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Shipyards developers fault city

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By STEVE PATTERSON

The Times-Union

The developers of the stalled mega-project The Shipyards say interference from Jacksonville City Hall derailed their work and cost them millions of dollars.

In their most detailed public comments in months, Carlton and Jeff Spence expressed dismay over local government's handling of questions about the development's finances. They also said city lawyers used talk of a criminal investigation to pressure them into a financially damaging agreement to withdraw from the sprawling residential-commercial project on downtown's riverfront.

"The General Counsel's Office had accused me and us of being crooks and threatened us with a grand jury," said Carlton Spence, patriarch of several local companies that include TriLegacy Group LLC and ICS Logistics Inc.

He added later: "It is just unimaginable that the current administration has thrown a monkey wrench in it [The Shipyards] ... and have done their level, level best to put a black mark" on the project.

The city's top lawyer disputed the developers' account of events. General Counsel Rick Mullaney said his office had no control over prosecution and never used that as a threat. Mullaney said he never tried to harm the Spences and was only interested in protecting the city's interests.

The Spences had declined to be interviewed about The Shipyards since spring, when they and city officials agreed to a mutual gag order while lawyers and auditors reviewed the project's use of $36.5 million in public money.

The father-and-son pair sat down for a lengthy talk with the Times-Union last week, after the newspaper reported on a never-filed draft federal lawsuit in which city lawyers accused them of racketeering and fraud. The draft lawsuit claimed millions of dollars that the city advanced to TriLegacy for construction of a riverwalk, park and related improvements had been "misapplied, stolen or embezzled."

The riverwalk and other improvements haven't been completed, although millions have been spent on bulkheads and underground work.

Carlton and Jeff Spence emphatically denied stealing anything and said the riverwalk and other public improvements would have been finished if they had been allowed to continue the development.

As their lawyers had argued to the city, the Spences told the Times-Union there had been no misuse of public money. They said money from a city bond issue was pooled with their private funds but that nothing in their arrangement with the city prohibited that.

A contract that the city and TriLegacy signed in 2001 said city money should be spent "for purposes consistent with the expenditures of proceeds of tax exempt bonds."

They said expenses that were listed in the draft lawsuit, including travel to Bermuda and buying an NFL skybox, were legitimate business costs that TriLegacy would cover with private funds. The men said Hamilton Traylor, TriLegacy's president, flew to Bermuda to examine docks built by a contractor who wanted to build The Shipyards' marina. Skybox seats were marketing tools, they said, used to woo or reward customers signing up for the project's $750,000 condominiums.

The developers said they don't understand why, in April, City Hall began questioning their work. Carlton Spence said his first hint of trouble was when Mayor John Peyton called and said the city wanted to perform a financial review. City officials have said the Jacksonville Economic Development Commission was reviewing grants to developers and asked TriLegacy for information about how it had spent public money, then had city lawyers follow up when the company provided information that was too general.

The Spences said the city's actions this year undermined three years of effort to develop the property.

TriLegacy was days away from locking in construction financing worth more than $60 million when the city questioned how public money had been spent, Jeff Spence said. That inquiry, which drew heavy news coverage, prompted a lender and a potential business partner to withdraw from The Shipyards, he said. A company spokeswoman said Monday the canceled funding included money to complete public amenities east of Hogans Creek.

Once a financial review began, the developers argue, City Hall attacked spending that it previously accepted. The draft lawsuit claims the developers misused $6.2 million of city money by paying off a mortgage on the land. But the Spences say they gave the city a record of the payment in 2002, and no one complained then.

Cindy Laquidara, the city's chief deputy general counsel, said Monday the mortgage record the Spences delivered in 2002 wasn't evidence that City Hall approved of their use of public money. The record was a one-page account of money that TriLegacy received and paid out when the city issued a $17 million installment payment on the public improvements.

Laquidara said the sheet didn't indicate that the $6.2 million mortgage was paid with public money, only that it had been paid somehow.

The developers also argued that, during negotiation of an agreement to withdraw from The Shipyards, city lawyers held up a multimillion-dollar warehousing contract between ICS, an industrial storage company owned by the Spences, and the Jacksonville Port Authority to use as leverage.

"They just put it in a drawer and ... held it hostage," Jeff Spence said. The settlement agreement was signed last month.

In an interview Monday, Mullaney said there had been no coercion to reach a settlement, although he said TriLegacy was warned there would be a racketeering lawsuit if negotiations failed.

Mullaney said a major port contract was delayed during the settlement talks but that was because the lawsuit could affect the financial future of both the Spences and ICS, which is the family's core business.

The settlement agreement allows another developer, LandMar Group LLC, time to decide whether to assume TriLegacy's obligations at The Shipyards. If that doesn't happen, TriLegacy must deed the property to the city, and could have to repay as much as $14 million.

Whether or not LandMar takes over the project, the Spences said the settlement is a bad deal for them.

"I've lost over $20 million. ... I don't have it to write off. I'll be paying it off for 10 years," Carlton Spence said.

His son said they agreed to the settlement because they didn't want to spend time and money fighting over The Shipyards in federal court. Jeff Spence said their legal fees were already "well north of $1 million," and that a drawn-out lawsuit would cast a pall over work at ICS. Like city officials explaining their willingness to settle out of court, Jeff Spence also said he didn't want to see the development languish indefinitely because of a court fight.

The Spences said the riverwalk and other public improvements would have been finished if they had been allowed to continue the development.

steve.pattersonjacksonville.com, (904) 359-4263

This story can be found on Jacksonville.com at http://www.jacksonville.com/tu-online/stor..._16636897.shtml.

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tfrohne Crossroads

tfrohne

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"TriLegacy was days away from locking in construction financing worth more than $60 million when the city questioned how public money had been spent, Jeff Spence said. That inquiry, which drew heavy news coverage, prompted a lender and a potential business partner to withdraw from The Shipyards, he said. "

Does anyone know who the lender and the potential business partner are ?

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