MINUTES
OF MEETING
NORTH
SPRINGS IMPROVEMENT DISTRICT
The
regular meeting of the Board of Supervisors of the North Springs Improvement
District was held Wednesday, February 3, 2010 at 5:00 p.m. in the district
office, 10300 N. W. 11 Manor, Coral Springs, Florida.
Present
and constituting a quorum were:
Steve
Mendelson President
David
Gray Secretary
Vincent
Morretti Assistant
Secretary
Also
present were:
Doug
Hyche District
Manager
Dennis
Lyles District
Counsel
Jane
Early District
Engineer
David
Green CH2M
Hill
Brenda
Schurz Administrator
Rod
Colon Utility
Director
Cory
Johnson CH2M
Hill
Nick
Schooley Drainage
Supervisor
Kay
Woodward Accountant
Dan
Daly CSID
Director of Operations
Joe
Sabino HBC
Clubhouse Manager
Barbara
Brewin United
Community Management
Donna
Holiday GMS-South
Florida, LLC
Robert
Stiegele Centerline
Homes
Jeff
Kronengold Centerline
Homes
FIRST
ORDER OF BUSINESS Roll
Call
Mr.
Hyche called the meeting to order at 5:00 p.m.
SECOND ORDER OF BUSINESS Approval of the Minutes of the January 6, 2010
Meeting
Mr.
Hyche stated the first item is approval of the minutes of the January 6, 2010
meeting.
On MOTION by Mr. Mendelson seconded by Mr. Gray
with all in favor the minutes of the January 6, 2010 meeting were approved as
presented.
THIRD ORDER OF BUSINESS Audience Comments/Board
Requests
Mr.
Sabino stated I am passing out some pictures of the area where we want to plant
a tree. One of our original tennis
members, Dave Taraboulos’ son passed away recently and a couple of the tennis
members have donated money to have a tree planted in his memory. They picked a Tabebuia tree and it is going
to be about 8 feet tall and they want to plant it in memory of Dave’s son. Dave has contributed a lot to the tennis
program and is one of the original members.
Mr.
Mendelson asked will there be a plaque on it?
Mr.
Sabino responded yes.
Mr.
Mendelson asked is there sufficient water in the area?
Mr.
Sabino responded yes.
Mr.
Gray asked where exactly is that?
Mr.
Sabino responded just west of court 7 and 8 and east of 9 and 10 in the big
open area.
On MOTION by Mr. Mendelson seconded by Mr. Gray
with all in favor the request for the planting of a tree in the open area west
of courts 7 and 8 and east of courts 9 and 10 was approved.
FOURTH
ORDER OF BUSINESS Rate
Study Presentation
Mr.
Green stated I am an economist with CH2M Hill and I have been leading this
effort to develop a rate analysis for the district. I will give you a summary of what we have
done and our preliminary results of that analysis.
The
last rate analysis you had done was in 1998 so it has been a little over 10
years and since that time the district has reached build out of its current
service area and we are not anticipating any additional growth in your existing
area but when the wedge opens up that will provide some additional growth but
that is outside the period we are looking at for this analysis. We are not expecting any growth from the
wedge at this point in time.
The
first step in conducting the greater fee analysis is to look at the amount of
money you need to generate to cover your costs which we call your system
revenue requirements. Under the
methodology we used to estimate those revenue requirements is called a cap
basis and is very similar to doing your annual budget and is basically designed
to cover your annual cash outlays and other financial commitments of the
district. In this case it consists of
your operating costs, funding of renewal and replacement, normal capital
outlays that are cash funded and any transfers to the general fund that you
have none of and reimbursements for services that are provided by the
district’s general fund to the utility and your debt service requirements for
any existing debt and planned debt that you are going to have during the five
year period that we are looking at. The
debt service requirement includes in addition to the principal and interest
payments on the bonds any other commitments that you made as part of those bond
issues which in this case means funding any reserve accounts that were called
for in the bond issue which have been fully funded so there is no current
financial commitment there. There is a
debt service coverage requirement that basically says that you commit to the
bondholders that you will collect net revenues which are equal to your gross
revenues of your system less your annual operating expenses, that net revenue
figure will be 110% of the annual debt service payment. That annual debt service payment, that margin
of 10% over that then becomes available for capital outlays and the like. It is an annual requirement.
