Overview of City of Miami Actions on the Watson Island Project

For 16 years the City of Miami has taken every opportunity to give property deeded for public use to benefit of a private developer.

State laws, the County’s Ethics laws, and the City's Charter and ordinances have been broken and trampled on in the process of this excessive favoritism.

The public has an opportunity right now to challenge the City's behavior.  See March 30 letter to Miami Commissioners.

The Flagstone Island Gardens Project for Watson Island, first approved by the City in 2001-2004, has since been supported, revived, and rescued by successive Miami City officials. After 16 years the financial markets have not stepped up to support the project despite two boom and bust cycles in Miami commercial real estate...has gone through delinquencies in payments...and yet has been granted 5 extensions in the past 7 years.  

Enough is enough!

HISTORY

2001     To improve the City of Miami's dire fiscal crisis, the City requested proposals (RFP) from private developers for plans to utilize public land for public purposes on Watson Island and generate additional revenues. Flagstone’s Island Gardens was selected to build a mega-yacht marina; two hotel towers of 12 and 22 stories, with 575 rooms (including 100 timeshare units), 137,000 square feet of retail space and 14 restaurants totaling 84,000 square feet; and other minor facilities for which the City would receive a minimum annual base rent of $2 million.

The voters approved the proposal in a referendum in November.

2004     The City formally approved the details of the Flagstone development plans, including two hotels now  with 33 and 50+ , with a total of 605 rooms (105 timeshare units), 225,000 square feet of retail space,  a ten story parking garage, and other commercial and cultural facilities.

2009     By 2009,  during one of Miami’s most robust commercial develop booms, no major banks or private equity firms came forth. Flagstone was frequently delinquent in paying its scheduled preconstruction payments in lieu of rent. The City repeatedly accommodated the developer by excusing the delinquencies, granting rent reductions, modifying the project, and/or extending the time for Flagstone to commence and complete construction.

2010     By late 2009, with still no financing on the part of Flagstone, and now faced with the broad economic downturn, former Commissioner Marc Sarnoff led actions by the City to substantially change the terms approved by the voters in 2001.

By renegotiating the financial terms with Flagstone and also voting to allow the project to proceed "in phases," instead of all at once the City acted unlawfully to let the developer off the hook.   The City did not require any new appraisals, traffic studies, or other impact studies. No new RFP was issued, nor a referendum called.  (Marc Sarnoff is now a Partner in the law firm that was and is still advising and lobbying for Flagstone.)

2011-2012   The Commission had again excused delinquencies in payments and other defaults, and continued to extend the developer's deadlines, despite the clear signs of another Miami commercial real estate boom.

2013     The Related Group proposed to "save" the project by doubling the square footage of the retail component from 225,000 to 525,000 square feet, and adding 100 hotel rooms and 100,000 square feet of convention center space.

It took a public records lawsuit by citizens against the City to uncover records showing the City was willing to dramatically increase the project using 2002 and 2004 data, while skirting laws requiring current traffic, environmental, public safety, and other impacts.

After an outpouring of public opposition, the City Commission of Miami Beach voted unanimously to oppose the revised project because of its impact on MacArthur Boulevard, the main corridor between Miami and Miami Beach. The Related Group, the new partners to the Flagstone Group, withdrew.

2014     On May 8, the Miami Commission voted to allow the project to proceed. Local residents and environmental groups raised a number of concerns such as:

* the City's charging the developer only $2 million in rent based on 2002 appraisals when 2013 and 2014 appraisals showed the 2014 fair market value was over $7 million

* failing to conduct any traffic studies after 2004 despite the massive growth in the last decade causing gridlock on MacArthur Causeway, as well as the new Port Miami Tunnel

* failing to take into account the environmental impact of the project:  notably the risks of catastrophic damage to this project on public property.  Damage that taxpayers would have to pay for because the City did not require the developer to design or insure for the impact of sea level rise over the life of the project.  This at a time when all South Florida local governments had acknowledged the reality of sea level rise today and the need to account for it in their decisions.

At that meeting, several Commissioners expressed concerns about the repeated delays and excuses from the developer, and said they would not approve any other extensions beyond the June 2, 2014 deadline for construction of the marina to begin. However, they also refused to address the massive subsidy or the lack of current traffic or environmental studies.

The Commission voted 4-1 to approve the project, while two Commissioners who voted to approve it said they relied on what turns out to be misleading comments by the Assistant City Attorney. She claimed that if the Commission did not approve the precise language submitted to it by the staff, at that hearing, the City would breach its "duty of good faith" to meet the developers deadline and be vulnerable to a lawsuit for breach of contract by Flagstone and be at risk of having to pay $58 million in damages for the developer's "documented" expenses.

