Sunday, April 14, 2024

The Auburn Trace update and election thoughts

Auburn Trace

A year ago, Delray Beach was talking about the city’s roughly $4 million investment in the Auburn Trace housing project. Delray Beach is still talking about those millions, but in a much better way—specifically, how the city can avoid losing them.

The city owns the second mortgage on the project that for a quarter-century has been home to low-income residents in Delray’s southwest neighborhood east of Interstate 95. In 1989, Delray loaned the developer $3.84 million from a federal housing grant at very favorable terms. Iberiabank owns the roughly $4.7 million first mortgage, and last October the bank foreclosed. In January, Auburn Trace, Ltd., which is part of Delray Beach-based Auburn Communities, filed a voluntary Chapter 11 bankruptcy petition and is seeking to reorganize.

Being second in line, Delray Beach could be out that $3.84 million, depending on how reorganization proceeds. In a January memo to the city commission, City Attorney Noel Pfeffer presented a proposal under which Delray Beach would buy the first mortgage from Iberiabank at a slight discount—about $4.3 million—to “better preserve its financial position. . .” Otherwise, Delray Beach might recoup only any equity left after paying off the bank, an amount that could be little or nothing. The city’s mortgage, Pfeffer wrote, could be “extinguished.”

The commission unanimously approved the proposal. On March 3, the city commission met in executive session— not open to the public—for a discussion about Auburn Trace that included not just Pfeffer but also the bankruptcy attorney hired to represent the city.

Though his January memo to the commission said the city needed to have closed on the mortgage sale by Feb. 27, Pfeffer told me Monday that the date was March 27. The city’s “due diligence” deadline ended Monday, and Pfeffer said nothing problematic turned up in the check of Auburn Trace’s condition and appraisals of the property. But the bank, Pfeffer said, needs approval of the sale from the Federal Deposit Insurance Corp. To allow time for that approval, Pfeffer said, he will schedule an item for the March 31 commission meeting that would extend the closing date to “the end of May.”

Ideally, Delray Beach wouldn’t be in this position. Ideally, Auburn Trace, Ltd., would be paying off the first and second mortgages and fixing up the property. Pfeffer acknowledged in his memo that this is a “complex transaction with an uncertain outcome.” Yet it’s a distinct and better transaction than the one that nearly got forced on the city a year ago.

One day before the commission meeting of March 16, 2014, Auburn Trace Ltd., asked the city to modify that loan. In exchange for the developer giving the city seven years of interest payments—$1.05 million—up front, the city would loan yet another Auburn affiliate another $4.3 million over 17 years. The affiliate would make no interest payments until the ninth year. The memo to commissioners called terms of the final principal payment “ambiguous.”

The memo added, “These terms are an incomplete basis on which to make a decision. . .Even were the terms to be attractive, there is little confidence in Auburn’s ability to fulfill its obligations.” The memo noted that two months earlier Iberiabank had told the city that Auburn was in default on both mortgages.

It was just the most recent request by Auburn Trace. The original 15-year loan became a 25-year loan, which then was extended to more than 31 years. Interest payments were delayed, and the city’s interest was “subordinated,” the memo said, so that Auburn could get more financing.

Then-City Manager Louie Chapman recommended last year that the commission reject the loan modification. Instead, the commission approved it 3-0. One vote came from Angeleta Gray, a lame duck who had lost her campaign for reelection. The two other votes came from Adam Frankel and Al Jacquet. Mayor Cary Glickstein and Commissioner Shelly Petrolia had been out of town. None of the terms had been in writing. “I struggle to understand what (the commission) agreed to,” Pfeffer said.

Fortunately, the interim city attorney scheduled for the next meeting a vote on rescinding that approval. With Glickstein and Petrolia back and Gray having been replaced by Jordana Jarjura, the vote to undo one of the most reckless decisions by any Delray commission passed 4-0.

Jacquet was a no-show, but Frankel reversed himself. In 2009, seven months into his first term, Frankel had voted to approve Villages at Delray, another Auburn Communities project. The Sun-Sentinel reported that 18 percent of Frankel’s campaign contributions had come from Auburn, its officials and its affiliates.

One could argue that Delray Beach now should let the reorganization play out and take its chances. One could argue that even if Delray Beach lost the investment, the money has helped to create affordable housing in what has been an overlooked part of the city. Pfeffer says Auburn Trace has been basically full for the last five years.

The case for intervening, though, is stronger. The money, Pfeffer said, is too much to ignore. Then there’s what Petrolia calls “the human element.” This is about peoples’ lives, not just the city’s finances. Delray Beach wants Auburn Trace to continue as a successful project, which will require upgrading the units.

