Peary Court – The Next Big Rip Off?

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Update:  There’s a nice write-up at goodmorningkeywest.com on this.  It actually answers some of the questions I asked below.  And here’s a link to the Housing First PAC started by Key West officials to push the purchase of Peary Court through.

The City of Key West is hoping to purchase the Peary Court apartment complex to provide 157 affordable housing units.  I’ve heard from some folks in Key West that are concerned about this.  I try to concentrate on issues that impact the Key Largo area, in particular.  However, I’m learning more and more that these seemingly local issues are often interrelated.  What happens in Key West can affect Key Largo and vice versa.

Think about the Cudjoe Regional fiasco.  That project is now $49 million over budget.  That excludes the $10 million assessment give-back to the customers in the local service area.  This is a total increased cost burden of $59 million on the backs of county-wide taxpayers.  In fact, Key Largo taxpayers are especially hard hit.  Monroe County imposed a $100 million funding imbalance on those citizens.  That forced an excessive contribution from folks in Key Largo, which is a moderate income area.  The economy in the area is now falling behind.

It’s definitely smart to pay attention whether there’s an immediate impact or not.  It might circle back around on you.  That’s one reason I’m writing about Peary Court.  The other reason is that I have friends in Key West, too, and this will definitely affect them.

Key West is looking to to purchase Peary Court for $55 million.  Ten million of that will come from their part of the Tourist Impact Tax.  At that purchase price, it will cost over $350,000 per unit.  The current owner, Peary Court Holdings, paid $35 million in 2013.  That’s a fantastic rate of return – $20 million in two years, a 57% increase.

According to information found at this link, the apartments in Peary Court currently rent for $2,450 per month.  So how will the city be able to offer lower rents when they paid $20 million more than the current owner?  What’s the business plan?  How is all this going to work exactly?  As it stands now, it looks like Key West taxpayers will not only foot the bill for the initial purchase but will also have to provide ongoing subsidies.  Is that the idea?

Let’s compare Peary Court to an affordable housing project that was recently completed in Key Largo. Keys Lake Villas purchased a 139-unit RV Park for $3.95 million in 2010.  They built 110 residential units on the property.  According to the Notice of Commencement on file with the county clerk’s office, the value of the construction contract was about $13.2 million.  So the total cost of the project was about $17.2 million or $156,400 per unit.  Roughly half the cost of what they’re planning at Peary Court.  These units rent for between $1,500 and $1,800 per month.  Perhaps the city ought to contact these folks.  They seem to have a better head for business.

People are going to make the same excuse for this project that they made for Cudjoe Regional – things are so much more expensive in Key West and the Lower Keys.  Sorry, that simply is not true.  According to Sperling’s Best Places, the median cost of a home in Key West is $434,000 and the cost of living is 50% higher than the United States average.  The median cost of a home in Key Largo is $408,000 and the cost of living is 45% higher than the United States average.  Things are maybe 5% higher overall, NOT DOUBLE.

I’m still researching all this.  I’d love to know how many affordable housing units are needed in Monroe County?  What constitutes affordable?  How much will the taxpayers have to spend to fill the need?  Are there ways to accomplish the goal in a more cost-effective way?

I have a lot more homework to do.  Here’s my reading list so far.  Stay tuned.

United Way’s ALICE Report.

Monroe County Workforce Housing Assessment Report.

Local Government Handbook 2015.  See page 259 for Tourist Impact Tax.

Florida Statutes 380.0666.  Land Authority.

Florida Statutes 125.0108.  Tourist Impact Tax in Areas of Critical State Concern (ACSC).  Key West is a separate ACSC than the rest of the Keys.

Monroe County Land Authority Budget 2015.

 

 

 

 

 

 

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