Councilman wants to give Shipyards, old Courthouse land away! What do you think?

[thelakelander]

City Council member Matt Schellenberg has filed an emergency bill to possibly give several downtown properties away to help reduce the city's unfunded pension liabiliity.  These sites include the Shipyards and the old county courthouse.  Is this a good idea?


The Shipyards site in July 2008.


The old courthouse site.

Bill would give city property to pension fund

The Shipyards, old courthouse, former City Hall and several Downtown parking facilities could be off the city's hands and into the Police and Fire Pension Fund's to help lower the city's unfunded pension liability.
City Council member Matt Schellenberg says the transfer of the properties, whose assessed values total $69 million, would go toward paying down the $1.7 billion unfunded pension liability. He said more properties could be added to the list.

"There is no reason why these properties that are underutilized shouldn't be looked at," he said.

He said making the deal will lower the pension liability in the short-term, by substituting cash for real estate, and in the long-term when the fund develops the properties and sells them.

Fund Administrator John Keane said Thursday that profits from any sales would be applied toward that obligation and the fund.

The Jacksonville Civic Council suggested real estate be a part of a pension solution. Keane worked with the council and is also the author of the legislation.

Full article: http://www.jaxdailyrecord.com/showstory.php?Story_id=540574

[Non-RedNeck Westsider]

So what he's suggesting is that we just give them $69M worth of land to pay on $1.7B worth of unfunded pensions and then....  then if they develop the land, they can apply the profits to the rest of it?

Riiiigggghhhhhhhtttttt.

We're giving them essentially a 4% down payment while the 'balloon payment' if you will, will be up to the Pension fund to work on from developing and/or selling the properties;  All the while, we're still paying interest on the remaining 96% of the unfunded pension;  AAAANNNNDDDDD   all the while it is still growing because we haven't found a workable solution to even begin to actually make it sustainable.

Sounds great.  Where do I sign up?

[CityLife]

If this city can't utilize all of its human capital on staff,  as well as power, connections, and incentives to redevelop or sell those properties more effectively than the Police and Fire Pension Fund can, just close the doors to City Hall.

I don't know that I have faith in the city to properly redevelop those properties, but what makes anyone think the Police and Fire Pension fund is capable of doing so? I had a meeting with a former lobbyist/political type in Tallahassee a few weeks back, and this person mentioned a few suspected shady dealings with the Police and Fire Fund management when we were talking about Jax.... This sounds like the Police and Fire Pension fund is going for a cheap land grab based on the city's poor financial state in the short term. The reality is that its a long game, and we can't look for cheap, easy short term solutions.

I think its a good idea for the city to use those properties to generate revenue, sell them on the free market, or form a P3 to redevelop them, all with the intent of using proceeds to pay down the liability, but I don't think putting them into the hands of the Police and Fire Pension Fund is the best long term strategy for the city. Unless, Mr. Schellenberg would like to provide any hard data proving otherwise.

[Non-RedNeck Westsider]

Also on the list:  Main/Forsythe Garage & Water St. Garage.

Lake (or anyone) - is the city still paying debt service on these garages until they have become 'profitable'? (JFC, I got into the wrong business out of college) Or are they in the clear?

[thelakelander]

If it were me, I don't think I'd sell any of my major downtown assets until the CRA plan is completed. At this point, without a plan, you really don't know what land you may or not need or what the best leverage options may be.

Here's how the last downtown land deal with the Fund worked out for the City:

Jacksonville City Council bill weighs buying vs. leasing downtown building

A Jacksonville City Council member wants the city to buy a renovated building it leases across from Hemming Plaza, arguing that spending about $15 million now will save money over time.

"While I don't want to assume any more debt, my feeling is we're swapping debt," said council Vice President Bill Gulliford, who filed a bill to buy the building at 407 N. Laura St., across the street from City Hall.

He said the pre-agreed lease increases and hikes in purchase price make buying the building the smarter choice, even if the city has to borrow money to do that.

"We're sort of doing the police and fire pension fund's job for them," he said " ... We're guaranteeing them a better return than they can get anywhere else."

Whether to buy now is "a business decision" that carries costs on both sides, said John Keane, the pension fund's administrator.

