May 202016
 

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by Arnaud and Naja Girard……

This must be an all time record for how fast a small City like Key West can vet, vote, and authorize payment on a 12.5 million dollar deal. In just 2 weeks time the City dispatched 12.5 million dollars to a private company that will provide affordable housing [for up to $2709/month] for rent-burdened Key West workers. The last leg of this race to closing played out this week: the County’s Land Authority pledged the entire City reserve plus $300,000 dollars to the Cornfeld Group. The private company based in Hollywood, Florida will use the money to purchase the 157 2-bedroom units at Peary Court while adding a deed restriction for affordable housing on the entire 24-acre parcel.

After digging into some stories about affordable housing deed restrictions ‘gone bad’ in the City of Key West area, The Blue Paper had some questions about this hurried method. Officially, the mysterious sellers of Peary Court are the cause of this expedited process. “They literally have a gun to our heads,” said Claude Gardner, the local real estate agent representing Jeff Cornfeld, “They gave us only 30 days to close the deal.”

For people who can afford $2400 to $2700 a month the deal may be good news. Under the deed restriction the property is entirely dedicated to affordable workforce housing. No unit, present or future, can be sold individually. The deed restriction doesn’t fully kick-in for 2-years but will then run forever. Current residents who do not qualify for affordable workforce housing will be able to stay for the remainder of their lease period plus an additional 12 months.

However, no strict limitation has been put on the level of affordable housing. Under the current City code, which will forever apply to Peary Court, there are 4 categories of affordable housing: low-median-moderate-middle.

For 2-bedroom units, 2016 rent caps [based on federal guidelines] go from $1546/month [low] to $2709/month [middle]. The owner can mix and match those levels at will, the only caveat shown in the code is that the total rent roll cannot exceed the equivalent of all units rented at the “moderate-income” level plus 10% [moderate-income cap for a 2-bedroom unit [2016] is $2,322/month.]

Apparently under current regulations [assuming all units remain 2-bedroom] the total monthly rent roll for 157 2-bedroom units is capped at $401,009.40/month [157 moderate-income 2-bedroom units plus 10%].

One of many mix and match scenarios could presumably be:

  • 130 units rented at “middle-income” [$2709/month; total rent = $352,170/month] 83% middle income
  • 5 units rented at “moderate-income” [$2322/month; total rent = $11,610/month] 3% moderate income
  • 8 units rented at “median-income” [$1935/month] [total rent = $15,480/month]  5% low-income
  • 14 unit rented at the “low-income” [$1546/month] [total rent = $21,644/month] 9% median income
  • TOTAL RENT ROLL: $400,904/month [< $401,009.40/month][$105 under the allowable cap]

Arguably, Peary Court will become largely unaffordable for most Key West workers despite the deed restrictions. At this week’s County Land Authority meeting public speakers made a last ditch effort to convince the government to save that 12.5 million for the creation of low-income affordable housing. “We don’t need moderate-affordable housing,” said resident and past City Commission candidate, Tom Milone, echoing the City’s own 2013 Comp Plan data and analysis regarding the housing crisis. [The City’s data shows a need for over 1000 low and median-income rental units and a surplus of moderate-income rental units.]

COMP PLAN SURPLUS JPGOn the rooftops, on the painters’ ladders, in construction trucks, the overwhelming presence of crews from Miami manned by Latinos from South America and Haitians shows to what extent Key West’s traditional workforce is melting away. However, because of the urgent need to oblige the sellers of Peary Court, a meaningful debate about how to provide low-income housing was thwarted. Hurried City leaders may also have been less careful than they should have been about the contents of the 12.5 million contract.

“Deed restrictions are not always as solid as you may think,” said David Richardson a former board member of the Salt Ponds condo association in Key West. That development was erected in the late 90’s on sensitive land and the State imposed affordable housing deed restrictions on 108 of the units in exchange for its approval. Mr. Richardson says he paid full price for what he believed to be a market rate unit. “I ended up getting on the board. We started compiling a list of the deed restricted affordable units and that’s when, through cross-reference, I discovered that my condo was supposed to be deed restricted affordable.” His deed however made no mention of it. Mr. Richardson contacted several attorneys including Bob Tischenkel, who was then the City Attorney, “They had no answers.” Maureen Bramlage has an explanation. “It was a mess. At the Salt Ponds when condos went through foreclosure the banks would sell them free and clear of those deed restrictions. People were renting at market rate regardless of deed restrictions. No one was paying any attention.” said Ms. Bramlage. Roger Holtkamp, the manager at the Salt Ponds condos confirmed that was how things used to be.

The Peary Court deed restriction contract and its enforcement should be a concern.

