CLEARWATER — In June, city leaders exulted in the promise of finally developing a half-dozen acres of long-vacant land east of downtown.
The land around Prospect Lake, a murky retention pond off Cleveland Street, was formerly occupied by a car dealership. But an Orlando-area developer promises an enticing vision: 247 one- and two-bedroom apartments with an urban, green vibe designed to lure young professionals.
To seal the deal, developer Prospect Real Estate Group offered a sweetener: 15,000 square feet of retail space.
Back then, ground was supposed to be broken this April after the city and Prospect hammered out a development agreement, something originally scheduled to be inked by last fall.
The only worry on the City Council at the time was that the developer wouldn't deliver fast enough.
Vice Mayor Paul Gibson, in particular, was adamant that any agreement must hold Prospect to a set timetable or the developer would face repercussions.
But nearly seven months later, it's not the developer causing the delay. Instead, a tangle of federal obligations on the property has held things up.
The city has been wrangling with the U.S. Department of Housing and Urban Development over an old grant used to acquire part of the property. Since market-rate apartments rather than affordable housing are planned on part of the land, the city needs to pay the federal housing agency back.
HUD wants $271,000. The city is seeking a lower amount. No resolution has been reached.
"But we're glad we have a baseline for discussion," said Geri Lopez, the city's director of economic development and housing.
In December, a Washington, D.C. lobbyist working for the city emailed HUD officials with a warning that the developer was ready to scuttle the deal.
But that was merely a strategic move to hurry things along, Lopez said.
Frank Tetel, Prospect's vice president, confirmed the city's take.
"That's all it was," Tetel said. "Nobody could close on a property (with the HUD money issue), because it would be a title issue."
The Prospect Real Estate Group, based in Longwood, is in fact moving forward and plans to break ground in July, he said.
A minor environmental soil clean-up is also necessary in small areas of parcels along Park Street where auto repair shops were located. Very low levels of petroleum byproducts are present as well in the Park Street right-of-way and old St. Vincent de Paul sites that are part of the development site. That work should be done by March, but a cost hasn't been determined, said Ed Chesney, the city's environmental manager.
City planners say that a delay of a few months won't harm the long-term viability of the $34 million project, but downtown boosters aren't persuaded.
Building living space downtown to draw professionals with money to spend is a revitalization elixir, they say, and Clearwater's struggling downtown core can't afford missteps.
"I'm extremely disappointed. It appears that all deadlines have not been met. I'm disappointed that the HUD situation was not resolved earlier. Prospect Lake is the most important thing we have downtown. Period," said Bill Sturtevant, chairman of the Clearwater Downtown Partnership.
A development agreement should be ready for council approval in early February, Lopez said.
If all goes well, it will be a happy ending for the troubled parcel first acquired by the city in 1999 for $1.2 million.
Mayor George Cretekos was the only council member to vote against the project after a Tampa Bay Times story revealed that a former executive with the company had pleaded guilty to corruption charges.
Prospect Real Estate Group officers hadn't told the city about Richard Zahn's criminal history. They said they figured city officials already knew about his legal troubles and December 2012 resignation, which the company said was well-known in the development community.
Cretekos said he discussed the state of the development with staff late last month.
"The staff didn't give me any reason that we should be concerned," he said.
Charlie Frago can be reached at firstname.lastname@example.org or (727) 445-4159. You can follow him on Twitter @CharlieFrago. To write a letter to the editor, visit tampabay.com/letters.