MINUTES WORKSHOP DESTIN CITY COUNCIL OCTOBER 10, 2013 CITY HALL ANNEX COUNCIL CHAMBERS 5: 30 PM The Cuncil fr the City f Destin met in special wrkshp sessin with the fllwing members present: Destin City Cuncil Mayr Sam Seevers Cuncilmember Sandy Trammell Cuncilmember Larry Williges Cuncilmember Jim Bagby Cuncilmember Tuffy Dixn Cuncilmember Jim Freman Cuncilmember Cyrn Marler Destin City Staff City Manager Maryann Ustick City Clerk Rey Bailey Cmmunity Develpment Directr Ken Gallander City Planner Hank Wllard Planning Manager Ashley Grana Land Use Attrney Sctt Shirley City Attrney Jerry Miller CALL TO ORDER, INVOCATION AND PLEDGE OF ALLEGIANCE Mayr Sam Seevers called the meeting t rder at Y 5: 30 PM. Cuncilmember Marler delivered the invcatin; which was fllwed by the Pledge f Allegiance. WORKSHOP At the request f the Mayr, the fllwing wrkshp participants intrduced themselves: Hank Wllard City Planner Ashley Grana City Planning Manager Christie Frtney Legendary, Inc. Ken Gallander Cmmunity Develpment Directr Maryann Ustick City Manager Sandy Trammell Cuncilmember Cyrn Marler Cuncilmember Sam Seevers Mayr Rey Bailey City Clerk Jim Bagby Cuncilmember Tuffy Dixn Cuncilmember Jim Freman Cuncilmember Page 1 f 10
Larry Williges Cuncilmember Jerry Miller City Attrney Shannn Hwell - Engineer Jhn Heiser Hward's Grup Jasn Shirey EquiValue Appraisal Dana Matthews Destin Attrney. Mary Ann Windes Prperty Owner GuyTadlck Prperty Owner Sctt Shirley City Land Use Attrney PART 1: Establish Quantifiable/Objective Criteria fr Tier 3 Public Benefits A) Opening Remarks/ Overview frm Staff and Stakehlder Rep( s) The City Manager nted that during the April 2, 2013 wrkshp, the Cuncil reviewed a prpsal t better quantify Tier 3 public benefits and then set a primary gal t establish quantifiable/ bjective criteria. On April 15, 2013 meeting, Cuncil unanimusly apprved a mtin t direct staff t finalize quantifiable/bjective criteria fr their review and cnsideratin; taking int accunt the specific pints made 2nd during the April wrkshp as well as the April 15th meeting. She then detailed the specific pints t take int accunt: The percentage divisin increases in density and intensity shuld vary accrding t the Future Land Use Map designatins and Zning Districts The percentage divisin f the increased density and intensity shuld be established t specifically incentive develpment in the Twn Center Mixed Use area and pssibly in ther districts D. Rather than a percentage divisin f the increased density and intensity, cnsider a straight percentage n the finished value f the prperty fr calculating the public benefit The " appraisal" prcess shuld be clarified t be based n the difference f the permitted and ready t develp land value f prperty f Tier 2, and the permitted and ready t develp land value at Tier 3 Maintain the eligibility f btaining Tier 3 develpment pursuant t an apprved annexatin agreement Accmmdate, withut penalty and recgnized as a public benefit, the unique peratinal characteristics f" Wrking marinas/ marina, cmmercial" as defined in the LDC that is integrated in a Tier 3 develpment The " Tier 3 fee cntributin" schedule shuld be adjusted t benefit the City mre The City Manager als stated that based n the directin f Cuncil and the invlvement f varius stakehlders during the wrkshp and Cuncil meeting, staff met with stakehlders fr several mnths (frm April thrugh August). She cntinued that in additin t and as a result f the cmplexity and interrelatinship f Tier 3 t the Tiered Land Use System and Land Use Planning, the meetings als included a thrugh review f Chapters 1, 7, and 13; adding that they als identified Land Develpment Cde prvisins which wuld need amending t be cnsistent with Page 2 f 10
