BULLETIN ARTICLES RELATED TO THE PROJECT-WIDE AGREEMENT
(BULLETIN AUGUST 2011)
"PROJECT WIDE AGREEMENT"
ADVANTAGES AND DISADVANTAGE
The POA, as a "watchdog" organization with regard to residents' interests, is currently reviewing the Project Wide Agreement in place for the districts south of CR 466. At approximately $6M per year, this is a significant expense item and needs to be reviewed periodically to assure that it is accomplishing the intended purpose.
Those of you living south of CR 466 may have heard of the Project Wide Agreement or seen the "project wide fee" line item in your numbered Community Development District (CDD) budget. The "project wide" concept has also come up for consideration a few times recently at AAC budget workshop meetings and a CDD3 meeting. Let us take a little more detailed look at the Agreement and review some of what we see as advantages and possible disadvantages of the Project Wide Agreement in use South of CR 466 in its present format, from a resident's perspective.
On August 29, 2003, the SLCDD Board (developer elected) and the CDD5 Board (developer elected at the time) entered into an interlocal agreement identified as the PROJECT WIDE AGREEMENT, stating that its purpose was to provide that the expense of maintaining (certain, listed) project wide improvements is shared equitably among all Districts within the area subject to the Agreement. Over time, the agreement has been amended to now include CDDs 6, 7 and 8 (SR 466A north to CR 466) and the improvements to be maintained now include landscaped rights of way (Buena Vista, Morse, CR 466 and CR 466A) including street lighting, entry features (CR 466 and CR 466A), lakes, shorelines, conservation, storm water retention and buffer areas, roads and bridges, transportation/recreation trails and tunnels. CDD 9 will be included in the fiscal year 2011-12 budget and CDD 10 will be added sometime in the future.
First, some definitions:
The SLCDD is the Sumter Landing Community Development District. Its governing board is elected by the landowners in the Sumter Landing commercial area, primarily the developer. Like all CDDs, it is a unit of special purpose government under Florida Statute - Chapter 190.
Numbered CDDs, such as CDDs 5 - 8 are also units of special purpose government. Initially their governing boards are elected by the developer but over time, as residents move in, the residents become the electors.
Interlocal agreement - Under Florida Statute 163.01 (2) governmental entities can enter into "interlocal" agreements on "a basis of mutual advantage"; 163.01 (5) (f) provides for a method or formula for "equitably' providing for and allocating and financing the capital, operating costs and reserve funds.
Assessable acreage - Within a CDD, certain lands are considered "assessable" meaning they are part of the tax assessment base such as homes and yards and commercial buildings, while other lands within the CDD, such as nature preserves, road right-of-ways, and storm water retention areas are not assessable for tax purposes, but their operating costs are assessed via the annual maintenance fee assessed on each home site or business.
1) CDDs 5 - 8, approximately 92% of their acreage is assessable meaning only 8% of their land mass is not maintained by the residents individually. The cost of maintaining this 8% is covered by the annual CDD maintenance fee assessed against each home site. 2) For the SLCDD however, less than 18% of the acreage (commercial properties) is assessable, meaning that the cost of maintaining 82% of the property in the SLCDD is covered by their annual CDD maintenance fee assessment.
The Agreement states that "The actual cost of maintaining the Project Wide Improvements shall be allocated among all the Community Development Districts within the Project based upon the proportion of assessable acreage each District represents to the total assessable acreage within the project." If the Florida statute requires "equitable"sharing of maintenance expenses for the listed improvements, based on 'mutual advantage', then the use of total non-assessable acreage, as opposed to assessable acreage may be a more equitable allocation tool in this situation. For example, under the current formula, assuming the project wide improvement funds are spent on the non-assessable acreage, during the current budget year, the SLCDD contains 49% of the total acreage needing maintenance assessments (non-assessable acreage) while the combined total of all of the non-assessable acreages for CDDs 5 - 8 contained 51% of the total acreage needing maintenance assessments. Yet, under the current formula CDD 5 - 8 residents paid 98.36% ($5,951,188) of the total Project Wide Improvement assessment, while the SLCDD paid only 1.64% ($94,498). It is also important that participating entities are similar in structure; maybe mixing residential needs with commercial needs is not a good idea.
Additionally, only charging property owners within the development districts does not cover all benefitting parties. The next time you have a chance, look at a map of your numbered district. You probably expect to see a plot of land that is roughly bounded on four sides. In actuality you will see a plot that more closely resembles a slice of Swiss cheese. Several large parcels of land, other than homes and roads, have been cut out of the numbered district so that they will not be subject to district infrastructure bonds or infrastructure maintenance assessments that the residential homeowners are subject to. These excluded parcels enjoy just as much benefit from the infrastructure created (storm water retention areas, main road right-of-way lighting and landscaping, conservation areas, etc.), but paid nothing for its creation and pay nothing for its maintenance and replacement. They are the shopping center lands and other commercial ventures, country clubs, and property that will become recreation centers, pools and executive golf courses, none of which are or will be contributing to the project wide funding.
