Because of its speculative construction of a major road project with money it did not have—the $10 million four-laning of a portion of Old Kings Road in 2010–The Palm Coast City Council is now legally against the wall.
The hope was that the real estate market would pick up and enable the city to re-finance with bonds. That never happened. The city has commitments to investors through its utility fund. Those bond holders want their money back. The city has no choice but to start taxing property owners along Old Kings Road to get that money.
The mechanism is in place to do just that: the city set up a special taxing district as part of the Old Kings Road project. But that doesn’t ease the difficult position the city is finding itself in: it is forced to levy taxes the property owners may have issues with, largely as a result of overambitious speculations by both the city and Walmart, one of the property owners that had pledged to build a store in the district, only to reverse course, for now anyway.
“According to our bond counsel, the assessment has to get started in order to keep the assessment district in place,” City Manager Jim Landon said, summing up the city’s situation to the council. “This is one of the few times in my option you don’t have an option. There is definitely a legal obligation to pay the utility back. And the way you pay the utility back is starting the assessment. So this is one of those where we’re saying we have to start the assessment this year in order to meet our obligation.”
On Tuesday, the council agreed to go ahead with what amounts to a technicality: an agreement with the Flagler County tax collector that lays the groundwork for tax collection from the district. But the document served to bring back to light—for council and public—the somewhat complicated underpinnings of a soured deal that has caused the city some grief and spun off not just rumors, but also contributed to an ongoing (if minor) movement to recall Mayor Jon Netts.
A special taxing district is set up when a local government needs to collect tax revenue from property owners in a specific geographic area, to pay for improvements largely benefiting those property owners (although, naturally, the benefits extend to anyone using the services that result from that investment, as with a road). Palm Coast in 2005 set up just such a special taxing district along Old Kings Road, when it was planning that road’s expansion from two lanes to four, from Palm Coast Parkway down to State Road 100.
The expansion was in part to accommodate the planned Walmart at the southern end of the project, near State Road 100. Walmart had bought the property and was telling the city that it would build there, only to pull back when the economy tanked and Palm Coast’s population stopped growing as it had before the crash.
Walmart’s about-face was emblematic of what was taking place across the city, the state and the country: project after project designed with boom-time assumptions in mind faltered and died or had to be revamped after the bust. The Old Kings Road project was among those: the four-laning of the road had to stop with Phase 1, at Town Center Boulevard. Phase 2 would have taken the four-laning to Palm Coast Parkway.
Not only was the city out of funds: it never had more than half of the $10 million to widen the road in the first place. (That $10 million was just for the first phase, from State Road 100 to Town Center Boulevard. But the sum includes some design costs for the second phase, too.) The city had originally planned to use the special district as collateral to float bonds to finance the project. That proved to be a miscalculation. The bond market had soured on such real-estate driven investments, especially in areas severely affected by the crash.
Palm Coast used $3 million in impact fees and $1.5 million out of its utility fund to pay for part of the project, justifying the utility fund spending, with some creative accounting, as required by the realignment of the road. But the city still had to borrow $5.2 million from its rich utility fund to finish the project, again on the assumption that projected developments would eventually generate money to pay back the fund. That never happened.
In sum, that still left the special district with a $6.7 million bill it has not paid. That’s the amount the city is trying—and needs to—recoup.
That’s why the project has been the source of what Landon calls “many rumors and false information I’m hearing out in the community.”
Dennis McDonald, who unsuccessfully ran for a county commission seat last year and has been a persistent critic of Landon’s administration, chiefly because of financial issues, has pointed to the Old Kings Road project as an example of what he considers the city’s misuse of dollars. “Our elected officials, including former County Commission member and clueless advocate [Frank] Meeker and Landon have failed miserably with this project as it has done nothing to generate any positive results,” McDonald wrote in an email shortly after the Tuesday meeting, when the city council took on the Old Kings Road matter.
