New deal benefits builder of city hall

But critics want a new look at the agreement to give about $70,000 in interest from an escrow account to the developer.

By AMY WIMMER

© St. Petersburg Times, published August 13, 2000

ST. PETE BEACH -- The City Commission brokered an agreement with the builder of its city hall that ultimately will put an additional $70,000 to $90,000 in the developer's pockets.

When the decision was made, few questions were asked publicly. But city officials say the extra money for builder Paul J. Skipper seemed only fair because the builder is paying for the construction upfront, with no payments made to him until the project is complete more than a year from now.

"To me, it's a logical thing," City Commissioner Jim Myers said. "He is the guy who's footing the bill, and he would earn the interest."

The city's original contract with the developer called for a different arrangement. Plans for a new city hall have been scrutinized the past two or three weeks as members of a citizens advisory committee stepped forward, insisting the city has left them out of the loop.

Skipper first offered to build the building for $2.8-million, though critics say the city's unique arrangement with him left the city without reassurances that he would not use low-quality building materials. The city agreed to pay $75,000 more for hurricane-resistant windows, bringing the price to $2.88-million.

In the amended contract, the new money for the developer will come from interest on $1.2-million the city deposited in an escrow account for construction of the new city hall. The original contract with the developer called for $700,000 to be placed in the account, with interest on that money going back to the city after it closes on the deal with the developer in perhaps November 2001.

"It's money that would have been generated for the city, had they kept it in their bank account," said Vina Del Mar resident Augie D'Alessio, who also is a member of the citizens advisory committee. "The original intent was that the money would stay with the city."

The way the contract was first written, the city could have expected to earn about $42,000 at the conservative interest rate of 6 percent, plus perhaps $30,000 more on the $500,000 that would have remained in city coffers. Under the revision, the developer will earn about $72,000, assuming the same interest rate.

No city official seems to know what interest the money is earning as it sits in the escrow account. When commissioners voted on the contract change, no one questioned the interest rate or how much money the city would lose by sacrificing the interest.

City Manager Carl Schwing said the developer set up the escrow account for the deal. The account is held at Cornerstone Community Bank, where Skipper sits on the board of directors.

Mayor Ward Friszolowski signed the contract amendment June 22.

The vote was taken at a publicly advertised special meeting held at 3 p.m. on the day city employees returned from Memorial Day weekend. Ralph Lickton, a city hall critic who insists the building is not worth the nearly $3-million the city plans to spend, questioned why the decision to give Skipper the interest has never been mentioned outside of the special meeting.

"It appears they followed their procedure as spelled out in the contract," Lickton said. "However, I believe the first mention of it was at this meeting itself. . . . It's a big chunk of money."

D'Alessio questions why his committee was never advised that the commission was considering such a change. He also was concerned that more attention was not drawn to the change during a regularly scheduled commission meeting.

"Unless you would get the actual material on this, you would have no inkling that they were planning to turn over the interest money," D'Alessio said. "I'm not faulting anybody but myself. In fact, blame me, because it was incumbent upon me to find out what they were doing."

City Attorney Jim Devito said the interest lost to Skipper should be included as a cost on the city hall building. That would bring the total cost from $2.88-million to perhaps $2.95-million or more.

"If there's interest on $0.2-million that's being lost, that should be added to the cost of the project. There's no doubt about that," Devito said. "The total should be whatever the costs are on the contract, and that would include any interest that the city is not earning."

Devito went on to say that awarding the interest on an escrow to the seller of the property rather than the buyer is nothing unusual. "Viewed in the full context of the deal, there's no rule on any of this stuff," Devito said. "The rule is, let's negotiate the best deal we can."

Trey Goldman, an attorney with the Florida Association of Realtors, said interest on an escrow account is simply a negotiable item.

"There's nothing in Florida statutes that says interest goes to the buyer or the seller," Goldman said. "It depends on who's got the power, who's got the upper hand."

The $1.2-million came from money the city has been saving for years, planning to use it for city hall renovations or new construction. It originally came from the sale of city property on the east side of the Corey Causeway, at a site where the city operated a sewer plant until the 1980s.

The city also plans to borrow about $2-million for the project, and Schwing, the city manager, said giving the interest to the developer prevents the city from having to borrow even more.

"Rather than say, "Well, we'll just borrow some more money,' which is going to have a lasting impact on our debt service payment, we allow for some of these changes through this interest agreement," Schwing said. "That way we can get more of the building we want without increasing our debt service."

Lickton also admits he understands commissioners' perspective when they question where their critics were months ago, when such decisions were being made. Now that construction is slated to begin in just three months, residents have stepped forward to request referendums on the construction and question details of the project.

Such questions should have been addressed months ago, city officials contend.

Part of the flourish of questions springs from the critics' discomfort with the unique deal.

Skipper, the builder, along with his business partner Joe Klingel, first offered two years ago to build a city hall on their 1.25-acre Corey Avenue property. Skipper had purchased the land for $538,000 after a plan fell through to build an insurance office building on the site.

The property was formerly the Paradise Miniature Golf Course. He wanted to build a new city hall on the site and then lease the land to the city of St. Pete Beach.

Commissioners said no. But Skipper came back months later with another proposal, one elected officials felt was too hard to pass up. He offered to hand over the property to St. Pete Beach if the city would pay him to build the city hall.

Devito, the city's attorney, told commissioners that donation of the land made it possible to award him the contract without going through a bid process. The commission approved a contract in January.

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