Longleaf Saga: Lessons Learned

This is the third installment in the Lake Wales Renaissance series. Lake Wales City Commissioner Robin Gibson serves as deputy mayor and chairman of the city's Community Redevelopment Agency.

CRA Created. Lake Wales formed its own Community Redevelopment Agency in 1985. The original purpose was to build on the downtown improvements completed in 1973 by capturing the benefits coming from the CRA's unique Tax Increment Financing tool. (The difference between property values before and after redevelopment should cause tax revenues to increase. That increase in both City and County taxes (increment) is set aside and deposited into a CRA Trust Fund for use with further redevelopment.)

Longleaf Created. Beginning in 1997, the City's management at the time retained a CRA expert, revamped the CRA Plan, and got aggressive. The City paid $2.4 million for a large tract of land south of town on both sides of U.S. 27, and annexed the property into the City. The CRA was then expanded to overlap the entire city population as well as the vacant land in the newly acquired property. The City then developed the property west of 27 into the Longleaf Business Park at a cost of an additional $2.1 million. The City Commission then transferred the Longleaf property together with the City's entire debt for the project to the CRA.

Longleaf Unloaded. The whole thing would have been an unmitigated disaster had it not been for the real estate euphoria in 2007, which led a starry-eyed development company from Ireland to pay $2.66 million in cash for the property east of 27. The company eventually went belly-up but the CRA had the money. Recently, the partially developed Longleaf Park, renamed Lake Wales Commerce & Technology Park, on the west side was sold to a private developer for almost $1 million. Thus, after the cost of carrying the property for 20 years, the CRA was fortunate to get a big part of its money back.

Benefit for City's Core. The justification for the CRA to pay for the new development of Longleaf was that the tax increment generated by Longleaf would be the "engine" to redevelop the "core city." Indeed, the projections were that Longleaf would be worth $75 million at buildout and generate an annual tax increment of more than $2.8 million for redevelopment of the Lake Wales core. Even a partial buildout would yield hundreds of thousands of dollars for the cause.

Benefit Scratched. The City's management changed, and the City got cold feet. The fear came from realizing the other side of tax increment financing. The increase in property taxes that is set aside for the CRA trust fund --- acts to deny those increases to the City's general revenue fund. The successor administration wanted the City's portion of the increment to go to general revenue and not to the CRA. The Commission followed the administration's strong recommendation and redrew the CRA boundary to take Longleaf out of the CRA district. While the City gained 52% of the increment for general revenue, the other 48% was lost to the County --- and 100% of Longleaf's increment was lost to the CRA. The "engine" for redevelopment of the city's core was scrapped.

Lessons Learned:

• Be consistent. Survive personalities. Get a good CRA plan and stick to it.

• The only justification for a CRA to risk borrowed money to improve property is for that property to increase in value and generate increment for CRA purposes. To divert increment generated at CRA expense to another purpose is counter to the statutory intent of Florida's Community Redevelopment Act.

• The City Commission may appoint a separate CRA board, or assume the CRA seats for themselves. As long as the same commissioners are board members for both entities, conflicts of interest will inevitably arise. In these instances, commissioners need to look beyond each entity and make decisions in the best interests of the citizens to be served.

The next article: The Walesbilt Hotel Saga.