City and Port Are on the Way to an Agreement

At the start of Tuesday's mediation between the city of Fernandina Beach and the Ocean Highway and Port Authority (OHPA), Administrative Law Judge E. Gary Early told both parties, "We may have a resolution that may not be an absolute victory for either party. Nobody comes out 100%."

And after three hours of wrangling and nearly five years of disputing whether the port should pay Fernandina Beach $50,000 a year for services the city provides, Early's prediction came true as a tentative settlement was reached. The agreement must now be approved by the city commission and OHPA commissioners respectively.

While peace was seemingly restored between both government agencies with OHPA agreeing to resume paying the $50,000 yearly in Payment In Lieu of Taxes (PILOT) assessment, both sides lost.

The city has spent $97,000 in legal fees and OHPA $100,000 in attorney costs over that five years.

The city, which was owed $250,000 in PILOT payments from 2019, agreed to accept $137,000 from OHPA as part of the agreement.

Both sides agreed to no future renegotiation of the payment agreement.

If there is a breach or refusal to pay that results in legal action, the prevailing party will be paid their legal costs by the losing party.

"I think it's a reasonable settlement. Hopefully everybody is leaving with just enough dissatisfaction to make it a good settlement, but just enough satisfaction to have this matter taken care of," Early said in ending the mediation session.

The talks turned when Commissioner Chip Ross did an about-face on his stated position. Ross supported the city continuing its legal case for a summary judgment for the payments, which is currently ongoing in Nassau County Circuit Court.

He changed his stance after hearing the city's outside attorney, Ellie Neiberger, describe the city's likely success of winning the summary judgment case at 85% to 90% and her assessment that the city had no written contract with OHPA for the payments.

"To be honest, at some point this is going to go on and on and on," Ross said. "So, $50,000 in perpetuity? We're going to keep spending, they're going to keep spending. I will accept the deal."

For the majority of the mediation talks, both sides were at loggerheads over specifics of the agreement.

The settlement talks nearly collapsed when the city took a stand with a counteroffer.

Late in the morning, the city made a final offer to OHPA of accepting a $37,000 yearly payment, but with an annual escalation formula based on inflation such as the Consumer Price Index (CPI). The city would accept $137,000 to wipe out the $250,000 past due OHPA obligations.

"We've forgiven $150,000. We've already given the city's money away for that escalator clause" said Commissioner Darron Ayscue. "The non-starter for me is there has to be an escalator clause. I'm willing to work with the port, but we have to have the escalator clause so this deal never comes back (to be disputed). We want this to be the deal that is finalized and it never needs to be reviewed because I don't want to put any commission or port in the position that has to deal with this again."

Mayor Bradley Bean was also adamant that the escalator clause be included in the city's counteroffer to OHPA.

"I want to make this clear right now, I don't want to go to court, but I would only do that deal if we guarantee that the escalator clause was going to be in there and the people of Fernandina Beach will have even more money from the port," Bean said.

Commissioner Ross also added that it was the city's final offer to settle.

Judge Early took that offer to OHPA commissioners, who objected to and dismissed the escalator clause requirement. Port commissioners finally settled on the $50,000 per year and $137,000 for the past due PILOT payments.

"How many more thousands of dollars do we need to spend fighting over this," said OHPA Commissioner Justin Taylor. "The city is at $90,000, we're at $100,000, we go to trial, it's another $100,000. It's going to keep adding up."

That's when OHPA made a counteroffer that was eventually accepted.

The first attempt at mediation came in 2020 after the city and OHPA could not reach agreement over the PILOT program at a joint meeting that January.

In its motion for summary judgment last March, the city cited evidence such as a 1986 preliminary development agreement that the city provided including OHPA making annual payments to the city in lieu of taxes. But the port balked at agreement and didn't make payments.

The city's motion cites a second agreement with OHPA in 1993 stating:

"The contract at issue in this case between the parties resulted from OHPA’s letter to the City dated October 5, 1993, accepting terms offered by the City in the City’s proposal dated September 3, 1993. The Agreement provided (among other things) that, beginning on July 1, 1994, OHPA would make annual (PILOT) payments to the City based on the previous year’s tonnage but such annual payment will not be less than $50,000 per year.