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City leases under microscope
BY TIMOTHY O'HARA
KEY WEST -- A
proposal by local businessman Ed Swift to lease and renovate a
city-owned building has ignited discussion about what city commissioners
say are inadequacies in city lease policies that have led to deals that
benefit some tenants more than the city.
Swift wants to turn
the old Plantains restaurant at 908 Caroline St. into a restaurant with
eight affordable apartments upstairs. The plan calls for him to pay
$1.25 million for renovating the structure and $1,000 a month rent to
the city.
The proposal was
withdrawn from consideration amid objections from residents, but will be
back before the commission Tuesday night.
The opposition to
Swift's plan prompted some residents to remind city commissioners that
the city has a track record of allowing properties to be rented for well
below market value.
"I hate to say it
because I think we have an exemplary staff, but time and time again the
city has gotten the shaft when it comes to leases. And if the city is
getting the shaft, citizens are getting the shaft," Commissioner Carmen
Turner said.
Some leases date back
nearly 50 years, when the price of commercial property was hundreds of
thousands of dollars less. Many of the 63 lease agreements don't include
monetary penalties for businesses not paying their rents on time, which
has become a source of contention as city records show Swift's Historic
Tours of America recently fell $500,000 behind in payments.
The rents for the
company's Casa Cayo Hueso, Conch Tour Train, Buggy Bus, Old Town Trolley
and Tropical Shell and Tropical Shell Aquarium were eventually paid and
Swift blamed the delinquency on a computer system recently installed.
The company, which pays a percent of the business as rent, was not able
to get accurate sales information, he said.
Commissioners
responded to news of the late payments by saying that the city needs to
conduct more regular audits to make sure rents are being paid on time.
Commissioners have also said that the city needs to hire a commercial
real estate expert to monitor and negotiate leases, so the city can
maximize profits on its properties.
Businesses
like the Key West Yacht Club, which pays the city $1 a year for its
waterfront restaurant and marina, and the Key West Chamber of Commerce,
which pays $10 a month for its building in Mallory Square, have been
held up as examples of bad deals for the city. Both are private
businesses that require memberships to join. The yacht club lease runs
for 99 years and expires in 2060. The chamber began leasing its
2,100-square-foot building in 1985 and received a 10-year extension in
1995.
The chamber lease
expires in 2005 and Turner and Commissioner Harry Bethel say they will
vote to make sure the business group pays market rate for the waterfront
property. Market rates in that area can vary between $45 and $150 per
square foot plus taxes, real estate insurance and maintenance fees,
according to local real estate experts.
"It's a sweetheart
deal and their lease is up in 2005 and they are going to pay market
rate. There's not much we can do about the yacht club for the next 60
years," Bethel said. "The chamber has a lot of money. They strictly
represent the commercial and tourist industry."
Chamber President
Virginia Panico said the chamber put $400,000 into the small building.
Most cities give chambers offices to work from, she said.
"We do a lot to
promote the well-being of the city," Panico said. "We give a lot of
information out to visitors and do a lot for the locals. We feel we're
an asset to the community. We do more than what a lot people know we
do."
On Tuesday's city
commission agenda is Swift's proposal for the former Plantains property,
which calls for a 20-year lease on a 5,000-square-foot restaurant
downstairs and eight affordable apartments upstairs at a rent rate of
$1,000 a month. Market rate prices for commercial space in the Key West
Bight area are about $30 a square foot, Prudential commercial real
estate broker Claude Gardner said. Using that figure, Swift would pay
$28,500 a month plus property and sales taxes, insurance and maintenance
fees.
Swift said that a
mortgage on a $1.25 million loan for building renovation costs is
$13,000 a month. The city would also still own the property and could
take control of it, with the improvements, in 20 years.
Bethel recently said
the project does not offer enough affordable housing units to make the
deal palatable. In light of Swift's recent delinquent payments, Turner
is concerned that Swift is putting up a personal guarantee, rather than
a construction bond.
City Commissioner Tom
Oosterhoudt said he would like to see a project that is entirely
affordable housing, but could vote in favor of the Swift project in the
hopes of removing the run-down building that sits there now.
tohara@keynews.com |
