Decade-Old Palm Avenue Decision Looms

Development

BY JACOB OGLES SRQ DAILY MONDAY BUSINESS EDITION MONDAY MAY 28, 2018

One of the most controversial issues in front of Sarasota city officials a decade ago has turned into a $49.8 million problem for officials today. Developers behind a proposal for a hotel and parking garage on Palm Avenue won a jury trial that alleged city commissioners backed out of an understood contract and left the Buck Leiter Group on the hook for a project already well underway.

The developers had been selected through a proposal process to build in the first phase of the plan a 453-space parking garage, 140-room hotel and 18,500 square feet of new retail, with plans for more condo units and parking spaces to come. While the deal involved 83 percent of investment in the garage to come from the developer, due to shifting interest rates and the financial market, changes to the arrangement were proposed that would greatly reduce what the developer chipped in on the garage. An article in The SRQ Journal at the time reported an estimated 54-percent of the garage cost would fall on the developer.

Officials with the Buck-Leiter Group did not return calls for comment. But in court filings, the development group noted it won a bid process in 2007. Filings for the plaintiff say much of the change in the financial proposal stemmed from the city’s misunderstanding of whether bonds would be taxable. In 2008, new City Manager Bob Bartolotta called the proposal “unacceptable” and recommended commissioners shoot it down. In July, they did. 

The move soured many downtown leaders at the time. “By losing that project, it sucked the wind out of things right at the time everything was falling apart with the economy,” says Diana Hamilton, who ran the City Life group with developer Matt Leiter and favored the project. “It was bad for the city and it set us back further than we would already have been.”

Former City Commissioner Kelly Kirschner says officials faced lobbying at the time to stick with the proposal, the fourth proposal over 20 years for a public-private partnership to develop the Palm Avenue project. “There was a lot of pressure for us to get that deal done,” Kirschner says. “I don’t think anybody on the commission wanted that project to fail.” But he said the change in the contract was too big a problem, and the city’s own finance leaders called it unworkable. Kirschner ultimately was part of a 3-2 vote to end the arrangement with Buck-Leiter. He stressed nobody at the time, including Buck-Leiter attorneys, questioned if the city had the ability to sever the deal.

Attorney Morgan Bentley, who represented the city in the suit, says no arrangement ever got finalized, so there was no contract to breach. The city in fact won this lawsuit in summary judgment after Buck-Leiter first filed it. But an appeals court said there was some financial arrangement and kicked it back to the lower court for a jury to weigh in. The jury found in the developer's favor. The hefty dollar amount was calculated based on profits lost for the developer over the decade in which a hotel could have been in operation, according to Bentley.

No members of the current City Commission served on the board in 2008, and all said they were still getting up to speed on trial details. Bartolotta no longer works with the city, and City Manager Tom Barwin started at the city in 2012. Bentley said the decision will be appealed and questions both whether Buck-Leiter had any type of contract with the city and whether damages accounting for lost profits would be appropriate. A nearly $50-million judgment against the city could impact budget decisions for years, officials acknowledge. But Bentley expects this case in appeal to go for at least another few years.

The site today houses a city-owned garage and the Art Ovation hotel.

Pictured: Rendering of Buck-Leiter proposal as shown in edition of The SRQ Journal.

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