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United States of America
Federal Trade Commission
Washington, D.C.
Date: September 20, 1991/October 4, 1991
FROM Joseph J. Koman, Jr. Attorney
Ronald D. Levis, Investigator
Division of Enforcement/BCP
Sugject: Show Cause Order
International Telephone and Telegraph, ITT, ITT Community Development Corporation ICDC and Palm
Coast, Inc., Docket No C-2854
To : Commission
Recommendation:
That the Commission issue a show cause order as to why the existing fifteen year moratorium on
sale of registered residential lots at Palm Coast should not be extended for an additional five years. Note: The extension
must be ordered not late than the expiration of the fifteen year period, which expires on December 27, 1991
Nature of Case
International Telephone and Telegraph Corporation ( ITT) , its land sales subsidiary, ITT Community Development Corporation
( ICDC), and ICDC subsidiary Palm Coast, Inc., 1 . were charges with misrepresenting ITT's obligations and responsibilities
of ICDC and Palm Coast, unfairly and deceptively selling land by misrepresenting the investment values of Palm Coast lots,
misrepresenting the types of amenities and facilities available at Palm Coast and failing to provide cancellation and refund
rights and failing to disclose other pertinent information.
__________________
1 ITT is one of the major industrial corporations in the United States. The 1991 Standard & Poors Register
lists ITT's revenue as $ 20.05 billion with 119,000 employees. ICDC is a land sales and development firm engaged in selling
and developing Palm Coast, a land development in northeast Florida, and also some surrounding areas. Palm Coast is located
in Flagler County, between Daytona Beach and St. Augustine, Florida. Attached is a map which shows the various communities
that comprise Palm Coast. On the reverse side is an aerial photograph of Palm Coast that clearly shows where growth
and development have occurred during the past fifteen years.
Background
A consent order was issued in this matter on December 10, 1976. The initial compliance report of February 28, 1977,
a spot check investigation report of December 28, 1978, a compliance investigation report of April 1, 1981, and the final
complance investigation report of October 6, 1983, were accepted by the Commission. The Atlanta Regional Office (ARO)
was responsible for this matter until December 1989, whereupon the Enforcement Division took responsibility for future compliance
activity.
Scope of the order
The Major purpose of the order is to prevent misrepresentations and to require disclosures concerning: (1)
the extent of Palm Coast's developoment, (2) ITT's financial responsibilities for the development, (3) the investment
potential of Palm Coast lots, (4) total lot costs, (5) the current extent of lot use and the timetable for development, (6)
the proximity of Palm Coast to major roads, cities and necessary facilities and amenities, (7) number and size of facilities,
amenities, and residents, and (8) notices of cancellation.
a second purpose of the order was to make Palm Coast a self-sufficient community with the necessary amenities for year-round
living. To assist in this goal, order paragraphs required certain improvements to be developmed and constructed in Palm
Coast. These included: (1) shopping center, (2) office building , (3) commercial, manufacturing, and
research park, (4) corporate headquarters, (5) I-95 interchange, (6) St. Joe Road improvement. All of these improvements
were developed and constructed within the time limitations imposed by the order.
The order also requires written and oral disclosures in Palm Coast's promotional material, contracts, property reports,
easements and covenants and sales presentations. Furthermore, respondents are required to conduct in-house surveillance
of their sales personnel as to compliance with the disclosure and representation requirements of the order.
By terms of the order, respondents are also limited in the size of their development for at least 15 years to 42,000
acres and a maximum of 48,000 registered residential lots. 2. The 15 year restriction on expansion was explained
to the Commission in
_________________
2...for a period of fifteen (15) years after the service upon respondents of this order,....respondents shall limit and
restrict the development presently known as Palm Coast and consisting of approximately 93,0000
acres, to a maximum of approximately 48,000 registered lots in a maximum of 42,000 acres,....and, accordingly, respondents
shall neither register any lots nor sell any registered lots in the balance of such approximately 93,000 acres.
earlier ARO staff pre-order memoranda as probably the most significant order accomplishment. By reducing the acreeage
55%, the Palm Coast community takes on a manageable size, and ICDC must concentrate its development efforts on a smaller parcel
of land. With a limited number of lots to sell, the provision alters the business of ICDC from a mere subdivider to
a community builder. This provision, as well as the one providing for the building of a basic infrastructure, were designed
to stimulate the development and population growth of Palm Coast and to produce a fully-planned and self-contained thriving
community. The order also required respondents to submit a report 13 years after date of service. If housing units
built or under construction do not equal 50% of the deeded lots, the Commission may extend the limit on the size of developoment
for an additional five years.
December 1, 1989 Compliance Report
As required by the order, ICDC filed its December 1, 1989, compliance report in a timely fashion. The order provided
that the written report be filed 720 days prior to the expiration of the fifteen (15) year moratorium period. The filed report
described the extent of the development at Palm Coast, including the number of dwelling units, recreational facilities and
public and commercial services (Compliance Report Materials File I, December 1, 1989, Report).
The December 1, 1989, reeport disclosed that at that time there were 7,552 dwelling units (6,784 single family and 768
multifamily) at Palm Coast and a population of approximately 15,000 ( 60% of Flagler County's total population).
Richard Braunstein, Assistant General Counsel for ICDC, orally reported that at the time of
the December 1, 1989 report, there were approximately 34,513 deeded lots. Thus, the report indicated that the number
of dwelling units located or under construction at Palm Coast after the expiration of the fifteen year period was not expected
to be equal to at least 50% of the number of lots at Palm Coast then authorized for residential use as to which deeds are
at that time held by purchasers or their assigne. The order provision provides that if the 50% figure is not achieved,
the Commission's Rules to extend the fifteen year period for an additional period not to exceen five years. Any such
extension must be ordered not later than the expiration of the fifteen year period ( December 27, 1991)
August 27, 1991 Compliance Report
On August 7, 1991, staff requested ICDC to provide updated data on both the number of deeded registered lots and dwelling
units at Palm Coast. ICDC's August 127, 1991, compliance report shows the following analysis of ICDC's deeded registered
lots and dwelling units as of November 30, 1989, and July 31, 1991:
Registered lots deeded November 30, 1989 33,700
Number of dwelling units on registered lots
single family 6,600
multi-family 800
Total: 7,400
Registered lots deeded Julyu 31, 1991 35,800
Number of dwelling units on registered lots
single family 7,700
multi-family 800
Total 8,500
The current data reveals that as of July 31, 1991, less than 24% (23.7%) of the deeded lots have dwelling units thereon.
This percentate is only slightly higher than the 22% comparison (of dewlling units to registered lots) which the November
30, 1989 data indicates. It falls far short of the 50% mandate. According to the report, the Palm Coast population now numbers
about 18,000.
Staff's August 1991 on-site inspection of Palm Coast
After the December 1, 1989 compliance report was submitted by ICDC, the Enforcement staff received a number of letters
from Flagler County Officials, various lot owners, and civic associations at Palm Coast and a number of individual lot purchasers
regarding possible Commission action about the extension of the moratorium for an additional five years. Most wanted
to make some personal input into the decision-making process and express their likes and/or dislikes of ICDC and the Palm
Coast community. Staff explained there would be a comment period where interested parties could submit written statements
and views to the Commission; however, a number of the parties requested Commission personnel be made available for oral comments.
As a result, the staff made itself available to meet with and discuss the applicable order provisions and community development
during the week of August 19 through 22, 1991. All of the parties spoken to were in favor of extending the moratorium
for another five years. It will undoubtedly take more than the additional five year period to achieve the order's 50%
dwelling units objective; 3 . however, the additional time period will provide all interested parties the opportunity
to insure orderly groth and development of Palm Coast will continue.
