Motives in Dow PUD likely tax related – appeal inevitable
Posted on August 26, 2015
Historic City News
Some in St Augustine who are watching with interest the transformation of the Dow Museum of Historic Homes into the Cordova Inn, say that the rhetoric used to pressure neighbors and influence members of the city’s two governing boards, city management, and city commission, limiting acceptable options for the subject real estate to either an upscale hotel or apartments, has been made because the new owner, David Corneal and his Old Island Hotels Inc., are trying to take advantage of an Internal Revenue Service 1031 tax exchange.
While Corneal can defer payment of capital gains from the reported $8,840,000 sale of Island City House Hotel in Key West, Monroe County, on October 29, 2014, he would only have 180 days to re-invest those funds in a like capital investment to be eligible.
A Planned Unit Development of 30-rooms, in a high-end hotel, bar, and amphitheater carved out of the city’s historic residential district (zoned HP-1) would certainly seem to qualify.
St. Johns County property records show a purchase of the Dow property by Old Island Hotels Inc. on October 31, 2014, for $1,700,000. The IRS also provides for a Qualified Exchange Accommodation Agreement under which improvements can be made to an exchanged property with the costs being applied to the 1031 exchange.
In truth, David Corneal actually had many options, but that was made moot when Commissioners Todd Neville, a family friend and business associate of Seth Corneal, Nancy Sikes-Kline, Leanna Freeman, and Roxanne Horvath, voted to allow the rezoning, over the objections of a two-thirds majority of residents who spoke against it at a meeting that dragged on past 1:00 a.m. Tuesday morning.
Neville, who was elected to represent the best interests of the whole community, speaking as an accountant, previously presented a financial overview of the performance of the Dow property, comparing its use as an 8-building apartment complex, which was allowed under the zoning in place when Corneal purchased it, to a luxury hotel, indicating that the owner would earn a substantially greater profit if he is allowed to replace the HP-1 zoning restrictions.
Local attorney, Jane West, filed a complaint with the city attorney asking that Neville recuse himself from participating in the discussion or voting on this issue based on his prior dealings with the applicant through Neville’s business relationship with Seth Corneal, the applicant’s son who is also a lawyer and represents Neville according to publicly available records. Neville refused.
It appears that an appeal on this decision in court is inevitable based on the refusal of the commissioners to follow the instructions of the city attorney regarding how they had to carefully consider the testimony and evidence presented Monday night. Vice-mayor Roxanne Horvath read aloud her decision from a prepared script; written long before she had heard the first piece of testimony.
Commissioner Sikes-Kline admitted soliciting professors from the University of Florida to write a position paper on the issue, falsely representing it to be a scholarly report when it was clearly not written to be objective, did not follow academic standards for research methods or program evaluation. By attaching the University of Florida logo to the report, a public fraud was committed; as the University of Florida did not conduct, oversee or sanction the report, nor do they offer any opinion on the credibility or reliability of its content.
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