RUTH ELAINE DREIDAME, RICHARD C.
LAMBRECHT, WILLIAM E. GARNER,
JOSEPH B. GORMAN and IRVING YEDWAB,
on behalf of themselves and all others
CASE NO. 2007-CA-3177
VILLAGE CENTER COMMUNITY
DEVELOPMENT DISTRICT, THE VILLAGES
OF LAKE-SUMTER, INC.,
and H. GARY MORSE,
RUTH ELAINE DREIDAME, being duly sworn, states:
6. The Settlement Agreement entered into by the parties includes provisions for the following:
1. I am the lead Plaintiff in this action.
2. I reside and own an interest in a homesite in that part of The Villages, Florida described in the Complaint herein as the VCCDD Service Area.
3. I have BS and Masters degrees from the University of Cincinnati and a Ph.D from Ohio State University. I served as an athletic administrator at the University of Dayton in Dayton, Ohio, from 1974 until my retirement in 1999.
4. As Senior Associate Director of Athletics at an NCAA Division I University, I dealt with all aspects of the Department of Athletics, including the entire budget process. I was a member of the University of Dayton Department of Athletics Executive Committee which annually prepared and monthly reviewed the ten million dollar plus budget for the Department. I was the Administrator responsible for financial aid (athletic scholarships), compliance, certification, eligibility, sports information, the strength and conditioning program, and the sports of baseball, women's volleyball, and men's and women's soccer, tennis, cross country and golf, and was responsible for administering and monitoring all of their budgets which totaled approximately four (4) million dollars.
In addition to my involvement at the University, I also held key roles with national associations which involved oversight of major budgets. I served the National Collegiate Athletic Association (NCAA) as Division I Vice-President, a member of the Council, the Executive Committee, and the Joint Policy Board. I was also a member of the National Association for Collegiate Directors of Athletics (NACDA) Executive Committee and Chaired the NACDA Director's Cup Committee.
5. I am familiar with the standard provisions of the Declarations of Restrictions related to the Villages homesites in the VCCDD Service Area. Over the past four (4) years I have researched, in detail, the VCCDD records reflecting the obligations and performance of the respective parties relating to the amenity fees and services set forth in the relevant provisions of the Declarations of Restrictions. Based on that research, I conclude the following:
(a) Owners of all homesites in the VCCDD Service Area contracted to pay monthly amenity fees to the developer, VLS, in return for VLS's agreement that it, or its assignee, would provide amenity facilities and services to the Owners.
(b) VLS, in installments, sold the amenity facilities and assigned the amenity fee receivables to the VCCDD which assumed VLS's duty to provide amenity facilities and services to the Owners.
(c) VCCDD issued revenue bonds in several installments (the last in 2004) to pay VLS for the facilities, the revenue bonds being secured by the amenity fee receivables.
(d) The VCCDD revenue bond debt service exceeds VLS's original built-in profit margin in the amenities fees. Thus, the revenue bond debt service has caused an increasing shortfall deficiency ("deficits") in Recreational Amenity Division funds ("RAD") available for the provision of amenity services and facilities and reserve fund for the renewal and replacement of amenity facilities.
(e) My calculation of the current and projected RAD deficits of $75,891,989 was based on the following methodology which divides damages into two major categories: those requiring immediate payment, and those requiring annual payments over a specified period of time.
(1) Immediate Payment Items: Renewal and Replacement Reserve Funds equal to five (5%) percent of the total amenity fees paid to the VCCDD to-date (excluding the amount that would have been expended for renovation of the Paradise Recreation Center had funds actually been available); pay-off of the debt on the Paradise Recreation Center renovation; a reserve fund for sinkhole repairs and other potential damages from hurricanes, tropical storms, droughts, etc.; and funds necessary to replace and widen eight miles of recreation trails running along-side El Camino Real and Buena Vista Boulevard North of CR 466.