Another
consideration here is that you also have an added bonds test that if you are
going to be issuing additional bonds there is also a commitment that before you
can issue those bonds your net revenues have to be 110% of the maximum annual
debt service for your existing debt and any planned debt in any current or
future year. If you have a larger debt
service payment in a few years then that would become the debt service amount
that you have to make the 110% of. In
your case all of your existing debt is pretty much level and any of the planned
debt we will be talking but tonight is also assumed to be level so we normally
don’t have any fluctuations of that nature.
Just
a quick summary of some of the assumptions that we made as part of this
analysis is that we would fund a renewal and replacement account or sinking
fund basically to the tune of $1 million a year beginning not this current
fiscal year but in fiscal year 2011 and beyond so that would be $1 million that
you would be setting aside for renewal and replacement of your plant and
equipment on an annual basis.
We
have also identified a capital improvement plan that totals close to $82
million over the next five years. We
also assumed that you would not draw down your current reserves to pay for
those improvements or help reduce the amount of debt service that you need to
issue to pay for those improvements. We
are looking at debt proceeds of about $16 million in fiscal year 2011 that will
pay for some of those capital improvements and another $63 million in
2013. We did not assume any refinancing
of your existing debt so we assume your existing debt stays in place as is.
We
also assumed that we would set our rates so that they would meet your annual
financial cash outlays and the debt service coverage requirements and fund the
utility’s revenue requirements through 2010 and beyond. The O&M expenses of the system will
increase by about 5% annually from the current budget level and any proposed
rate adjustments in 2010 would be in effect for approximately 5 months which
would assume basically that those rates went into effect the 1st of
May. We are proposing subsequent rate
adjustments associated with that second bond issue in 2012 and 2013 that would
be implemented at the end of fiscal year 2012 and the beginning of fiscal year
2013.
This
chart summarizes the projected capital improvement program for your
system. This is what I mentioned earlier
is about the $82 million in improvements.
The major items in this projection is in the current fiscal year we have
about $3.2 million for land acquisition for a new site for the plant. We have in addition some facilities for about
$1.2 million and lift station refurbishment of about $1.5 million and in
addition we have reimbursements for WCI according to your development
agreements of about $3.6 million in fiscal year 2011. In addition there are some subdivision line
replacements that amount to about $1 million per year for the next four
years.
In
addition we have a Floridan well and $4 million for deep well injection in 2012
as well as a 10 million gallon per day reverse osmosis water treatment plant to
the tune of $16 million. In addition a
degasification facility for $1.4 million, some water supply lines for $2.8
million and pumps and chemicals, etc. for related improvements for about $2.4
million. Then we get to the big ticket
item which is a new wastewater treatment plant and reuse facility to the tune of
$35 million. That altogether amounts to
about $82 million and that is what we are looking to do primarily through bond
proceeds and then through your rates.
Your
operating expenses now are about $6 million in terms of current operating
expenses. As I mentioned we assumed that
is going up by about 5% per year so it ends up to be about $7.2 million out in
2014. With the implementation of the
reverse osmosis water treatment plant there would be some savings in your
operating expenses so we might not have as great of an increase but until that
materializes I have been conservative and assumed that we would continue to
have about a 5% increase in operating expenses.
Your
current debt has been around $2.4 million per year. It dropped down in the current fiscal year to
around $2 million and it remains at that level out through 2023 then that debt
is paid off.
In
terms of proposed new debt we are looking at proceeds from a proposed bond
issue in 2011 of about $16 million. We
made a fairly conservative assumption that you could issue that debt at about a
5 ½% interest rate. That is probably
higher than what you could get right now but my experience is that forecasting
interest rates is a good way to look like a fool so we assumed something that
was fairly conservative compared to what is existing. We assumed a 30 year bond and to issue those
bonds you would have to fund a bond reserve that would amount to about 8% of
the bond proceeds and 3% issuance costs so the total amount of this bond issue
is closer to $18 million and annual payments on that bond assuming level
payments over the entire 30 years would be about $1.2 million per year
beginning in 2011. In 2013 we are
looking at proceeds of about $63 million similar assumptions regarding the
bonds, total loan amount would probably be closer to $70 million for that bond
and payments would be an additional $4.8 million. Beginning in 2013 and 2014 probably
additional debt service between those two of about $6 million per year which is
what this next chart shows that you would have payments of $1.2 million in 2011
and 2012 and then about $6 million in 2013 and 2014 and beyond for new debt
service.
