Good First Step On Watson Island Needs Surefooted Followup
Written by Michael Lewis on November 12, 2009
By Michael Lewis
New Miami Mayor Tomás Regalado plans to start off on the right foot next week by seeking a vote that could terminate a lease to a developer who has defaulted on payments due the city.
Immediately bringing the Watson Island lease for the unborn Island Gardens project before the commission is absolutely the right first step. It shows concern for the city’s wallet that City Manager Pete Hernandez has not.
Mr. Hernandez told us last week, before the election, that he sees no hurry in seeking a quarter million dollars in late land use payments from developer Mehmet Bayraktar as the city struggles to pay its bills.
"…I’m not prepared to put any action before the commission…," Mr. Hernandez told us. "We don’t want to, in essence, take I would say premature steps."
What in the world is premature about collecting needed money that’s overdue and making sure the valuable public land at the city’s front door, a one-of-a-kind bayfront location of huge value, doesn’t permanently remain with a developer who lacks wherewithal to pay vastly reduced pre-construction rent?
After all, the land is to go under lease Feb. 1 for Island Gardens, which to this point is not financed and not paying. There is urgency in preventing that.
When the city decided in 2001 to yield its best land, it was desperate to make a deal. Today, it shouldn’t be.
The manager’s laissez-faire attitude toward city assets is, unfortunately, not unique to either this deal or Mr. Hernandez. The city for years has tossed away both money it was due and its assets.
Of course, a city is not run to earn a profit. It should aim to benefit its populace.
But when a government does decide to yield valued assets to net a profit rather than benefit the public, it meets pitfalls. And it usually tumbles in, because the best government’s skills are not geared to the business world.
The city’s shameful record in business isn’t the fault of the current administration, commission or mayor. The blame belongs to predecessors — as in government all failed deals inevitably do.
But past city failings can serve as a cautionary tale of what to avoid, and illustrate why Miami is best off not trying to play Let’s Make a Deal with developers, who often defeat the city at the expense of residents and taxpayers.
Start three decades ago, when a firm took over city-owned land on Virginia Key for employee parking and to run a ferry service to its development. When the city tried to collect rent, the developers not only refused to pay but decided the city’s dock was theirs and told the city to keep off.
That had been going on eight years when Miami Today in 1988 questioned the deal. The developers then agreed to move out — using instead Port of Miami land, again at no rent and with no formal vote. The city was left holding the quarter-million-dollar bag for unpaid rent.
The city manager then billed developers, who ignored him. A year later he said the money wasn’t worth the aggravation and decided to forget about it.
By the way, this was no poor development. It was one of the world’s richest — Fisher Island. It never paid, and the city didn’t care.
Today’s city manager is nearing the same route for the same amount of money for the mega-yacht marina and hotel project on Watson Island, which has been billed as this community’s most luxurious resort. History repeats.
History is also on the verge of repeating if the city hands Watson Island land over to developers who are in arrears in rent. That has happened before too.
On April 1, 1990, the city handed its Dinner Key boatyard at 2640 S Bayshore Drive in Coconut Grove to a California developer, Cal Fla Marine, which at the time was already two months behind in rent to the city.
After that, the developer never paid a cent. Miami had to start eviction proceedings, with taxpayers paying legal bills to get their own land back.
At that point, the developer’s general partner filed for bankruptcy, but the city still didn’t get its land.
A new developer from North Carolina moved in to take over the lease but couldn’t get $6 million it needed to start the project.
That left the city out $560,000 in unpaid rent and no land until a bankruptcy judge finally awarded the city $32,000 for years of use of the land, far less than the city’s legal costs to get it back, much less rent.
And, get this: the city then went to bid out the project again, for the third time in five years. For years other deals chosen for the site failed. The city seldom learns.
Another city business bungle may be in the making.
As we documented several weeks ago, the city just paid to build a clubhouse at its Melreese Golf Course to earn profits that would cover losses created in turn by a golf course partnership deal that was intended to make a profit and didn’t.
But the city says, incredibly, it has no idea how much it expects the clubhouse to generate. There is no business plan.
Note four reasons the city makes a rotten businessman.
First, administrations and officeholders change. Those who cut a deal seldom remain to live with its consequences. So folks now at the city need to exercise extreme care not to leave behind failures of their own.
Second, we don’t hire city officials or elect leaders to run businesses. A city’s aim is not to return a profit but to serve the citizens. When those in power lose perspective on that, the public pays.
Third, political skills and business skills are not the same. There are few Michael Bloombergs.
Fourth, politics and campaign contributions can intrude. Good businesses seek to maximize profits. Most politicians seek to maximize clout and campaign war chests. The two aims mix poorly.
Mayor Regalado now appears intent on wiping out a deal that’s rapidly headed down a path the city has too often traveled. Bravo.
But he and the reconstituted city commission need to be wary not to trade one non-paying tenant for a new problem, as the city did at its boatyard.
It should not take a referendum to evict a defaulted tenant and regain city land. Eviction should come now — and not be followed by another deal.
The city tries too hard to make deals where few good options exist. The Watson Island land in particular is the city’s finest open site and the site best suited to use by the public rather than for profit of either city or private party.
Many will come along to seek that land. Its value will keep rising. Today’s economy is the worst to maximize its commercial value.
Conversely, now is the absolute best time to return that land to the public as a water-oriented park. That should be the next job for the new mayor and commission.