prpsed changes t the Cmprehensive Plan. She als added that based n the amunt f material they have t cver, staff has recmmended they schedule tw separate wrkshps. Cmmunity Develpment Directr Ken Gallander infrmed the Cuncil they have subjectivity eliminated in this prcess; and that frm staff and develpment cmmunity's perspective, the prcess is mre simplified, mre quantifiable, and mre bjective. It prvides the pprtunity fr mre interest fr ptential develpment and redevelpment in the City. Mr. Gallander then described the prpsed Tiered Land Use System prcess as fllws: City adpts 5- year capital imprvement prjects plan. City determines a percentage increase f density and intensity frm a Tier 2 t a Tier 3 fr each Future Land Use Map designatin and reimplementing zning district City implements an adpted appraisal prcess prviding fr the " Appraised Current Market Value" f the subject prperty taking int accunt Tier 2 develpment standards and cnsidering these standards as the maximum allwed at the time f the appraisal valuatin. The " Appraised Current Market Value" is determined and then multiplied by the Mean Average Density/Intensity Increase frm Tier 2 t Tier 3 Example SHMU: " Appraised Current Market Value" f prperty = 4, 030,000. Mean Average Density/Intensity Increase frm Tier 2 t Tier 3 = 32%. Tier 3 Additive Value Calculatin: $ 4, 030, 000 x 0. 32 =$ 1, 289,600 Reference adpted "% Split Tier 3 Fee Cntributin: CITY and OWNER" adpted in LDC HMU: 35% CITY t 65% OWNER Tier 3 Additive Value = $ 1, 289,600 x 0. 35 = $ 451, 360 CITY btained Tier 3 Fee Cntributin Tier 3 Fee Cntributin Payment: 10% f fee paid at time Final Develpment Order is issued 40% f fee paid at time f final Certificate f Occupancy 50% f fee paid within ne year f final Certificate f Occupancy, t be bnded by develper thrugh an irrevcable letter f credit issued by a financial institutin in favr f the City. Attrney Dana Matthews expressed that it has been quite a rewarding experience wrking with s many different peple wh play different rles in the develpment industry develpers, architects, engineers, stakehlders and appraisers sharing thughts and ideas, examining the current prcess and trying t cme up with ideas t imprve it. He nted that prperty wners and lenders have t lk at every financial cmpnent f a deal, and that they have t have certainty ging int the prcess in rder t evaluate pr- frmas. He als stated it is unfair t expect Cuncil t determine public benefits with n standards in place; adding that the prpsed system is designed t take the uncertainty ut f the public benefit. Page 3 f 10
Mr. Matthews als discussed the imprtance f putting the standards in the Cmprehensive Plan and then int the LDC, s that if it becmes necessary t adjust the prcess in the future, the Cuncil culd amend the LDC a lt easier than having t g thrugh a Cmprehensive Plan change. Als accrding t Mr. Matthews, the City has faced a serius decline in revenue ver the last 5 r 6 years; and that this particular prgram prvides different surces f funding. It prvides funding thrugh fee cntributin fr the added value a develper wuld get ging frm Tier 2 t Tier 3. It culd als prmte ecnmic develpment which culd help increase the current advalrem tax base in the cmmunity and prvide additinal revenue fr future services the City may need. B) Appraisal Prcess: Key Pints Presentatin by Mr. Jasn Shirey, MAI, CCIM, CPM f EquiValue Appraisal Mr. Jasn Shirey f EquiValue Appraisal, LLC prvided a detailed presentatin n the appraisal prcess using the appraisal reprts n tw hypthetical vacant land parcels 7 acres zned TCMU (Twn Center Mixed Use) and 2. 