Palm Coast Approves Surtax Tool as It Looks To Recoup Old Kings Road Widening Costs
FlaglerLive | December 18, 2012
Ever since the Palm Coast City Council lent itself $6.3 million to four-lane the southern end of Old Kings Road as a welcome mat for Walmart, the council has been looking for ways to pay itself—or rather, Palm Coast taxpayers—back. On Tuesday, the council voted 4-0 to lay the groundwork for a special taxing district in the area.
That means starting next year, property owners along that portion of Old Kings Road may have to pay a surtax on their property bill. If so, it could be a steep one, because the property owners are few, and the many developments that the city expected would be there by now, bearing the brunt of a surtax, never materialized. Old Kings Road’s vacant parcels is to be a reminder of Palm Coast’s role in a real estate bubble whose bursting continues to reverberate.
“The four-laning of Old Kings Road between Town Center Boulevard and State Road 100 was actually completed at the request of the property owners,” Jim Landon, the Palm Coast city manager, said. “They were interested in seeing these improvements occur to encourage their property to be developed. Obviously the economy then hit us, and it did not occur as anticipated.”
Palm Coast also bears some responsibility for going ahead with the four-laning of the road well after the market had crashed. In Palm Coast, the market peaked in 2006 and early 2007. Design for the road had begun in 2005. Construction on the road began in February 2009, the same month that Walmart closed on the 31-acre property along Old Kings, nearer SR100, where it planned to build a 187,000-square-foot Supercenter.
Walmart was to pay some of the costs of the road (namely, its shift closer to I-95, where drivers could see the store), as was Palm Coast. But that left a chunk of money to be paid from another source. That’s where the property owners along the road came in, agreeing to a special taxing district. But that district was established when the city assumed it could sell 30-year municipal bonds (a sort of mortgage for capital projects like roads) and bill the property owners to repay the bonds over those 30 years.
When it came time to sell the bonds, the market had collapsed. No bond holder wanted bonds backed up by real estate, especially not real estate in Palm Coast. The city had a problem on its hand. The project had been designed. Walmart had closed on its property. That didn’t mean it would build. The future was unclear and getting darker. But the city made a bet. It figured that Walmart would soon build. And it looked at four-laning Old Kings Road as a build-it-and-they-will-come sort of spur to activity.
Landon told the council as much in 2009, when he was justifying the city’s $6.3 million loan from its utility fund to underwrite the costs of the four-laning: “This is really more of an economic development initiative than anything else at this point, with the economy the way it is,” Landon told the council in January 2009. “This really is an opportunity to see that area start to grow with a more commercial base.”
Perhaps it was a worthy bet. But Walmart never built, and still won’t give the city any indication of when it might do so. One reason it’s holding out is that the four-laning of Old Kings Road is only half done. It stretches from Town Center Boulevard down 1.5 miles to SR100. It’s still a two-lane road from Town Center Boulevard to Palm Coast Parkway, and the city has no money to finish that portion.
Still, the 1.5 mile project was completed, handsomely, by May 2010. The city and the property owners had agreed to a new arrangement for the money at stake. Property owners would, over three years, pay 5 percent interest to the city for the money the city “borrowed” from the utility fund to complete the project. But that agreement ends this month.
“So next year we have to develop a mechanism for hopefully a long-term solution to having these property owners pay back the debt for this street improvement,” Landon said Tuesday. “One of the options is still to add it to their tax bill, the taxing district, assessment district.”
The council agreed to do just that. It did not vote for a tax. It merely gave itself the option to establish that taxing district in 2013. It did not talk tax rates or even when it might impose that tax, if it will at all. But it is looking like it will, because the city is out of options, and it cannot leave its loan hanging. Meanwhile, Landon and his administration are continuing negotiations with property owners. The council’s action today gives Landon more leverage in his talks with property owners.
Of course, no taxing district could be established without public hearings, if and when the council decides to enact such a district.
“We are attempting to work with the property owners to come up with a funding mechanism, a financing mechanism that would be acceptable to those property owners, because obviously we need to have their support to pay back the loan,” Landon said. “So we have started that dialogue, we have a couple of proposals, we have a meeting set up in January that has to occur in 2013. This needs to be one of the options on the table for your consideration.”
Landon warned the council: “It doesn’t require you to start that assessment district but if you don’t do this, once again, you would take that option away from yourself. It has to happen before the first of the year, and that’s why it’s on your agenda today.”
With no discussion, the council voted 4-0 to approve the resolution.
The Affected Landowners: