A $157m funding gap and internal city documents add fuel to the fire
A 3,250-unit Florida development backed by more than $50 million in investment sits frozen — because a neighboring city will not turn on the water.
That is the central allegation in a federal lawsuit filed on March 26, 2026, in which the developers behind Avalon Park Daytona Beach say the City of Ormond Beach has effectively stalled their fully approved project by refusing to provide essential utility services. The case, Avalon Park Daytona, LLC, et al. v. City of Ormond Beach (Case No. 6:26-cv-00658, M.D. Fla.), raises questions that should matter to anyone in the real estate industry: What happens when a municipality with exclusive control over water and sewer service simply decides not to cooperate?
The development in question spans roughly 1,589 acres west of Interstate 95 in Volusia County. It was approved by the City of Daytona Beach in 2018 for 3,250 residential units and 200,000 square feet of non-residential space. Avalon purchased the project in 2020, and in 2021, the Daytona Beach City Commission unanimously greenlit the preliminary plat for Phase 1 — 1,609 residential units and 90,000 square feet of non-residential construction across 761 acres. Every required land use and development approval was in hand.
But the Avalon property sits in a peculiar jurisdictional arrangement. While located within Daytona Beach's city limits, the land falls within Ormond Beach's designated utility service territory under a 2006 interlocal agreement between the two cities. That agreement made Ormond Beach the wholesale provider of water and wastewater for the area.
According to the lawsuit, Avalon has been asking Ormond Beach since 2021 to confirm its capacity and provide the basic connection information needed to design the project's utility systems and begin construction. To date, the filing states, Ormond Beach has not furnished that information. Without it, Avalon says it cannot finalize engineering plans, complete the final plat, or break ground.
What makes the situation more striking is what Ormond Beach's own planning documents appear to show. The city's 2024 Water Supply Work Plan, adopted in August 2024, estimates that roughly $196 million in infrastructure spending is needed to service the area — with more than $157 million listed under funding sources described as "to be determined." Yet the filing alleges that Ormond Beach simultaneously insists it is the sole authorized provider and has threatened legal action against both Daytona Beach and Avalon to block any alternative utility arrangements.
The lawsuit also points to internal city documents, including talking points prepared for a January 2024 mayor's meeting in which the Ormond Beach city manager reportedly acknowledged the project "could face years of litigation if disputes, particularly around water service, are not resolved."
Avalon is seeking compensation under federal and state constitutional protections against government takings of private property without just compensation. The developers say the city's actions have cost them over $50 million already spent and tens of millions more in expected returns.
No court ruling has been issued and no final determination has been made. The case remains in its earliest stage.
For real estate professionals watching Florida's growth corridors, though, the dispute offers a cautionary glimpse at a risk that no amount of due diligence on zoning and entitlements can fully capture — the possibility that a municipality holding the keys to utility service may simply choose not to open the door.
