By Jane Smith
Town Square in Boynton Beach has new municipal buildings, a renovated historic high school and a new fire station. But the lack of parking garages makes the area appear unfinished.
Boynton Beach has been waiting for nearly two years to have garage parking for 465 vehicles, promised by JKM BTS, its Town Square private partner. While the city waits for the garages — estimated to cost $34 million — construction costs are rising by an estimated 5% annually, according to analytics on EdZarenski.com. The website provides in-depth analysis on the economics of construction.
In late November after more negotiations seemed fruitless, Boynton Beach sued JKM BTS, asking a judge to decide whether the city had met its obligations under a March 2018 developer’s agreement and can sever that relationship.
JKM built the Cortina apartment buildings and a dog park west of the interstate in Boynton Beach.
Boynton Beach sold 7.68 acres to JKM affiliates in three parcels for $10 each in 2018. It also gave JKM nearly $2 million in cash for development costs and redid the streets in the entire Town Square area — including new water and sewer lines, storm drainage and buried power lines.
To its credit, the firm did supply 301 surface parking spaces on the land it received from the city, as required in the March 2018 developer’s agreement. Those spaces are used during the day by the city, Community Redevelopment Agency, the Schoolhouse Children’s Museum and library workers. Customers doing business at City Hall and visitors to the museum and library also use the parking spaces during the day. “Negotiations between the city, potential workforce housing developers and separately with JKM have taken place,” read a written update by John Markey, a JKM principal, presented at the March 16 City Commission meeting.
“Pending litigation has negatively affected the prospects of obtaining any project construction financing.”
Commissioner Justin Katz contradicted Markey by saying no workforce housing negotiations are taking place. He was backed up by the city manager.
“The financing fell apart years before COVID and the litigation was filed,” Katz said at the meeting.
In mid-March 2020, Boynton Beach and cities worldwide shut down to help stop the spread of the coronavirus.
Markey finally appeared virtually at the second City Commission meeting in July, saying he and his wife had stayed home for a few months to avoid catching COVID-19. He missed four months of virtual meetings, even though Katz had asked for monthly updates.
The south garage received a building permit on Sept. 5, 2019, and was supposed to be finished by June 5, 2021, Colin Groff, then assistant city manager, said during the July 21 Town Square update. The north garage was estimated to be finished by Dec. 5, 2021.
But no work on the garages has begun.
“The timelines are completely gone,” Markey said at the July 21 meeting.
He asked for taxpayer dollars from the city’s Community Redevelopment Agency to help underwrite the private portion of Town Square.
Katz said “absolutely not” to that, pointing to the low cost of the properties, the $2 million in cash and the redone streets. Developers normally would do road improvements on their own.
History of the deal
Boynton Beach signed a developer’s agreement with Markey in March 2018. The agreement detailed what the city was supposed to do and the obligations of Markey’s affiliates that had been set up individually for each project.
The financing mechanism changed from having the city set up a community development taxing district to serve the area’s long-term needs to an outside nonprofit that specialized in public/private partnerships and could issue the Town Square bonds quickly.
The $78 million in bonds were issued by Community Facility Partners of Minnetonka, Minnesota, in July 2018. But the nonprofit could not finance private projects, Markey found out in the fall of 2018. That left him scrambling for financing for the two projects.
As of June 30, JKM had spent nearly $5.8 million on development costs of the three parcels, Markey said at the Sept. 1 commission meeting.
The three parcels that Markey’s firm purchased for $30 in September and December 2018 were appraised at $19.7 million in May 2018. That was several months before the old City Hall and library were demolished to make way for Town Square.
The city agreed in December 2018 to remove its right to repurchase the land after JKM said it needed that clause lifted in order to gain construction financing.
Both City Attorney James Cherof and Markey declined to explain their reasoning, citing the lawsuit.
But official county real estate records do not show a construction loan taken out by JKM on the Town Square parcels.
On Dec. 28, 2018, a $3.5 million letter-of-credit was lent by City National Bank of Florida, secured by the three Town Square parcels. That loan was satisfied on Feb. 7, 2020.
Another $5.5 million “bridge” loan was given by BI 58 LLC on Dec. 23, 2019. The Miami-based partnership specializes in short-term financing for commercial real estate projects. JKM paid off that loan on Dec. 17, 2020.
In the fall of 2019, Markey said, city staff was working toward becoming a co-guarantor of the garage loans that would be financed by Iberia Bank. Then the city decided that was too risky, he said, without owning the land.
In February 2020, the city talked about borrowing $34 million to build the garages by agreeing to “pre-buy” them.
Then, Markey said, the finance world shut down because of the pandemic. Ú
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