Jackson-Shaw Co. v. Jacksonville Aviation Authority
2008 Fla. LEXIS 2398, 8 So. 3d 1076, 33 Fla. L. Weekly Supp. 972 (2008)
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Rule of Law:
A public entity's long-term lease agreement with a private entity, which involves revenue sharing and public contributions like infrastructure and land, does not violate the Florida Constitution's prohibition against joint ownership or pledging public credit, so long as the public entity does not assume liability for the private entity's debts and its property is not encumbered as security for the private entity's financing.
Facts:
- The Jacksonville Aviation Authority (JAA), a public entity, owned 328 acres of undeveloped land known as Woodwings East near the Jacksonville International Airport.
- Seeking to generate revenue without using its capital for development, the JAA entered into an agreement with Majestic Realty Company (Majestic), a private developer.
- The agreement gave Majestic an option, for up to 15 years at no cost, to enter into 65-year ground leases on parcels of Woodwings East for commercial development.
- The JAA was obligated to construct a road extension into the property for up to $750,000, an expenditure for which it had already budgeted.
- The JAA also agreed to provide up to 50 acres of its own separate land, at no cost to Majestic, for any required wetlands mitigation.
- Under the ground lease, the JAA would receive rent calculated as the greater of a small fixed annual amount per acre or 50% of the 'net revenue'.
- Net revenue was defined as the cash remaining after Majestic reimbursed itself from gross revenues for all project costs, including construction, financing, interest, and management fees.
- Majestic owned all buildings and improvements on the property until the termination of the lease, at which point they would transfer to the JAA.
Procedural Posture:
- Jackson-Shaw Company sued the Jacksonville Aviation Authority (JAA) in the United States District Court for the Middle District of Florida, seeking to invalidate the agreement with Majestic Realty Company.
- Following a bench trial, the federal district court entered judgment in favor of the JAA, ruling that the agreement did not violate the Florida Constitution.
- Jackson-Shaw Company, as appellant, appealed the district court's decision to the United States Court of Appeals for the Eleventh Circuit.
- The Eleventh Circuit found that the case involved unsettled questions of state constitutional law and certified two questions to the Supreme Court of Florida for resolution.
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Issue:
Does a public entity's long-term ground lease agreement with a private developer, which includes revenue sharing, public funding for infrastructure, and providing land for wetlands mitigation, violate Article VII, Section 10 of the Florida Constitution's prohibition against becoming a joint owner with or pledging credit to a private entity?
Opinions:
Majority - Per Curiam
No, the agreement does not violate Article VII, Section 10 of the Florida Constitution. The court held that the JAA did not become a prohibited 'joint owner' with Majestic because the term is not strictly equivalent to a 'joint venturer' or 'partner' under common law. Critically, the JAA did not share in any potential losses, had no liability to Majestic's creditors, and its fee simple title to the land was not encumbered by Majestic's financing. The court also held that the JAA did not impermissibly pledge its 'credit,' which it defined narrowly as imposing a new financial liability or creating a public debt for a private benefit. The JAA's pre-budgeted road construction and use of its own land for wetlands mitigation did not constitute a pledge of credit under this definition. Since no credit was pledged, the project only needed to serve a 'public purpose,' a standard met by the JAA's goal of generating revenue from dormant public property.
Analysis:
This decision provides significant clarity on the scope of Florida's constitutional limits on public-private partnerships, establishing that complex, long-term lease structures with revenue-sharing are permissible. By declining to equate 'joint owner' with the strict common-law definition of a 'joint venture,' the court grants public entities more flexibility in structuring deals to develop public assets. The ruling distinguishes between impermissibly assuming a private entity's debt (pledging credit) and permissibly contributing public assets or pre-budgeted funds to a project that serves a public purpose. This precedent will likely encourage more public-private development projects in Florida but also underscores that the key constitutional protection is insulating public funds and property from the risks of private enterprise failure.