McDonald claims the special taxing district “siphoned” $9.8 million out of city coffers, triggering the recently approved utility rate increases. The city has been under federal mandate to build a new clean-water plant since 2007, and because of that double commitment (the loan to the special district and plant funding), the utility had to raise rates, McDonald claims.
Property owners in the special taxing district have been paying 5 percent interest on the city loan since construction began. That has generated $640,000. That money goes into the utility fund’s operating budget. But it also defrays the utility’s own loan cost. So it’s not an entirely net benefit to the utility coffer.
But paying interest is not enough: for “legal and practical reasons,” the city says, the principal itself must start to be repaid. Put more simply: the city legally has no other option.
Last year the council approved an ordinance that would start levying actual taxes on property owners in the special district beginning this November. Property owners have until June 1 to come up with an alternative. So far, they have not.
“When will the city recoup its investment?” council member Bill McGuire asked the manager. He did not get a clear answer. Since the city did not build the whole road, the actual benefit to property owners is not the same as it might have been had the four-laning been competed to Palm Coast Parkway, That affects the amounts they will have to pay back.
There is also the distant possibility of bonds picking up the financing. But before that happens, investors want to see real constructions: homes or businesses in place. While that remains an option, it’s not yet a possibility the city can plan on. That leaves the burden on the property owners. McGuire, who does not always choose his words carefully, nevertheless raised the salient question on the matter: “The people that belong to the cartel, for want of a better word, that is involved in this, what’s their position on repaying the special assessment?”
“It’s fair to say that they’re all in a different position and they all have different opinions,” Landon said. “We find that when we get 10 of them in the room we usually get 10 different positions, or maybe 15 sometimes. We are hoping—and there are discussions—that we can reach a general agreement that we all can move forward with. But at this time, we’ve made it very clear to them that we can’t wait for them to reach an agreement because we have some deadlines in order to get the assessment started this year. So we’re moving with our process meantime.”
How much each property owner will be taxed hasn’t yet been calculated. Nor has the administration or council settled on whether to tax property owners evenly across the district, or differently depending on which property owners fall within the part of the district that has been four-laned, as opposed to the part of the district that has not. That’s currently a source of conflict. Landon acknowledges that property owners have a right to question being taxed for a road that was never built. So the city is focusing on the first phase. But he’s leaving no doubt as to the council’s obligation to get its money back.
The council has until August to approve the agreement with the tax collector in order for it to be in effect by November.
Palm Coast’s Old Kings Road Special District Presentation
confidential says
How many millions of our Palm Coast Utility were also wasted in 3 years of projects, planning and development meetings for the failed Coquina Desalination Plant? I heard were more than 3 million. Can someone confirm if I am over or short? Please no more gamble with our utility! Now we have to confront rate increases and not exactly the $4.61 announced in the letter attached to our last water bills. In our case with much less than average 4,000 consumption as our bill shows only less than 3,000 /month since 12/12, but received an increase of $8 not $4.61 …or $5.
Why when our profitable utility had a healthy reserve account the funds were dilapidated..? Now after the new Conservatory, Sanctuary, Tidelands and other developments North East of Palm Coast were added to the old sewer serving lift stations not designed originally by ITT for such a big consolidation, we, the original residents around these stations have to deal with the noise (and even depends were the breeze comes form the smell) of the septic pump tank trucks howling away the overflow so does not back up in our homes..! Unbearable noise of the pumping tank trucks day and night….in rainy weather . Now our concern is what happens when a hurricane comes and dumps rain for days and we are evacuated…and of course the tank trucks won’t be circulating in a hurricane neither? I am going to find out when back that sewer backed up over 300,000 paid home? Or infested our very much cared lawns?
Were Bobby Ginn and all the other builders of the above mentioned developments hooked to our old deteriorating lift stations, charged the proper impact fees for the compact housing that they created and if so why the funds were not properly utilized to provide them with new lift stations to serve them? Our old decaying original lift stations on top of it, all sustain seepage of rain water something very costly for processing sewer as well.. I believe we all residents around lift stations that require days and nights running septic tank trucks continuously pumping during heavy rain, deserve a written document from our city about when these lift stations will be permanently repaired or upgraded for the unsustainable additional connections they have to endure, that are a threat to our costly homes for contamination by sewer back up during heavy precipitation. Maybe until then the utility company should install check valves to those homes to prevent sewer back up in hurricane weather until permanent repairs take place? Prevention is better than cure.