________________
3 At a rate of approximately a 2 % increase in dwelling units to registered lots over a 1 year , 8 month period
of time ( i.e., from November 30, 1989 to July 31, 1991, the percentage went from about 22% to 24%) it would take another
21 1/3 years to reach the 50% build out. However, since the time frame November 30, 1989 to July 31, 1991, reflects a period
of housing recession, it would be unwise to conclude that it will take that length of time to reach the 50% build out.
The Flagler County Officials are of the opinion that an extension of the moratorium would be in the best interest of
the county and its residents. According to Mr. Noah McKinnon, the attorney for the county commissioners, if ICDC wanted
to develop and sell new lots in the county, their plans would have to be interfaced with the Comprehensive Land Use Plan
(CLUP) adopted by the STate and ICDC in 1974, and amended in 1977, when a more limited 42,000 acre subdivision was adopted.
Using CLUP, Flagler County plans five (5) years in advance for lands that will be needed over the next five (5) years for
schools, parks, administrative buldings, etc. Such planning helps to keep county taxes lower and encourages adopting strong
regulatory or zoning rules to scrutinize incoming industry and hlep protec the environment. Therefore, if ICDC were
sudenly to announce a plan to plat, register and marker new residential lots, the county would view the proposals under a
magnifying glass ( one of the county commissionser, Al Jones, specifically used the term "under a magnifying glass') to ensure
that corporate plans would not upset the delicate growth and develpment balance in the county.
Furthermore, since the state now has requirements ( Concurrence Acts) for all utility, etc., infrastructure to
be in place prior to selling homesiet property, the infrastructure would not only be prohibitively expensive for ICDC, but
it would mean the county would face additional concerns involving water, drainage, solid waste, etc.
By extending the moratorium, Flagler county authorities will be assured that ICDC will continue to develop existing Palm
Coast acreage in the county for at least 5 more years, and be intimately involved in the same issues that the county must
face, i.e., water and utility management and use of public lands. In essense, the moratorium provides an extension of
the continuity of the cooperative business relationship currently existing between the county and ICDC. Perhaps Mr. Guy Sapp,
the county's deputy tax appraiser summed up the situation best: If it "aint't broke, don't fix it."
The staff spoke with ICDC officials on Augsut 27 and 28, 1991. Mr. Braunstein advised that ICDC
will not oppose the Commission in extending the moratorium another five years. ICDC still has an inventory of unsold
registered lots at Palm Coast and in recent years it has decided to upscale the area east of the Intercoastal Waterway.
ICDC is centering most of its development acitivites and financial resources east, from the existing core area at Palm Coast
towards the Atlantic Ocean. It will take anywhere from ten to twenty years to develop this area. ICDC is not interested
at this time in developing lands outside those contained in the CLUP Agreement. ICDC is pouring millions of dollars
into making this area a 'Second Palm Beach" in which only the wealthy can afford to live. For
example, it has spent more than $11 million on a Mediterranean-styled Equity Country Club, to be used exclusively by residents
in the communities.
Recommendation
Respondents have not met the order's proscribed target goal of 50% build out of deeded Palm Coast residential lots (
only 24% of deeded residential lots have dwelling units constructed thereon since service of the order); and staff's inquiry
does not disclose the existence of any valid reason as to why the moratorium should not be extended for an additional five
(5) years. An extension will encourage continued construction of dwelling units within the sections comprising Palm
Coast. Moreover, respondents do not oppose the extension of the moratorium for an additional five years.
Therefore, it is respectfully recommended that the Commission, pursuant to Section 3,72 of the Commissions's Rules of
Practice issue the accompanying order to show cause as to why the existing fifteen year limitation on the sale of registered
lots ( maximum of approximately 48,000 registered lots in a maximum of 42,000 acres) should not be extended for an additional
five year period. A draft Federal Register Notice is attached to the file.
Attachments'
1. Aerial Map of Palm Coast
2, Order to Show Cause
3, Draft Federal Register Notice
Approved:
Justin Dingfelder
Assistant Director
Division of Enforcement/BCP
william S. Sanger
Associate Director for Enforcement/BCP
...
...
Compliance Investigation
At the time staff of the Atlanta Regional Office concluded the last compliance investigation,
they reported that the Admiral Corporation, a wholly owned subsidiary of ITT, was developing property east of the Intracoastal
Waterway ( Hammock Dunes, a private community of 2,250 acres:, and therefore, they were attempting to verify whether this
acreage was part of the 42,000 acres within which ICDD was permitted to register and sell lots in accordance with the Commission's
order. To assist them in making this determination, ARO requested that respondents forward a copy of the application for development
approval ADA for a development of regional impact DRI which Florida statures required developers to file with State and local
authorities. However, previous to ever receiving the ADA/DRI application, the Commission closed the compliance inquiry with
the caveat that ARO monitor the situation as it developed. The Secretary's letter advised respondents of the Commission's
continued interest in the Admiral Corporations' development activities.
After this matter was assigned to the Division of Enforcement, staff reviewed existing files
and upon discussing the matter with respondents counsel discovered that the previously requested ADA/DRI application
had never been forwarded to the ARO. Therefore, we again made
the request. Staff will review the ADA/DRI application, as well as the Comprehensive Land Use Plan CLUP, and existing maps
of the area at or prior to the time the order was issued, and conduct discussions with knowledgeable persons to determine
whether Hammock Dunes, as well as the five or six other developments east of the Intracoastal Waterway, fall within the restricted
42,000 acres. The company maintains that all of these development are
within the permitted acreage. They also maintain that by
deplating lots within the original Palm Coast
subdivision, they have been able to register lots in Hammock Dunes, etc. and still stay within the order's proscribed cap
of 48,000 registered residential lots. As of this time, the staff has been unable to locate the two maps relied upon to show
the areas comprising the 42,000 acres. 5
With regard to the cap of 48,000 lots, the staff has also discovered that the respondents in
recent years have engaged in a substantial buy back program. ( approximately 8,000 lots bought back from previous ICDC
purchasers to replenish its lot inventory for additional lot sales, lot and home packages and sales or exchange programs such
as the Harbor Club time sharing program in which equity can be applied to a lot and house package. The manner in which this
buy back program affects the cap of 48,000 lots has yet to be determined. It is clear, however, that the purpose of this order
provision limiting the number of lot sales was to change the busineess attitude of ICDC from a seller
of lots to a community developer and builder. At the time of the order 38,000 of the 48,0000 lots
had been sold. by 1983, there were only 2,000 lots left in inventory October 6, 1983 report by ARO which was in line with
the decrease in lots the Commission envisioned. The Buy back program, however, has put a new twist on the meaning of the previously
arrived at numbers....
...
...
Staff has also been advised by a number of Palm Coast residents that respondents have shown an
increasing disinterest in furthering the growth of Palm Coast and are attemptiong, by frivolous means, to extricate
themselves from the financial burdens of canal maintenance, road improvements or providing utility hook ups to existing plant
facitilties. For example, there are certain sections of Palm Caost in which alternative methods to sewer hook ups are used.
These areas have holding tanks in which the effluent flows and pumping of raw sewage is done on a....
...
...
Page 7
(total 93,000 acres, 42,000 buildable acres, 51,000 acres moratorium)
5 Pomeranz Exhibit A was the map used before the order was accepted by the Commission.
Lister Physical Exhibit C
was the map used in the intial compliance report.
| Federal Trade Commission October 4, 1991 |
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| September 20, 1991 / October 4, 1991 |
United States of America
Federal Trade Commission
Washington, D.C.
