For all the flak the city of Orlando's taken about its generous incentive deals for high-rise developments, at least it figured out a way to get some of its money back. In each of the five agreements the city reached since August 2004 – the Premiere Trade Plaza, The Paramount on Lake Eola, Tradition Towers, Camden Orange Court and 55 West at the Esplanade – city lawyers inserted a clause allowing the city to control the developments' telecommunications services.
All totaled, that's more than 1,600 high-end condominium units, an estimated 75 percent or more of which would sign up for digital cable, high-speed Internet service and other fancy accommodations. That doesn't include tens of thousands of square feet of office space, also likely to need high-speed Internet and other telecom services. A cable company could bring in more than $3 million a year, according to city records.
Five companies bid to become the city's telecom provider. A city selection committee ranked Smart City as the No. 1 contractor, but Bright House Networks – the No. 3 finalist – appealed. On Jan. 9, the city council directed its staff to renegotiate with the top three finalists. Based upon the companies' offers, the city will make between 5 percent and 7.5 percent of the winner's revenues for the next five years, and perhaps an upfront payment as well. That means at least $275,000, and maybe as much as $643,000, in revenues for the city, according to records included in Bright House's appeal.
But the eventual winner won't be servicing the Premiere Trade Plaza, the three-towered development under construction on Church Street and Orange Avenue. Though the city kicked in $22 million in cash and tax breaks to get that complex off the ground, it won't make a cent on the building's cable contracts because the city declined to control the Plaza's telecom services. As a result, developer Cameron Kuhn has selected two private telecom companies to serve his buildings, which will net the Plaza up to $65,000 in fees. Taxpayers, meanwhile, stand to lose about $90,000 over five years on just the residential part of Kuhn's building. It's unclear how much the 101 office condos will generate for their service provider, meaning it's impossible to determine what the city's take would have been.
Under the terms of the incentive agreements, each developer has the right to get its own offers from telecom providers, but the city can match those offers within a specified time period, usually 30 or 45 days. On Sept. 13, Kuhn's construction manager sent the city a letter saying the Plaza received an offer from PurDigital Media Inc. to handle its residential services. A month later, on Oct. 14, the Plaza told city officials that Proximiti – a cable company that also bid to be the city's provider – would handle its commercial towers.
In both cases, the city never answered. Why? City officials say it's because they had only recently begun the process of selecting a provider. The city lost out because it wasn't ready when Kuhn was. And it wasn't ready, says one City Hall source, because it didn't want to be.
"My feeling is it was favoritism," says the source, who is familiar with both the incentive contracts and the city's ongoing negotiations with cable providers. "If it wasn't Kuhn, why would you wait? Wouldn't you want the money?"
Kuhn's deal was the first of the group to be finalized, on Aug. 31, 2004. The 55 West contract was finished in November 2004. That means the city knew for nearly a year – or more, if you consider that both of these developments had so-called memoranda of understanding with the city going back to late 2003 – that it needed to select a telecom company, but did nothing.
"We could have started the process," says the source, who spoke on the condition of anonymity. "It's poor management of the incentives they're giving this guy."
Officially, the city says the delay had nothing to do with favoritism. Instead, it was the result of uncertainty. "There were no other models," says spokeswoman Laura Bornfreund. "It was a pretty unique opportunity for the city."
In 2004, when the city began adding these clauses to its incentive deals, the Florida Legislature was considering a bill that would ban municipalities from acting as cable providers. Originally, Bornfreund says, that's what the city wanted to do, at least for these properties. But the legislative rumblings put a hold on things, because the city didn't want to do anything that would soon become illegal. In June 2005, Gov. Jeb Bush signed a bill restricting cities' roles in the telecom business, and Orlando decided to contract with a third party. The next month, in July, it asked for bids.
As far as the city's concerned, it moved as fast as it could. In any case, the taxpayers lost, and Kuhn won.
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