A Disastrous Deal for Taxpayers: The Beach Club Lease Renewal of January, 2018

The Beach Club lease renewal will result in lease fees that are so incredibly low, the unrealized revenue to SRIA/Escambia County will amount to $50 Million dollars over the life of this lease term.  How was this allowed to occur?

The 128 unit Beach Club condominium complex at Pensacola Beach recently renegotiated their lease with the Santa Rosa Island Authority.

The original 1949 lease had been amended in 1985 (but this amendment was not recorded) and it was amended again in 1985 a second time (recorded).  The original lease was set to expire in 2048--but instead the Island Authority renegotiated this renewal, ahead of schedule and on VERY favorable terms for Beach Club.  This happened in 2017 and the parties signed a new amendment in January of 2018--starting the clock on a brand new 99 year lease.

Because of the changes made to this renewal that was just completed and finalized this year--the properties on this land will only pay ad valorem taxes on improvements, not on the land.  The property's owners will pay a lease fee to the SRIA.

This lease fee, according to the property appraiser, is a total of $23,593.78 yearly----- or just $184.33 per unit per year!!

This amount of a lease fee for such a valuable piece of Gulf-front property is ridiculously low, so much so that I feel it is borderline scandalous.  Why was this rate negotiated down to such a small amount?  Who decided this was appropriate?  Why are the taxpayers that own this land being treated so unfairly in this deal?   These are questions I am asking and that I will continue to ask until I get a good answer.  So far I have received no good answers. (Similarly priced condominiums on the Gulf of Mexico in Perdido Key pay in excess of $4000 MORE yearly in taxes and fees as do the 128 owners of Beach Club now as a result of this "re negotiation.")

Meanwhile, a quick look at section VI of the second amendment to the original Beach Club lease, signed in 1985, clearly states that the minimum rent [lease fee] will be $25,000.00 or $500.00 per unit per year, whichever is greater.[EMPHASIS ADDED]    So why is the lease fee only $184.33 per unit 20 years later in 2018 when the minimum per unit 20 years ago was $500 per unit?  Why?

This same section, section VI, goes on to state that the rental amounts will be tied to the "CPI, 1967,

Unpacking the Beach Lease Mess Part II: Fixing the Problem Going Forward

Although we may not be able to fix some very bad deals (For Escambia County) that were negotiated in the past, we MUST reform the re negotiation process going forward.  This MUST happen.  

As I've discussed at the last meeting, and as I discussed here, here, and here--there is a massive problem with the way several recent "re-negotiations" have been handled at Pensacola Beach.

Several have and/or will lead to a staggering loss of revenue for the taxpayers going forward.

Some are questioning now whether the most egregious of these renewals can or should be "unwound" because the terms are so destructive to the taxpayers that own these properties.  

We shall see how that unfolds....

Meanwhile, we must fix the problem going forward, we MUST prevent this abuse of the taxpayer from EVER happening again in the future.  I have put together a simple, multi-step plan that I believe will solve the problem, make things right, and address this issue going forward.  It goes like this:

   --Establish a moratorium on ANY more large condo lease renewals by SRIA and without BCC    authorization until a standard process and standardized lease models/templates can be put into place with the SRIA.

1       --No renewals of any existing “Master Leases” ever.

2     -- No leaseholder shall be compelled to renegotiate any executed, lawful lease prior to expiration         UNLESS such a leaseholder makes the affirmative choice to do this. (in other words, if the status quo of your lease is to your satisfaction, you do not have to make any changes to what you are paying now-if you want to renegotiate early—you can)

3      --Homestead property that currently carries a perpetually renewing lease and pays full ad valorem         

Unpacking the Beach Lease Mess Part I: Who Owns the Beach?

The subject of Pensacola Beach leases draws lots of heated opinions and positions.  I only care about insuring we don't ever again get taken to the cleaners via pennies on the dollar lease arrangements with the owners of million-dollar condos on the Gulf...

Last week the BCC had a good discussion on the various problems with the leases on Pensacola Beach.  For those that are interested, the video of that discussion is here.

The problem with any discussion about leases, lease fees, and taxes--is that other issues get brought into the discussion to conflate the underlying topic....then the discussion devolves among those various "camps" of folks that have differing agendas.  Beach Lease Holders that pay full ad valorem taxes on improvements and land+ Lease fees, Condo Owners that pay ad valorem taxes just on the improvements and not the land + Lease fees,  The property appraiser, The SRIA, the Escambia Board of County Commissioners, Activists that want to prevent fee-simple title from ever being granted to private parties for any part of this land, and last but not least, the Lawyers on both sides of the issue who make lots of money fighting over valuations of appraisals and other aspects of the leases and taxation.

For my part--I simply want equity by and between lease holders going forward.  I do not want to re-litigate the past, nor do I want to discuss the distinctions between fee-simple title and leases.

Should million dollar condos on the Gulf at Pensacola Beach pay about half the amount of taxes and fees of what million dollar condos on the Gulf in Perdido Key pay?

In short, I simply want to insure that a "Beach Club" type lease renewal NEVER again happens to the taxpayers.

So let's just boil it down and start with the basics, and work our way down to what matters, and to do this we will ask some rhetorical questions.  (then I'll provide answers that are my opinions and what I believe to be true with supporting facts, however I am open to any dissenting opinions)

1.  Who is the lawful OWNER of ALL the property that was deeded to Escambia County via the 1946 Public Act of Congress and subsequent 1947 Conveyance granted to Escambia County---including those portions that currently lie in Santa Rosa County?

Answer: The Citizens of Escambia County and NOBODY ELSE! (But multiple, subsequent sub- leases of various portions of this land have been made by Escambia to Santa Rosa County, and to private parties in Escambia County.  And multiple leases have been made between Santa Rosa County and private parties on the portions of properties leased to Santa Rosa County that lie in Santa Rosa County)

2.  Was it, and is it, legal for Escambia County to enter into leases, including leases that are perpetually renewing, for portions of this one large property that was given to Escambia County by the Federal Government in 1947?

Answer:  Yes--(otherwise someone would have challenged the underlying legality of the granting of these initial and subsequent leases  in court at some point--or the courts would have at some point weighed-in on this question and invalidated these leases at some point over the course of one of  the court's multiple "cracks" at this question during litigation over the last 5 decades on various aspects of beach leases.....)

3.  Is there a distinction to be made between Ownership of Beach Land under Land Title Law and Equitable Ownership of  the same Beach Land for Tax Purposes under the Law?

Answer:  YES--1000% yes  (More than half of the leases made by Escambia County to various