The total amount of the June, 2007, initial settlement demand for immediate funds was $16,123,740, as follows:
RENEWAL & REPLACEMENT RESERVE FUND $7,680,011
PAY OFF PARADISE REC CENTER DEBT 3,130,129
SINKHOLE, ETC. RESERVES 1,070,000
RECREATION TRAIL RENOVATION 4,243,600
The initial demand included $7,680,011 to be deposited in the Renewal and Replacement (R & R) Reserve Fund. At that time - June 2007- the R & R Fund totaled only $832,737.38, the amount required to be in reserve by the Bond Covenants. There was $1,000,000 from the VCCDD 2006 budget which was in the operating budget and had not been moved to the R & R, $1,200,000 in the then current 2007 VCCDD budget which had been designated for R & R but which residents had been advised at a VCCDD meeting would be reduced considerably to pay for the movement of various VCCDD office personnel to other buildings, and $1,400,000 which was designated in the 2008 VCCDD budget for R & R. It was agreed between the parties that if the above three sums were actually placed in the R & R Reserve Fund, they, as well as the bond- required reserve dollars, could be deducted from the initial $7,680,011 demand since that demand figure was the total amount of funds needed to meet the plaintiffs requirement that five (5%) percent of all amenity fees received by the VCCDD be placed in the R & R Reserve Fund. Adjustments were made by the VCCDD so that the 2007 designated funds would not be used for furnishing and construction costs for the new Customer Service Building, and both the 2006 $1,000,000 and the 2007 $1,200,000 were officially placed in the Renewal and Replacement Reserve Fund. Additionally, the Escrow Agreement (which is part of the Settlement Agreement) provides that if the designated $1,400,000 in the 2008 budget is not put into the R & R Fund, defendant VLS will provide the difference to be deposited in the VCCDD RAD R & R Fund. Therefore, the original $7,680,011 R & R Reserve fund demand was adjusted by deducting the assured total of $4,436,068 from the $7,680,011 to reach the settlement amount of $3,243,943.
The initial demand for the pay-off of the Paradise Recreation Center debt was $3,130,129. After calculations were updated, it was estimated that $2,669,729 was still due on the principal and a $145,896 payment on the debt service between June of 2007 and February, 2008 (the estimated date of settlement of this litigation) for the settlement total pay-off of $2,815,625.
The initial demand for Reserve funds for such things as sinkhole repair, etc. was $1,070,000. There were a number of additional items which were discussed as possible uses of these funds and the defendant agreed to increase it to $1,500,000.
The initial demand for funds to widen and replace the recreation trails North of CR466 was agreed upon in the amount of $4,243,600 which was based on information provided by the VCCDD Property Manager. The figure was two years old, so the initial figure was increased by three (3%) percent for each of those two years.
These adjustments and modifications resulted in a negotiated settlement agreement for the defendants' immediate payment of $11,803,168 for the following purposes:
RAD RENEWAL AND REPLACEMENT RESERVE FUND $3,247,273
PAY- OFF OF PARADISE REC CENTER DEBT 2,812,295
SINK HOLE, ETC. RESERVES 1,500,000
RECREATION TRAIL RENOVATION 4,243,600
(2) Annual Payments: includes funds necessary over the next thirteen (13) years to assure services that had been reduced and to pay expenses that were not budgeted at the time of the revenue bond issues. This additional funding was required until the year 2020, at which time the reduction in bond debt, due to scheduled amortized pay-off of some of the earlier bonds, is calculated to be sufficiently reduced for regular amenity fees to provide funds for these purposes. Services to be restored include pool monitors, additional recreation center monitors, after hours golf ambassadors for the executive golf course, and additional staffing and equipment for Neighborhood Watch. Expenses not addressed in the operating budgets utilized to determine the sales prices of the amenity facilities included funds for R & R reserves, recreation trail and tunnel maintenance, recreation trail and tunnel reserves, retention pond maintenance and repair, and additional funds for unforeseen circumstances such as substantial increases in the minimum wage.
Prior years' budgets and VCCDD minutes were reviewed to determine the amount of money that would be needed annually to provide the following:
Restoration of pool monitors at all of the VCCDD owned swimming pools during the warm months and over winter vacation periods as had been done prior to 2005. It would start at $217,008 and increase to $309,978 in 2020 for a total sum of $3,395,109.
Additional recreation staff to monitor recreation facilities, both indoor and outdoor and return the closing hour for Recreation Centers to 11:00 P.M. as had been done prior to 2005. It would start at $252,470 and increase to $356,777 in 2020 for a total sum of $3,933,737.
Restoration of after hours golf ambassadors to monitor play on the executive courses when the starters and course ambassadors are no longer on duty as had been done prior to 2005. It would start at $105,300 and increase to $150,131 in 2020 for a total sum of $1,644,542.
Restoration of Neighborhood Watch Services to the level it had been prior to 2005. It would start at $831,782 and increase to $1,185,921 in 2020 for a total of $12,990,591.
The above figures for pool monitors, etc. were all increased by three percent (3%) each year rather than at the five (5%) generally forecasted for full-time employees because all of them would be part-time, minimum wage employees and not due to receive benefits.
R & R Reserve Fund needs were estimated to be five percent (5%) of the annual amenity fees collected. It would start at $1,643,355 and increase to $2,951,228 in 2020 for a total sum of $29,108,712.
Funds for annual maintenance of the recreation trails and tunnels were added as a new item to meet the contract requirements for providing all the recreation facilities. It would start at $200,000 and increase to $285,150 in 2020 for a total sum of $3,123,548.