Date: September 20, 1991/October 16, 1991
FROM Joseph J. Koman, Jr. Attorney
Ronald D. Levis, Investigator
Division of Enforcement/BCP
Sugject: Show Cause Order
International Telephone and Telegraph, ITT, ITT Community Development Corporation ICDC and Palm
Coast, Inc., Docket No C-2854
To : Commission
Recommendation:
That the Commission issue a show cause order as to why the existing fifteen year moratorium on
sale of registered residential lots at Palm Coast should not be extended for an additional five years. Note: The extension
must be ordered not late than the expiration of the fifteen year period, which expires on December 27, 1991
Nature of Case
International Telephone and Telegraph Corporation ( ITT) , its land sales subsidiary, ITT Community Development Corporation
( ICDC), and ICDC subsidiary Palm Coast, Inc., 1 . were charges with misrepresenting ITT's obligations and responsibilities
of ICDC and Palm Coast, unfairly and deceptively selling land by misrepresenting the investment values of Palm Coast lots,
misrepresenting the types of amenities and facilities available at Palm Coast and failing to provide cancellation and refund
rights and failing to disclose other pertinent information.
__________________
1 ITT is one of the major industrial corporations in the United States. The 1991 Standard & Poors Register
lists ITT's revenue as $ 20.05 billion with 119,000 employees. ICDC is a land sales and development firm engaged in selling
and developing Palm Coast, a land development in northeast Florida, and also some surrounding areas. Palm Coast is located
in Flagler County, between Daytona Beach and St. Augustine, Florida. Attached is a map which shows the various communities
that comprise Palm Coast. On the reverse side is an aerial photograph of Palm Coast that clearly shows where growth
and development have occurred during the past fifteen years.
Background
A consent order was issued in this matter on December 10, 1976. The initial compliance report of February 28, 1977,
a spot check investigation report of December 28, 1978, a compliance investigation report of April 1, 1981, and the final
complance investigation report of October 6, 1983, were accepted by the Commission. The Atlanta Regional Office (ARO)
was responsible for this matter until December 1989, whereupon the Enforcement Division took responsibility for future compliance
activity.
Scope of the order
The Major purpose of the order is to prevent misrepresentations and to require disclosures concerning: (1)
the extent of Palm Coast's developoment, (2) ITT's financial responsibilities for the development, (3) the investment
potential of Palm Coast lots, (4) total lot costs, (5) the current extent of lot use and the timetable for development, (6)
the proximity of Palm Coast to major roads, cities and necessary facilities and amenities, (7) number and size of facilities,
amenities, and residents, and (8) notices of cancellation.
a second purpose of the order was to make Palm Coast a self-sufficient community with the necessary amenities for year-round
living. To assist in this goal, order paragraphs required certain improvements to be developmed and constructed in Palm
Coast. These included: (1) shopping center, (2) office building , (3) commercial, manufacturing, and
research park, (4) corporate headquarters, (5) I-95 interchange, (6) St. Joe Road improvement. All of these improvements
were developed and constructed within the time limitations imposed by the order.
The order also requires written and oral disclosures in Palm Coast's promotional material, contracts, property reports,
easements and covenants and sales presentations. Furthermore, respondents are required to conduct in-house surveillance
of their sales personnel as to compliance with the disclosure and representation requirements of the order.
By terms of the order, respondents are also limited in the size of their development for at least 15 years to 42,000
acres and a maximum of 48,000 registered residential lots. 2. The 15 year restriction on expansion was explained
to the Commission in
_________________
2...for a period of fifteen (15) years after the service upon respondents of this order,....respondents shall limit and
restrict the development presently known as Palm Coast and consisting of approximately 93,0000
acres, to a maximum of approximately 48,000 registered lots in a maximum of 42,000 acres,....and, accordingly, respondents
shall neither register any lots nor sell any registered lots in the balance of such approximately 93,000 acres.
earlier ARO staff pre-order memoranda as probably the most significant order accomplishment. By reducing the acreeage
55%, the Palm Coast community takes on a manageable size, and ICDC must concentrate its development efforts on a smaller parcel
of land. With a limited number of lots to sell, the provision alters the business of ICDC from a mere subdivider to
a community builder. This provision, as well as the one providing for the building of a basic infrastructure, were designed
to stimulate the development and population growth of Palm Coast and to produce a fully-planned and self-contained thriving
community. The order also required respondents to submit a report 13 years after date of service. If housing units
built or under construction do not equal 50% of the deeded lots, the Commission may extend the limit on the size of developoment
for an additional five years.
December 1, 1989 Compliance Report
As required by the order, ICDC filed its December 1, 1989, compliance report in a timely fashion. The order provided
that the written report be filed 720 days prior to the expiration of the fifteen (15) year moratorium period. The filed report
described the extent of the development at Palm Coast, including the number of dwelling units, recreational facilities and
public and commercial services (Compliance Report Materials File I, December 1, 1989, Report).
The December 1, 1989, reeport disclosed that at that time there were 7,552 dwelling units (6,784 single family and 768
multifamily) at Palm Coast and a population of approximately 15,000 ( 60% of Flagler County's total population).
Richard Braunstein, Assistant General Counsel for ICDC, orally reported that at the time of
the December 1, 1989 report, there were approximately 34,513 deeded lots. Thus, the report indicated that the number
of dwelling units located or under construction at Palm Coast after the expiration of the fifteen year period was not expected
to be equal to at least 50% of the number of lots at Palm Coast then authorized for residential use as to which deeds are
at that time held by purchasers or their assigne. The order provision provides that if the 50% figure is not achieved,
the Commission's Rules to extend the fifteen year period for an additional period not to exceen five years. Any such
extension must be ordered not later than the expiration of the fifteen year period ( December 27, 1991)
August 27, 1991 Compliance Report
On August 7, 1991, staff requested ICDC to provide updated data on both the number of deeded registered lots and dwelling
units at Palm Coast. ICDC's August 127, 1991, compliance report shows the following analysis of ICDC's deeded registered
lots and dwelling units as of November 30, 1989, and July 31, 1991:
Registered lots deeded November 30, 1989 33,700
Number of dwelling units on registered lots
single family 6,600
multi-family 800
Total: 7,400
Registered lots deeded Julyu 31, 1991 35,800
Number of dwelling units on registered lots
single family 7,700
multi-family 800
Total 8,500
The current data reveals that as of July 31, 1991, less than 24% (23.7%) of the deeded lots have dwelling units thereon.
This percentate is only slightly higher than the 22% comparison (of dewlling units to registered lots) which the November
30, 1989 data indicates. It falls far short of the 50% mandate. According to the report, the Palm Coast population now numbers
about 18,000.
Staff's August 1991 on-site inspection of Palm Coast
After the December 1, 1989 compliance report was submitted by ICDC, the Enforcement staff received a number of letters
from Flagler County Officials, various lot owners, and civic associations at Palm Coast and a number of individual lot purchasers
regarding possible Commission action about the extension of the moratorium for an additional five years. Most wanted
to make some personal input into the decision-making process and express their likes and/or dislikes of ICDC and the Palm
Coast community. Staff explained there would be a comment period where interested parties could submit written statements
and views to the Commission; however, a number of the parties requested Commission personnel be made available for oral comments.
As a result, the staff made itself available to meet with and discuss the applicable order provisions and community development
during the week of August 19 through 22, 1991. All of the parties spoken to were in favor of extending the moratorium
for another five years. It will undoubtedly take more than the additional five year period to achieve the order's 50%
dwelling units objective; 3 . however, the additional time period will provide all interested parties the opportunity
to insure orderly groth and development of Palm Coast will continue.
________________
3 At a rate of approximately a 2 % increase in dwelling units to registered lots over a 1 year , 8 month period
of time ( i.e., from November 30, 1989 to July 31, 1991, the percentage went from about 22% to 24%) it would take another
21 1/3 years to reach the 50% build out. However, since the time frame November 30, 1989 to July 31, 1991, reflects a period
of housing recession, it would be unwise to conclude that it will take that length of time to reach the 50% build out.
