent referendum.

He said the project’s footprint would not grow beyond that original approval, and he described the additional commercial space Ross and Perez are considering — their plan would more than double shopping space from the 220,000 square feet in the original scheme — as “a little more retail.’’

The commissioner, who also chairs the DDA, said he did not want the agency discussing the project because several members of its board are downtown Miami developers who have potential conflicts in reviewing a plan that might represent competition for their own projects.

He defended allowing Perez’s Related Group of Florida and Ross’ New York-based Related Companies to make their pitch to join the project, noting that Island Gardens’ original developer, Flagstone Properties, has been unable to start construction even though the city has repeatedly extended its lease on the land.

The vote before the commission last month, he stressed, was not an approval, but merely another lease extension for Flagstone to allow the developers to flesh out their plan and determine whether it’s feasible.

“I’ve had no secret meetings with Jorge Perez and no double-secret meetings with Steve Ross. All we did was grant them an extension of time,’’ Sarnoff said, before adding: “I’m getting a better developer. You’re not going to take that?’’

Sarnoff also ripped into Beach officials for intruding on city of Miami affairs at a time when they’re considering a convention center expansion project that would also bring additional traffic to the MacArthur. He derided the Beach officials for worrying about causeway traffic after having rejected a planned Baylink light-rail transit link some years ago.

“In order for us to build a building, now apparently we have to go to the Beach as well? Do we get to vet their convention center? The people who are complaining about traffic on the causeway refused Baylink because they didn’t want our people going over there,’’ Sarnoff said. “The full story is, the Beach wanted to have only people who could afford to pay $20 for a parking space.’’

Sarnoff also expressed irritation that Beach City Manager Jimmy Morales showed up to an advertised DDA public meeting at which the Island Gardens expansion was to have been discussed. The discussion did not take place because Sarnoff had the item taken off the agenda at the last minute, Goyanes and others said.

Sarnoff said Beach officials and members of the public will have a chance to debate the plan in future hearings before Miami’s planning board and City Commission, when and if the plan is formally submitted to the city. That process would also require a new study of traffic impacts.

“They’re going to have their opportunity. Jimmy Morales can come and lobby us,’’ Sarnoff said, adding: “You can’t talk out of both sides of your mouth.’’

But Beach Commissioner Michael Gongora said it’s irresponsible, and possibly illegal, for Miami officials not to take impacts on the causeway and Miami Beach into account. Gongora, who said he was stunned to read about the proposed expansion in the newspaper, complained that Miami officials did not give their Beach counterparts so much as a courtesy briefing.

“That was one of the most disconcerting aspects of the project. I learned about it in the Miami Herald, like a lot of people,’’ said Gongora, who wants his city to sue. “This started out as a luxury yacht marina, but it has gone on steroids.’’

The Beach commission will take up the issue at its next meeting, on Wednesday.

Flagstone, led by Mehmet Bayraktar, won the right to develop Island Gardens in 2001. His proposal was based around the marina and two hotels, and included a modest shopping area. The plans were approved by referendum, a requirement for all public-private waterfront development deals in Miami.

To the Miami commission in June, however, Ross and Perez presented a dramatically expanded vision for the site that would add not just substantial retail but also a conference center, 100 hotel rooms and more parking to the original scheme. The partners said they aimed to complete the project by 2017. Perez, the prolific Miami developer whose projects include IconBrickell, said it would be his “crowning glory.’’

City officials said they are renegotiating the lease terms to increase revenue to public coffers based on the larger amount of retail.

Only Commissioner Frank Carollo objected, noting the original deal was more than a decade old and proposing the city hold out for a better payoff by rebidding the project.

Because the city regards the changes as relatively minor, officials say the expanded project doesn’t require extensive new approvals or a new referendum — a claim some critics ridicule.

“It seems like a pretty big leap. How do you take a project from 200,000 square feet to half a million, add 100 hotel rooms and say there is no additional impact? It doesn’t make sense,’’ Stern said. “This is a critical issue. We can’t just shrug it off.’’

One legal question Gongora, Stern and other critics have raised is whether the city of Miami can even legally approve the expansion without the DDA.

The plan that caps development in the DDA district, which is governed by state approval known as a Development of Regional Impact, or DRI, has been managed by the DDA since the order was first instituted in 1987. The DRI allows for management of growth while encouraging development because it exempts individual developers from seeking state approvals for projects with major regional impacts. Instead, developers in the district pay fees into city funds to improve roads and other services.

Several legal experts, including Beach city attorneys, say that likely means that only the DDA can decide to move retail space from downtown to Watson Island.

Related’s own attorneys at legal powerhouse Greenberg Traurig assumed the same, and even drafted legal documents for the DDA to begin the process.

But the state Legislature essentially did away with new DRIs in urban areas when it gutted the state growth-management law three years ago, and while existing DRIs remain in force, state enforcement has been relaxed. This week, a state spokeswoman in Tallahassee said the city can initiate the change on its own, without the DDA.

The state also now says the city can move development “credits’’ through the area covered by the DRI without state review because the total amount of development in the district doesn’t change.

But given Watson Island’s location and the project’s potential impacts on the neighboring jurisdiction of Miami Beach, some experts also believe the DRI requires the state to step in and review the expansion. Miami land-use lawyer Jeff Bercow, who has served as a pro-bono counsel to the DDA, said in an email to agency officials that the changes require state review of the impacts. The email was released in response to a public-records request by Venetian Islands resident Stephen Herbits, who is suing for more records, including all communications between city officials and the developers.

Both those questions could become the subject of litigation to block the project, the experts say.

Sarnoff, a lawyer, said the law governing DRIs is so unsettled he’s not sure what it requires.

“To say the law is not clear is an understatement,’’ Sarnoff said. “I don’t care who sues who. Let a judge decide what the DRI says. That’s how you clear up a law.’’

Miami Herald staff writers Martha Brannigan and Kathleen McGrory contributed to this report.

A previous version of this story mischaracterized the position of attorney Jeffrey Bercow in an email on whether the Downtown Development Authority should be the legal applicant for proposed changes to a plan for a hotel and retail complex on Watson Island. Bercow's email did not address the matter.

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