Khan's Jacksonville Shipyards Plans Revealed

[Non-RedNeck Westsider]

Off the top of my head there are some parts that I would be focusing on if I were negotiating the deal, and understand I have very little actual knowledge of how the TIF is structured and any other tax-abatement strategies that may be used/requested:

Allowing the TIF to be repurposed solely into the project is a great idea as long as it's continuously used to maintain/enhance the public aspect of things.  Park upkeep, newly required salaries, etc...  I wouldn't want to see it used to pay for private enhancements.

Setting a time-limit on any tax rebates that accelerate the moment the property changes hands.  The property can't cost the city forever.

Using this development as a springboard for some actual transit oriented plans into the area.  Whether it be streetcar (least expensive) or finishing another 2 legs of the Skyway (preferred by me), so be it, but it needs to be part of the plan.

Setting aside a portion of any monies to be allocated to the Hogan Creek remediation/tie in.  It is being used as part of the overall plan, but there needs to be some sort of direct funding tied into the project to actually bring it to fruition, otherwise I see it as a selling point only and never as an actual commitment.

[CityLife]

The city could act as master developer and keep 100% of profits.

To me, this is the absolute worst case scenario for the Shipyards.

Completely agree with NRW above ^

Assuming the city is competent enough to manage the cleanup (a big assumption, I concede), we win either way.

Worst case scenario is that we get a clean piece of riverfront property and a riverwalk extension.

Plus, I can't imagine the terms presented in Khan's non-binding proposal will be the final terms.

Certainly the city can negotiate a 60-40 split.

I didn't say the city should act as master developer, just that it could in the event that Khan tries to completely jerk the city around for an 80/20 split. Simply playing devil's advocate.

The real question though is what is Khan going to actually deliver in order to be granted the opportunity to capture 80% of profits? If that entails him spending hundreds of million on the project and/or bringing in big time outside players that the city would not otherwise be able to, I can understand giving up the gains. However, if he wants carte blanche to do whatever, without any promises or assurances to the city, I have a problem with it.

^This all may be a moot point, as I have a hunch that he has an ace or two up his sleeve.

[edjax]

Wow. Tryimg to put a positive spin on the TriLegacy. Poor mayoral oversight.  Millions and millions lost. Nice try.

I don't think it's spin - it's what happened. The city didn't own the land before the deal, TriLegacy did. They gave TriLegacy $38 million that went somewhere (who really knows). However, after that happened, the city got the land.

Effectively, the city paid $38 million for some land.

And the 35 million to clean it up. Anywy you look at it the city did not handle it properly.

There's no spin: the developer defrauded the city, but even still the city got the land after it happened. But more to the point, we still don't know would happen if this deal were to go through and then, somehow, didn't pan out. It's totally possible that we'd still have an empty lot we'd be on the hook for, but we wouldn't own it or have any say what happened next.

Just don't think it is quite as rosey as you want to make it sound, city basically on hook:

- 38 million paid to TriLegacy
- potentially 35 million to remediate it now that the City is the owner, and Simms even thinks that may be low
- how many millions to fill in the 5.1 acres which sounds like they are on the hook for per prior agreement
- How many millions in legals costs with the TriLegacy and subsequent lawsuits.

So I think the complete failure of the Delaney administration on over site of the TriLegacy debacle is
the primary reasons we are where are now. 

If Mayor Brown had been involved in the TriLegacy debacle would you be as forgiving of his "negotiating" skills that had taken place? Not a chance. 

[Non-RedNeck Westsider]

If Mayor Brown had been involved in the TriLegacy debacle would you be as forgiving of his "negotiating" skills that had taken place? Not a chance.

To be fair, at least Delaney had a vision, put it into action and produced some tangible results.  Were they all perfect?  No, but overall the BJP did more good than harm.  What has Brown accomplished?

That argument is a non-starter.