The Flagler County Officials are of the opinion that an extension of the moratorium would be in the best interest of
the county and its residents. According to Mr. Noah McKinnon, the attorney for the county commissioners, if ICDC wanted
to develop and sell new lots in the county, their plans would have to be interfaced with the Comprehensive Land Use Plan
(CLUP) adopted by the STate and ICDC in 1974, and amended in 1977, when a more limited 42,000 acre subdivision was adopted.
Using CLUP, Flagler County plans five (5) years in advance for lands that will be needed over the next five (5) years for
schools, parks, administrative buldings, etc. Such planning helps to keep county taxes lower and encourages adopting strong
regulatory or zoning rules to scrutinize incoming industry and hlep protec the environment. Therefore, if ICDC were
sudenly to announce a plan to plat, register and marker new residential lots, the county would view the proposals under a
magnifying glass ( one of the county commissionser, Al Jones, specifically used the term "under a magnifying glass') to ensure
that corporate plans would not upset the delicate growth and develpment balance in the county.
Furthermore, since the state now has requirements ( Concurrence Acts) for all utility, etc., infrastructure to
be in place prior to selling homesiet property, the infrastructure would not only be prohibitively expensive for ICDC, but
it would mean the county would face additional concerns involving water, drainage, solid waste, etc.
By extending the moratorium, Flagler county authorities will be assured that ICDC will continue to develop existing Palm
Coast acreage in the county for at least 5 more years, and be intimately involved in the same issues that the county must
face, i.e., water and utility management and use of public lands. In essense, the moratorium provides an extension of
the continuity of the cooperative business relationship currently existing between the county and ICDC. Perhaps Mr. Guy Sapp,
the county's deputy tax appraiser summed up the situation best: If it "aint't broke, don't fix it."
The staff spoke with ICDC officials on Augsut 27 and 28, 1991. Mr. Braunstein advised that ICDC
will not oppose the Commission in extending the moratorium another five years. ICDC still has an inventory of unsold
registered lots at Palm Coast and in recent years it has decided to upscale the area east of the Intercoastal Waterway.
ICDC is centering most of its development acitivites and financial resources east, from the existing core area at Palm Coast
towards the Atlantic Ocean. It will take anywhere from ten to twenty years to develop this area. ICDC is not interested
at this time in developing lands outside those contained in the CLUP Agreement. ICDC is pouring millions of dollars
into making this area a 'Second Palm Beach" in which only the wealthy can afford to live. For
example, it has spent more than $11 million on a Mediterranean-styled Equity Country Club, to be used exclusively by residents
in the communities.
***************
***************
Despite the assurances of ICDC officials that extending the moratorium for five years will not
affect their development plans one way or the other, the commission's failure to extend the moratorium might needlessly open
a "Pandora's Box", which once opened will be difficult to control. the essential element of the order was limiting the development
of Palm Coast to 42,000 acres and 48,000 registered lots. These 48,000 registered lots were in a 17,000 acre area,
the very area in which the Commission wanted growth to bolster respondents' claims that Palm Coast was a well planned and
developed community. By terms of the order, a visible fulfillment to these claims would have been dwelling units on a 50%
of those registered lots which were now deeded. This goal had not been reached. However, housing construction
and orderly growth are continuing and with 5 years more of construction, ICDC will at least have come much closer to that
50% lever.
Right now ICED has two options for spending its resources in Palm Coast" the development
of the original 17,000 acres and/or the development of its properties east of the Intracoastal Highway. As previously
noted, staff is concerned that by developing the latter area, ICDC might have violated the order's acreage and lot prohibitions.
However, regardless of the outcome of this issue, there is no doubt that ICDC is presently concentrating its resources on
the development of the up-scale properties east of the Intracoastal and therefor, allotting a disproportionate share of such
resources in the 17,000 acres the Commission wanted fully developed. Allowing respondents the option to begin the development
or sale of undeveloped or raw land in the substantial remaining acres that they own ( 51,000 acres ) gives ICDC
an immediate third option on which to spend its resources. This option is the very one the commission wanted to foreclose
until the original property was developed.
While ICDC advises that it has no interest in selling this undeveloped land right now, they might
feel differently 1, 2, 0r 3 years down the pike. In the past and even presently, respondents have demonstrated an ability
to obtain the necessary permits and approval of the projects by accommodating the concerns of state and local agencies.
As the largest taxpayers in Flagler County, that political considerations would not be the major factor in providing free
rein to develop these areas. There is only one available option, i.e., the Commission's order, that will first and foremost
assure that respondents "maintain the status quo" of their current development activities and obligations for a finite
period and hopefully, allow the 17,000 acres ( primarily the western parts ) to continue to grow and develop at a pace more
closely in keeping with the pace envisioned when the order was issued.
Furthermore, by extending the moratorium for another five years staff can continue with its compliance
investigation to insure that respondents' obligations are fulfilled. If the facts warrant, it would serve as the legal basis
for any possible civil penalty, for developing outside the proscribed
lots ( only 24% of deeded residential lots have dwelling units constructed thereon since service of the order); and staff's
inquiry does not disclose the existence of any valid reason as to why the moratorium should not be extended for an additional
five (5) years. An extension will encourage continued construction of swelling units within the sections comprising
Palm Coast. Moreover, respondents do not oppose the extension of the moratorium for an additional five years.
Therefore, it is respectfully recommended that the Commission, pursuant to Section 3.72 of the
Commission's Rules of Practice issue the accompanying order to show cause as to why the existing fifteen year limitation on
the sale of registered lots ( maximum of approximately 48,000 registered lots in a maximum of 42,000 acres) should not be
extended for an additional five year period. while the commission is not required to publish a Federal Register Notice
under this section of the Rules, by putting this proposed order in the Federal Register a broader base of possible commentors
will be put on notice of the commission's proposal. This procedure should provide the Commission with more information
on which to make a final determination as to whether to issue the Order. A draft Federal Register Notice is attached to the
file.
Attachments:
1. Aerial Map of Palm Coast
2. Order to Show Cause
3. Draft Federal Register notice
APPROVED:
Justin Dingfelder
Assistant Director
Division of Enforcement/BCP
William S. Sanger
Associate director for Enforcement/BCP
| Federal Trade Commission Initialed October 4, 1991 |
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| F.T.C. September 20, 1991 / October o4, 1991 |
United States of America
Federal Trade Commission
Washington, D.C.
Date: September 20, 1991/October 16, 1991
FROM Joseph J. Koman, Jr. Attorney
Ronald D. Levis, Investigator
Division of Enforcement/BCP
Subject: Show Cause Order
International Telephone and Telegraph, ITT, ITT Community Development Corporation ICDC and Palm
Coast, Inc., Docket No C-2854
To : Commission
Recommendation:
That the Commission issue a show cause order as to why the existing fifteen year moratorium on
sale of registered residential lots at Palm Coast should not be extended for an additional five years. Note: The extension
must be ordered not late than the expiration of the fifteen year period, which expires on December 27, 1991
Nature of Case
International Telephone and Telegraph Corporation ( ITT) , its land sales subsidiary, ITT Community Development Corporation
( ICDC), and ICDC subsidiary Palm Coast, Inc., 1 . were charges with misrepresenting ITT's obligations and responsibilities
of ICDC and Palm Coast, unfairly and deceptively selling land by misrepresenting the investment values of Palm Coast lots,
misrepresenting the types of amenities and facilities available at Palm Coast and failing to provide cancellation and refund
rights and failing to disclose other pertinent information.
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1 ITT is one of the major industrial corporations in the United States. The 1991 Standard & Poors Register
lists ITT's revenue as $ 20.05 billion with 119,000 employees. ICDC is a land sales and development firm engaged in selling
and developing Palm Coast, a land development in northeast Florida, and also some surrounding areas. Palm Coast is located
in Flagler County, between Daytona Beach and St. Augustine, Florida. Attached is a map which shows the various communities
that comprise Palm Coast. On the reverse side is an aerial photograph of Palm Coast that clearly shows where growth
and development have occurred during the past fifteen years.