Under the agreement signed this week, neither the City, the Housing Authority, nor the Land Authority are given full auditing rights or powers. Compliance will be verified by a single declaration signed annually by the Peary Court owners. Given the intricacies associated with renting 157 units at 4 different affordable housing income levels, that can change from month to month, it is questionable whether and to what extent these deed restrictions will be monitored and enforced.

In fact, the City Commission voted to buy the Peary Court deed restrictions without first seeing what the agreement would look like. “This is not City of Key West money,” City Attorney, Shawn Smith, told them, explaining why there was no written contract for Commissioners to look at prior to approval, “The City merely makes a recommendation to the Land Authority.”

“They [The Land Authority] may decide they don’t want to do it, after they look over all the contracts and look over everything,” said City Commissioner Payne, “and if they’re not happy then they’ll say no I’m sorry, your nomination, we’re not going along with it. That’s their absolute right to do and that’s their duty. So, I’m very comfortable doing this… I trust that these land restrictions are going to be iron clad and that they’re going to be something that will be to the benefit of our City.”

Yet it was clear at this week’s Land Authority meeting that the County had no intention to “second-guess” the City.

“This money is allocated to the City of Key West,” said Danny Kholage, sitting on the board of the Land Authority, “The City Commission is charged with reviewing these requests, going through all of the analysis, holding the public hearing and acting. And they have acted. It’s not for us — I do not see this as our responsibility to second-guess, go behind, reevaluate this request on the part of the City Commission. So I’m not gonna’ do that.”

If the City Commission relied on the County and the County on the City, then who is watching out for taxpayers interests or for low-income people unable to find an apartment?

The City Charter was amended in 2007 to require that the acquisition of any interest in real property be put to referendum. A previous attempt by the City to purchase Peary Court was rejected in a referendum by 58% of voters just 2 months ago. The fear of delay or possible rejection caused the attorneys to find a loophole around the referendum requirement: the County’s Land Authority, not the City, they claim, was buying the deed restriction [an interest in real property]… with City money.

In many regards the agreement drafted by the lawyers exceeds expectations: the property can only be used for rentals, qualifying tenants have to earn 70% of their income in Monroe County and have to have been County residents for at least a year.

However, as was proven by the Salt Ponds fiasco, no matter how iron-clad the deed restrictions are, the only thing that truly matters is that the requirements be enforced. In the deal between the City and the Cornfeld Group there is no requirement for an independent audit and more importantly none of the government agencies involved have a right to a full audit short of legal action.

The Housing Authority’s 2014 monitoring report, which was released in August of 2015 showed that about 40% of owners were not compliant.

 

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  24 Responses to “Peary Court: Affordable Housing Deal Goes Through / Units Can Legally Rent For $2709/Month”

  1. Naja, you nailed it and thank you.

    Now! everyone should understand the History of Key West is Very big money and the government will always Coho to money and not the voters.

    So now the city needs to finish Perry Court, by changing the density rules. For It will happen in the near future!

    As history goes, Look at Truman Annex, waterfront Park, Key West Bight > high rise buildings and taking of KWB monies (2.5 Million), Black History Museum, and the possible new directions for Bahamas Village housing, don’t ever forget the Dean voting scam and Dean still lives in Key Heaven outside of KW – thanks to the 3 person election board of District #1, District #6 plus Elections person.

    This is one human family – we all get stepped-on equally, for less than a better word.

    Bottom line it is “US” the voters are the problem…not the commission, the government offices, city manager, county or police or code. We voted them in and now we are living with the results. So “shame on us” it is too late to change anything in the near future with only one person running or District #1 and District #6, for you see the fix is in – and it will be very hard to ever change the years of KW Culture.

    Now is the time to go forward and agree, but also get what is needed by the speed of business not the speed of government, Don’t try to “hang on” for it is happening covertly around you every day – try to direct it to a positive out-come for all.

    The city raises 15 million in taxes and has a budget of 166 million the school board budget is 169 million…The city is the biggest landlord in KW and I for one would like the city go back to cleaning-up the city and stop being a landlord…why do we need more and more city employees for something the city does not need to be.
    The sidewalks are a mess and many lawsuits are in the pipeline against the city,
    The last lawsuit the city/voters paid $74k – which a sidewalk repair of $1k could have fix the problem. Check the Mingo item – no mention of the money to the public up front.

    This KW city story goes on and is great entertainment, I hope other voters are tired of KW City actions and will stand up and enter the political arena plus vote – KW has too many great people to set back and watch your investment go down the tubes…your talent is needed and we will vote for you.

  2. How many times have we seen this scenario? They “literally have a gun to our heads”…”they gave us only thirty days to close the deal”. Gee! Then what? Oh, yeah…I forgot: The sky is gonna fall!