If you want to look at this somewhat 'politikally', then IMO as an incoming mayor, I would embrace it whole-heartedly.  It won't be determined a success or failure until well into the term, and because of short-term memory, you would then have the ability to accept the credit for a job well done or blame the previous administration for negotiating the boondoggle it becomes. 

[edjax]

If Mayor Brown had been involved in the TriLegacy debacle would you be as forgiving of his "negotiating" skills that had taken place? Not a chance.

To be fair, at least Delaney had a vision, put it into action and produced some tangible results.  Were they all perfect?  No, but overall the BJP did more good than harm.  What has Brown accomplished?

That argument is a non-starter.

If you want to look at this somewhat 'politikally', then IMO as an incoming mayor, I would embrace it whole-heartedly.  It won't be determined a success or failure until well into the term, and because of short-term memory, you would then have the ability to accept the credit for a job well done or blame the previous administration for negotiating the boondoggle it becomes.

Trust me I am not a Brown fan at all, but the Delaney is wonderful act is old. Yes BJP was good, but all funded by taxes and he also brought us DROP and 8% COLA pensions too. He did plenty of harm to our city also. And regarding this thread I think he is partially to blame where we are with the Shipyards now.

[simms3]

One of the interesting points brought up is that if this were to happen, we likely aren't seeing much office/residential/hotel for a while, since we'll need to wait on the absorption of this space.

The one exception might be hotel-IF the city builds the convention center. I think with this development and a convention center, Jacksonville can transform very quickly into a pretty decent convention city.

I think Jax could be a decent convention town.

Without getting into the weeds, this is an extraordinarily bad deal for the City as currently drafted.  It places all of the risk and upfront cost on the City with all (OK, the vast majority of it) of the upside (profit) going to Khan.  He will receive the property with very few obligations other than to act as a broker by selling the parcels to others to develop.  Understanding the challenges of developing downtown and the softness of the market, it's likely that this land will sit vacant for many years to come with the only outcome being that the City has given away the land. If we're lucky, we might get a football practice field built on prime riverfront property that does very little to improve the experience of everyday Jacksonville residents or even tourists...and I don't believe for a second that he'll build the practice facility as depicted in the presentation.  Can you say "Value Engineering?"

I'm worried all we'll end up with is a practice field on the riverfront.

^If were just going to divide it up and sell it off, we could do it ourselves and keep 100% of the profit and 100% of the tax revenues, instead of 20% and 0%.

Taca, the city has already stated that there's no interest in dividing up the parcel.

There is no "interest" because Shad Khan is guiding the process and playing puppetmaster.

I do agree with Taca that the city could act as master developer and keep 100% of profits. However, I think in that scenario just about anyone would seek property tax abatements of some sort. I think pretty much everyone is asking for the REV Grant from COJ these days. I don't think Khan should be punished for being wealthy and should qualify for abatements just as any old Joe would. However, I do think that the 80-20 proposition is ridiculous. That needs to get a lot closer to 50% before the city takes it on....unless of course Khan has a few aces up his sleeve (like a major corporate relocation). 

The city could.  Other cities do have very strong agencies with competent people who know how to properly develop these things or get these things developed.  I don't believe Jacksonville is such city.  In fact, I would guess that overall the city has some of the least competent people working for it.

Khan seemingly came up with a process to move forward with development, and he has the wherewithal to find people to develop it.  He will implement, so he's asking to be paid for this.  If the city were competent, this would all have been done years ago.

The City's basis in the Shipyards is the $36.5M given to TriLegacy.  That's it.  It owns the Shipyards strictly as a secured creditor (oh, and under state and federal regs, as a secured creditor, it becomes entirely liable for the contamination if it does not actively try to convey the property in a commercial feasible manner). 

Under Khan's proposal, the City's basis in the property is $36.5M plus whatever capital costs Khan is seeking.  Seems to me, the 20% that goes to the City plus future tax revenues eventually covers the City's basis in the property.