Background
A consent order was issued in this matter on December 10, 1976. The initial compliance report of February 28, 1977,
a spot check investigation report of December 28, 1978, a compliance investigation report of April 1, 1981, and the final
compliance investigation report of October 6, 1983, were accepted by the Commission. The Atlanta Regional Office (ARO)
was responsible for this matter until December 1989, whereupon the Enforcement Division took responsibility for future compliance
activity.
Scope of the order
The Major purpose of the order is to prevent misrepresentations and to require disclosures concerning: (1)
the extent of Palm Coast's development, (2) ITT's financial responsibilities for the development, (3) the investment
potential of Palm Coast lots, (4) total lot costs, (5) the current extent of lot use and the timetable for development, (6)
the proximity of Palm Coast to major roads, cities and necessary facilities and amenities, (7) number and size of facilities,
amenities, and residents, and (8) notices of cancellation.
a second purpose of the order was to make Palm Coast a self-sufficient community with the necessary amenities for year-round
living. To assist in this goal, order paragraphs required certain improvements to be developed and constructed in Palm
Coast. These included: (1) shopping center, (2) office building , (3) commercial, manufacturing, and
research park, (4) corporate headquarters, (5) I-95 interchange, (6) St. Joe Road improvement. All of these improvements
were developed and constructed within the time limitations imposed by the order.
The order also requires written and oral disclosures in Palm Coast's promotional material, contracts, property reports,
easements and covenants and sales presentations. Furthermore, respondents are required to conduct in-house surveillance
of their sales personnel as to compliance with the disclosure and representation requirements of the order.
By terms of the order, respondents are also limited in the size of their development for at least 15 years to 42,000
acres and a maximum of 48,000 registered residential lots. 2. The 15 year restriction on expansion was explained
to the Commission in
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2...for a period of fifteen (15) years after the service upon respondents of this order,....respondents shall limit and
restrict the development presently known as Palm Coast and consisting of approximately 93,0000
acres, to a maximum of approximately 48,000 registered lots in a maximum of 42,000 acres,....and, accordingly, respondents
shall neither register any lots nor sell any registered lots in the balance of such approximately 93,000 acres.
earlier ARO staff pre-order memoranda as probably the most significant order accomplishment. By reducing the acreage
55%, the Palm Coast community takes on a manageable size, and ICDC must concentrate its development efforts on a smaller parcel
of land. With a limited number of lots to sell, the provision alters the business of ICDC from a mere subdivider to
a community builder. This provision, as well as the one providing for the building of a basic infrastructure, were designed
to stimulate the development and population growth of Palm Coast and to produce a fully-planned and self-contained thriving
community. The order also required respondents to submit a report 13 years after date of service. If housing units
built or under construction do not equal 50% of the deeded lots, the Commission may extend the limit on the size of development
for an additional five years.
December 1, 1989 Compliance Report
As required by the order, ICDC filed its December 1, 1989, compliance report in a timely fashion. The order provided
that the written report be filed 720 days prior to the expiration of the fifteen (15) year moratorium period. The filed report
described the extent of the development at Palm Coast, including the number of dwelling units, recreational facilities and
public and commercial services (Compliance Report Materials File I, December 1, 1989, Report).
The December 1, 1989, report disclosed that at that time there were 7,552 dwelling units (6,784 single family and 768
multifamily) at Palm Coast and a population of approximately 15,000 ( 60% of Flagler County's total population).
Richard Braunstein, Assistant General Counsel for ICDC, orally reported that at the time of
the December 1, 1989 report, there were approximately 34,513 deeded lots. Thus, the report indicated that the number
of dwelling units located or under construction at Palm Coast after the expiration of the fifteen year period was not expected
to be equal to at least 50% of the number of lots at Palm Coast then authorized for residential use as to which deeds are
at that time held by purchasers or their assigns. The order provision provides that if the 50% figure is not achieved,
the Commission's Rules to extend the fifteen year period for an additional period not to exceed five years. Any such
extension must be ordered not later than the expiration of the fifteen year period ( December 27, 1991)
August 27, 1991 Compliance Report
On August 7, 1991, staff requested ICDC to provide updated data on both the number of deeded registered lots and dwelling
units at Palm Coast. ICDC's August 127, 1991, compliance report shows the following analysis of ICDC's deeded registered
lots and dwelling units as of November 30, 1989, and July 31, 1991:
Registered lots deeded November 30, 1989 33,700
Number of dwelling units on registered lots
single family 6,600
multi-family 800
Total: 7,400
Registered lots deeded July 31, 1991 35,800
Number of dwelling units on registered lots
single family 7,700
multi-family 800
Total 8,500
The current data reveals that as of July 31, 1991, less than 24% (23.7%) of the deeded lots have dwelling units thereon.
This percentage is only slightly higher than the 22% comparison (of dwelling units to registered lots) which the November
30, 1989 data indicates. It falls far short of the 50% mandate. According to the report, the Palm Coast population now numbers
about 18,000.
Staff's August 1991 on-site inspection of Palm Coast
After the December 1, 1989 compliance report was submitted by ICDC, the Enforcement staff received a number of letters
from Flagler County Officials, various lot owners, and civic associations at Palm Coast and a number of individual lot purchasers
regarding possible Commission action about the extension of the moratorium for an additional five years. Most wanted
to make some personal input into the decision-making process and express their likes and/or dislikes of ICDC and the Palm
Coast community. Staff explained there would be a comment period where interested parties could submit written statements
and views to the Commission; however, a number of the parties requested Commission personnel be made available for oral comments.
As a result, the staff made itself available to meet with and discuss the applicable order provisions and community development
during the week of August 19 through 22, 1991. All of the parties spoken to were in favor of extending the moratorium
for another five years. It will undoubtedly take more than the additional five year period to achieve the order's 50%
dwelling units objective; 3 . however, the additional time period will provide all interested parties the opportunity
to insure orderly growth and development of Palm Coast will continue.
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3 At a rate of approximately a 2 % increase in dwelling units to registered lots over a 1 year , 8 month period
of time ( i.e., from November 30, 1989 to July 31, 1991, the percentage went from about 22% to 24%) it would take another
21 1/3 years to reach the 50% build out. However, since the time frame November 30, 1989 to July 31, 1991, reflects a period
of housing recession, it would be unwise to conclude that it will take that length of time to reach the 50% build out.
The Flagler County Officials are of the opinion that an extension of the moratorium would be in the best interest of
the county and its residents. According to Mr. Noah McKinnon, the attorney for the county commissioners, if ICDC wanted
to develop and sell new lots in the county, their plans would have to be interfaced with the Comprehensive Land Use Plan
(CLUP) adopted by the State and ICDC in 1974, and amended in 1977, when a more limited 42,000 acre subdivision was adopted.
Using CLUP, Flagler County plans five (5) years in advance for lands that will be needed over the next five (5) years for
schools, parks, administrative buildings, etc. Such planning helps to keep county taxes lower and encourages adopting strong
regulatory or zoning rules to scrutinize incoming industry and help protect the environment. Therefore, if ICDC were
suddenly to announce a plan to plat, register and marker new residential lots, the county would view the proposals under a
magnifying glass ( one of the county commissioners, Al Jones, specifically used the term "under a magnifying glass') to ensure
that corporate plans would not upset the delicate growth and development balance in the county.
Furthermore, since the state now has requirements ( Concurrence Acts) for all utility, etc., infrastructure to
be in place prior to selling homesites property, the infrastructure would not only be prohibitively expensive for ICDC, but
it would mean the county would face additional concerns involving water, drainage, solid waste, etc.