    Didn’t we see these kinds of shenanigans with regard to Hickory House? How about Marathon Manor? How many millions of county taxpayers dollars are still tied up in these two tragedies?

    This “Plan B” didn’t just drop from the sky: The amount of work by the Cornfeld interests is plainly obvious. That takes time. It’s been in the works for quite a while. I don’t blame them for anything. They’re in business to make a buck. Same deal with the current owners, whoever they might be. These are savvy people…unlike our current crop of “public servants”. These public servants are ill-equipped when it comes to the real estate game. That’s what we, in effect, told them…by rejecting their recent referendum.

    We (the city) are supposedly buying a “restricted deed” provision in this deal…for $12.5 million. Hmmmm. Where on the balance sheet do we place this “investment” and at what value? Or, does it show up as a value on Cornfeld’s balance sheet?

    Aside from the cautions duly outlined by our dear Editor, I would also ask: What happens to this deal if Cornfeld…at any time in the future, decides to just bankrupt the property? What then happens to such gewgaws as “deed restrictions” and the like? Sorry…but this looks like a bad meal…sure to come back up again, and again.

    Why don’t we just keep our $12.5 million in our pocket and see what happens?

    Dickford

  3. I’m curious. Will Peary Court be taxed at the $60m purchase price, at the $47.5m out of pocket price or continue at the current $29m?

    • Property is supposed to be taxed on it’s actual value. This is where things get complicated. Just because it was purchased for $ 60 million does not mean it is worth that amount. Often the way taxes are done is to come up with a number less than a typical owner would sell it for. That keeps it from being contested. The millage rate is simply high enough to get what they really want. As a result of this sale there is reason to not only raise it but also other such property owned by others. This is why some end up needing to sell the home they owned for 20 years. Even with homestead and save our home regulations it still raises every year and at sale time the taxes go way up. This being commercial rental it dam sure should go up. But this is Bubba ville so no telling what the tax appraiser will come up with. Yet another likely corrupt office. Bottom line it is paid with tenants rent money.

      • By deeding the property as affordable in perpetuity, the owners will be saving a ton of money on property taxes. The property values will be about half as much as market rate, but the rents they charge will be essentially the same as market rate. Clever of them.

        • Colby, RE: Clever of them.

          We’d all do the same thing: It’s just bizness! That said, it’s a dam site better than the previous proposition, where the property would have no taxable value at all.

          My question(s) lie in a different direction: What is the big deal with this enticing $12.5 million fund? Note that it is central to both propositions. Why? We KNOW this money is real. Where’s the “real money” from the rest of these people? Has anybody seen a written proposal…replete with dollars and “sense”? As far as I’m given to understand, that is yet to be drafted. I find it troublesome that this fund can be spent in this fashion: It does not appear to be in accord with the stated purpose of the fund. IOW, exactly what does KW get for forking over this $12.5 million? A “deed restriction”?
          How d’ya capitalize that?

          Dickford

  4. I am disappointed in KW but not surprised. This is the result of a lack of knowledge and skills required about the construction and rental business. It is something the government should stay out of. We will not likely ever invest our money in KW. The amount of corruption by the KWPD and other offices of KW are far too clear. Not even sure if we care to visit it in the future. Are far cheaper places that offer just as much. Only real event KW has that can’t be found in other towns is Fantasy Fest. Only hopes of KW changing are up to the voters and they are too busy working 60 hours to have time to vote or care. Many of the charms we loved about KW are gone. Cowboy Bills is gone and leaves us with no bar that plays country music. The pier show has all but left. And something we noticed a few weeks ago is becoming very disturbing. The bars are all blasting music so loud that it disturbs even walking past them on Duval street, Grease Monkey will cause damage to your hearing. Seems they all keep trying to be louder than the bar next to them. Sidewalks are blocking foot traffic to the point that you must walk on the street to get around them. Only place we have found even close to good music at reasonable sound level is Dante’s so spend a lot of time at them and Ft Zack. In short KW is turning ugly.

  5. <>
    That sort of says it all. BAU – that’s Business As Usual – is obviously alive and well in KW.
    Hurry, hurry, hurry! Put your money down ladies and gentlemen! Join our shell game and watch in awe as we pass the buck!!
    So freakin’ sad.

  6. See who in gooberment buys a new boat or a Mercedes.

    We’ve been coming to KW for over 20 years, the last 6 years for 3-4 months at a time. This upcoming year will be the last time. KW used to be a fun carnival with great food and entertainment with nice quiet spots and delightful back streets and local laid back culture.

    Now it’s becoming like a zoo. The corruption used to be comical. Now it’s pretty serious it appears.

