The Village of Wellington (VOW) has been asked to allow a major commercial and residential development to be built in the heart of its crown jewel, the Equestrian Preserve Area (EPA). The request to build is not the issue. The issue is the ask surrounding the request to build.
What is the ask? VOW is being asked to take 96.29 acres out of the EPA without performing a developer counterparty risk assessment, without hiring a Florida-based land use subject matter expert, and without the use of a third-party audit on the interested parties.
What is counterparty risk? Counterparty risk is where the success of an investment is contingent upon the performance or support of an underlying party or parties connected to a financial transaction. For VOW, conducting a counterparty risk assessment is the only way to determine which entity, among the developers and their private investors, is financially and contractually responsible for completing the proposed equestrian, residential and commercial development in the EPA. In short, in the event one or more of the developers become insolvent, which entity becomes the ultimate guarantor, or does that responsibility transfer to the taxpayers of the village?
One way to eliminate counterparty risk is for each of the proposed developers to submit to a financial audit by a third-party auditor. With interest rates at an all-time high, and outstanding developer loans coming due, lenders are reticent to extend additional credit. The use of a certified, third-party audit would bring adequate assurances that each of the proposed developers are all in a solvent position.
An additional area of concern involves the litigation process. While it is important to retain the best legal counsel money can buy, it is equally important to retain a Florida-based land use subject matter expert (SME). The right land use expert can highlight the zoning compliance deficiencies and navigate regulations surrounding permittable use of each subject parcel. Relying on the village planning staff to vouch for a project the developers are proposing should be done with an uninterested SME to avoid any appearance of collusion or impropriety.
And then there is the unintended economic impact underlying the proposed development.
The economic impact derived from Wellington’s equestrian community cannot be understated. According to the Palm Beach County Sports Commission, “The 2021 Winter Equestrian Festival contributed $279 million and 2,880 jobs to the Palm Beach economy.” If the village’s equestrian footprint is continuously replaced with residential and commercial development over the next 10 to 20 years, how will VOW recapture this decades-old reliable revenue stream it has relied upon?
At the end of the day, asking VOW to exchange a portion of its crown jewel for something of lesser value is not a prudent investment decision.
And so, I ask, how can the village continue to be good stewards of its Equestrian Preserve Area without a counterparty risk assessment, a conflict-free subject matter land use expert and a third-party auditor?
Antoine Orr, Wellington