If the City breaks even on this deal, it's a win.  That property has been idle for far too long. 

But my understanding is that future tax revenues go to Khan/Shipyards development groups?  Also, how much is all of this land worth?  Let's say 30 out of 53 acres gets sold at $2M/acre.  City makes $11-12M back, which is chump change.  Future tax revenues are certainly not going to be all that much either, and won't be realized for many decades (and it sounds like they will be used to pay off a loan secured by TIF bonds issued by the city, in other words, Khan pulls tax revenue out up front, city gets paid back many years later).

My question with the TIF is that if it's all 1 district and Khan wants all TIF to go to the Shipyards - does that prevent other developers from benefiting the way Khan wants to benefit?  And what if a successful Shipyards plays a role in doubling the value of other buildings downtown.  He gets all of that incremental tax revenue as well?  What's the time period?  When does the district expire?

[heights unknown]

All I can say is.......WOW!!! and.......GEEZ!!! Do I understand most or all of this?  HELL NO! However, I will say this: 1) Give Shad Khan a chance; 2) City of Jax...don't give anything away unless you know for sure you will get something back, sure and viable, for the City of Jax and its people in return; 3) Though Shad Khan maybe trying to puppet and control this thing, the City has to tip toe on their heels and be on top of this thing from start to finish...the City must ensure that JACKSONVILLE's best interests are put to the fore and not allow this thing to not be built, fall through the floor, or the ball dropped and we end up with a huge empty parking lot with a couple of practice fields that will be there long after most of us are pushing up pecan trees. However, it doesn't take a rocket scientist to figure out exactly what is going on, what has to happen, and what has to not happen in order for this to be successful not only for the City of Jacksonville, but also for both sides which of course includes Shad Khan.......THERE, I SAID IT.

[MEGATRON]

Wow. Tryimg to put a positive spin on the TriLegacy. Poor mayoral oversight.  Millions and millions lost. Nice try.

I don't think it's spin - it's what happened. The city didn't own the land before the deal, TriLegacy did. They gave TriLegacy $38 million that went somewhere (who really knows). However, after that happened, the city got the land.

Effectively, the city paid $38 million for some land.

And the 35 million to clean it up. Anywy you look at it the city did not handle it properly.

The City is not currently obligated to clean up the property

[MEGATRON]

In red

Interesting points after reading the full term sheet available on the TU.
-City to pay for environmental cleanup up to 35mil, Up to is key - I think that's a low number and leaves a lot of public risk on the table - this will be negotiated down
-bulkhead improvements and maintenance,
-infastructure pertaining to bay street,
-the Riverwalk improvement and extension,
-public park portions and
-Hogans Creek improvements up to Liberty St.
Also:
-City 20%/Iguana 80% land sale profits Just as I thought - Khan's going to parcel off the Shipyards to developers.  Presumably developers.  It'll be interesting to hear about all the other limitations here, and honestly, I'm not comfortable with an 80-20 split here.  I don't believe that Khan is taking on nearly 80% of the risk here, especially if he's not actually the one developing the whole thing.  If he wants to negotiate other deals for himself in separate JVs with other partners for the land he sells off, then fine, but the city should negotiate a 50-50 split on land profits.  To Khan it's essentially free money - he's not putting anything into the land, yet, before sale, like the city is doing.  At the end of the day, though, this is basically worthless land.  We aren't talking much money here compared to everything else related to this deal.  I foresee Khan getting land for free, having the city essentially prep it to be developed at city cost, Khan flipping it into a New Co with some other partner(s) and contributing the land as part of his basis, maybe requiring other partners to fund go forward, and this is Khan's way of staying in a deal and making some money.  It's free equity for Khan and if it pans out, what that looks like is $0 spent, $10M earned, almost like what is called a promote, except via technicality Khan contributes something - land - that he got for free.
-Shipyards to be rezoned, free of mobility fees forever.  Never make anything forever.  Duh
-Shipyards keeps all TIF futures generated.  Ok - so back to my other question - are there more than 1 TIF district?  or are they saying that they will package a bond for the Shipyards based on future tax revenues across all of downtown and nobody else, even future developers of other sites, get a penny?  Needs more color here
-City required to fill 5+ acres of land according to an existing agreement?? DEP Pemit #16-192176-003-EI  Ha! I knew it...those renderings were too robust to be true, lol.  5 acres is not small.
I still feel this may be the best deal the city may get, but I must admit it's hard to see the city commit funds to the extent of Hogans Creek redo and filling in 5 acres of waterfront on top of only seeing profits in the way of net land sale profit. I believe the long term benefits will make up for cost at some point but it is a steep price the city must agree to. Its time to put up or shut up. Someone correct me if I missed anything, but do you guys feel the city can fund said obligations?
If so, without a raise in taxes, how are they funded?