Magnolia says
If I read this correctly, our City Manager, Mayor and Council all belong in prison for stealing. What do we have to do to call in an investigation? Every time there is a “deal” done in this town, it is to the benefit of a major landowner/developer and the people are left holding the bag.
This town had a surplus when I moved here many years ago, in the old days, when it had honest politicians in office.
Recall? Hell, they need to be in prison for misappropriation of funds. This is outrageous.
r&r says
WalMart has no problem duping the city council of Palm Coast.. Look around and you’ll see evidence all over the city..
Dennis McDonald says
Thank you for being first to step off the curb in letting the Citizens of PC know how they have been played.
The information on the required change to Water Plant #2 was indeed known in a FDEP letter dated 2/2007 but what was not mentioned is that City Manager Landon took $8.1 million on 2/2009 and loaned it from Our Utility Enterprise fund to the Old Kings Rd SAD with Landon signing the note. YES ! Landon spent OUR rainy day cash reserve funds TWO years after he was ordered to modify Plant #2, what a guy ! Pure and simple this is why we have a 20% increase in water and sewer rates.
This is a direct violation of his fiduciary responsibility as CM. and as I have said at Council Meetings “Mr Landon needs to be discharged for cause”.
Landon’s claim to have gotten the City $640,000 in interest is true, BUT it is only Temporary. The Funding Agreement signed by Landon and approved by City Resolution 2008-98 signed by Netts shows on page 4 section 4 that those $$ are CREDITED back to the landowners when the City makes the Final Assessment Resolution which is what they are setting the stage for now.
There is a grass roots effort to RECALL “King” Netts and it is up and ready for use when the Citizens of Palm Coast are ready to “clean house”. Become more informed and involved of the process by going to PALMCOASTOVERSIGHT.com The Recall can be an effective tool to allow the Voters to keep elected officials from doing as they please once in office. Just my opinions but King Netts with his man Landon is too much to bear for another almost four years, lets get these guys a bus ticket back to NJ or Texas.
Anonymous genius taxpayer concerned citizen insider says
Dennis,
Get holmberg in here quick! If his underwater stabilizers can grow our beaches, maybe they’ll grow our cash reserves against the waves of stupidity coming from council. It’s worth a shot right? Can I borrow $50,000?
Jack Howell says
Netts, Landon and company need to be investigated and called to accountability on this caper. The State of Florida needs to step in to this in a big way and investigate all parties involved to get to the bottom of this matter. I am tired of our “smoke and mirrors” government leadership and their constant failure to give citizens the truth. Let the chips fall as they may. What part of “crime” in White Collar crime don’t they understand?
Glad I left Palm Coast says
The work was done by a local company in which kept local employees working, I was one of them and I am thankful for this project. Its unfortunate what happened but the old road was no good and obsolete.
downithelab says
Would make a nice place for a four way drag race on Saturday nights…
That and ten bucks will get you into the Mother’s Day party.
Chris says
Here we go again. It’s called putting the horse before the cart. HOW IS THIS GOING TO AFFECT HOMEOWNERS OR BUSINESSES THAT BUILD AND MOVE INTO THE SPECIAL TAXING DISTRICT?
This is not good folks. What it is – incompetence at it’s worst. No! we don’t need to make it a toll road. Why should residents of this City get stuck with this boondoggle.
Between the School tax; the widening for the new I95 ramp; the purchase of a dilapidated water system; 4 laneing the rest of Belle Terre; the building of a new jail and, the purchase of a decrepit asbestos hospital building, did I miss anything. Taxpayers of this County have to wonder what the hell are these people we elect doing??? Not only that, we have a City Manager that makes over $200,000 a year that seems clueless. Go ahead, tell me, you want to build your City Hall in Town Center too. No wonder ITT got out before these idiots bankrupt Our City.