Sharing of maintenance expenses across development districts can be a great idea - for example where the item being maintained is used by all districts but located in just one of the districts. Recreation trails and tunnels are good examples. They are utilized by all residents irrespective of where they live. While the initial construction cost of these trails was paid for by the residents of the numbered district wherein each trail section is physically located, it seems reasonable for the maintenance cost of the total trail system and tunnels to be allocated based on the number of roof tops in the total area (i.e. CDDs 5 - 8) since we all use them and benefit from their proper maintenance.
Questions regarding the current project wide application begin to surface when you start to include unique maintenance items that only benefit a particular district or entity. Why include the Lake Sumter Landing Lighthouse ? Why include the Lake Sumter Landing Market Square which is owned by the amenity division of the SLCDD ? (The amenity system does not pay any part of the project wide expense and receives rental revenue 365 days per year for the square from the developer's entertainment department.) Why include conservation areas which are located outside of all of the Districts in a system that allocates expense based on assessable acreage when these lands are not assessable? For example, the SLCDD (on behalf of the commercial property owners or the amenity system) can accept the deed to a preserve or conservation area from the developer, and then have the project wide agreement cover the cost of maintenance of this property, almost all of which then falls on the CDD 5-8 residents.
The cost of most of the maintenance items within the project wide agreement are reasonably easy to estimate, as the districts north of CR 466 have been doing so for many years. While it would be difficult to determine the impact of nature (sink hole activity, etc.) in any given year, such costs could be estimated and reserved for as CDDs 1-4 currently do. By estimating each district's expenses, each district should end up paying its "standalone" amount minus a savings for any economies of scale resulting from the combining of the contracts across multiple districts. Clearly if there is no savings from such a pooling, the districts would be better off on their own where they can have clearer visibility of where their funds are being spent. If the suggestion is that there is no ability to estimate expenses by district, another alternative would be to use total acreage rather than assessable acreage, but it should include all benefitting properties - numbered districts, the SLCDD (both commercial and amenity acreage) and all other properties in the DRI (development of regional impact) that were specifically excluded from being in a development district. For example, Sweetbay Supermarket which was excluded from the boundaries of the SLCDD acknowledges the benefit it receives from the project wide improvements - storm water retention ponds, right-of-way lighting and landscaping, bridges, tunnels and trails - and voluntarily pays approximately $4,000 per year to the project wide fund. Should the Arnold Palmer Country Club, the Cane Garden Country Club and the Mallory Hill Country Club, like Sweetbay, also contribute something since they receive these same benefits ? Should all properties owned/operated by the amenity system be included in the amenity division's total acreage and the entity that receives amenity fee payments provide the appropriate amount to the project wide fund? If the right-of-way landscaping and street lights along the main roads are to be maintained via a project wide assessment, should not all property owners on those main roads be asked to make an appropriate contribution as was Sweetbay, even if they are recreational amenity facilities, commercial buildings or privately owned country clubs?
When residents first began to serve on the CDD4 board, they discovered that CDD4 residents were paying the total bill for the maintenance of the CR42 right-of-way even though CDD4 had only about 25% of the land fronting on CR 42. As a result of negotiations with the other property owners with CR 42 frontage, the maintenance expense is now shared between the Lopez Country Club, the VCCDD (Mulberry Rec Center frontage), the professional building owners, the Mulberry Shopping Center tenants and CDD4 residents. These other entities are not located in CDD4 or any other development district, but they NOW contribute to the maintenance expense that they all benefit from.
The current practice of utilizing assessable acreage as the allocator appears to shift additional expense to residents of CDDs 5 - 10. Storm water retention areas, nature preserves, conservation areas and main road right-of-ways create most of the expense in the project wide agreement but are generally not assessable acreage, so the expense "driver" is not tied to the expense "payer". Further, not including all commercial property within the DRI in the Project Wide Agreement, simply because the district boundaries were intentionally drawn around them, seems inappropriate. Residents pay amenity fees and these should be used to maintain the recreational facilities including their fair share of right-of-way maintenance (as Mulberry Rec Center does). Does this additional expense cause residents to pay more and/or get less for their numbered district maintenance assessments, which must cover the maintenance of the common lands and facilities within their specific district, many of which are not included in the project wide agreement?
Does the pooling of maintenance efforts in this project wide plan provide a visible savings to the numbered districts versus what it would cost them on their own? Certainly it should not cost them more. In next month's Bulletin, we will provide some facts and figures that can help you understand the financial impact of the current project wide maintenance agreement on both the residents and the commercial property owners.