Keane noted the fund ended up in the 2009 Godbold Annex deal through a chain of agreements that reduced the city's unfunded liability to the pension system. He said he hopes the city will be open those types of agreements in the future.

Read more at Jacksonville.com: http://jacksonville.com/news/metro/2013-03-29/story/jacksonville-city-council-bill-weighs-buying-vs-leasing-downtown#ixzz2fStjI26m

[Noone]

We have a crazy, reasoning , problem. That helped me make my vote.

[thelakelander]

Also on the list:  Main/Forsythe Garage & Water St. Garage.

Lake (or anyone) - is the city still paying debt service on these garages until they have become 'profitable'? (JFC, I got into the wrong business out of college) Or are they in the clear?

I'd have to go back and verify, but I believe we are still subsidizing those garages to the tune of millions each year.  I believe they cost us more than the Skyway does annually.

[Non-RedNeck Westsider]

If it were me, I don't think I'd sell any of my major downtown assets until the CRA plan is completed. At this point, without a plan, you really don't know what land you may or not need or what the best leverage options may be.

Here's how the last downtown land deal with the Fund worked out for the City:

Jacksonville City Council bill weighs buying vs. leasing downtown building

A Jacksonville City Council member wants the city to buy a renovated building it leases across from Hemming Plaza, arguing that spending about $15 million now will save money over time.

"While I don't want to assume any more debt, my feeling is we're swapping debt," said council Vice President Bill Gulliford, who filed a bill to buy the building at 407 N. Laura St., across the street from City Hall.

He said the pre-agreed lease increases and hikes in purchase price make buying the building the smarter choice, even if the city has to borrow money to do that.

"We're sort of doing the police and fire pension fund's job for them," he said " ... We're guaranteeing them a better return than they can get anywhere else."

Whether to buy now is "a business decision" that carries costs on both sides, said John Keane, the pension fund's administrator.

Keane noted the fund ended up in the 2009 Godbold Annex deal through a chain of agreements that reduced the city's unfunded liability to the pension system. He said he hopes the city will be open those types of agreements in the future.

Read more at Jacksonville.com: http://jacksonville.com/news/metro/2013-03-29/story/jacksonville-city-council-bill-weighs-buying-vs-leasing-downtown#ixzz2fStjI26m

From the comment section as an add by Steve Patterson:

here's what a summary for City Council members says about the history behind the deal:
"Background Information: The City purchased the Laura Street Trio of buildings (Bisbee Building, Florida Life Building, and Marble Bank building) in 2006 at a price of $3 million and conveyed the buildings to the Police and Fire Pension Fund (PFPF) in return for a credit of $3 million against the City's unfunded actuarial liability to the fund, along with a commitment to an additional $5 million contribution to the pension fund for renovation of the structures for commercial re-use. In 2009 the City agreed to purchase and convey the Haverty Building to the PFPF in exchange for another $3 million credit against its UAAL to the fund and a release from its $5 million obligation with regard to the Laura Street Trio. The City then leased the building back from the PFPF for use as City office space for a term of 44 years at a rate that would guarantee the PFPF an 11.9% rate of return on its investment of $10 million in renovation costs, plus a guaranteed 12% inflation rate applied every 4 years."

Read more at Jacksonville.com: http://jacksonville.com/news/metro/2013-03-29/story/jacksonville-city-council-bill-weighs-buying-vs-leasing-downtown#ixzz2fSxZooQV

So if history holds true, we'll give the properties away, they may or may not get developed, but then we'll start paying rent on them to make up for some other deal. 

Again.  Where do I sign up?  Lol.

[edjax]

I wouldn't sign up for anything this guy proposes.  One of the dumbest of the group on council.  Looking forward to day this guy is voted out the door.  Unfortunately he is my representative. 

[thelakelander]

After getting the Trio for $6 million, the Fund flipped it to developer Cameron Kuhn for $6 million:

Officials from The Kuhn Cos. have sent a $6.15 million offer to the Police and Fire Pension Fund to purchase the Laura Street Trio.

The trio, which is at the corner of Laura and Adams streets, includes the former Florida Life, Bisbee, and former Marble Bank buildings.

The Police and Fire Pension Fund has been redeveloping the buildings into condominiums, office, and retail space and it has bought land around the buildings for a parking garage.

The move would make sense for Kuhn officials, who are restoring the former Barnett Bank building across the street.