R & R Reserve Funds were established for the recreation trails and tunnels. The base amount needed was projected to be $212,180, which is five percent (5%) of the initial cost of the renovations. Thereafter, this amount would increase at the rate of 3% per year and end at $302,514 in 2020 for a total sum of $3,313,758.
Funds for retention pond maintenance for those ponds the VCCDD recently took over from CDD4 was established at $25,000 and increase at the rate of three (3%) percent each year to $35,643 in 2020 for a total sum of $390,383.
Funds to replace a potential reduction in amenity fee resale income and to provide gate manning was established at $120,240 increasing at the rate of three (3%) percent each year to $171,431 for a total sum of $1,867,869.
The total initial settlement demand for additional monies needed for the thirteen (13) year period - 2008 through 2020- was $59,768,249. This demand was based upon the premise that there would be no new revenues, other than annual CPI increases.
(f) Based on the foregoing methodology for determining the funds needed and using those exact figures, the attorneys and I then made revenue adjustments for the addition of Freedom Pointe amenities fees and resale amenity fee increases, and factored in various scheduled decreases in the debt service and the increasing percentage of amenity revenue that would be available for operating expenses due to the increasing gap between the almost constant debt service and the growing operating expenses in order to calculate the current and projected deficits as follows:
For each of the thirteen years, the attorneys and I calculated the following revenues:
Amenity fees, golf fees and previous year resale additions increasing at the rate of 2.47% per year, which was the average CPI for the ten year life of the VCCDD;
Other amenity facility-produced revenue increasing at the rate of 1.5% per year;
Additional revenue from Freedom Pointe increasing at the rate of 3.0% per year;
Additional resale revenue based on 6.5% of the homes that have not been resold selling each year.
The attorneys and I subtracted the operating expenses (which were increased at the rate of 4.7% per year) and the scheduled bond debt-service from the revenue total to determine the projected net available revenue for each of the next thirteen (13) years. We then subtracted that amount from the initial settlement demand for that year to determine the actual amount needed to eliminate the projected deficits.
Net Available Revenue
2010 1,485,354.31 3,895,815.00 2,410,460.69
2011 1,918,210.74 4,038,923.00 2,120,712.26
2012 1,992,114.81 4,208,437.00 2,216,322.39
2013 1,817,652.53 4,374,639.00 2,556,986.47
2014 1,780,061.27 4,547,823.00 2,767,761.73
2015 1,916,744.37 4,728,301.00 2,811,556.63
2016 2,686,551.60 4,916,397.00 2,229,845.40
2017 2,629,665.52 5,112,449.00 2,482,783.48
2018 2,209,704.99 5,313,808.00 3,104,103.01
2019 4,522,614.88 5,526,759.00 1,004,144.12
2020 5,582,077.73 5,748,773.00 166,695.27
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TOTALS $31,747,872.66 $59,768,249.00 $28,020,376.34
(a) Sufficient payments by Defendants to eliminate the current ($11,803,168) and projected ($28,020,376) RAD deficits detailed above, a total of $39,823,544.
(b) The creation by Interlocal Agreement of an Amenity Authority Committee (AAC), whose members will be residents, elected by residents (or appointed by Governing Boards elected by residents if elections are not possible), which will have (i) discretion over the expenditures of all non-bond required amenity funds and the rate setting of amenity facility user fees; (ii) operational control over the amenity facilities and services; (iii) approval over future debt secured by amenity fees or facilities; sale, assignment or trade of amenity facilities; and future areas to be brought within the Center District Service Territory (excepting no more than three hundred (300) additional dwelling units without their approval); and (iv) authority to establish a maximum amenity fee for the Center District Service Territory.
(c) An agreement that the number of golf tee-times reserved for sales purposes by defendant VLS for prospective residents of the Villages shall not exceed a monthly maximum of three hundred- twenty five (325) of the approximately 21,060 tee-times available on the VCCDD operated executive courses. Prior to the Settlement Agreement, there was no limit on the number of tee- times that VLS could reserve for sales purposes.
(d) In order to prohibit further dilution of the amenity program by bringing additional amenity contracts into the VCCDD service territory (such as was done with Freedom Pointe), the VCCDD has agreed to give the AAC approval powers as noted above in item 6(b)(3).
(e) Agreement that all attorney fees, incentive awards and costs will be paid in addition to the foregoing settlement amounts rather than being taken from those amounts.
RUTH ELAINE DREIDAME
STATE OF FLORIDA
COUNTY OF MARION
SWORN TO AND SUBSCRIBED before me this _____ day of March, 2008.
6. The Settlement Agreement entered into by the parties includes provisions for the following: