FOLIO
Never before has so much been spent to accomplish so little for so few.
The city is about to blow more than $60 million to create nothing. The concert venue at Metropolitan Park has already been dismantled and the City Hall Annex was imploded for nearly $5 million. Next up is the demolition of the former Duval County Courthouse on Bay Street for $3 million, then more than $37 million to remove a ramp to the Hart Bridge. Another $18 million is designated for eliminating The Jacksonville Landing.
Development by wrecking ball is the new motif. Of course, the hope is that new development will replace the existing facilities and—hope upon hope—that these new facilities will prove more successful than what they replaced.
It’s a risky proposition under any circumstance, but now is an especially interesting time in the economic cycle to undertake scorched-earth tactics.
Interest rates were increased seven times in the last two years, as corporate, government and personal debts have reached historic highs. Nonetheless, the hope (there’s that word again) is that Jaguars owner Shad Khan will come through with new developments—once he lands millions in taxpayer subsidies, of course.
Jacksonville has been down this road before and has the scars to prove it. As the hopes of the city are being placed in Shad Khan now, its fate was was all but entrusted to Cameron Kuhn a little more than a decade ago.
CITIZEN KUHN
In 2005, developer Cameron Kuhn came to Jacksonville, buying up properties and selling dreams of downtown revitalization. He bought the SunTrust Tower on Forsyth Street, added the Laura Street Trio and eventually amassed more than $60 million in Downtown property.
Kuhn began his development game in Orlando where he was called the “King of downtown Orlando” and “Citizen Kuhn.” He later expanded his operations to Tampa and Jacksonville and, later, beyond Florida to New Orleans and Atlanta.
But property values started declining soon after he came to the Bold City. Then, in 2007, the lending market took a nasty turn. In 2008, he told the Orlando Sentinel he was “all but broke.” By 2009, creditors were foreclosing on his Jacksonville properties. Finally, in 2010, he filed for bankruptcy.
Now, more than a decade later, Kuhn’s Jacksonville projects are still just that: projects. There are new plans and new taxpayer subsidies, of course, but nowhere to rent or set up a business.
The Berkman II Tower followed a similar timeline and its unfinished hulk still haunts the Downtown landscape.
A NEW HOPE
In 2011, Shad Khan bought the Jacksonville Jaguars and, in 2015, Jacksonville’s Downton Investment Authority selected Khan’s Iguana Investments to develop Jacksonville Shipyards. The plan included the development of The Shipyards, Lot J (adjacent to the stadium) and Metropolitan Park, with $2.5 billion in private sector investment for residential and commercial development. Apartments, office space, condominiums, restaurants and a marina—a brand new city on the river.
The tax incentives haven’t been calculated but are a necessary ingredient, according to the principal players: Jacksonville Mayor Lenny Curry, Jacksonville Jaguars President Mark Lamping and, of course, Shad Khan. It is safe to say that millions more in tax dollars will be included in a deal to develop these locations.
ADDITION BY SUBTRACTION?
In 2016, Jacksonville Mayor Lenny Curry announced plans to tear down ramps to the Hart Bridge because they were considered unsafe. Later, their removal was described as a process to improve truck access to JaxPort’s Talleyrand Terminal. Eventually, the city admitted the changes would direct traffic to Khan’s planned developments at The Shipyards.
The total bill of $37.5 million will come from local, state and federal governments. When the state portion was appropriated, the nonpartisan watchdog, Florida TaxWatch, categorized the project a “Budget Turkey.” What’s a TaxWatch Turkey? “[I]ndividual appropriations that circumvent a thoughtful and thorough budget process.”
The plan is to tear down a ramp that allows access to the central business district from the Hart Bridge. The new exit will drop down from the bridge to ground level in the sports and entertainment district on Bay Street. In effect, this renovation will force Downtown-bound traffic into Khan’s proposed developments.
In February 2019, Mayor Curry concluded a deal to demolish The Jacksonville Landing. The current manager of the property, developer Toney Sleiman, will be paid $15 million to leave The Landing, which is appraised at only $3.9 million. An additional $3 million will be ponied up to buy out the current tenants and demolish the facility. In total, $18 million will be borrowed to destroy the remaining restaurants and stores at The Landing for flat earth.
QUESTIONS
For the last 30 years, Downtown development has focused on the central business district, the area around The Landing. Proponents of shifting development to The Shipyards have argued it would be too expensive to refurbish The Landing facility. Yet, as taxpayers are starting to see, city officials are willing to spend lots of money to take The Landing off the development game board. Among the current plans for the site: a green space.
Why? They want to drive real development to The Shipyards and points east, to the sports and entertainment district, almost two miles away. They want Shad Khan’s East Jacksonville playground to become the new “Downtown” destination of choice.
The question must be asked: Why new facilities in a distinctly different location, which is now largely vacant, will work after the same type of development “failed” in the central business district? As local commercial real estate expert Stanton Hudmon explained, “Retail without residential is dead.” It is a $60 million gamble that will initially result in more traffic and fewer options for drivers, diners and shoppers.
City Councilmember Anna Lopez Brosche, who is challenging Curry’s reelection, told Folio Weekly, “Mayor Curry’s administration has a propensity for tearing things down without building anything up. The citizens of Jacksonville should be concerned about what is happening to Downtown. Every indication points to Lenny Curry having the taxpayers invest in land-clearing so that his developer buddies get a sweetheart deal on premium land buys.”
The mayor’s office did not respond to a request for a comment.
TIMING
The Federal Reserve Board has increased interest rates seven times in the last two years. The national business press reports that debt levels are reaching the danger zone. Headlines signal “[t]he biggest red flag for the next recession” and “[a] $9 trillion corporate debt bomb is bubbling in the U.S. economy.”
Alliance Bernstein mutual fund manager Doug Peebles has warned of a more challenging lending environment in his article, “The End is Near for the U.S. Credit Cycle. Are You Prepared?”
These economic conditions are quite similar to those that preceded the Great Recession, when property prices cratered and credit markets froze. As interest rates increase, it becomes more difficult for consumers to afford to shop and go out, more challenging for businesses to continue hiring and tougher for governments to continue borrowing. In addition, higher interest rates often cause economic growth to contract.
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Shad Khan’s plans for the Jacksonville Shipyards, Lot J and Metropolitan Park will no doubt be impressive if they are realized. But they will include millions in government subsidies and are years from completion.
Is it worth eliminating The Landing, the Hart Bridge ramps, the City Hall Annex and Metropolitan Park for the possibility of future development? Like the collapse of Cameron Kuhn’s empire and the remains of Berkman Plaza II demonstrate, the best of plans laid in rosy economic times can evaporate when the economy swings in a different direction.
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