But the deal is far from done. Pension Fund executive director John Keane hopes to meet with Kuhn officials next week to discuss the deal, but the parties have yet to have a phone conversation hashing details out, he said.

Kuhn vice president George Moore said the company would have more details after talking with fund officials.

The pension fund has owned the project since spring 2005, after gaining control of it from the city in exchange for a $3.25 million credit toward the city's pension fund debt.

The city has since also agreed to contribute $5 million to the fund to help with the renovations, but Keane said those agreements wouldn't jeopardize a sale.

Jacksonville Economic Development Commission executive director Ron Barton didn't return a voice message on his cell phone left Wednesday evening.

Since then, the fund has invested a couple million dollars to purchase land for the parking lot and began the renovations, Keane said.

He said he received several offers to buy or partner in the project, but up until this one the pension fund board considered the offers too low at less than $5 million.

full article: http://jacksonville.com/tu-online/stories/081706/bus_4476190.shtml

[icarus]

First, the profit comment is misleading.  The value ultimately realized by the Fund from the sale or the development of the properties would offset the Fund's expenses.  It was the profits realized by the Fund in the management of its assets that allowed COJ to take several holidays from paying into the Fund.

The upside is that ownership by the Fund would reduce the level of bureaucracy associated with the sale of any of the assets. Plus, the Fund has a fiduciary obligation to seek maximum value from those assets.

[thelakelander]

In the case of the courthouse site, it's been mentioned several times that it should become the location of the new convention center.  What happens if it is given to the Fund, a few months later the CRA suggests that a convention center should be located there, but the maximum value of the asset for the Fund is residential, office or maritime related?  Then we'd have a situation where the fiduciary obligation may not match the overall vision of how downtown should be redeveloped.

I think it's possible to avoid situations like this if we just finish the CRA first, which should help identify what is and is not needed to help make the plan an effective one.

[Non-RedNeck Westsider]

First, the profit comment is misleading.  The value ultimately realized by the Fund from the sale or the development of the properties would offset the Fund's expenses.  It was the profits realized by the Fund in the management of its assets that allowed COJ to take several holidays from paying into the Fund.

How so?  Whatever the value of the sale - expenses = profit.  That final number will be the one used as far as the city's contribution and not the sale price.

The upside is that ownership by the Fund would reduce the level of bureaucracy associated with the sale of any of the assets. Plus, the Fund has a fiduciary obligation to seek maximum value from those assets.

How does this help the city?  Now the PFPF can sit on $69M worth of property until a deal falls into their lap that they want.  The city is still on the hook for maintaining the fund whether or not the properties are sold.   There is ZERO incentive to sell the property.

[Non-RedNeck Westsider]

In the case of the courthouse site, it's been mentioned several times that it should become the location of the new convention center.  What happens if it is given to the Fund, a few months later the CRA suggests that a convention center should be located there, but the maximum value of the asset for the Fund is residential, office or maritime related?  Then we'd have a situation where the fiduciary obligation may not match the overall vision of how downtown should be redeveloped.

I think it's possible to avoid situations like this if we just finish the CRA first, which should help identify what is and is not needed to help make the plan an effective one.

Agreed.  Based on the simple math - it's still only a 4% payment into a fund that we're on the hook for regardless.  Then we're turning them over to an agency that won't require any urgency to develop the properties, while we're still on the hook. 

Bad.
Decisions.
Galore.

[icarus]

I'm playing a little bit of devil's advocate here.

1. We are talking about the COJ. The same city that if I believe doesn't even know what real estate assets it owns, i.e. RFP hiring a consulting firm to inventory and value.

2. What makes you believe that the Fund is going to be less likely to develop the properties than COJ? If anything, the Fund will sell versus donating to another failed development scheme.

3. Any profit to the Fund regardless of how you calculate it reduces the potential obligation of COJ.

4. The City, as reflected in this Forum, has a number of competing wishes, i.e. dredging port, New Convention Center, Mass Transit/RTC.  We can not fund them all and can't even keep all of our libraries open let alone all our grass mowed.

5. A transfer to the Fund puts the responsibility in a single board versus the siloed departments/politics of the City.  As a businessman, I would rather negotiate with a single entity versus a plethora of departments and special interests.