This article examines the methodology used to arrive at a price the City of Boca Raton proposed charging Virgin Trains USA (VTUSA) for the land proposed for a train station and parking garage. This land is depicted in the red highlighted area titled “Approx. Lease Area (Station + Parking)” below.
Fair Market Value
According to Boca Raton code, Section 13-72, City-owned land to be used for commercial purposes must be sold at fair market value. In the proposed lease agreement between the City and VTUSA, however, the City is offering to lease land for $1.00/year for up to 89 years. The fair market value of the land is probably over a million dollars and VTUSA is proposing paying $89.00.
There are five exceptions to the fair market value requirement:
- Any sale, lease or conveyance of land to a not-for-profit organization which is determined by the city council to be providing a service which is related to the health, morals, protection and welfare of the community
- The sale, lease or conveyance of land, the disposition of which is governed by applicable provisions of state or federal law.
- The sale, lease or conveyance of land for the purpose of a convention center or other purpose determined by the city council, based on a written study of economic impact, to be of significant economic benefit to the community and which sale, lease or conveyance is approved after a public hearing.
- Abandonment of public rights-of-way pursuant to Article II of Chapter 25, Code of Ordinances.
- The sale, lease or conveyance of land which results in payment to the city in an amount in excess of fair market value.
Exception three above is being cited by the City as the reason for selling the land at less than fair market value. The “written study of economic impact” referenced by the City in proposed Ordinance 5509 was prepared by VTUSA and submitted to the City in November, 2019. It is available here. It’s not clear what the City staff contributed to the study.
Fair Market Exception Criteria Not Met
The problem with claiming that the VTUSA study satisfies the criteria of exception three above is that there are no City costs factored into the study. Only economic benefits are included. A study of economic impact must include both economic benefits as well as economic costs.
Economic Impact = Economic Benefits – Economic Costs
Not including economic costs in the study means that the economic impact of the train station is overstated. A few of the costs that should be included are:
- $12M the City is paying to build the parking garage
- Cost to the City of building a pedestrian bridge
- The fair market value of the land that the City is losing
- Incremental City services required to support the train station
- Infrastructure improvements needed to deal with increased local vehicle, pedestrian and bicycle traffic.
Steps Required for Economic Impact Study
Before adopting Ordinance 5509 and committing to lease the City-owned land for $1.00/year, the City must submit the following to satisfy Section 13-72 (3).
- Present a written due diligence report on the study submitted by VTUSA. Alternatively, the City could estimate economic benefits.
- Present a written study of economic impact of the train station/parking garage that includes ALL estimated City costs.
- Present a report showing that the economic impact of the train station/parking garage results in significant economic benefit to the community. Since the lease term is 89 years, time value of money must be considered.
BocaFirst plans to do our own due diligence of the VTUSA study and will continue to report on the lease agreement status.