By Steven Ryzewski

Despite his support of the intentions behind Florida’s Live Local Act, DeBary City Manager Carmen Rosamonda has been taken aback by the extent to which the still-new legislation has been used as a cudgel against his city and others.

“A lot of developers right now are using this as a threat — every developer I’ve met within the past three or four months has threatened the city with it — and they’re using it as a weapon.”

The weaponization Rosamonda describes is related to the local zoning preemption element of Live Local Act, a law that received bipartisan support and was designed to help alleviate the state’s affordable housing crisis. The language regarding preemption requires cities and counties to approve multifamily projects on land with industrial or commercial zoning — so long as 40% of the proposed units meet its affordable housing designation.

In such a scenario, a developer might allude to its ability to build apartments on a property that has commercial or industrial zoning to create some leverage — especially if it is a property city leaders would prefer not to see apartments built on.

This is significant, as the usage of Live Local Act as a threat is just one example of the fallout that has accompanied the new law’s implementation — much of which has been viewed favorably and has generated enthusiasm.

“I’ve been doing state and local taxes for 40 years, and I’ve seen more interest in [Live Local Act] than any other state or local tax incentive that has come down the pike,” said Marvin Kirsner, a Fort Lauderdale-based shareholder and tax attorney for mega-law firm Greenberg Traurig LLP, referring to the law’s tax incentives for affordable units.

While views on the implications of Live Local Act vary, one thing is evident from discussions Orlando Business Journal had with nearly a dozen real estate execs, attorneys and city officials — the potential impact could be profound.

“Live Local Act is like throwing a hand grenade on the state of Florida,” said Chuck Whittall, president of Orlando-based Unicorp National Developments Inc.

Whittall is currently proposing a $30 million redevelopment project on Restaurant Row in Dr. Phillips, on an outparcel of New York-based Kimco Realty Corp.’s Marketplace at Dr. Phillips shopping center. Kimco has plans to redevelop part of the property with apartments, and Whittall said he anticipates the group will use Live Local Act in getting its plans there approved.

Noting pushback and concerns from the neighboring community about the size and scale of the apartments Kimco may build there, he suggested the law could have been more precise in its execution. “I think it could have been done better, but I think if it was done better, it might not have gotten done — or would have taken a long time, based on how politics go.”

Here, OBJ takes a deep dive into what professionals on the ground are hearing, seeing and anticipating when it comes to Live Local Act — its intended benefits, its unintended consequences and everything we still don’t know.

The business case for Florida’s Live Local Act

Anthony De Yurre, a partner and attorney focused on land development and government regulation for Miami-based law firm Bilzin Sumberg, said Live Local Act is driving unprecedented interest.

That’s a good thing, he indicated, because the state’s affordable housing challenges must be alleviated to continue its robust economic growth. “It’s impossible to sustain Florida’s growth if we sell a dream to young urban professionals and then they have to live an hour and a half away to commute to their new job here.”

Brad Parker, a veteran land broker for Longwood-based Southern Realty Enterprises, described the legislation as “the best thing the state has done in 20 years.”

Suggesting the Orlando market is 70,000 housing units short of where it needs to be, Parker indicated Live Local Act may benefit from being retooled during the next legislative session to be even more forceful in promoting new housing construction. “They’re going to have to get the cities and counties out of their comfort zone.”

The law incentivizes new housing inventory in several ways, from new funding mechanisms to administrative approvals provided the preemption language.

Julie P. Kendig-Schrader, a shareholder and land-use attorney for Greenberg Traurig, said that preemption can save developers at least a month during the entitlement process — making for a “very attractive aspect of Live Local Act.”

There are also tax incentives included in the law. For instance, qualifying affordable apartment units that are rented to tenants under a certain threshold of the local median income will be eligible for tax exemptions of 75% and 100% per unit, based on where the tenant falls on the percentile.

Despite the significance of the incentives, Jill Rose, a senior vice president with Orlando-based Bishop Beale Duncan, suggested some of the early projects choosing to incorporate Live Local Act may experience some hurdles and failures — and that others looking to take advantage are awaiting the outcomes of those pioneering projects.

“It’s going to take a little bit of time for people to work it out.”

