Cakes Across America Dumps Airport Building County Built For It; Taxpayer Bill: $300,000+
FlaglerLive | August 15, 2010
It was just four years ago that county government, the Flagler Chamber of Commerce celebrated what they dubbed as the county airport’s long-awaited coming of age as an engine of economic development. The county used a $514,000 federal grant to build a 3,000-square-foot headquarters at the airport for a company called Cakes Across America in exchange for a 20 year lease and the promise of 26 well-paying jobs, and possibly 40 down the line.
Down the line is here. Last week Cakes Across America turned over the keys to its headquarters at the airport and moved out, its promise never fulfilled. The minimum of 26 jobs it had to produce in exchange for the arrangement never materialized, and the business—which matched customers with specialty cakes from bakeries across the country, without baking anything locally—was shrinking. The economy didn’t help. But the company’s troubles with the county pre-date the recession. It wasn’t doing as well as planned even in 2007, at the height of the housing bubble, generating at most eight employees, just five of them new by the time the county had to prove the grant had paid off.
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“They owe us money. They have a sub-grantee agreement through a CDBG grant,” County Administrator Craig Coffey said on Saturday, referring to a federal Community Development Block Grant, “they owe us $300,000-some dollars, but we’ll have to take legal action to collect that.”
Fran Greene, the company founder and owner, said on Monday: “On several occasions, Flagler County has proposed a new lease with a significant increase in rent to Cakes Across America. On these occasions, the county has offered the company an option to vacate the building. Cakes Across America decided to exercise the option offered.”
Cakes Across America looked like a business with great potential since its inception in a Flagler Beach strip mall in 1999. But it moved to the airport on the promise of growth rather than actual growth. By the time the company was ready to leave earlier this month, it was using just one-third of the building, according to the administrator, and had changed its business model, scaling back on its original designs. The company isn’t out of business, Coffey said. The company’s address, on its website, is listed as a post office box in Flagler Beach. Calls to Fran Greene, the company president, and to Denis Bayer, the company’s Flagler Beach-based attorney, were not returned Sunday afternoon, nor were emails to two of the company’s email addresses.
Almost two years ago, the Department of Community Affairs, the state agency that channeled the federal grant for Cakes Across America, asked for the money back. The five jobs Cakes Across America created did knock off $100,000 of what the county owed. But that still left $400,000 to pay back. Coffey worked out an arrangement with Cakes Across America to pay back the money in quarterly installments of $13,370, letting the company stay at the airport and continue to make a go of it. That arrangement is over. The county is paying back the state grant in installments, through the airport’s fund–a so-called “enterprise fund,” which means revenue generated through the airport’s operations, outside of the county’s property-tax supported general revenue fund. Ultimately, taxpayers would be on the hook for the note if the airport’s fund can’t make the payments. That’s not the case for now, and may never be the case if the airport successfully re-fills the building with a paying tenant.
For the county, it is the third major business the county subsidized in the name of economic development, only to see the business break its end of the deal and leave taxpayers holding the bag. The Ginn Corp. went bankrupt after the county build a $2 million corporate hangar for it at the airport. The county, again through the airport fund, is paying $200,000 a year on that mortgage for an empty building. Earlier this year Embry-Riddle University backed out of a 10-year lease signed in 2004 to run a flight-training school out of a 19,000-square foot building also built by the county specifically for the university’s purposes. The University didn’t leave the county hanging as much, buying out the lease for $900,000. Another business may soon be moving in there, with generous rent discounts from the county.
But the airport isn’t a cash cow. Its revenue of $3.6 million in 2007-08 is down to a projected $1.4 million next year, out of which it must pay the $200,000 on the Ginn building and $111,000 on the Embry-Riddle building. That $311,000 is a considerable burden on the airport fund–a burden that will grow larger the longer the buildings are not occupied with well-paying, rather than subsidized, tenants. The Ginn building won’t be paid off until 2026. The Embry-Riddle building won’t be paid off until 2024, for a combined $6 million bill by then.
“We’re restructuring ourselves, and we’re in a bad economy, and we have people that want to criticize because we’re in a bad economy,” Coffey said. “It’s easy to do that in a bad economy. All these buildings are assets, and regardless of we’re getting it back, they’re similar to mortgages on a house. The value is still there, and we’re not upside down on them, meaning, just like a house, they’re still worth a lot more than what we owe on them.”