By extending the moratorium, Flagler county authorities will be assured that ICDC will continue to develop existing Palm
Coast acreage in the county for at least 5 more years, and be intimately involved in the same issues that the county must
face, i.e., water and utility management and use of public lands. In essence, the moratorium provides an extension of
the continuity of the cooperative business relationship currently existing between the county and ICDC. Perhaps Mr. Guy Sapp,
the county's deputy tax appraiser summed up the situation best: If it "aint't broke, don't fix it."
The staff spoke with ICDC officials on August 27 and 28, 1991. Mr. Braunstein advised that ICDC
will not oppose the Commission in extending the moratorium another five years. ICDC still has an inventory of unsold
registered lots at Palm Coast and in recent years it has decided to upscale the area east of the Intracoastal Waterway.
ICDC is centering most of its development activities and financial resources east, from the existing core area at Palm Coast
towards the Atlantic Ocean. It will take anywhere from ten to twenty years to develop this area. ICDC is not interested
at this time in developing lands outside those contained in the CLUP Agreement. ICDC is pouring millions of dollars
into making this area a 'Second Palm Beach" in which only the wealthy can afford to live. For
example, it has spent more than $11 million on a Mediterranean-styled Equity Country Club, to be used exclusively by residents
in the communities.
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Despite the assurances of ICDC officials that extending the moratorium for five years will not
affect their development plans one way or the other, the commission's failure to extend the moratorium might needlessly open
a "Pandora's Box", which once opened will be difficult to control. the essential element of the order was limiting the development
of Palm Coast to 42,000 acres and 48,000 registered lots. These 48,000 registered lots were in a 17,000 acre area,
the very area in which the Commission wanted growth to bolster respondents' claims that Palm Coast was a well planned and
developed community. By terms of the order, a visible fulfillment to these claims would have been dwelling units on a 50%
of those registered lots which were now deeded. This goal had not been reached. However, housing construction
and orderly growth are continuing and with 5 years more of construction, ICDC will at least have come much closer to that
50% lever.
Right now ICED has two options for spending its resources in Palm Coast" the development
of the original 17,000 acres and/or the development of its properties east of the Intracoastal Highway. As previously
noted, staff is concerned that by developing the latter area, ICDC might have violated the order's acreage and lot prohibitions.
However, regardless of the outcome of this issue, there is no doubt that ICDC is presently concentrating its resources on
the development of the up-scale properties east of the Intracoastal and therefor, allotting a disproportionate share of such
resources in the 17,000 acres the Commission wanted fully developed. Allowing respondents the option to begin the development
or sale of undeveloped or raw land in the substantial remaining acres that they own ( 51,000 acres ) gives ICDC
an immediate third option on which to spend its resources. This option is the very one the commission wanted to foreclose
until the original property was developed.
While ICDC advises that it has no interest in selling this undeveloped land right now, they might
feel differently 1, 2, 0r 3 years down the pike. In the past and even presently, respondents have demonstrated an ability
to obtain the necessary permits and approval of the projects by accommodating the concerns of state and local agencies.
As the largest taxpayers in Flagler County, that political considerations would not be the major factor in providing free
rein to develop these areas. There is only one available option, i.e., the Commission's order, that will first and foremost
assure that respondents "maintain the status quo" of their current development activities and obligations for a finite
period and hopefully, allow the 17,000 acres ( primarily the western parts ) to continue to grow and develop at a pace more
closely in keeping with the pace envisioned when the order was issued.
Furthermore, by extending the moratorium for another five years staff can continue with its compliance
investigation to insure that respondents' obligations are fulfilled. If the facts warrant, it would serve as the legal basis
for any possible civil penalty, for developing outside the proscribed
lots ( only 24% of deeded residential lots have dwelling units constructed thereon since service of the order); and staff's
inquiry does not disclose the existence of any valid reason as to why the moratorium should not be extended for an additional
five (5) years. An extension will encourage continued construction of swelling units within the sections comprising
Palm Coast. Moreover, respondents do not oppose the extension of the moratorium for an additional five years.
Therefore, it is respectfully recommended that the Commission, pursuant to Section 3.72 of the
Commission's Rules of Practice issue the accompanying order to show cause as to why the existing fifteen year limitation on
the sale of registered lots ( maximum of approximately 48,000 registered lots in a maximum of 42,000 acres) should not be
extended for an additional five year period. while the commission is not required to publish a Federal Register Notice
under this section of the Rules, by putting this proposed order in the Federal Register a broader base of possible commentors
will be put on notice of the commission's proposal. This procedure should provide the Commission with more information
on which to make a final determination as to whether to issue the Order. A draft Federal Register Notice is attached to the
file.
Attachments:
1. Aerial Map of Palm Coast
2. Order to Show Cause
3. Draft Federal Register notice
APPROVED:
Justin Dingfelder
Assistant Director
Division of Enforcement/BCP
William S. Sanger
Associate director for Enforcement/BCP
| Federal Trade Commission September 20, 1991/Oct.16 |
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| Federal Trade Commission September 20, 1991 / October 16, 1991 |
United States of America
Federal Trade Commission
Washington, D.C.
Date: September 20, 1991/October 16, 1991
FROM Joseph J. Koman, Jr. Attorney
Ronald D. Levis, Investigator
Division of Enforcement/BCP
Subject: Show Cause Order
International Telephone and Telegraph, ITT, ITT Community Development Corporation ICDC and Palm
Coast, Inc., Docket No C-2854
To : Commission
Recommendation:
That the Commission issue a show cause order as to why the existing fifteen year moratorium on
sale of registered residential lots at Palm Coast should not be extended for an additional five years. Note: The extension
must be ordered not late than the expiration of the fifteen year period, which expires on December 27, 1991
Nature of Case
International Telephone and Telegraph Corporation ( ITT) , its land sales subsidiary, ITT Community Development Corporation
( ICDC), and ICDC subsidiary Palm Coast, Inc., 1 . were charges with misrepresenting ITT's obligations and responsibilities
of ICDC and Palm Coast, unfairly and deceptively selling land by misrepresenting the investment values of Palm Coast lots,
misrepresenting the types of amenities and facilities available at Palm Coast and failing to provide cancellation and refund
rights and failing to disclose other pertinent information.
__________________
1 ITT is one of the major industrial corporations in the United States. The 1991 Standard & Poors Register
lists ITT's revenue as $ 20.05 billion with 119,000 employees. ICDC is a land sales and development firm engaged in selling
and developing Palm Coast, a land development in northeast Florida, and also some surrounding areas. Palm Coast is located
in Flagler County, between Daytona Beach and St. Augustine, Florida. Attached is a map which shows the various communities
that comprise Palm Coast. On the reverse side is an aerial photograph of Palm Coast that clearly shows where growth
and development have occurred during the past fifteen years.
Background
A consent order was issued in this matter on December 10, 1976. The initial compliance report
of February 28, 1977 a spot check investigation report of December 18, 1978, a compliance investigation report of April 16,
1981, and the final compliance investigation report of October 6, 1983, were accepted by the Commission. The Atlanta
Regional Office (ARO) was responsible for this matter until December 1989, whereupon the Enforcement Division took responsibility
for future compliance activity.
Scope of the order
The major purpose of the order is to prevent misrepresentations and to require disclosures concerning:
(1) the extent of Palm Coast's development, (2) ITT's financial responsibilities for the development,
(3) the investment potential of Palm Coast lots, (4) total lot costs, (5) the current extent of lot use
and the timetable for development, (6) the proximity of Palm Coast to major roads, cities, and necessary
facilities and amenities, (7) number and size of facilities, amenities, and residents, and (8) notices of cancellation.