Public records now show the City had nothing in the way of "documentation" other than unverified self-serving summaries from Flagstone, and five other reasons her statements were misleading or false. The “push against a deadline” took place after two, repeat, two years the City staff discussed bringing the issue before the Commission.

Because Watson Island was deeded by the State of Florida to the City decades ago solely for "public or municipal purposes," the project required further approval by the Governor and Cabinet. Public records show that for over two years, the Florida Department of Environmental Regulation (DEP) opposed the project because of the lack of current appraisals, because of  Flagstone’s " lack of progress on this project over the past eight years," and because of a variety of uncured financial defaults.

However, Flagstone hired a lobbyist with close ties to Governor Rick Scott, who magically rescued the project from defeat. Only days before the last possible date for Cabinet approval, the Department agreed to place the Flagstone project on the May 13 agenda, and dropped its objections based on instructions "from the Capitol."  [See Herald report here]

Still, with these green lights from the City and the State, it is now documented through public records that Flagstone did not obtain the necessary permits and commence the "actual act of physical construction" by June 2 as its agreements required. Yet some City officials still stand by Flagstone. As the Miami Herald reported:

"Thirteen years ago, Miami voters blessed a developer's plan for a megayacht marina, two luxury hotels and tons of space for shops on publicly owned Watson Island. For 13 years, nothing happened. On May 8, 2014, after a series of extensions still failed to produce anything, Miami officials gave Flagstone Property Group one last chance: Start construction by June 2, they said. Or else. "Two weeks after the do-or-die deadline, there's no construction at the barren waterfront site, either on land or underwater. The developer doesn't even appear to have applied for building permits from the city. But Flagstone and city administrators insist "construction work" had indeed begun by June 2 - because, they say, a diver mapped and surveyed corals and sea grasses that must be moved or replaced elsewhere in the bay before dredging and construction of the marina can begin." [See Herald report here]

2015     The Third District Court of Appeals, breaking 80 years of precedent, ruled that Miami residents didn’t have a right to a trial even if they had a reasonable argument that the City has broken its own Charter and other laws.

            For several different commercial developments – all put in place during former Commissioner Marc Sarnoff’s tenure – residents from Norman Braman, Martin Margulies, Steven Kneapler, Grace Solares and CaCC supporters were denied the right to a trial.

            There is a wide-spread belief that a trial under oath with penalties for perjury would have implicated various senior City officials for strategies and tactics for which they could have been held responsible.

2016     In response to the growing pattern of denying residents access to the courtroom, Miami voters by an extraordinary vote of 84%, amended the City Charter to assure residents had the right to a trial in the future..

The new provision is an incentive for some to reconsider a lawsuits regarding SkyRise, Flagstone, Miami World Center, and Grove Bay.

2016     In September, Flagstone filed an application, two years in the making, to expand its project-- even before it has begun being built. Flagstone’s most recent Major Use Special Permit (MUSP) modification seeks to slip the request past the Commissioners by getting the Director of City Planning and Zoning to approve the changes as “minor.”

            CaCC, with the help of its experts, informed the Commission that the application did not meet the requirements under the Code for being “minor.”

            Commissioner Ken Russell requested the Director of P&Z to provide his response to CaCC’s analysis.  After a 10 week delay the Director provided his answer-- and only because the Commissioner put a pocket agenda item on the Commission’s schedule. To add insult to injury, the Director of P&Z delivered the written response to the Commissioners themselves the morning of the hearing, preventing CaCC, its experts and others in the public from being able to provide input to the Commissioners.

            Flagstone went back to the drawing boards to make changes that it hoped would qualify for “minor” to avoid a Commission vote.

2017     But they didn’t make enough changes. CaCC wrote additional letters on January 25, February 16 and March 30 to the Commission, as the application was repeatedly amended to accommodate what CaCC has challenged.

            CaCC is anticipating that City Officials will again claim that the MUSP must be approved before May 1st so that Flagstone can meet its next deadline. This “rush” to meet the deadline is ironic given that Flagstone has had 2 ½ years to prepare for this deadline

 It would not surprise us if the City staff claims --yet again-- that if the Commission doesn’t approve the developer’s current request, the city will be exposed to a liability claim.

We believe that is not only wrong, but if the City does makes that claim, the Commission should extend the project by 60 days while it obtains outside legal expertise. Our advisors believe the City has not now and will not have any liability, as Flagstone has participated hand in hand with all of the City’s own wrong-doing.

AND HERE WE ARE!  STAY TUNED!