It was on the brink of a fatal stalemate that could potentially bring some residential development to a halt in Flagler County.
But the working group of local government staffers struggling to craft a formula requiring developers and builders to pay their fair share had a breakthrough at its last meeting Wednesday, devising a new formula that representatives from the school district, Palm Coast, Bunnell and Flagler Beach all agreed to submit for review by each of their elected boards.
Put simply, developers would pay offsetting fees (or “proportionate share mitigation” fees) intended to let the district plan and pay for new schools in 30 percent increments from the time a large development is platted, then at the 24 month mark, then at the 48 month mark. The district had wanted 40 percent up front, 30 percent the second year, 30 percent the third year. Flagler Beach was on the district’s side. But the county, Palm Coast and Bunnell wanted no more than 20 percent up front, and the rest stretched over a longer timeline. The latest proposal splits the difference down the middle.
If the gambit works–as it must, if the governments are to avoid being out of compliance with state law by Sept. 1, when the agreement currently in effect runs out–the county and the agencies will have a new joint agreement, technically called an inter-local agreement, or ILA. Development will proceed. The school district will get its share of up-front money to plan and pay for new schools.
And the divisive, inter-governmental conflict triggered primarily by the County Commission last year, and lasting until now, will be resolved in time for the November election, when the school district is needing voters to approve the unrelated renewal of its half-cent sales tax supplement. It’s unrelated, but as Assistant County Attorney Sean Moylan told the group as it was mired in stalemate Wednesday morning, before the breakthrough: “I want to have positive news going into this election season with the half penny on the ballot. I want there to be positive momentum for the schools, positive headlines. The half penny is way more important to the schools than this stuff we’re talking about.”
The district might disagree about a hierarchy between one initiative and the other, since “this stuff we’re talking about” is also a foundation of what the district hopes will be the financing of a $70 million middle school in 2024, and a $90 million high school two years after that–assuming its projected enrollment numbers hold up. There’s a lot of disagreement over those projections, and the last 14 years’ flat enrollment do not yet point to any surge in enrollment, as the district is predicting–certainly not the 3,000 additional students in the next half decade.
A quick recap on recent history and definitions:
Last year the school district sought to double its school construction impact fees, the one-time fees charged to developers on new homes, apartments and mobile homes only, to defray the impact of new students on the district. Impact fee revenue accounts for the lion share of school expansions, construction and debt service. The county, under pressure from the Flagler Home builders Association, objected to the district’s proposal. State law requires the county to approve such proposals, giving the county significant leverage to go as far as vetoing the district’s proposals. The district scaled back its impact fee increase, and the county approved that new schedule. (See: “In Sharp Retreat from County’s and Builders’ Barrage, School Board Adopts Much Smaller Impact Fee Increase.”)
That resolved only half the challenge. The county, in this case largely at the initiative of Joe Mullins, who is currently chairing the commission and is the panel’s loudest pro-development voice, decided to rip up the ILA in effect since 2008, giving the school district and the cities 120 days’ notice. By Sept. 1, a new ILA would have to be in place. That ILA defined, among other things, how developers pay the district up-front, or proportionate share mitigation, fees for new schools when the district is already at capacity.
Mitigation fees are not an issue when the district has space. When that’s the case, builders just pay their impact fees when they’re due, and move on. But when the district is at capacity, as it says it already is, it needs up-front payments from developers to start planning and building schools. It cannot wait for impact fees until the homes are built. The mitigation fees are credited to the impact fees due, so they’re not an additional cost for developers and builders. But they are an up-front cost. It’s a matter of timing.
To be able to finance its new schools later this decade, the district argued that it needed 40 percent of fees up front, then the 30-30 in years two and three. The county, Palm Coast and Bunnell argued that was too much, and that a 20 percent “reservation fee” up front was sufficient. The district countered that there’s no such thing as reserving a spot for a student in a district already beyond capacity. It’s legally untenable, the district said, sticking to its 40-30-30 approach. The county, meanwhile, stuck to its Sept. 1 deadline, when it would bail from the ILA.
