Flagler Awards $90,000 Subsidy to Company, Secret For Now, to Construct “Spec” Building

Update: The county’s economic development department announced on Aug. 2 that the building will be developed by partners Erlene Thomas and Jack Beutlich, and leased by Margaret Sheehan-Jones of Parkside Realty.

Flagler County government has been trying to construct a “spec” building for a decade–the sort of commercial building built entirely on speculation that once built, would attract new industrial businesses to the area, presumably creating new jobs.

Monday morning, the County Commission approved a $90,000 subsidy over 10 years for a local company to build a 20,000-square-foot facility on at least 2 acres along U.S. 1 that would be fit for a manufacturing and distribution plant. Commissioners are commending the economic development department’s long-term effort to get a viable, light-industrial building built and position the county to better attract prospective employers.

But in a departure from generally transparent practices unfder the current economic development administration, the county administration is keeping the name of the company and the location of the future building secret, possibly in violation of the open-record law: The law protects, for a set period of time, the confidentiality of companies getting incentives in economic development plans. But the provision applies specifically to a “private corporation, partnership, or person is still actively considering locating, relocating, or expanding its business activities in this state,” in the wording of the law provided by County Attorney Al Hadeed.

The company planning to construct the building is none of those things. It will merely be a landlord hoping to fill its building with new prospects, though it alone will decide what tenants to bring in, not the county. “They control who goes in, they control the rent, they control the length of the lease, they control all of that,” Helga van Eckert, the county’s Economic Development Director, said.

The county is only subsidizing the landlord. The reason the county is withholding the name: “They haven’t closed on the land yet and they want the deal to go through before the name is made public. It’s for no other reason than that,” van Eckert said when pressed for an explanation for the secrecy. The explanation, however, unwittingly if explicitly underscores the fact that the secrecy is not related to the county’s economic development package, but exclusively to the land-buyer’s negotiating position, essentially placing the county in a position to protect the land-buyer’s hand, against the seller, who is also, of course in Flagler County. The county, in other words, is taking sides in a real estate transaction unrelated to the economic development incentives.

Van Eckert told Hadeed that “that she has an unexpired written request from the prospect entered into before the incentive agreement was concluded. The request invokes the confidentiality provisions of the statute,” Hadeed wrote.

Government’s economic development ventures have often clashed with the state’s transparency laws, most recently as the Legislature zeroed out funding for Enterprise Florida, the state’s private-public economic development agency, in large part because lawmakers found the agency’s transparency wanting.

Flagler County government’s economic development department has generally been transparent, applying the law’s confidentiality clause within reason, but always revealing the names of entities in line for taxpayer subsidies once those deals are approved by the County Commission. In this case, the subsidy will be granted the company whether new companies or jobs are created or not, as long as the company constructing the building is done with construction by 2018, and as long as it pays its property taxes in future years. There is no performance linkage between the $90,000 subsidy and new companies brought in or or jobs created.

County government agreed to a similar $90,000 subsidy just once before, in December, when the commission extended the subsidy to Gioia Sails, the Palm Coast manufacturing company, to expand into a facility on Commerce Boulevard. That subsidy is conditional on Gioia buying land and building a 25,000 square foot property, getting a certificate of occupancy, and staying there at least 10 years. The move by Gioia was predicated on an expanding business, and the presumption of new jobs. There was no secrecy in the deal once the County Commission approved it.

Van Eckert defended the silence around the latest deal, saying no county money is to be spent until the project is built. Commissioners, she said, are “not approving the actual transmittal of the fund as much as they’re approving the program for it.”

But it remains unclear how the one particular company was chosen, or how it emerged, to be the one getting the $90,000 subsidy for the spec building.

“No other contractor wanted to do the same thing,” Commissioner Dave Sullivan said during the meeting. “This is just one contractor who decided to do this if they got this incentive.” Clarifying that comment today, he said: “I just wanted to make sure we didn’t arbitrarily pick one person over another without due process, and the answer was this was the only contractor. They’ve been trying for a long time.” But he acknowledged that he had not probed further to find out what method the county adopted to broadly and fairly offer the incentive before settling on that one prospect. “I did not do a further investigation of that point,” Sullivan said.

There are very few commercial, industrial-zoned parcels for sale along U.S. 1, that fit the description of the prospective buyer. There’s a 2.5-acre parcel just south of County Road 304, listed for $165,000, but it’s not in Bunnell (the agreement with the county specifies that the buyer will construct the 20,000 square foot building “in the City of Bunnell.” And there’s a 4-acre parcel just north of the intersection with Belle Terre Boulevard, within the city limits of Bunnell, listed at $400,000. There is also 1-acre warehouse closer to downtown, too small for the proposal. The 2.5-acre parcel is still an active listing. There are no pending sales.

“It’s just going to be a matter of two weeks before we announce, we don’t want to undermine their project or the sale of the property,” van Eckert said.

Once built, the building will generate additional property taxes, offsetting the county subsidy. Van Eckert expects a $1.7 million investment in the building.

“It seems to me a reasonable approach, very low risk on our side, and it kind of pays for itself,” County Commissioner Donald O’Brien said.
“As a member of the business community, long-time active in economic development world locally, this is something that’s sorely needed from where I sit.”

Flagler County has tried to put up a building on specs in the past, but those plans involved “heavy lift” on the county’s part, County Administrator Craig Coffey said. More specifically, the county’s previous economic development arm, Enterprise Flagler, a private-public partnership dissolved in 2010, tried that year to float a referendum that would have asked taxpayers to approve a small property tax increase, with that revenue to be used to pay for such things as a spec building. The plan never made it to referendum, however.

Project “Spec” (2017)

Click to access project-spec.pdf