13 years after an agreement for development, Miami’s Watson Island is still barren

06/21/2014 7:33 PM

06/22/2014 1:26 PM

Thirteen years ago, Miami voters blessed a developer’s plan for a megayacht marina, two luxury hotels and tons of space for shops on publicly owned Watson Island.

For 13 years, nothing happened.

Last month, after a series of extensions still failed to produce anything, Miami officials gave Flagstone Property Group one last chance: Start construction by June 2, they said. Or else.

Two weeks after the do-or-die deadline, there’s no construction at the barren waterfront site, either on land or underwater. The developer doesn’t even appear to have applied for building permits from the city.

But Flagstone and city administrators insist “construction work” had indeed begun by June 2 — because, they say, a diver mapped and surveyed corals and sea grasses that must be moved or replaced elsewhere in the bay before dredging and construction of the marina can begin.

The city’s legal staff concluded that the preliminary environmental work meets the contractual conditions for “start of construction’’ under Flagstone’s agreement with the city, administrators say.

“In essence, to us, that was satisfaction of the conditions,’’ said Deputy City manager Alice Bravo.

But that position has prompted questions from some city commissioners who have been leery of Flagstone’s ability to finish, and provoked fresh outrage from critics of the deal who have long called it a boondoggle.

One key question: It’s unclear how the city’s position jibes with the simple definition of start of construction in Flagstone’s agreement with the city. That language says: “ ‘Commence construction’ shall mean that all material plans and permits are approved and issued and the actual act of physical construction has begun.’’

Fair deal?

Meanwhile, another emerging issue is raising questions about the fairness of the overall deal to taxpayers. New appraisals, commissioned by the city, suggest Flagstone and its principal, Mehmet Bayraktar, will be significantly underpaying for use of the city property if they ever complete the project.

Two appraisers independently concluded in April that the city should get around $7.2 million a year in annual rent based on a sharp increase in the value of both upland and submerged land — far more than the initial minimum rent of $2 million that Flagstone will pay under the existing deal, based on 2001 assessments, if the project is completed. The city charter bars leasing public land out at less than full market value.

At least three city commissioners say they were unaware of the new appraisals when they agreed last month to move forward with the project. The appraisals surfaced publicly after the hearing only because they were obtained by Venetian Causeway residents who have repeatedly and successfully sued the city for public records it had failed to release.

But no city administrator cited the new appraisal figures or produced the reports during the lengthy hearing, in which Commissioner Frank Carollo and members of the public challenged the $2 million rent amount as likely to be significantly out of date.

Bravo said she believes city commissioners were informed about the existence of the appraisals.

But Carollo, who opposed the extension but had to leave the hearing before voting, and Commissioner Francis Suarez, who expressed reservations about Flagstone’s ability to deliver before voting to go forward, said they could not recall being told about them. So did Commissioner Marc Sarnoff, who spoke in favor of going forward. All three said they had not seen the appraisal reports before the hearing.

Stephen Herbits, a Venetian resident who unsuccessfully sued to stop the project and who has gone to court to obtain public records multiple times, dismissed the city’s posture on start of construction, and its apparent failure to disclose the new appraisals, as ploys to help the developer at the expense of taxpayers.

“The City has bent over backwards, particularly since 2010, to excuse the developer’s delays and ignore the growth downtown and on Miami Beach that changes the financial, traffic, and environmental impacts of the project,’’ Herbits said in an email. “This latest gimmick crosses the line and should offend everyone who believes in honest and transparent government. For months, the City has intentionally hidden public records showing how it has accommodated the developer and ignored the clear language of the contract.’’

About appraisals

Last week, Suarez sent City Manager Daniel Alfonso two emails asking him to explain the administration’s position on the construction-start issue and demanding to know why commissioners were not told about the appraisals. He had not received a response by Friday evening, a staff member said.

Suarez said he’s uncertain what commissioners could have done about the appraisals, since the city attorney’s office told them they could not renegotiate terms of the deal during the hearing. But he called the concerns raised by critics “valid.”

“I share the concerns about this developer’s ability to perform,’’ Suarez said. “And I think the appraisal issue is important. It’s important for city residents to feel confident that whatever deal the city is striking is a good one.’’

Carollo said he remains convinced the city should pull the plug on Flagstone’s contract and rebid the project, but added he’s not sure what commissioners can do given the administration’s legal position that the developer has fulfilled the conditions to proceed.

“In my frustration I asked the city attorney the definition of stringing us along,’’ Carollo, an accountant, said in an interview. “You’re talking 13 years later about a voter referendum in 2001. You don’t have to be a CPA to know that [Flagstone] should be paying a lot more.’’

Sarnoff said he thought the developer would start actual construction by June 2, but added the commission may be unable to do much about that issue.

“I was led to believe he would have started pile-driving by June 2. But the city attorney decides what is commencement. Not me or anyone else,’’ Sarnoff said. “It’s disappointing.’’

But Sarnoff said he did not support terminating the deal, noting that rebidding the project would delay it by several years more, and deprive the city of the more than $1 million a year Flagstone has been paying in pre-completion rent since a 2010 renegotiation of the lease.

Bravo and Flagstone lobbyist Brian May defended their position, even as they said they don’t believe the developer has obtained building permits from the city for the marina.

But they said that the required environmental mitigation of the coral and seagrasses constitutes the first part of marina construction, and that the revised 2010 agreement with Flagstone allows construction to proceed in phases. They added that all necessary permits for that mitigation work are in place.

Another document obtained by Venetian residents, however, seems to undercut those assertions. The document, a draft of a revised agreement prepared last year when developer Jorge Perez was considering joining the project as a partner, contains a parenthetical note under the definition of start of construction that reads: “DISCUSS expand definition of Start of Construction to include mitigation and other environmental activities.’’ That was language not incorporated into the existing agreement.

But May says that it’s “absurd” to assert that mitigation is not equivalent to breaking ground, given that the developer could not legally proceed before the environmental work is done.

“It’s an integral part of the project,’’ May said. “There is nothing else we can do until we move those corals and sea sponges. I told the commission clearly that’s what we would be doing.’’

Besides, he said, there are other obstacles in the way: Port Tunnel construction crews have parked equipment and materials on the Flagstone site, and utility relocation — another piece of pre-construction work — can’t start until that’s gone. Then the seawall bulkhead must be rebuilt.

If all goes according to plan, the city and Flagstone say, marina construction could begin by December.

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