That created a problem all its own. If the ILA is nullified by that date, the county and everyone else would be out of compliance with state law, which requires a “concurrency” agreement to be in place: development cannot go forward if there’s not enough space in schools for new students. Just as the county took a hard line on its Sept. 1 deadline, the district took a hard line by threatening not to sign off on new development without concurrency, or legally challenging the county if it did so unilaterally.
That would theoretically bring a lot of residential development to a halt, and if the county were to issue development permits anyway, the district made clear it would take legal action, ramping up the confrontation.
Moylan pointed out that the county had asked for a list of informational items that had yet to be presented by the district. “So we’ve gotten nowhere. I mean, we don’t have the bonding information. We don’t have another offer on the table. We haven’t really gotten anywhere.” Moylan said. “The fact that we haven’t gotten an answer on that. It’s just unfortunate. You know, we have the deadline looming.”
“We did not create a deadline,” Chris Wilson, the lawyer representing Flagler schools on the impact fee and ILA issues, retorted, as the meeting got mired in intransigeance. The district’s Patty Bott, who is leading the negotiations on the working group on behalf of schools, said the county should not have that looming deadline of pulling out of the ILA. Moylan said the county wasn’t budging on that. The district threw up its hands, terming it the county’s problem. Then Neysa Borkert, Palm Coast’s city attorney, summed up the situation as it was at that very point:
“It is everyone’s issue,” she said. “It’s the school district’s issue. It’s the counties’ and it’s the cities’. It’s everybody’s issue. And all I’ve heard in this entire meeting is, I get it, everybody’s digging their heels in the ground because that’s what their boards want. And if that’s the case, if we cannot agree even on the smallest things, then how are we going to move forward? This is the called the working group for a reason, because we’re supposed to be providing some type of solutions. So it’s everybody’s issue. If we cannot provide to the Oversight Committee some type of plan, some type of suggestion, I don’t know what needs to happen here. But what I do know is we just can’t come back to the Oversight Committee and say, well, nobody agrees.”
It got more tense when Bott, who was running out of patience with Moylan questioning the district’s projected enrollment figures, suggested waiting until the state releases official enrollment figures in October–implicitly meaning that the ILA deadline would have passed by then, the system would be out of compliance, and the district would stop signing off on developments. “If that’s really the concern is that we’re not growing or that we’re not going to have to an increase in students or that we’re not growing,” Bott said, “let’s wait and see what the October numbers tell us.”
That was the brink.
As it turned out, Palm Coast Development Director Jason DeLorenzo and Deputy Development Director Ray Tyner were just then working on a solution, and made their breakthrough proposal: 30 percent at final plat, 30 percent at 24 months, and another 30 percent at 48 months, or four years. The remaining 10 percent would be picked up when impact fees are paid.
There was an immediate shift in the room’s atmosphere, as if the nosedive was stopped and the oxygen masks could come off, letting everyone breathe easy again. There were even a couple of “thank you very much” from the district’s side.
“Construction for subdivisions is slow at first because the buyers have difficulty realizing what the project is going to look like and they don’t know the viability of the project,” DeLorenzo said. “So it’s 24 months in the slow portion of construction, then you accelerate beyond that, and you get the other 60 percent in the next 24 months.” If the builder builds more houses than projected in the first 24 months, impact fee payments would kick in, as opposed to mitigation payments, offsetting the difference.
“I can write the words, if we can agree,” Moylan said. The looming question remains whether the county, foreign neither to egos nor turf claims, will accept a compromise crafted by Palm Coast, particularly since the county fronted the 20 percent proposal initially.
The DeLorenzo-Tyner proposal will be presented to the oversight committee, which consists of elected representatives from each local government, and which next meets on Aug. 4. Assuming it approves–as it almost certainly will: the oversight committee has not exactly been a font of creativity so much as blabber–the oversight committee will then send the proposal to each of the government boards for ratification. The ratification will, in turn, be the foundation of a new ILA, which would presumably be drafted in time for going in effect by Sept. 1.