5 acres zned SHMU (Suth Harbr Mixed Use). He emphasized that these prperties d nt exist, and they have been created fr the purpse f case study r example nly. The purpse f the appraisal is t derive an pinin f the hypthetical current market value f the fee simple interest in a fictitius hypthetical subject prperty; and the values reprted are predicated upn market cnditins prevailing as f the effective date f the appraisal. A. Prperty: Hypthetical Vacant Land Parcel 7 Acres Zned TCMU Twn Center Mixed Use ( Exhibit C- 1 f Staff Reprt) Page 6 t 27 Start setting frth what prperty they are valuing; and setting frth what they believe is the highest and best use f the prperty Prvide mntnus detail Dictate legal descriptin f the prperty (lcatin) Prximity t utilities Culd be very simple r very cmplicated Summary f Salient Facts and Cnclusins ( Basic Data) Appraisal Scpe f Wrk Definitin f Value, Prperty Rights Appraised, and Intended Use Required in all appraisal reprts Unifrm Standards fprfessinal Appraisal Practice A Dcument that gverns hw appraisal reprts are put tgether Set Frth Definitin f Market Value A requirement f the Unifrm Standards f Prfessinal Appraisal Practice Identificatin f Subject Prperty Page 4 f 10
Page 25-28 Factual Descriptins f Prperty This is a fictitius prperty; but, there wuld be a lt mre infrmatin in a real case prperty Pages 29-26 Reginal Map Area Map Appraisers Sketch f Hypthetical Subject Prperty Tpgraphic Map Fld Map Fld Zne Descriptin Aerial Phtgraph Actual Picture f Subject Prperty What are the dynamics that surrund the market where this prperty is lcated? Its prximity t water Financial demgraphics that make up the area What can ne ptentially d with this prperty? Pages 37 42 Start t develp an pinin n the highest and best use f the prperty that results in the highest value Analyze zning f the prperty ( In this case subject t the Tier 2 density and intensity) Assessment and Taxes n the prperty Pages 43-71 Analysis f Data and Opinins f the Appraisers Market Area Summary. Prvides insights n 1 Where the jbs cme frm? A A A Page72-73 Hw much peple generally make? Are mst huses wner ccupied r rented? Is there a large seasnal influx f peple Highest and Best Use Analysis Begins t tap n the actual valuatin prcess An input variable t hw cmparable sales are selected Fur cmpnents f Highest and Best Use Analysis Permissible Use Physically Pssible Use Feasible Use Maximally Prductive Use Page 5 f 10
Page 74 80 Highest and Best Use ` As Vacant' Fictinal Prperty Legally Permissible A Subject prperty is zned TCMU Twn Center Mixed Use, by the City f Destin A Physically Pssible A A Assumed fictinal piece f prperty has n adverse physical cnditin Financially Feasible Outline market cnditin Maximally Prductive Cnsider the legally permissible, physically financially feasible uses f the prperty Valuatin Methdlgy Overview Pages 81-86 Land Valuatin Methdlgy Cst Apprach Methdlgy Sales Cmparisn Apprach Methdlgy Incme Apprach Methdlgy Final Recnciliatin Prcess Cmparable Sales Page 89-93 pssible, and Lking fr cmparable prperties that wuld feature similar zning designatins and ptential fr future develpment A Attempting t lk at it thrugh a buyer in the market Land Analysis Grid Determining reasnable wrth f the prperty based n ther sales that ccurred in the market and ther pending sales Cmparable Sale Adjustments Prperty Rights Financing Cnditins f Sale Ecnmic Trends/ Market Cnditins Lcatin Size Shape Tpgraphy Zning and Tier 2 FAR Highest and Best Use Functinal Utility Access Page 6 f 10
B. Prperty: Hypthetical Harbr Frnt Vacant Land Parcel 2. 5 Acres Zned SHMU Suth Harbr Mixed Use (Exhibit C- 2 f Staff Reprt) Page 78-83 Highest and Best Use ` As Vacant' Legally Permissible A SHMU is a high intensity designatin that allws fr a wide variety f cmmercial, residential, and mixed cmmercial/residential uses Physically Pssible A As described in the Subject Site sectin f the reprt, the subject site is assumed t have the apprpriate size, shape, tpgraphy, available utility and ther physical attributes necessary t permit a variety f legally permissible uses Financially Feasible Maximally Prductive Fllwing Mr. Shirey's presentatin, the Mayr turned the matter ver fr Cuncil members' cmments r questins. Referencing the fllwing bullet pint, " Rather than a