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Miami Herald  - October 15, 2007

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Failed Wynwood site attracts bids
The Wynwood Foreign Trade Zone had collapsed amid lawsuits and infighting, but now the sale of the property will clear some old debts and raise new hopes

BY ANDRES VIGLUCCI

Behind wide-open gates, the big warehouse and office building -- the product of millions of dollars in public investment -- stands empty and trashed, windows busted out, covered in graffiti, stripped by vandals of anything of value.

This is all that remains of the Wynwood Foreign Trade Zone, a commercial project whose sponsors once pledged 3,000 jobs for a struggling community. It never got off the ground, done in by 17 years of infighting and a skein of lawsuits steeped in claims of ethnic discrimination.

Now the bankrupt nonprofit group behind the trade zone stands to receive a multimillion-dollar windfall from a project that by any measure has been a rotund failure.

Broke, owing more than $2 million in back taxes, and unable to afford even a guard to secure its property, the Wynwood Community Economic Development Corp. has put it up for sale.

Amid rising values in suddenly hot Wynwood, the overgrown, trash-strewn property -- worth about $3.5 million when the city of Miami agreed to donate it to the economic development corporation in 1989 -- is now worth far more. Nine prospective buyers bid for it, and a contract with one is under negotiation, the broker handling the sale says.

The expected sale price: more than $16 million, according to a city official. The largest chunk will go to the development corporation, subject to approval by a federal bankruptcy judge.

The city will get a smaller cut, likely far less than the value of the donated land and a $5.5 million federal loan that helped finance construction of the trade zone buildings.

That's a consequence of a 2005 ruling by a circuit judge who concluded the city had obstructed the project by reneging on agreements with the development corporation. The judge's decision gave the development corporation title to the property and said the group does not have to repay the federal loan.

REINVEST FUNDS

The development corporation, essentially dormant for years, says it doesn't yet know what it will do with the money. By federal law, the funds must be reinvested in the community, but the organization has no plans at the moment.

''I'm tired, this has taken its toll,'' said the group's executive director, William Rios, who says he has not been paid in 12 years by his organization. ``If the number is $5 million, we can do a lot of things, but it's all premature until we get it all in front of a judge.

''The bottom line is, it's a new day and we're moving forward,'' he said. ``The idea is to finally put something together that will bring some level of income from development.''

City officials say they, too, look forward to closing the books on a bad deal.

If it goes through, the sale will settle various claims and debts, including back taxes and a partial refund to the city, which has been paying off the $5.5 million U.S. Housing and Urban Development loan.

''The condition of this property now is just horrific,'' said Assistant City Attorney Henry Hunnefeld. ``The city wants to do something with it. Having somebody new come in and energize the property will be a win-win-win scenario.''

It's unclear what prospective buyers intend to do with the property, which is zoned for industrial use. The city would have no say over how it is used other than to make routine zoning determinations.

If the sale price is $16 million, the city might receive $1.5 million under the proposed settlement, Hunnefeld said. The development corporation would get up to $8 million after paying off taxes and a former creditor, Robert Stok, who controls 30 percent of the property, he said.

Because the Wynwood development corporation is a nonprofit group, it must detail its spending on public tax reports. Federal tax laws require that its funds go to promoting development in the Wynwood community.

Activists who have followed the tangled deal question whether the impending sale serves the public.

''With this sale, there are no concrete promises that would meet community interest, such as living wage jobs, affordable housing, job training,'' said Sushma Sheth, campaign director for the Miami Workers Center, in a written statement.

``The community of Wynwood and Greater Miami has once more been left out of decisions that impact our lives. Instead of private off-the-radar land grabs, we need community control over development.''

It all began with great promise in 1989, when the City Commission agreed to donate the vacant land to the Wynwood development corporation. When the group secured a license two years later from the federal government for the free-trade zone -- essentially an area where foreign goods are stored, shipped or assembled free of tariffs -- it was hailed as a coup.

But there was trouble almost from the start.

The city and the development corporation soon began jousting. City officials complained about Rios' salary, which at one point exceeded $100,000, and alleged the group was misspending. The city scuttled a $5 million federal grant when the development corporation resisted demands to put commissioners on its board and return control of the land to the city.

Rios complained of discrimination, contending that city officials were singling out the group, whose leadership was largely Puerto Rican, for unusually strict inspections and requirements -- claims that HUD officials confirmed in a scathing 1995 internal memo.

At the same time, a competitor -- the privately owned Miami Free Zone -- sued to have the Wynwood group's license revoked, claiming unfair competition. The Wynwood group prevailed, but years of legal wrangling added to delays.

MORE TIME IN COURT

To develop and operate the project, the Wynwood group brought in a private firm, Dade Foreign Trade Zone. But they eventually began bickering over control, too, and landed in court. The developers contended they lost $4.5 million on the project before declaring bankruptcy.

To settle a suit by the Wynwood development corporation and its partners, the city agreed in 1995 to seek $10 million in low-cost federal loans to finance construction, but gave the group just $5.5 million.

That wasn't enough to finish the trade zone complex, the development corporation said. But city commissioners, ignoring the advice of staff and attorneys, refused to disburse the balance, according to court records. The city then tried to foreclose on the property.

By 1999, the zone had attracted one tenant, a company owned by the developers, and, briefly, a Japanese company. In 2002, the Wynwood development corporation locked the developers out of the building and the project was essentially dead.

The Wynwood group again sued, saying the city reneged on its promises. Miami-Dade Circuit Judge Jennifer Bailey agreed. In 2005, she concluded the city was largely to blame for the project's collapse.

''No justification for the city's action was reflected in the record,'' she wrote. ``It could have avoided this result.''

The property became an illegal dump and a haven for vagrants, police say. The city has condemned it as unsafe.

In an interview, Rios insisted the trade zone could have fulfilled its promise.

''No one has ever said the project was not a great idea,'' he said. ``The problem was, everyone wanted a piece of it.''

Miami Herald staff writer Scott Hiaasen contributed to this report.