This is not the final iteration, by any means.  I wouldn't be surprised if we're looking at 15+ years of project, 3 of those being working out some of these preliminary details.  And I REALLY hope the city's foot forward now is to spend $$$ on a great legal team from another city (NOT Jax, no offense).  $$$ for a big city firm/team will pay off in a better deal for the city without ruining the deal.  Khan will certainly be doing the same.

Interested as to why you think $35M is a low number.

[edjax]

Wow. Tryimg to put a positive spin on the TriLegacy. Poor mayoral oversight.  Millions and millions lost. Nice try.

I don't think it's spin - it's what happened. The city didn't own the land before the deal, TriLegacy did. They gave TriLegacy $38 million that went somewhere (who really knows). However, after that happened, the city got the land.

Effectively, the city paid $38 million for some land.

And the 35 million to clean it up. Anywy you look at it the city did not handle it properly.

The City is not currently obligated to clean up the property

Of course not if they just want to let it sit there vacant.

[edjax]

Stephanie Brown, WOKV is live tweeting the DIA Mettimg at 3 for those that are interested.

[edjax]

They decided to have a special meeting next week dealing with it. 

[Marle Brando]

Good. I suspect the DIA will have a counter sheet ready by then, they must. Let's not get used to delays in the process and get the RFP's going.

[JeffreyS]

I agree with Simms if the city were competent to move this forward themselves or with others it would have been done years ago.  Let Khan do it just push for a little better deal.

[KenFSU]

Here are some details from the meeting, per Stephanie Brown (https://twitter.com/newsandnom) (thanks for the heads up, Ed!)

- Jags lobbyist Paul Harden asks DIA to keep an open mind about the proposal, knows there will be a back-and-forth
- Harden says their "unwavering goal" is to benefit the City of Jacksonville.
- Harden: we know this is a bold project, getting a football franchise together was bold and it happened
- Harden says he's here to answer questions and encourage them to get the bid process moving. City must solicit other bids b4 moving forward.
- DIA CEO recommending to set special mtg for next wk to discuss how to move forward w/ Khan's Shipyards proposals. Because they just got terms yesterday, they haven't yet had enough time to really consider this plan and what to do with it.
- DIA moves to set a special meeting for next week dealing with Shipyards proposal and process forward. Date TBD pending schedule comparisons.
- DIA CEO Aundra Wallace- we'll work expeditiously on this, it's important issue for the community. Chair adds "there's a lot o f work ahead"
- Paul Harden- lawyer working w/ Khan's investment grp- says they know will be a discussion, but they're dedicated to what's best for City
- Harden says City has abt $32mill in bonds off land, but they are willing to not make the City pay that off, instead will leave public space
- If current design doesn't include enough public park space to offset that debt, Harden says they are willing to build more in to the plan.
- Still no specific price tag being offered for City or private contribution. Also no clear funding idea, but Mayor says he's hopeful.
- Harden says all the public contribution they built in to the proposal is similar to public $ ask that's been offered to other proposals