CRA Board, mayor want answers on stalled Washington Square redevelopment
TaMaryn Waters, Tallahassee Democrat
6 min read
The stalled project at the Washington Square site.
The developer backing the stalled Washington Square project owes more than $210,000 in permit fines and may be running out of time to prove the project is remotely viable.
Tallahassee Mayor John Dailey wants an update on the project and consensus from members of the Community Redevelopment Agency Board. He directed the CRA director to work with City Manager Reese Goad on learning the status of the half-constructed site that's fallen even further into disrepair.
"I have expressed my interest with our executive director to really get to the bottom of what's going on with Washington Square," said Dailey, during the Oct. 12 CRA Board meeting. "I know it's a complicated issue. Not only do we have the tax credits involved, but the city of Tallahassee has liens involved on the property ... We need to make sure that what is there is structurally sound."
With an initial $90 million estimated cost, the redevelopment project fell woefully short of its promise to bring a 270-room Loews Hotel as its anchor tenant, 67,000 square feet in office space and a downtown parking garage with 425 spaces; nearly half would be public parking.
Latest rendering of the Washington Square, mixed-use development under construction on an entire 1-acre city block on the northeast corner of Calhoun Street behind the Leon County Courthouse.
Still, the developer insists that the future still could be bright for the site.
In an interview with the Tallahassee Democrat Wednesday, developer Ken McDermott said he had hoped construction activity would have been underway by now, adding "it's a terrific site and it's going to be developed."
McDermott said he's still committed to bringing the project to completion — the road to get there remains to be seen.
Construction began in August 2018 at the 1-acre city block on the northeast corner of Calhoun Street behind the Leon County Courthouse.
Work came to a screeching halt a year later. The project has since been saddled with lawsuits and liens from some of its contractors, which were later paid off. Since then, there has been no significant on-site activity to signal the project will resume anytime soon.
Unpaid fines continue at Washington Square
On Oct. 16, Assistant City Manager Karen Jumonville gave an update on an outstanding balance from the Washington Square developer that's owed to the city.
"The first case relates to the environmental management permit for the site," Jumonville wrote. "On October 12, 2021, the Environmental Board found the site to be in violation (due to an expired permit, lack of stabilization of the soil, and not restoring the sidewalks and streets, among other requirements) of its permit. Fines commenced on October 26, 2021 and are accruing at the rate of $250.00 per day. To date, fines are approximately $180,037."
The stalled project at the Washington Square site.
Since that email, fines are approximately $181,287. Jumonville said the second case involving Washington Square is related to expired building permits. As of Oct. 18, accruing at a rate of $100 per day, fines are approximately $36,800.
A city spokesperson said none of the fines have been paid.
CRA considering its options
In February 2022, the CRA Board reluctantly approved McDermott's request to extend the project completion date from March 8, 2022 (an additional 30 months) to Sept. 8, 2024.
McDermott, principal at the now dissolved Fairmont Development LLC, also made a longshot request for a $3 million loan to keep the project afloat and complete several ongoing issues, such as backfilling a void between the eastside parking garage and the foundation on Calhoun and Jefferson streets that have resulted in the mountain of fines. The CRA Board denied the request.
Ken McDermott, with Fairmont Tallahassee LLC and owner of Washington Square, speaks to the Community Redevelopment Agency during a meeting Friday, Dec. 3, 2021.
As of Oct. 24, CRA Director Stephen Cox told the Democrat he hasn't received any updates from McDermott or his attorney. At the behest of the CRA Board, Cox said staff will reach out to the developer in the coming weeks.
"From a CRA perspective, we haven't spent any money on this project. Really the only thing we can do is officially rescind the agreement," Cox said.
According to the agreement, the CRA agreed to provide up to $9.6 million in tax credits after the project's completion and if the project met 90% of its initial project description.
"When we spoke to the developer about a year ago, he provided a report from an engineer indicating that the parking structure was sound at that point," Cox said. "It's been over a year. Not much work has been done to the structure. So, again, our concern is (whether) it's structurally sound?"
At the time, McDermott asked the CRA not to cancel the agreement because it would impact his ability to identify secure additional financing or business prospects.
"The board held off on doing any action at that point, and it was under the understanding that he is moving forward with the repairs, satisfying the liens that have been assessed on the property and those kinds of things," Cox said.
McDermott told the Democrat the structural engineering firm that designed the garage has recently presented letters to "joint venture partners that we're talking with ... the structure is absolutely sound."
"Concrete structures, such as the (Calhoun) Eastside parking garage or any parking garages, are designed to be exposed to the weather," he said. "This is no different than the parking garage I'm next to which has been there for over what 45 years now. So the structural issue is a non-issue."
The stalled project at the Washington Square site.
When asked about why fines haven't been paid, McDermott said they'll be paid once the project resumes and the project is complete. For example, he said some fines are related to landscaping on the site and that can't be completed until the development is built.
"We have to get a lot of different pieces together in order to finish the project, and we're working," McDermott said. "It will eventually happen."
Options being weighed on both sides
McDermott points to rising interest rates for commercial lending and the COVID-19 pandemic's overall impact on the economy as the culprit to why the project is stalled.
He's optimistic, though, and said he's working with a real estate broker who's "getting some very good response." McDermott said he'd be willing to work with a partner or sell the property, adding "whichever comes first."
If it moves forward, McDermott said he still envisions a hotel as the property's anchor and a parking garage. However, the ample office space laid out in plans may shift to residential space considering the dramatic shift to a virtual workforce following the pandemic.
The stalled project at the Washington Square site.
"I think apartments are a wonderful synergy with the hotel because it would be the real plus to have the services of a hotel available if you had an apartment," McDermott said.
Now, Cox said, there appears to be consensus among CRA board members to take some level of action if necessary. He said the board may consider the rare move to rescind the agreement with Washington Square — signaling the agency's position to sever all ties with the failed development.
"I think they're all kind of to that point where they want to know what their options are and move forward," Cox said.
McDermott said that a move to rescind the agreement would be a detrimental blow toward the project's completion. He pointed to "conditions beyond our control" that have impacted Washington Square from seeing the finish line.
"It would hurt the project because that's a real necessary component of downtown construction and there are enormous expenses involved in building (a parking garage)," he said. "We would certainly hope that the city remains our partners."
Contact Reporter TaMaryn Waters at tlwaters@tallahassee.com. Follow @TaMarynWaters on X.
