CLEARWATER — City officials on Thursday agreed to hire a consultant to help them decide whether to accept significant structural and financial changes developers say are required to make an apartment project on the downtown bluff feasible.
The City Council agreed to extend the developers’ deadline to commit to the deal, which was expiring at the end of this month, to Aug. 31 while a consultant analyzes the impact of their new terms.
Last June, the council selected the joint proposal of Gotham Organization of New York and The DeNunzio Group of Pinellas County from three bidders to build about 600 apartments with retail on the former City Hall site on Osceola Avenue. The plans also include a 158-room hotel on the vacant Harborview site a half-block north. The projects were billed as catalysts needed to bring full-time visitors and residents downtown as the city opens the $84 million renovation of the waterfront and Coachman Park this June.
But skyrocketing insurance and interest rates, coupled with decreased revenue projections from the rental market, have made the apartment plans agreed upon last summer financially unworkable in today’s economy, said Gotham Vice President Matthew Picket.
The development team had to wait to inspect the sites and begin due diligence work until seeing the outcome of a ballot question in November that asked residents whether the city could sell the two parcels to the developers. It passed with two-thirds of the vote.
Although no changes are proposed for the hotel and a final site plan is being submitted May 1, The DeNunzio Group President Dustin DeNunzio said the success of the hotel and its 20,000 square feet of retail space “relies on the new residents that will be living next door.”
Instead of building two 27-story towers with 500 to 600 apartments, the developers are asking to build one tower with 400 units. The ground-floor retail could decrease, but Katie Cole, a land-use attorney representing Gotham and DeNunzio, said Thursday that final square footage is still being determined.
Instead of paying the city $15.4 million for the City Hall site by the closing deadline of Dec. 31, 2024, as agreed upon last year, the developers are asking to pay $7.6 million within five years of closing. The $15.4 million price was based on an appraisal of the land for its highest and best use, which would include condominiums.
But the city required the developers to build apartments to ensure it attracts full-time residents and helps downtown revitalization. The appraisal showed a value of $7.6 million for apartment use, according to city attorney David Margolis.
As an alternative, the developers are proposing for the city to convey the property and retain a zero-interest mortgage for the developers to pay the $15.4 million in a lump sum 10 years after closing.
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Instead of building two floors of underground parking for the apartments, as required in the agreement, the developers are proposing one subterranean level with one level above ground.
The revised terms still include a $4 million gap to make the project viable enough to obtain financing, which the developers are asking the city to help fill. One option is to eliminate a pedestrian bridge originally included in the design.
Any changes to the terms of the development agreement approved last year will require votes by the council at two future public hearings.
Mayor Brian Aungst Sr. said that he wanted to balance the intent of what voters approved with what is best for the city and that further analysis of the revised terms was worthwhile.
“We’ve waited over 20 years for something like this, a catalytic project downtown,” Aungst said. “We cannot let perfect be the enemy of good and I still think this proposal, after renegotiating further, is still a good proposal.”
But council member Kathleen Beckman said the council rejected other bidders that had smaller proposals in favor of the added density in the original plan from Gotham and DeNunzio. She questioned what message this would send to future developers if the city changes the terms.
“We need to address voters who are questioning and skeptical of our democratic process, because these proposed changes are very different than what was presented and what our voters voted on,” Beckman said.
But if the council were to reject Gotham and DeNunzio’s changes and restart the request for proposal process for developers, long-awaited downtown revitalization would be further delayed.
The next chance for the city to add a referendum to the ballot for a new project would be in March.
Companies tied to the Church of Scientology have purchased about 175 parcels in and around downtown since 2017, leaving most of them vacant and complicating the city’s revitalization efforts.
The downtown waterfront and bluff parcels in city control are the best chance at fighting back, council member Mark Bunker said.
“I do think it is better to go along with the project that will bring some much-needed life downtown and spur other people to bring their projects downtown rather than completely abandoning it,” Bunker said. “This is the first step in seizing control of our downtown back from Scientology.”