    Affordable housing is a great problem for those of you who live in KW. The admission price has gotten too high with the cost of seasonal rentals and drinks and food for snowbirds as well. We who come for the season bring a lot of money into town and we’re being forced out by the cost of living as well.

    • Yes. We know. I have lived here for ten years. Not only have our rents increased dramatically, so has the hotel rates and bed taxes. We have less of a workforce and less tourists spending money. I own a boat. It costs me over $900 a month to tie a rope to a cleat. And I’m in stock island, to boot. The attitude of the city of key west is f**k you, pay me. Whether resident or tourist. $2700 a month is affordable? That’s about all I make in a month. Horrible what the city is doing to everyone.

  7. As tourists we should all stop coming after seeing this misuse of that 5% bed tax we pay. It will not help so much as 1 worker at any level. We have been visiting KW for 42 years and seen many changes. A few for the good but mostly bad. Land marks such as Fast Buck Freddies are gone. It has become so commercialized by the rich that it has lost most of its charm. The prices are getting crazy. We can easily afford but feel like we are being ripped off. Been nice if some of that $12 million was used on the beaches. Defeats the purpose of a bed tax. Service will suffer when low paid workers leave and then the tourist stop coming. Dam shame to see what once was a great town destroyed. As to the corruption it likely has always been going on. The Blue paper simply has brought it to attention.

  8. with the relaxing of rules regarding Cuba, this town will die out because nobody will bother to drive here to visit Cuba when it will be much easier and cheaper to depart from Miami and other cities. KW is simply pricing itself out of play.greed is killing this town, predictably but nobody cares because of their blind greed it is becoming too much like south beach and the powers that be are trying to turn Cuba into the same

  9. Shipyard…need I say more?

  10. Our illustrious Mayor and Commissioners never do the will of the people of Key West. They were defeated in their effort to buy Peary Court so they just figured out a way around that. Of course this all had to be done quickly without having the time to fully understand the ramifications of giving the buyers $12.5 million. There is a glut of apartments available on the island at the price level of Peary Court but of course that fact means absolutely nothing to them. As usual, the people on this island who don’t need help receive it anyway while the rest of us are supposed to believe our leaders that help is coming. I seriously believe you could round up random people off the streets here and they could make more intelligent decisions than the clowns we have in charge.

  11. Well, I hate to say it, but those of you who live in KW and vote in KW are the ones who put those folks into public office. As I said, we’ve been coming to KW for over 20 years and each year a few new (and old) public officials have been either arrested or otherwise being pilloried for corruption. I’ve seen some very astute votes by residents such as the cruise boat dredging and Peary. But as long as you keep putting the same ole same ole in office, what really changes. I’ve been watching the old school so called remodel. It’s not done yet and how many millions over budget.

  12. The price of housing is very high in this community. But people need to remember that price is solely based on supply & demand (actually demand / supply). The price-points of supply are not determinative of price, generally. More available housing units (of any kind) will lower the price.

    So the answer is that we need MORE housing, not housing for particular income levels. When there are more units, the prices will drop, whether they are moderate, median, low or very low rents. By waiting around for “low income housing” or “workforce housing,” the low-supply issue is exacerbated.

    Perry Court may or may not have been the correct answer, but doing nothing is definitely the WRONG answer.

    (Higher wages would help, too!!)

    John Miller
    Key West

    • Yes , if they created more housing then supply goes up and demand lowers. Normal developers know this but the clowns in office do not.
      That 12 million could have easily created 150 new small units and as a result the demand would been lowered for Peary Court and as a result prices would be going down. Hope they enjoy the new toys that will arrive. Everything about this deal says BRIBE.

  13. To get the full drift of what went down at the recent county commission meeting, open the link below to the county’s video of the meeting. The Peary Court $12.5 million kickback agenda item (F 6) begins around the 09;35:30 point.The entire item took a while and was wonderful local government theater if you have a gallows sense of humor.

    http://monroecountyfl.iqm2.com/Citizens/SplitView.aspx

  14. I fully agree with JIMINKEYWEST that this deal has BRIBE written all over it. From what I’ve read the $12.5 million we are GIVING the Cornfeld Group constitutes the entire amount they will be putting as a down payment to purchase Peary Court with maybe a little left over to put in their pockets or OTHERS. It sure must be nice to purchase a $60 million property without using a cent of your own money as a down payment. I fully expect to be reading about this debacle in the future as how another developer fleeced us and were never held accountable.

    • Now you’re getting’ it! This is how “successful business people” (like Donald Trump) do business! OPM = Other People’s Money: A great gig…if ya’ know the “right”people. 😉

      Dickford

  15. Now we really need to focus our efforts on making sure somebody runs against Weekly and Cates in the upcoming election….At this point I’ll even vote for Donald Trump if we could get him to run for KW office.

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