A second purpose of the order was to make Palm Coast a self-sufficient community with the necessary
amenities for year-round living. To assist in this goal, order paragraphs required certain improvements to be developed
and constructed in Palm Coast. These included:
(1) shopping center (2) office building, (3) commercial ,
manufacturing, and research park, (4) corporate headquarters, (5) I-95 interchange,
(6) St. Joe Road improvement. All of these improvements were developed and constructed within the time limitations imposed
by the order.
By terms of the order, respondents are also limited in the size of their development for at least
15 years to 42,000 acres and a maximum of 48,000 registered residential lots. 2 According to
three consulting firms retained by the ARO, restricting the size of the community increased the chances for its viability.
In its pre-order memoranda the ARO staff explained to the Commission that the 15 year restriction on expansion was probably
the most significant order accomplishment. By reducing the
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2 ...for a period of fifteen (15) years after the service upon respondents of this
order,...respondents shall limit and restrict the development presently known as Palm Coast and consisting of approximately
93,000 acres, to a maximum of approximately 48,000 registered lots in a maximum of 42,000 acres,... and, accordingly,
respondents shall neither register any lots nor sell any registered lots in the balance of such approximately 93,000 acres.
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acreage 55% , the Palm Coast community takes on a manageable size, and ICDC must concentrate
its development efforts on a smaller parcel of land. With a limited number of lots to sell, the provision alters the
business of ICDC from a mere subdivider to a community builder. This provision, as well as the one providing for the
building of a basic infrastructure, were designed to stimulate the development and population growth of Palm Coast and to
produce a fully-planned and self-contained thriving community. The order also required respondents to submit a report
13 years after date of service. If housing units built or under construction do not equal 50% of the deeded lots, the
Commission may extend the limit on the size of development for an additional five years.
Major Impact
Unlike many of the other land sales orders in which the principle relief for past customers has
been redress, 3 the thrust of this order was to make Palm Coast a viable community for past and future purchasers.
By requiring ICDC to make both tangible improvements in the subdivision and limit the area of development , the Commission
set up a mechanism to achieve these goals and contributed to the growth of Palm Coast. First, ICDC's initial compliance
with the provisions requiring certain improvements to be developed and constructed played a role in respondents' determination
to stay with the subdivision even after it fulfilled these obligations within the first six years. Secondly, the moratorium
on lot sales meant that if ICDC was going to stay with this subdivision, it would have to develop (at least to a certain extent
) those lands to which the Commission was giving it access. Without the moratorium, ICDC could literally have sold thousands
of lots outside of the 42,000 acres, which would have given minimal or no benefit to the original Palm Coast purchasers.
After making the commitment to stay with the subdivision, ICDC in 1983 elected to turn its primary
attention to the area east of Palm Coast on the Intracoastal Waterway. Its creation of an upscale community generated
interest in Palm Coast's core and canal areas, thereby affording renewed interest in the subdivision as an investment or place
to live. As property
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3. although a redress type of order would have produced a percentage return of purchase
price for past customers, the end result would most likely have been a total abandonment of the subdivision by the developer
as occurred in the Horizon subdivisions. These subdivisions have had minimal growth during
the same time frame in which Palm Coast has expanded considerably. Most of the land cases were brought at the same time, and
the other orders have achieved nowhere near the growth experienced in Palm Coast.
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values in these two areas have increased, lower-priced lots in outlying areas have become more
attractive and growth has moved north and south from the core area. Furthermore, since ICDC is interested in maximizing
profits on its capital investment in the upscale area, they have encouraged housing construction. And with housing and
an increase in population, economic benefits are felt throughout Palm Coast. The adage that people and orderly growth
emanating from a focal point will eventually lead to the build-out of a subdivision has taken hold in Palm Coast. in
no small measure, the Commission's order has been the catalyst in the forward movement of Palm Coast.
December 1, 1989 Compliance Report.
As required by the order, ICDC filed its December 1, 1989, compliance report in a timely fashion.
The order provided that the written report be filed 720 days prior to the expiration of the fifteen (15) year moratorium
period. The filed report described the extent of the development at Palm Coast, including the number of dwelling units,
recreational facilities and public and commercial services ( Compliance Report Materials File I, December 1, 1989 Report).
The December 1, 1989, report disclosed that at the time there were 7,552 dwelling units
( 6,784 single family and 768 multifamily) at Palm Coast and a population of approximately 15,000 ( 60 % of Flagler
County's total population ). Richard Braunstein, Assistant General Counsel for ICDC, orally reported that at the time
of December 1, 1989, report, there were approximately 34,513 deeded lots. Thus, the report indicated that the
number of dwelling units located or under construction at Palm Coast after the expiration of the fifteen year period was not
expected to be equal to at least 50% of the number of lots at Palm Coast then authorized for residential use as to which
deeds are at that time held by purchasers or their assigns. The order provision provides that if the 50% figure is not
achieved, the Commission may initiate proceedings under Section 3.72 of the Commission's Rules to extend the fifteen year
period for an additional period not to exceed five years. Any such extension must be ordered not later than the expiration
of the fifteen year period (December 27, 1991).
August 2, 1991 Compliance Report
On August 7, 1991 , staff requested ICDC to provide updated date on both he number of deeded
registered lots and dwelling units at Palm Coat. ICDC's August 27, 1991, compliance report shows the following analysis
of ICDC's deeded registered lots and dwelling units as of November 30, 1989, and July 31, 1991:
November 30 1989
Registered lots deeded 33,7000
Number off dwelling units on registered lots
single family 6,6000
multi-family 800
Total: 7,400
July 31, 1991
Registered lots deeded 35, 800
Number of dwelling units on registered lots
single family 7,7000
multi-family 800
Total: 8,500
The current data reveals that as of July 31, 1991, less than 24% ( 23.7%) of the deeded lots
have dwelling units thereon. This percentage is only slightly higher than the 22% comparison (of dwelling units
to registered lots ) which the November 30, 1989 data indicates. It falls far short of the 50% mandate. According to
the report, the Palm Coast population now numbers about 18,000.
Staff's August 1991 on-site inspection of Palm Coast
The Enforcement staff was contacted by Flagler County Officials, various lot owners and civic
associations at Palm Coast, and a number of individual lot purchasers regarding possible commission action about the extension
of the moratorium for an additional five years. Therefore, once staff had successfully resolved several other land sales
matters on its docket, the staff made itself available to meet with and discuss the applicable order provisions and community
development during the week of August 19 through 22, 1991. All of the parties spoken to were in favor of extending the
moratorium for another five years. It will undoubtedly take more than the additional five year period to achieve the
order's 50% dwelling units objective; 4 but the consensus is that the Commission's order is responsible
for ICDC's decision to stick with the subdivision and for the growth that has in fact occurred (24% build out).
The additional time period can only lead to an increase in the build out and provide all interested parties the opportunity
to insure that the orderly growth and development of Palm Coast will continue.
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4 At a rate of approximately a 2% increase in dwelling units to registered lots over a
1 year , 8 month period of time (i.e., from November 30, 1989 to July 31, 1991, the percentage went from about 22% to 24%)
it would take another 21-1/3 years to reach a 50%build out. However, since the time frame November 30, 1989 to July 31, 1991,
reflects a period of housing recession, it would be unwise to conclude that it will take that length of time to reach the
50% build out.
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The Flagler County officials are of the opinion that an extension of the moratorium would be
in the best interest of the county and its residents. Flagler County plans five (5) years in advance for lands that
will be needed over the next five (5) years for schools, parks, administrative buildings, etc. Such planning helps to keep
county taxes lower and encourages adopting strong regulatory or zoning rules to scrutinize incoming industry and help protect
the environment. Therefore, if ICDC were suddenly to announce a plan to plat, register and marker new residential lots,
the county would have to carefully review the corporate plans to ensure that they would not upset the delicate growth and
development balance in the county.
