County paid 2006 price for apartment complex

As real estate prices plummeted last year, Hillsborough County officials paid a premium price for a 39-year-old apartment complex in an impoverished area.

The county wants to build a library on the site but has no plans to start work until the economy improves.

In the meantime, the county has agreed to let a nonprofit organization run by state Sen. Victor Crist, who plans to run for a county commission seat in 2012, manage the apartments for a fee.

In November, county commissioners approved paying $3.8 million for the 72-unit Rainbow Apartments complex in the University of South Florida area, about $2 million more than the market price listed by the property appraiser at that time.

Rather than get new appraisals closer to the sale, county real estate officials based the sales price on appraisals done in 2006, the height of the real estate boom.

The deal comes as county government looks to save money in the face of a $110 million budget shortfall that threatens the jobs of 1,000 county employees.

"If I was spending a couple of million dollars, I would pay for a current appraisal," said Warren Weathers, Hillsborough County's chief deputy property appraiser. "If it's costing $3 million or $4 million, if that brings it down a million dollars, it would be worth it."

County officials defend the purchase, saying the 2-acre site is perfect for the long-planned library that will serve nearby magnet schools, Muller Elementary and Bowers Whitley Career Center. They say appraisals done last year for a road-widening project in the same area supported the 2006 appraisals.

"I feel the price was reasonable based on the land sales and comparable sales in that vicinity," said Mike Kelly, the county's real estate director.

Several county commissioners, asked about the apartment complex this week, either didn't remember the sale or were vague on the details.

County backed grants for owner

The county has a long history with Rainbow Apartments. In 1997, county housing officials helped the owner, Oak Forest Trust, get state and federal grants totaling $832,000. The trust used the money to renovate several apartment buildings, including Rainbow.

The principal partners of the trust, now called Tampa Real Estate Inc., are Bob and Marilyn Fernandez. They could not be reached for comment.

In 2005, Tampa Real Estate notified the county it wanted to sell Rainbow. Negotiations began a year later among the county, Fernandez and the nonprofit University Area Community Development Corp. run by Crist, which has worked with the county on redevelopment projects in the area.

The plan called for the county to put up the purchase money and transfer the property to the nonprofit group, which would operate the apartments until the county had the money to staff a library.

However, the deal was put on hold in 2007 when the U.S. Department of Housing and Urban Development discovered the county had not required Fernandez to maintain enough affordable units in the complex. The dispute delayed a final agreement until last fall.

Organization to manage complex

In November, the commission approved the $3.8 million purchase.

The county has negotiated a contract with University Area Community Development to run the apartments for two years, with two one-year extensions if the county needs more time to staff the library.

During that time, the organization will collect the rent and a management fee of 4 percent of gross rental revenue. Rental money will be used to maintain the property as well as pay for insurance and utilities. Any remaining money will be used on projects in the area, Crist said.

Crist, a Republican whose district includes the area where the library will be built, said he was not involved in negotiations to buy the apartments. The purchase was vital, he said, to complete the millions of dollars worth of public investments made in an area known as "Suitcase City" because of its entrenched poverty.

Projects built in the area since the 1990s include the two magnet schools, University Area Community Park, University Area Community Clinic and a Junior Achievement office.

"Rainbow is right in the middle of the entire redevelopment campus," Crist said. "You couldn't ask for a better site; that's why the county didn't want to lose it."

'Get a more current appraisal'

Still, the question remains: Could the county have gotten a better deal?

Maggie Tagliarini, a former Affordable Housing Office employee who is familiar with Rainbow, said the county should have driven a harder bargain.

"In this market, as fast as prices are falling, I would get a more current appraisal," Tagliarini said. "They could have easily updated those old appraisals from 2006."

Supporters of the deal counter that rental property values have not fallen to the same degree as single-family housing. One reason, they say, is that people who have lost their homes through foreclosure were forced to sell end up in rental housing.

"With the number of people coming out of single-family housing, ... rent costs have remained pretty stable in this area," said Julian Garcia, executive director of University Area Community Development.

Kelly said if he had ordered a newer appraisal, it might have increased the value instead of lowering it.

Such a scenario is unlikely, however, said Tim Wilmath, director of valuation for the property appraiser's office.

"We aren't seeing a lot of increases in the market right now," he said.

The property appraiser's office set Rainbow's market value at $2 million in 2008. A year earlier, the value was $1.79 million.

Wilmath said the property appraiser's market values are conservative, probably 80 percent of true market value.

"So if you take our assessment and apply that formula, we think it should be worth about $2.6 million," he said.

Wilmath said he understands the county putting a higher value on the property. He compared it to a drugstore chain assembling a number of tracts for a store and parking.

"The last piece tends to be higher," he said, "because the word gets out and they sort of hold you hostage on that piece of property."