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Miami Herald - August 28, 2006

Council: When are fees `excessive'?

In its first redevelopment meeting since the Miami Herald's House of Lies series exposed mismanagement in the county's housing programs, some on the North Miami City Council took affordable housing developers to task for what they called excessive developer fees.


A company set up to build affordable housing came under fire for its 15 percent developer's fee at Tuesday's North Miami redevelopment board meeting.

North Miami Housing has an exclusive contract with the city to fulfill a promise to match 6,000 luxury homes at Biscayne Landing with the same number of housing units for needy residents.

Several members of the city council, sitting as the redevelopment board, said the fee seems excessive. For comparison, some federal affordable housing programs cap developer fees at nine percent of construction costs. The city of San Diego uses four percent as an ''example'' of typical developer fees.

However, Otis Pitts of North Miami Housing told the council that ''may seem excessive at first'' but that ``15 to 18 percent is a customary fee when it comes to affordable housing.''

Higher fees are usually awarded only to developers working with tax credits, which is not the case in North Miami.

Mayor Kevin Burns said those comparisons may not be fair because North Miami housing has its own overhead costs that must be paid out of developer fees. Some of the work at Rucks Park, the proposed 136-unit affordable housing project on Northeast Fifth Avenue, has been done by North Miami Housing already, he said.

''They've put a million dollars into that site and we haven't paid them dime one,'' Burns said. The project was renamed Pioneer Gardens later in the meeting.

Pitts noted that Biscayne Landing developers, who have a majority stake in North Miami Housing, have given the city millions of dollars and pledged $20 million to build a library and Olympic Training Center.

Council member Michael Blynn disagreed, saying the money for new city buildings ``was just a little sweetener for letting them use our land.''

Blynn said in an interview the developer fee was part of an agreement approved by the City Council before Burns and council member Marie Steril were elected. If the 6,000 units average $50,000 in costs, developer fees could reach $45 million.

''I agree with Otis Pitts that 15 to 18 percent is customary for affordable housing. But if they're making that kind of money, the city shouldn't be doing anything for them. They should be doing everything,'' Blynn said.

He and council member Scott Galvin said the Miami Herald's House of Lies series, which uncovered massive fraud and mismanagement in the county's housing programs, prompted them to take a harder look at North Miami Housing. Burns said the city does have recourse if North Miami Housing inflates costs to earn higher fees.

North Miami Housing, designed to include women, minorities and small business in the process of building the housing, includes a number of local people. Pitts has a 22 percent interest in the company, and others with smaller shares include Judsen Siskind Enterprises, Rudolph Moise, Andre Pierre, Nadine Pierre-Louis, Renee Secasas and Ghislain Gouraige.

The developer fee is a percentage of construction costs and would be paid monthly when construction starts. Burns said the city does have recourse if North Miami Housing inflates costs to earn higher fees.

''We'll have somebody watching to make sure what they're spending is reasonable,'' Burns said, adding that the city can provide housing to residents through renovation without relying on North Miami Housing.

While developer fees may not be on the table, Burns said he'll call a special meeting soon to discuss the city's agreements on Rucks Park. Issues that need clearing up include a 60-year-old clay sewer pipe on the property, and insurance issues.

''We'll have a groundbreaking in September, and it'll be a real groundbreaking, not just a ceremony. You'll see guys out there working the next day,'' Burns said.