By extending the moratorium, Flagler County authorities will be assured that ICDC will continue
to develop existing Palm Coast acreage in the county for at least 5 more years and be intimately involved in the same issues
that the county must face, i.e., water and utility management and use of public lands. In essence, the moratorium provides
an extension of the continuity of the cooperative business relationship currently existing between the county and ICDC.
The staff spoke with ICDC officials on August 27 and 28, 1991. Mr. Braunstein advised that ICDC will not oppose the
Commission in extending the moratorium another five years.
Compliance Investigation
At the time staff of the Atlanta Regional Office concluded the last compliance investigation,
they reported that The Admiral Corporation , a wholly owned subsidiary of ITT was developing
property east of the Intracoastal Waterway ( Hammock Dunes, a private community of 2,250 ) , and therefore, they were
attempting to verify whether this acreage was part of the 42,000 acres within which ICDC was permitted to register and sell
lots in accordance with the Commission's order. To assist them in making this determination, ARO requested that respondents
forward a copy of the application for development approval (ADA) for a development of regional impact (DRI)
which Florida statutes required developers to file with State and local authorities. However, pervious to ever receiving
the ADA/DRI application, the Commission closed the compliance inquiry with the caveat that ARO monitor the situation as it
developed. The Secretary's letter advised respondents of the Commission's continued interest in the Admiral Corporation's
development activities.
After this matter was assigned to the Division of Enforcement, staff reviewed existing files
and upon discussing the matter with respondents' counsel discovered that the previously requested ADA/DRI application had
never been forwarded to the ARO. Therefore, we again made the request. Staff will review the ADA/DRI application,
as well as the Comprehensive Land Use Plan (CLUP), and existing maps of the area at or prior to the time the order was issued,
and conduct discussions with knowledgeable persons to determine whether Hammock Dunes, as well as five or six other developments
east of the Intracoastal Waterway, fall within the restricted 42,000 acres. The Company maintains that all of these
development are within the permitted acreage. They also maintain that by deplating lots within the original Palm Coast
subdivision, they have been able to register lots in Hammock Dunes, etc., and still stay within the order's proscribed cap
of 48,000 registered residential lots. As of this time, the staff has been unable to locate the two maps relied
upon to show the areas comprising the 42,000 acres. 5
With regard to the cap of 48,000 lots, the staff has also discovered that the respondents in
recent years have engaged in a substantial buy back program ( approximately 8,000 lots bought back from previous ICDC purchasers
) to replenish its lot inventory for additional lot sales, lot and home packages and sales or exchange programs ( such
as the Harbor Club time sharing program in which equity can be applied to a lot and house package)> The manner in
which this buy back program affects that cap of 48,000 lots has yet to be determined. It is clear, however, that the
purpose of this order provision limiting the number of lot sales was to change the business attitudes of ICDC from a
seller of lots to a community developer and builder. At the time of the order
38,000 of the 48,0000 lots had been sold. By 1983, there were only 2,000 lots left in the inventory ( October
6, 1983 report by ARO ) which was in line with the decrease in lots the Commission envisioned. The buy back program,
however, has put a new twist on the meaning of previously arrived at numbers.
Staff has also become aware of some consumer complaints regarding the manner in which lots have
been sold to certain ethnic minorities, e.g., Chinese immigrants in New York City. It has been reported that ICDC or
its brokers' representatives have used prohibited misrepresentations ( good investment) to sell lots in Palm Coast.
Staff has also been advised by a number of Palm Coast residents that respondents have shown an
increasing disinterest in furthering the growth of Palm Coast and are attempting, by various means, to extricate themselves
from the financial burdens of canal maintenance, road improvements or providing utility hook-ups to existing plant facilities.
For example , there are certain sections of Palm Coast in which alternative methods to sewer hook-ups are used. These
areas have holding tanks in which the effluent flows and pumping of raw sewage is done on a
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5 Pomeranz Exhibit A was the map used before the order was accepted by the Commission.
Lister Physical Exhibit C was the map use in the initial compliance report.
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(Add Page Number 8 Here )
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Page 9
Conclusion
Despite the assurances of ICDC officials that extending the moratorium for five years will not
affect their development plans one way or the other, the Commission's failure to extend the moratorium might needlessly open
a "Pandora's Box" , which once opened will be difficult to control. The essential element of the order was limiting
the development of Palm Coast to 42,000 acres and 48,000 registered lots. These 48,000 registered lots were in a
17,000 acre area, the very area in which the Commission wanted growth to bolster respondent's claims that Palm coast was a
well planned and developed community. By terms of the order , visible fulfillment to these claims would have been dwelling
units on 50% of those registered lots which were now deeded. This goal has not been reached. However, housing
construction and orderly growth are continuing and with 5 years more of construction, ICDC will at least have come much closer
to that 50% level.
Right now ICDC has two options for spending its resources in Palm Coast: the development
of the original 17,000 acres and or the development of its properties east of the Intracoastal Highway. As previously
noted, staff is concerned that by developing the latter area, ICDC might have violated the order's acreage and lot prohibitions.
However, regardless of the outcome of this issue, there is no doubt that ICDC is presently concentrating its resources on
the development of the up-scale properties east of the Intracoastal and therefore, allotting a disproportionate share of such
resources in the 17,000 acres the Commission wanted fully developed. Allowing respondents the option to begin
the development or sale of undeveloped or raw land in the substantial remaining acres that they own ( 51,000 acres )
gives ICDC an immediate third option on which to spend its resources. This option is the very one the Commission wanted to
foreclose until the original property was developed.
While ICDC advises that it has no interest in selling this undeveloped land right now, they might
feel differently 1, 2, or 3 years down the pike. In the past and even presently, respondents have demonstrated an ability
to obtain the necessary permits and approval of the projects by accommodating the concerns of state and local agencies.
As the largest taxpayers in Flagler County, ICDC wields tremendous influence, and there are no assurances that political considerations
would not be the major factor in providing free rein to develop these areas. There is only one available option, i.e.,
the Commission's order, that will first and foremost assure that respondents 'maintain the status quo" of their current development
activities and obligations for a finite period and hopefully, allow the 17,000 acres ( primarily the western parts) to continue
to grow and develop at a pace more closely in keeping with the pace envisioned when the order was issued.
furthermore, by extending the moratorium for another five years staff can continue with its compliance
investigation to insure that respondents obligations are fulfilled. If the facts warrant, it would serve as the legal
basis for any possible civil penalty, for developing outside the proscribed 42,000 acres or violating the cap of 48,000 registered
residential lots.
Recommendation
Respondents have not met the order's proscribed target goal of 50% build out of deeded Palm Coast
residential lots (only 24% of deeded residential lots have dwelling units constructed thereon since service of the order):
and staff's inquiry does not disclose the existence of any valid reason as to why the moratorium should not be extended for
an additional five (5) years. An extension will encourage continued construction of dwelling units within the sections
comprising Palm Coast. Moreover, respondents do not oppose the extension of the moratorium for an additional five years.
Therefore, it is respectfully recommended that the Commission, pursuant to Section 3.72
of the Commission's Rules of Practice issue the accompanying order to show cause as to why the existing fifteen year limitation
on sale of registered lots ( maximum of approximately 48,000 registered lots in a maximum of 42,000 acres ) should not
be extended for an additional five year period. While the Commission is not required to publish a Federal Register Notice
under this section of the rules, by putting this proposed order in the Federal Register a broader base of possible commentors
will be put on notice of the Commission's proposal. This procedure should provide the Commission with more information on
which to make a final determination as to whether to issue the Order. A draft Federal Register Notice is attached to
the file.
APPROVED:
Justin Dingfelder
Assistant Director
Division of Enforcement/BCP
William S. Sanger
Associate Director for Enforcement/BCP
Attachments:
1. Aerial map of Palm Coast
2. Order to Show Cause
3. Draft Federal Register Notice
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