The city isn’t just attempting to get more control over its money. The city is attempting to get more control over Auburn Trace’s future. The potential return on investment goes beyond numbers. The political change in Delray Beach over the last two years has led to the city’s improved priorities regarding Auburn Trace.

Politics and the eye doctor

The controversy involving a Palm Beach County ophthalmologist and a U.S. senator has a lot to do with politics and even more to do about the cost of health care.

Salomon Melgen has raised hundreds of thousands of dollars for Sen. Robert Menendez, D-N.J., and the Democratic Party. Courtesy of Melgen, Menendez has taken trips on private jets that he did not report as gifts, later repaying Melgen.

When Medicare has questioned Melgen’s possible overbilling, Menendez has intervened on Melgen’s behalf. Menendez also intervened on behalf of a company in which Melgen had an interest when the company was having trouble enforcing a contract with the Dominican Republic.

South Florida long has been known as a center of health care fraud and excessive billing, especially when the patients are on Medicare. But as theTimes reported in January, the push in Washington for a health care system driven by outcomes rather than services has made some snowbirds question tests and procedures suggested by doctors in Florida. Those skeptics call their doctors in the Northeast and Midwest for a second opinion and are told that the tests and procedures aren’t necessary.

The paper reported that Florida leads the nation in costs for tests and imaging for seniors over the last two years of their lives. In his address to the Legislature this year, Gov. Rick Scott referred to Florida’s “exceptionalism.” The Melgen story is a reminder that when it comes to health care Florida too often is “exceptional” in the wrong way.

Boca election notes

It’s not often in a three-way race that the candidate who gets the fewest absentee votes get the most at the polls, but Jeremy Rodgers pulled it off to win the Boca Raton City Council Seat 3 race last week.

To do that, according to precinct results released Friday by the supervisor of elections office, Rodgers got his biggest margins in areas where turnout was highest. That happened throughout the city, not just in one area. Rodgers lives in northwest Boca, but he did very well in downtown precincts. He nearly doubled Jamie Sauer’s total in one of the precincts where her neighbors vote.

As expected, Sauer won some of the northwest precincts where former Mayor Steven Abrams has run well. Abrams was helping Sauer. But her margins there over Rodgers were small. Turnout was only 11.3 percent, but for Rodgers it was a strategic 11.3 percent.

And Delray’s outcome

Meanwhile in Delray Beach, Mitch Katz did something more remarkable.

In the four-way race for the Seat 3 city commission seat, Katz won nearly every precinct on Election Day. I counted just three for Christina Morrison, two for Josh Smith and none for Bruce Bastian. Like Rodgers, Katz trailed after the absentees were counted. Morrison led.

At the polls, however, Katz got 603 votes more than Morrison in a race where turnout was 16.3 percent. And given the breadth of his support and the balance of his fund-raising, Katz can say and mean it that he intends to represent all parts of the city.

Based on that precinct-by-precinct report, Delray Beach Mayor Cary Glickstein mostly owes his victory to downtown voters. Glickstein beat Tom Carney by 490 votes in a surprisingly close race, and Glickstein got 267 votes more than Carney in just three downtown precincts, two at Veterans Park and one at the 505 Club on South Federal Highway. Glickstein won more precincts, but he needed to win those big, and did.

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You can email Randy Schultz at randy@bocamag.com

For more City Watch blogs, click here.About the Author

Randy Schultz was born in Hartford, Conn., and graduated from the University of Tennessee in 1974. He has lived in South Florida since then, and in Boca Raton since 1985. Schultz spent nearly 40 years in daily journalism at the Miami Herald and Palm Beach Post, most recently as editorial page editor at the Post. His wife, Shelley, is director of The Learning Network at Pine Crest School. His son, an attorney, and daughter-in-law and three grandchildren also live in Boca Raton. His daughter is a veterinarian who lives in Baltimore.

Randy Schultz
Randy Schultz
Randy Schultz, a native of Hartford, Connecticut, has been a South Florida journalist since 1974. He worked for The Miami Herald until 1976 and for The Palm Beach Post from 1976 until 2014, where he served as managing editor and editorial page editor. Since 2014, he has written a politics blog, commentaries and other articles for Boca magazine. His writing has earned first-place awards from the Florida Magazine Association and the Florida Society of Newspaper Editors. Randy has lived in Boca Raton with his wife, Shelley Huff-Schultz, since 1985. His son, daughter-in-law and their three children also live in Boca Raton.

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