The developer of Palm Coast’s Town Center is suing the city for breach of contract, alleging that Palm Coast government has failed to guarantee water and sewer service for Town Center holdings it was planning to sell.
Palm Coast Holdings, the successor to Florida Landmark Communities and a subsidiary of Duluth, Minn.-based Allete Corp., sued Palm Coast in Circuit Court in Bunnell on Oct. 23. They are asking a judge to enforce the city’s promise of providing water and sewer service to Town Center, or require it to pay unspecified damages. It is the second major lawsuit filed against the city in the last five weeks. The Flagler Home Builders Association sued the city at the end of October over new development impact fees.
In Town Center, the developer spent $35.5 million building roads, sidewalks, water and wastewater piping and underground electric service in the 1,557-acre development of regional impact, or DRI, as it was referred to. (A DRI is a planned, large-scale development.)
In the summer of 2024, the suit alleges, the developer tried to sell its land holdings and secured contracts to do so. “However, the purchasers cancelled the sale agreements during the due diligence period upon learning that the City was refusing to guarantee the potable water availability and wastewater capacity associated with the remaining entitlements in the Town Center DRI.”
Without that guarantee, the developer is left “with nearly worthless vacant land,” the suit alleges, and the “extraordinary injustice” of being unable to develop the land. The developer lost “millions” in those derailed deals. There were two potential buyers. The lawsuit does not identify them, though if the case were to go to trial, the city would push for that information and the details of the failed transaction to be disclosed.
The Palm Coast administration and its attorney do not discuss pending litigation, though the claims will be answered formally, typically within the next 20 days.
City Council members are not under the same constraints when it comes to addressing lawsuits. They tend to limit their comments. But they have discussed lawsuits in general terms during council meetings–as they might this one at this evening’s meeting–or in brief comments outside of meetings.
“I am confident this lawsuit is without merit,” Vice Mayor Theresa Pontieri, an attorney, said today. “While I respect every party’s right to seek legal recourse, I believe this action was taken in haste and does not reflect the full facts or applicable law. Through the City’s response and the appropriate legal channels, I am confident that a fair and thorough review will confirm our position. My focus remains on serving our community with integrity and transparency.”
One of the counterpoints the city is likely to make in its formal answer is to highlight ongoing development activity in Town Center. The Promenade, the six-building, 230,000-square foot mixed-use project on 17 acres by a Flagler Beach-based developer, broke ground the summer Palm Coast Holdings said it lost its sale contract. A 10-building, 264-apartment complex on 67 acres is now under construction along Town Center Boulevard, near Imagine School, among other developments. Another apartment complex is also under construction in the DRI. But none of these developments are part of the Palm Coast Holdings portfolio cited in the lawsuit.
The city would not deny–cannot deny–having challenges with sewer capacity. It’s what led to a consent order in October 2024, as the city’s Waste Water Treatment Plant #1 in the Woodlands, its largest and oldest, experienced frequent overcapacity issues during severe storms. That plant serves Town Center. The state ordered the city to increase its capacity by 2028.
Since then, the city doubled sewer capacity at its Waste Water Treatment Plant #2, providing substantial relief to the Woodlands plant. The City Council also approved a half-billion dollar spending plan to improve its water and wastewater infrastructure, especially the Woodlands plant, weathering a public outcry for raising utility rates 31 percent over three years. In 2024, the city raised utility development impact fees sharply to help pay for the improvements.
The city also lobbied for tens of millions of dollars in state aid to help with water and wastewater capacity, much of which the legislature appropriated until Gov. DeSantis vetoed it.
The city all but acknowledged having been taken by surprise by the sudden surge of new residents starting in 2018, with about three-quarters of that development occurring on entitled ITT-platted single-family lots that could not be stopped from developing, absent a draconian and politically perilous moratorium. But if the city was flat-footed for a time, it may be difficult to convince a judge that Palm Coast has been myopic since.
In other words if a judge were to require Palm Coast to fulfill its promise, as the lawsuit is asking, Palm Coast would point to its various steps since March 2024 and say: the city is doing just that.
As of 2022, the city approved (“vested” is the technical term) the Town Center DRI for 2,750 housing units (all but 151 of which have been sold) and 4.6 million square feet of office, retail and commercial space, 1.48 million of which has been sold, according to figures provided in the lawsuit. By vesting all that, the city agreed that “all owners within the DRI property are vested for water, sewer, traffic, park and all other public services,” the lawsuit quotes a city document as asserting.
Through a new development order, the city has since approved increasing the residential units to 3,575, leaving nearly 500 units to be built out, and reducing the office, retail and commercial space slightly, to 4.38 million square feet, leaving 2.8 million square feet to be built out. The amendment did not change the city’s commitment to sewer and water service. Palm Coast Holdings/Florida Landmark Communities (via Allete) own all those remaining parcels.
For those remaining housing units and other uses, the demand for potable water would be 765,000 gallons per day, if built out, and 579,000 gallons per day of sewer capacity. The developer claims “the City has essentially exhausted all of its potable water and wastewater capacity–without properly reserving the capacity promised” the developer in the 2003 development order, the suit states.
“Through the comprehensive plan planning process, the City has known since at least 2010 (when it updated the City’s Comprehensive Plan 2035) that it only had potable water capacity sufficient to meet demand through 2023. This fact was never communicated to the Developer at any time during the process of amending the 2003 DO,” the suit states, using the acronym for the development order. “The City’s sewer treatment capacity is in a comparably deficient state, based on a record of state enforcement actions and recent discussions at City Commission meetings.”
The statements are correct but leave silent net capacity improvements in 2025 as well as the half-billion dollar utility capital improvement plan.
The suit also points to seven additional square miles the city has annexed since 2010 despite capacity issues while “diverting potable water and wastewater capacity to lands outside the city limits,” such as in the Hammock and the rest of the barrier island.
The lawsuit in sum alleges that a project in Town Center could not get built today for lack of water and sewer. The city would dispute that. Typically, a developer applies for water and sewer capacity through the ordinary regulatory steps with a local government. Part of that is securing a general permit for water and sewer, issued when there are no capacity issues. If there are such issues, the developer may apply for an individual permit through the Department of Environmental Protection.
DEP has never denied such a permit to a developer in the city.
The lawsuit was filed by D. Kent Safriet, Patrice Boys and Valerie Chartier Hogancamp of Holtzman Vogel Baran Torchinsky and Josefiak, a Tallahassee law firm.
The lawsuit is below. The lawsuit with attachments is available here.
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