James Wigington says
If you think this is bad just go to the tax appraisers website and look at the land these yahoos purchased on Bulldog Drive next to the high school. They are playing Monopoly with tax payers dollars.
fla native says
Would somebody please call the Governor’s office?
confidential says
Many millions of our Palm Coast Utility were also wasted in 3 years of projects, planning and development meetings for the failed Coquina Desalination Plant? I heard were more than 3 million. Can someone confirm if I am over or short? Please no more gamble with our utility! Now we have to confront rate increases and not exactly the $4.61 announced in the letter attached to our last water bills. In our case with much less than average 4,000 consumption as our bill shows only less than 3,000 /month since 12/12, but received an increase of $8 not $4.61 …or $5.
Why when our profitable utility had a healthy reserve account the funds were dilapidated..? Now after the new Conservatory, Sanctuary, Tidelands and other developments North East of Palm Coast were added to the old sewer serving lift stations not designed originally by ITT for such a big consolidation, we, the original residents around these stations have to deal with the noise (and even depends were the breeze comes form the smell) of the septic pump tank trucks howling away the overflow so does not back up in our homes..! Unbearable noise of the pumping tank trucks day and night….in rainy weather . Now our concern is what happens when a hurricane comes and dumps rain for days and we are evacuated…and of course the tank trucks won’t be circulating in a hurricane neither? I am going to find out when back that sewer backed up over 300,000 paid home? Or infested our very much cared lawns?
Were Bobby Ginn and all the other builders of the above mentioned developments hooked to our old deteriorating lift stations, charged the proper impact fees for the compact housing that they created and if so why the funds were not properly utilized to provide them with new lift stations to serve them? Our old decaying original lift stations on top of it, all sustain seepage of rain water something very costly for processing sewer as well.. I believe we all residents around lift stations that require days and nights running septic tank trucks continuously pumping during heavy rain, deserve a written document from our city about when these lift stations will be permanently repaired or upgraded for the unsustainable additional connections they have to endure, that are a threat to our costly homes for contamination by sewer back up during heavy precipitation. Maybe until then the utility company should install check valves to those homes to prevent sewer back up in hurricane weather until permanent repairs take place? Prevention is better than cure.
hiredtekneck says
when will the criminal charges be filed?
Anonymous says
There should have been some $$$ held/given by walmart if they wanted a new road. It should have been their to pay for it or most of it to keep them to their word. Buts thats all should have could have. We noe need to get rid of every one in PC Government who waisted our $$$ like this. They must go by vote or by police escourt in cuffs.
mequeenb says
where do we sign to impeach the mayor
Glenn says
Where do I sign?
Seminole Pride says
Be sure to include a Bike Lane.
PJ says
Great road to drive on thanks Mr. Landon and Mayor Netts. Smooth and wide it makes me feel real good. Thanks again………………….
Nah, all kidding aside does anyone know was this road built with grant monies?
Chris says
Oh, I forgot, the 6 laning of Palm Coast Parkway. Folks, these projects cost money. Where is it coming from? At this rate we’ll be paying Long Island taxes. The sad part is that families trying to make a living in this City find it very difficult. It’s all service industry paying, if you’re lucky, $8 an hour. Young people are not going to stay here or for that matter in Florida to get a good job. No wonder the school enrollment is dropping – there’s no jobs and the school board wants more, more , more. For what, to satisfy their egos. This whole mess started because some Mother wanted to hire a security guard for her daughter and from there it snowballed.
It’s almost like a conspiracy among these players to tax us by taking from Peter to give to Paul. I already voted NO!
Anon says
Here is the web site that has the petition to recall Mayor Netts.
http://www.palmcoastoversight.com/
Send him and his $200,000 a year town manager out of town on the same train, bus, car, horse.
CitizenKane says
Will the residents of Hidden Lakes have assessment to pay? Some say that these assessments could be between 6000 and 9000 dollars.
Is this true?