Unintended consequences, challenges for Florida cities and counties

A common theme among those OBJ spoke with is that support for Live Local Act’s goals is widespread.

There are, however, concerns about implementation — including overriding zoning maps for cities that, for instance, would normally not allow an apartment community to be built in an industrial corridor.

“There’s a compatibility issue,” said Angel de la Portilla, president of Orlando-based Central Florida Strategies, whose clients include private sector developers as well as local governments. “These are areas where you have warehouses and large tractor-trailers operating in the early morning hours. Essentially, you’re going to have school buses competing with tractor-trailers for limited capacity on roads.”

De la Portilla further explained that one of the benefits for city governments of having clusters of industrial properties, for instance, is that such areas tend to require less infrastructure and service needs, which affects the bottom line for municipal budgets.

“If you build apartments, it requires additional police and fire department services in those areas, and you would need additional capacity for roads and schools. For an industrial area without multifamily, you just need roads to get trucks in and out of the warehouses, as those areas are not as costly to service,” he added.

DeBary officials say the budget implications for cities and counties are further compounded by the tax incentives of Live Local Act.

As an example, Rosamonda told OBJ an already-approved industrial project in the Volusia County suburb is in jeopardy as its developer weighs not building the project and instead selling it to a multifamily developer. The potential pivot on the property is concerning for several reasons, he said.

“We went from an [industrial and commercial] development worth maybe $50 million to our tax base, which would provide 300 to 500 jobs, to an apartment complex.”

Shari Simmans, the city’s director of economic development and communications, explained further that the lack of tax revenue, paired with the necessary infrastructure and emergency services needs for a large new apartment community, could put the city at a loss of $5 million to $10 million annually when contrasted with the revenue it had hoped for under the original project.

But proponents like De Yurre say much of the municipal pushback comes from smaller, well-off suburbs that do not want the new housing inventory for sociopolitical reasons.

He added that the law is being mischaracterized as a blank check of sorts, allowing developers to build dense projects to their hearts’ desire. Instead, he notes that preempted permissions are based on maximum density already allowed within a given jurisdiction and height allowances based on existing heights allowed within one mile of the prospective project.

“You still have to comply with all of the different zoning and land-use requirements of the jurisdiction — people seem to be forgetting that. It’s all relative to the jurisdiction.”

Live Local Act’s information vacuum in Florida

One thing plaguing Live Local Act at its early stages of implementation are information gaps — both in terms of ambiguities in how the law was written and will be interpreted, as well as in elements experts say have clarity but are not widely known.

An example of the latter is De Yurre’s citation of how the law’s preemption mechanisms still work within existing jurisdictional frameworks, or how the tax exemptions are granted only on a unit-by-unit basis and not for an entire building — a misconception Kirsner said he has encountered.

But there are areas lacking clarity also, including how broadly commercial and industrial zoning interpretations can be extended — given the many sublevels and variations of such zoning categories — and whether planned-unit developments, or PUDs, that include commercial and industrial components qualify.

“It’s going to be interesting to see how that gets interpreted,” Kendig-Schrader said. “There are many zoning districts that don’t have the letter ‘C’ in them that could be considered commercial zoning … it’s potentially going to be a topic of debate.”

In the meantime, some municipalities — including DeBary — are exploring implementing moratoriums to give themselves time to get their arms around Live Local Act, while others — including Clermont, Lake Mary and Orange County, locally — have had discussions during meetings or taken smaller actions related to the legislation.

Nearly all of those interviewed suggested there could, and perhaps should, be tweaks to the law during the next legislative session.

For instance, Rosamonda said he and other officials from similar-sized cities would like to see a carve-out for smaller municipalities. De la Portilla suggested a potential carve-out or reevaluation of the industrial zoning preemption.

Still others, like longtime land broker Trevor Hall, with Colliers’ Orlando office, said he would like to see the law better incentivize for-purchase affordable housing as opposed to for-rent housing.

And, of course, there is the potential that as robust as conversation has been and may be in the near term, it will proceed without a full understanding of the implications because development has stagnated amid high costs.

So said Whittall, who has been consistent about “unsustainable” construction costs hampering projects here, adding the complete fallout may be delayed until the markets level off.

“We may not see the full effect for years.”

Source: Orlando Business Journal

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