Keys Energy Diesel Plant

The former City Electric Diesel Plant is located at the top of Angela Street between Bahama Village and the Truman Waterfront Park. Efforts to redevelop the plant may be the latest COVID-19 victim.

An effort to redevelop the former Keys Energy Diesel Plant in Bahama Village may be the latest COVID-19 victim.

Key West City Commissioners, acting in their capacity as the Caroline Street Corridor and Bahama Village Community Redevelopment Agency, voted Tuesday to withdraw a contract offered to the Key West Art & Historical Society to redevelop the former diesel plant. The society had been selected in August 2018 as the winning — and only — bidder on the city’s Request for Proposals to stabilize and renovate the abandoned former electrical generation plant.

KWAHS had proposed to redevelop the five-building diesel plant into a museum, multipurpose space for events, and a restaurant and microbrewery. The project would take eight to 10 years and be done in three phases at a cost estimated between $10-20 million.

However, an official contract with KWAHS was never signed. Negotiations with the city have dragged on due to several “sticking points,” according to City Manager Greg Veliz. Then, the KWAHS board of directors decided last month to postpone further negotiations with the city until at least June of this year.

“Due to COVID, and the larger economic impacts, the society’s board of director’s opted to postpone moving forward with the lease until later in the year,” Michael Gieda, KWAHS Executive Director, told The Citizen on Friday, Jan. 8. “COVID dramatically altered all aspects of our operation, including fundraising. The society’s board targeted the end of the second quarter 2021 (June) to review.”

As a result of that postponement, Veliz withdrew the contract offer, which would have given the buildings and land to KWAHS for free in return for the non-profit paying all the development costs. The reason? The city did not want a repeat of another recently failed project, where it awarded a contract to build a new restaurant in Mallory Square to local restauranteur Joe Walsh, only for the negotiations to stall over the next 10 years while the plans underwent multiple changes. The city recently backed out of that RFP, as well.

“We’ve dragged things out before. Memories get clouded. We get far away from the original RFP,” Veliz said. “I didn’t want that to happen again.”

Built in the 1880s, the historic diesel plant ceased operations in the 1970s. Empty and slowly crumbling since then, Keys Energy Services offered it for free to the city and voters approved the transfer in a 2016 ballot referendum.

A 2018 report by the city’s building officer recommended demolishing three of the five buildings on the site because of unsafe conditions. But fearful of losing an historic part of Bahama Village, several residents complained and asked that the Key West Historic Architectural Review Commission be allowed to weigh in on the decision. Commissioners agreed, and HARC developed recommendations on how the structure could be saved. A request for proposals was put out in September 2018.

A GOOD MATCH

The only organization to respond to the RFP was KWAHS. However, it seemed like a good match. The society has already redeveloped the Custom House, the Lighthouse and Keepers Quarters, Fort East Martello and the Tennessee Williams Museum in Key West, and manages day-to-day operations at those facilities. KWAHS board members were well-versed on how to find funding for historical restoration projects.

But the society could not accept donations until it had signed a lease with the city. And those negotiations ran into several problems. First, because the diesel plan is located in a designated community redevelopment area, city-owned property can only be leased to a third party for a maximum of 20 years. KWAHS wanted a longer lease to justify the time and capital costs it was going to invest. But the only way to do that was to ask voters to approve a referendum and the city already had other referendums on the 2020 ballot.

“You have to pick and choose when you go to the voters,” Veliz told The Citizen in February 2020. “You don’t want to go too often.”

Other “sticking points’’ in the negotiations included finding outside funding sources that would allow commercial use of a historic property. A restaurant, brewery or other commercial use was a critical part of the KWAHS proposal, intended to bring in revenue that would subsidize operating costs. Another problem was the city wanted the contract to include aggressive development timetables, “that in fairness, were difficult to meet,” Veliz said.

Then the COVID-19 pandemic hit, decimating fundraising efforts at virtually every non-profit organization in Monroe County, if not Florida and the country beyond. Gieda said the society board is still “interested and committed” to the preservation of the diesel plant buildings but wants to hold off any further review until at least June, which is the end of KWAHS’s second quarter.

“The pause is 100% due to COVID and larger impacts,” he said. “We are still open and willing to move forward with the project at a later date.”

MORE COMPETITION?

Veliz said he will put out a new RFP soon, possibly changing aspects of the proposal to make it more palatable to developers. But there may be more competition this time around. Mayor Teri Johnston said the city’s renewed efforts to build affordable housing on a 3.2-acre parcel next door to the diesel plan, the connection of the new housing development to the rest of Bahama Village, and a planned zoning change making development easier on the plant site may attract other developers and investors.

“People were not in the mindset for the potential it has,” Johnston said about the 2018 RFP, which came after the city initially proposed to demolish the electrical plant buildings. “Hopefully, we’ll get more people interested in it.”

One possible organization is the Bahama Village Redevelopment Advisory Committee, the committee tasked with researching and recommending potential development projects that would specifically benefit Bahama Village. The advisory committee has been weighing in on the 3.2-acre housing proposal but did not give input on the diesel plant RFP, according to BVRAC Chair Aaron Castillo. He said at Thursday’s BVRAC meeting he wanted his board to look at turning the diesel plant into the commercial portion of the housing development project, which has proposed including space for retail and small businesses somewhere on the 3.2 acres. Castillo suggested using the plant for a restaurant serving “island flavor” food, going back to the Caribbean origins of the original settlers in Bahama Village. He also wants to see a small grocery store where residents can pick up last-minute items in the neighborhood.

“We need the mom-and-pop” stores in Bahama Village, Castillo said. “Everybody needs a loaf of bread or a can of soup, rather than leave the neighborhood.

“If [the diesel plant] goes to a developer and he can’t do what we want,” Castillo told his board members the next day, “this board here can do it themselves. We can do this job.”

BVRAC members agreed to have a formal discussion on the diesel plant at their next meeting on Feb. 4. In the meantime, city officials want to move quickly so as not to get stuck with having to make repairs to diesel plant buildings, several of which have only partial roofs. A 2018 report by an outside engineering firm estimated it would cost between $2.7 million to $3.7 million just to stabilize the five buildings that make up the plant, making them watertight.

“We don’t have the money. They [KWAHS] don’t have the money. Right now, nobody wants to get into a $2 million to $3 million project,” Veliz said.

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