"PROJECT WIDE AGREEMENT (PWA)"
(Bulletin October 2011)
Part Three
Section I. The case for a review by an Outside, Independent Consultant
Before we begin to further discuss the PWA, let's recall our purpose. As stated in the original article in the August 2011 Bulletin, the POA is a "watchdog" organization with regard to residents' interests. The POA will attend the meetings, do the research and report the facts we believe residents should be aware of. The PWA is an interlocal government agreement which involves a substantial amount of money (more than $7M annually), and consumes more than half of the annual maintenance budgets of CDDs 5, 6, 7, 8 and 9. The POA believes that now that at least two of the CDD Boards are now controlled by resident elected Supervisors, it might be appropriate to review the PWA in its entirety.
We began our review by researching the topic of interlocal government agreements (IGA). We found that they are a common practice used by local governments throughout the country to work together to reach common goals and to solidify compromises they have negotiated. An IGA is essentially a formal written contract between governmental entities that sets forth the purposes, powers, rights, obligations, and responsibilities of each of the parties to the agreement. The purposes of an IGA can include long range planning, managing growth and development, revenue sharing, increased cost efficiency of development or delivery of services, and protection from the adverse actions of other public entities.
Inherent in all of the literature we reviewed was that the first step in initiating an IGA is for each individual governmental entity to determine what they have to gain and what they have to lose if they participate in a proposed IGA and then attempt to negotiate with the other parties in order to achieve the best benefit they can for their own constituencies. With this in mind, we then reviewed the Districts documents to determine how the PWA actually originated.
The original 2003 PWA was between the SLCDD (Sumter Landing Community Development District) and CDD5. (It has been expanded over the years to include CDD6, 7 and 8 and the 2011-12 Agreement will also include CDD9).
Transcriptions of the two meetings in which the PWA was adopted and the meeting in which it was first amended are as follows:
8/27/2003 - CDD5 Monthly Board Meeting
Pete Wahl, District Manager - "Mr. Chairman - you got a revised agenda at your place this morning,
(No public announcement that it would be on the agenda. - All supervisors were appointed/elected
by the Developer)
"The interlocal agreement that exists between District 5 and Sumter Landing for maintenance of
area wide Projects' - There are some projects which are part of or outside of the boundaries of
District 5 that District 5 enjoys the benefit of and this agreement is simply an agreement that
assures that you will be participating in the funding and operation and maintenance of certain of
these items. So, that agreement is before you and we would recommend approval."
There was an immediate motion to approve. There was no discussion or any explanation by Mr.
Wahl upon what the formula was based, parameters of what was to be included, the cost savings or
increases that would inure to CDD 5, items which should be negotiated or anything else.
The motion passed.
10/13/2003 - SLCDD Monthly Meeting -All Supervisors appointed/elected by Developer
Pete Wahl - "Mr. Chairman, what you have here is an interlocal agreement between
this Board and CDD No. 5 indicating that they will share certain costs for what are
considered our project wide costs, and we will share in the funding of what are
considered their project wide costs so that everybody that benefit's the same gets to
pay the same."
Chairman - Okay, so we need a motion and discussion for this interlocal agreement.
No discussion.
The motion passed.
5/19/2006 - CDD 5 Monthly Meeting
The First Amendment to the Agreement was not listed on the agenda provided to the
public - It was brought up by Mr. Wahl under staff reports. Mr. Wahl stated that
"We do have a staff report - I put on your desk this morning - I think I did - a list of
Exhibit A. These reference the project wide costs… and we need to accept the list
with an amended Exhibit A as submitted and authorize the Chairman to execute an
amended agreement that is being developed, apparently I got it but I didn't realize
what I had so I don't have a copy of that for you but it will simply be incorporating
this language of Exhibit A."
The motion passed.
As 'ungovernment-like'as the above proceedings appear, the worst offense occurred at the November 17, 2006 CDD 5 monthly meeting when the Project-Wide was on the agenda, but in the presentation to the Board, which now included two residents, Mr. Wahl only presented the additions to the Project Wide list and did not advise the Board that by signing off on this Agreement they were taking away the right of the residential districts to have a vote on what improvements would be included on the Project Wide list.
THE ORIGINAL 2003 PWA READS AS FOLLOWS:
"PROJECT WIDE IMPROVEMENTS. For the purposes of this Agreement, Project Wide Improvements shall include those improvements described in Exhibit "A". As additional Project Wide Improvements are developed within the Project, the parties, by amendment, shall add such additional Project Wide Improvements to this Agreement." (Emphasis added.) "AMENDMENT. This Agreement may be modified in writing only by the mutual agreement of the parties in accordance with their respective laws, rules and procedures." (Emphasis added.)
THE NEW 2006 CLAUSE READS AS FOLLOWS:
"PROJECT WIDE IMPROVEMENTS. For the purposes of this Agreement Project Wide Improvements shall include those improvements described in Exhibit 'A'. As additional Project Wide Improvements are developed within the Project, Sumter Landing District by resolution, shall add such improvements to the Exhibit 'A' Project Wide Improvement listing as attached to this Agreement." (Emphasis added.)
This is the early paper trail for a matter which currently involves 7 to 8 million dollars annually and it certainly does raise some questions. The most paramount of which is - If an outside, INDEPENDENT expert had been hired by RESIDENT ELECTED SUPERVISORS to evaluate the merits of the proposal would they have advised the Supervisors to respond differently?
From the data the POA has reviewed, it seems reasonable that the numbered CDDs should request a 'first ever' review of the PWA. This is a high ticket item (over $7M) and should have the same level of professional involvement as a bond re-issuance.
Step 1 - Find out what each district, including the commercial district, is saving by
participating in the PWA. This is not that hard to do. In the maintenance contracts that we
reviewed, the bulk of the cost was based on area of grass to be maintained,
shrubs/trees/beds to be maintained and quantity of annuals to be changed out quarterly.