percentage divisin f the increased density and intensity, cnsider a straight percentage n the finished value f the prperty fr calculating the public benefit"; Cuncilmember Bagby asked why they did nt cnsider a straight percentage n the finished value f the prperty fr calculating the public benefit. Mr. Shirey replied it has sme inherent prblems because there are a number f variables that wuld play int this scenari; adding that unless they knw what they are planning t build, what it wuld cst t build it, and what it culd ptentially sell fr, there is really n way t get a definitively accurate number. He added it becmes mre cmplicated with large pieces f prperty; fr instance, trying t determine what a shpping center is wrth. Mr. Gallander cmmented that the develpment cmmunity wuld like t knw the values n certain prjects up frnt; and that if they waited until the determinatin f the final value, it wuld nt be cnducive t the evlutin f this prcess. Cuncilmember Bagby maintains they use sme assumptins in the appraisal prcess, as shwn n page 84 f the sample hypthetical appraisal dcuments as presented by Mr. Shirey; and whether it is fr a new huse, an ld huse, r a raw land value. He als stated that the whle prcess is subjective; but, in this case the subjectivity is mre refined because it invlves a certified r licensed appraiser. He added he disagrees nt being able t back int the finished cst in determining the public benefit because Mr. Shirey just explained during his presentatin hw they back int the finished cst t shw the bank they culd meet the required margin ( 35%) t get the lan. He als added that every develper wh has ever develped a piece f land has dne sme variatin f this frmula with their investment grup, equity partners, r with their banks. Page 7 f 10
Mr. Shirey explained that it is a speculative market right nw; and they are buying prperties with the understanding that it cannt be immediately develped. He als stated this type f analysis is nt the sle methd; but a supprting methd in cnjunctin with ther methds. He added that the prperty appraisal ften times des nt crrelate t market value; smetimes very accurate and smetimes nt s accurate. He als added the mass appraisal prcess is different than an independent prperty appraisal prcess; and that it is nt feasible fr a prperty appraiser t independently appraise every piece f prperty. Mr. Matthews cmmented that trying t figure ut the verall grss prfit n a piece f prperty and trying t get a percentage f it is nt ging t pass cnstitutinally; adding they need t base things n sund appraisal techniques. Mr. Bs stated that the appraisal has t be within 9 mnths fthe submissin, which means it has t be timely; adding they culd take an appraisal tday and then lk fr a develpment 2 years frm nw because land is very depressed and nthing makes sense t build tday. Hwever, when it makes sense t develp, then the incremental value increase frm Tier 2 t Tier 3 manifests itself in increased value f land, which is lgical and fundamental t the entire prcess. Cuncilmember Bagby stated that everything depends n what the citizens want fr the City; and that he des nt think they want t have 16 r 17 stry buildings everywhere with landscaping bscuring view crridrs. He added he wuld be willing t put this item t a referendum and let the citizens decide. Cuncilmember Williges stated that with regards t a referendum vte, he believes the citizens' pinin wuld differ sharply with what wuld be best fr the City financially; adding their decisins wuld be based purely n aesthetics. He added that height particularly alng the harbr is immaterial as a ne r tw-stry building wuld blck the harbr anyway. Accrding t Cuncilmember Freman, they have been trying t hnr the wishes f the public in every way they can. He stated they tried using " cmpatibility" in the past and it did nt wrk. The current system is a wrk in prgress