SUBJECT:
Title
Requesting Updated Direction from the Board for the County Administrator, County Attorney, Clerk of Court, and Outside Bond Counsel to continue discussions with and conducting preliminary due diligence assessment of a proposal from Upward Communities to deliver affordable essential workforce housing for public agency employees
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INITIATOR: |
DEPARTMENT: |
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Matthew G. Minter, County Attorney |
County Attorney |
DESCRIPTION/BACKGROUND:
The Board will recall that Mr. Jason Roberts, CEO of Upward Communities, previously presented a concept to the Board on November 17, 2025, to provide affordable essential workforce housing that would be available for employees of Marion County, the City of Ocala, Marion County Public Schools and the Marion County Sheriff’s Office, among others. In order to be approved, the proposed project must meet all legal and financial requirements of the Board, the Clerk, our bond counsel and Upward Communities.
The general structure of the proposed project is for Upward Communities to obtain bond financing to construct several hundred single family homes on a site in Marion County, that would be for the purpose of providing housing that would be affordable to public employees of Marion County, the City of Ocala, or the School Board. According to a Master Lease document, Upward Communities would, as the Landlord, lease all of these homes to Marion County, and the County would in turn sublease the homes to the public employees. As a result of the lease between Upward and the County being a 100 -year lease, the property would not be subject to ad valorem taxation, which would then allow the units to be rented to the public employees at a lower rate than competitive housing in the marketplace.
A threshold requirement for this project to go forward is for the County to adopt a Resolution that would include a finding that such a project is not only for a “public purpose,” but is for a “paramount public purpose.” This relates in part to the question, whether the County is, in fact, faced with such a housing crisis that it is the County’s “governmental burden" or obligation to solve. The County will also need to make a legislative finding that entering into a 100-year lease is in the best interest of the County since Florida law limits such lease terms to 30 years, unless such special finding is made.
While the bonds that would be issued would not be Marion County bonds, the revenue stream that would come from the rentals of the individual homes would be the source of repayment of the bonds. The County would be obligated to make the required payments even if some units were not occupied.
If the Board ever reached the point in the long-term lease that it felt the financial obligation was no longer in the public interest, the Board would have the option of exercising a “non-appropriation” decision - to advise the Landlord that at the end of a particular budget year, it would no longer appropriate funds to continue making payments. That would end the County’s financial liability for the rent payments to the Landlord, but not without consequence. Such a decision, according to our outside financial advisor PFM, would be tantamount to a bond default. It would have significant negative consequences on the County’s ability to undertake future debt funding.
The question has been posed, what could the County do to provide financial security for itself in such eventuality. In this regard, the Board may recall the unique financing the County did to pay $20M for 2.5 million tons of airspace in the new ACMS landfill. In that transaction, we were able to provide ourselves with a security interest, a mortgage in the property if ACMS defaulted - we would have ultimately owned the 640 acre parcel.
There is no similar situation with the Upward Communities project. If the County exercised its non-appropriation option, the County would not have a security interest in the houses - they would remain the property of the Landlord, and the County would have to immediately assign the sub-lease agreements to the Landlord.
One other point with respect to the draft master lease agreement under review, between Upward Communities and the County. It indicates that the Landlord has the “necessary expertise, financial resources, and experience in full project delivery of affordable housing projects.” Factually, that does not seem to be accurate with respect to this particular type of project. While Upward has a few projects they are working on launching, particularly in Texas, I do not believe they have actually constructed any at this time, not to mention that none have been operating for several years to enable us to evaluate how they have actually performed. But, even if we were to credit such expertise that presumably we would be relying on, the draft master lease agreement appears to provide that Upward would be able to unilaterally assign the agreement to another party, in which case we would lose such expertise.
The underlying concept behind the proposed project is a positive concept. It may be the case that, given time and experience with the actual performance of other similar projects, this concept could be more safely evaluated. In consideration of the foregoing concerns, I deemed it appropriate to seek further guidance from the Board whether to continue our review of this project.
BUDGET/IMPACT:
None
RECOMMENDED ACTION:
Recommended action
For discussion.
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