Each district knows what these volumes are and they are typically spelled out in the
contracts, district plans and Villages specs. This is also true with maintenance
responsibilities for retention ponds as their identification number for use on contracts
usually indicates the District which has the maintenance responsibility.
Each district should determine their standalone maintenance costs for the proposed
project-wide improvements so that they are in a position to evaluate the financial impact
various proposed formulas might have upon their residents.
Step 2 - While an outside independent, financial/consulting firm should have been used originally, it is not too late, that is, if the SLCDD developer elected board and all of the residential CDD boards agree to it as the PWA states that: "This Agreement may be modified in writing only by the mutual agreement of the parties…" IDEALLY, a district's share of the total maintenance cost should be based on their share of the maintenance expense they generate toward the total. If your district generates 25% of the PWA maintenance expense, then you should pay 25% of the total bill (and hopefully your 25% share is less than what it would cost you on your own). As far as reserves for sinkholes, that should be collected based on the area of your district to be covered by the sharing of risk (the "insurance" policy). Again, if your district has 25% of the storm water pond area to be included, you should contribute 25% of the transfer to reserve expense. Factors, such as can be found in The Villages, e.g.., CDDs 5 and 6 have greater financial exposure for landscaping expenses due to the amount of acreage they have along the Boulevards, as opposed to CDDS 7 and 8. By the same token, however, they had far greater infrastructure costs which they are paying through their infrastructure bond assessments to construct those Boulevards and CDDs 7 and 8 benefit from the beautiful landscaped roadways and recreation trails they use which were constructed with CDD 5 and 6 residents' money. It would be reasonable that CDDs 7 and 8 might agree to share in the maintenance costs because of the value they can perceive.
This is why an independent professional needs to be hired to do the analysis and to come up with recommendations for:
- an equitable formula for cost sharing;
- criteria to be used for placement of items in the PWA;
- whether or not combining residential and commercial districts for the purpose of this particular IGA
- are in the best interest of BOTH parties,
- to assist in negotiations between the parties as needed, etc.
District staff has hired consultants in the past for situations involving far less money.
Section 2. Criteria To Be Used To Determine Inventory Covered by the PWA
As discussed above in Section 1, as a result of the passage of the November 17, 2006 Project Wide Amended Agreement, the residential boards have NO CONTROL over what properties are placed on the PW listing. What are, or are eventually to be resident elected CDD Boards have turned over more than 50% of their maintenance assessment funds to the control of the developer elected Board. So, why make a fuss about electing residents to the CDD boards in the residential districts if they are going to turn the majority of their responsibility and control over to the developer elected commercial district Board?
Below are a few examples of items that the SLCDD has approved for inclusion in the PW listing since the signing of the initial PWA:
- accepted the deed and maintenance responsibility of over 600 acres of mitigation areas and then placed them in the PWA for maintenance funding;
- placed Market Square, which is an assessable SLCDD owned property into the PW Listing and then assessed the PW fund $43,000 for its annual assessment which is paid to the commercial owners property maintenance budget; It should also be mentioned that the amenity system receives income from the developer for his rental of the town square each evening. (Note: The amenity system receives your amenity fees, rents the square to receive additional income and then has the residents via there numbered district assessment pay for maintenance of the square. And the amenity system contributes NOTHING to the PWA);
- placed maintenance of the Sumter Landing Lighthouse in the PWA for funding;
- placed maintenance of the Sumter Landing dock and gazebo in the PWA (why should residents pay via the PWA to maintain the tour boat landing which is part of the amenity system when their amenity fees are supposed to cover those expenses;
- used $130,000 of PWA funds for architectural fees and construction of the new Recreation Department requested park instead of using the more appropriate amenity fees. (See Note above)
- expended $8,500 to put up the Xmas tree on the Sumter Landing Square, to name a few.
At a glance, it would certainly appear that the criteria for adding properties onto the PW List should be better defined to eliminate inclusion of any expenses which should be the responsibility of the amenity budget and those which should be paid for by the commercial property holders, especially in light of the fact that the residential CDDs (5, 6, etc,) NOW have NO VOTE in the matter, nor do they have any say so in whether or not some of the entries identified above are appropriate. From our review of the minutes, it does not appear that these decisions are even included in agenda packets or discussed at the residential CDD meetings.
Section 3. Criteria For A Government To Be Considered for Inclusion in the PWA
Should the PWA be limited to the numbered (residential) districts 5 - 10, which have common needs and structure and only include their basic maintenance responsibilities:
Specifically identified landscaped rights-of-way including street lighting; entry features; preserves; storm water retention basins and other water retention areas; tunnels and recreation trails; or should it include the Sumter Landing commercial district which is structured substantially different because it continues to accept additional properties located outside of its geographic boundaries from the Developer, and includes commercial, income producing property.
{Just a Note: The PWA budget for fiscal year 2011-12 is set at almost $7.3M. While the Sumter Landing commercial property owners are assessed $94,498 of the total, which is less than 1.3%, they actually only contribute $50,990 since $43,508 is directly returned to them for town square maintenance. Are we to understand that their inclusion in the PWA and $51K contribution is in the best interests of the residents who pay the remaining $7.249,000, plus the balance of their own annual CDD maintenance fee and their monthly amenity fee?)
We have reviewed several Engineer's Reports for various interlocal government projects around the country and believe that hiring an independent consultant to take a look at the current PWA and make recommendations would be very worthwhile. At $7M and more, the PWA is a big ANNUAL expense for the residential districts. Residents of the numbered districts have no idea if they are receiving equitable benefits as required by F. S. 163.01(2) and 163.01(5)(f) . Hopefully they do. Isn't it time they find out?