in many ways; and that they are trying t make imprvements n it with this iteratin f the LDC and Cmprehensive Plan. He further stated that a referendum des nt make sense; adding he is nt even sure hw they wuld wrd the referendum language. Mr. Shannn Hwell, an engineer, cmmented that the cmbinatin f FAR and density is what makes the mixed use prject; and that t take away ne r the ther wuld be taking prperty rights away frm prperty wners. He als stated that cmparing 30-A and Destin des nt wrk as they are different cmmunities. Cuncilmember Marler stated that the stakehlders in this rm really have the stake in the whle thing because they wn the land and they are nt being allwed t develp their land withut ging thrugh a difficult prcess invlving public benefit. He als stated each Cuncil member, develpers, and City staff members all have differing pinins regarding public benefit; and that the public will als have a different pinin if they put this item t a referendum. He added that the Page 8 f 10
prpsed cncept is the right directin t g, and as Cuncil members they have an bligatin t lk at the whle cncept f what Destin was in the past, and what Destin is nw; which is a Mecca where peple cme and expect smething. He als added if peple d nt get what they want here, they wuld g elsewhere like Suth Waltn Cunty. The Land Use Attrney pinted ut a very practical prblem with a referendum. He stated that ne f the things they wanted t d was t take the standards ut f the Cmprehensive Plan and put them in the LDC s they culd adjust them mre easily by fllwing the rdinance adptin prcess. He cntinued that a referendum wuld prvide a permanent standard unless they d anther vter referendum t amend it. Accrding t Cuncilmember Bagby, they really have t lk at the " duble- dipping" issue; which is the density and intensity issue. He stated that if they d nt fix this issue, there wuld be a lt f peple that wuld leave the City because they just d nt like what it prduces. Mr. Bs stated that the term " duble- dipping" is a mixed use develpment. The develpment f the festive market place is a cmbinatin f residential and cmmercial use f the same site. A mixed use develpment is when they have a cmbinatin f cmmercial and residential use f the same prperty. Cuncilmember Bagby stated that anyne can have all the density and intensity they want if they have enugh land; but, the prblem is they d nt have an abundance f huge parcels, just a bunch f little individual parcels. The City Manager re-emphasized the mtin made by Cuncil n April 15, 2013 t finalize the quantifiable/ bjective criteria; and that the Cuncil set several pints which they addressed. She stated that they lked at all the districts and actually came up with sme incentives. She cntinued that in partnership with stakehlders, they have cme up with sme recmmendatins t the City Cuncil tnight. She added that n the Octber 10th wrkshp, they wuld discuss future land use; and then at sme pint they wuld bring this back at a regular meeting fr apprval by Cuncil. At this time, the Land Use Attrney annunced he is calling fr an Executive Sessin at 5: 00 p.m. n Mnday, Octber 21, 2013, preceding the regular Cuncil meeting, t receive the Cuncil' s advice regarding the strategy t be used in the fllwing cases: TRIDENT- OPERATIONS, LLC and RED BRICK CONSTRUCTION, LLC, Plaintiff, vs. CITY OF DESTIN, FLORIDA and MARYANN USTICK, Defendants, in the United States District Curt, Nrthern District, Pensacla Divisin, Case N. 3: 13- cv- 00546- MCR-EMT CITY OF DESTIN, FLORIDA, Plaintiff, vs. TRIDENT-OPERATIONS, LLC, ST. LACA HOLDINGS, LLC, and DESTIN AR, LLC, Defendants, in the Okalsa Cunty Circuit Curt, Case N. 2013 CA 004321F Page 9 f 10
ADJOURNMENT Having n further business at this time, the meeting was adjurned at 7: 50 PM. ADOPTED THIS 18TH DAY OF NO ' MBER 2013 By: ATTEST: Sa.+ eevers, Mayr Rey Bailey, City Clerk Page 10 f 10