Again,
we are funding renewal and replacement at about $1 million per year. Bringing all those elements of the revenue
requirements together this is what you see and this is 2010 and you add the $2
million of existing debt plus the $6 million in operating expenses you are at
$8 million in revenue requirements. Next
year in 2011 when we continue to have the $2 million in debt, operating
expenses increase a little bit but we are adding the debt service on the 2011
bonds of $1.2 million and about $1 million for renewal and replacement our
annual revenue requirements jump up to about $10.5 million. Then they go up to about $15.9 million in
2013 and $16.3 million in 2014 with the additional second bond issue.
This
line is your projected revenue under your current rates and you will notice it
looks very flat and that reflects the fact that we are not expecting any growth
and if we don’t assume any rate adjustments there is not a whole lot to cause
your revenues to increase. This is what
we are looking at in terms of a significant deficit going forward in terms of
revenues of your system given those expected expenditures. The other consideration is that we are
forecasting that you would not meet coverage with the new bond issues so in
order to issue the new bonds you would have to increase your rate revenues to
cover all those costs.
This
is a quick summary of your current water rates.
Currently for residential and multi-family units you have a charge of
$13.86 as a minimum charge and for the first 12,600 gallons everyone pays $1.34
per thousand gallons. If your usage
exceeds the 12,600 and up to 25,200 gallons that volume rate doubles from $1.34
to $2.68 for that usage in excess of 12,600 gallons. If you are using in excess of 25,200 gallons
the rate goes up to $4.02 per thousand gallons.
Commercial has an increasing minimum charge based upon the size of the
meter but the volume rates are the same per level of usage.
On
the sewer side you have an $8.65 minimum charge and the commercial minimum
charge increases with the meter size and the volume rate per thousand gallons
is $1.34 but that is capped at 9,875 gallons.
On
irrigation the minimum charges are a little higher than what you have for your
regular customer minimum charges but the volume charges would be the same.
In
terms of projected adjustments to your rates in order to cover your projected
costs and meet your debt service coverage we are anticipating you will need an
across the board 30% increase in your water, wastewater and irrigation rates to
cover your costs through 2011. What we
are talking about is a rate increase that would be implemented in May of this
year and would be in effect through the rest of fiscal year 2010 and all of
fiscal year 2011 so you wouldn’t have a new increase in 2011 but in 2012 and
2013 we would need some additional rate increases of about 28% in both of those
years to bring your rates up to a level to meet the requirements.
Mr.
Gray stated within four years you have a 90% rate increase.
Mr.
Green stated it is a pretty substantial increase. If you are going to cover those projected
costs that is what you are faced with.
We can talk about some things we can do to potentially mitigate some of
that.
Mr.
Gray stated that is a 90% increase in a recession.
Mr.
Green stated you have to remember this is four years out.
Mr.
Gray stated and there is going to be a recession for a couple more years.
Mr.
Green stated I agree. Similarly if we
were looking at the same increases for the volume rates this is what would
happen to the volume rates. They would
go from $1.34 for 0 to 12,600 gallons up to $1.74 and at the end of the period
close to $2.94.
The
sewer similarly would climb from $1.34 up to $1.74 and end up at $2.94. With that we get to a point where we are
generating sufficient revenues to cover your costs, we are actually generating
a bit of a surplus in 2012 because we are trying to get up rather than have a
50% increase in 2013 you kind of spread it out over the two years, that is why
we have the two 28% rate increases. That
is the projection that the revenues would come out to covering your projected
costs and we would be meeting your debt service coverage requirements each year
under these projections. What that
really means is that right now you have a rate of about $41.27 a month for a
user consuming 7,000 gallons of water per month which is your average customer. Your typical customer is probably using
somewhat less than that but this is your average customer. You have a lot of customers that don’t use
very much water but there are a few at the end that raise the average for
everybody else. As a result 7,000
gallons is probably more than 50% of your customers would use. That customer would see a bill of about
$41.27 on their current bill and if we did an across the board 30% increase
they would see a $53.65 bill which is about a $12.38 increase and that would go
up from there.
I
would like to turn your attention to the structure of your rates. Right now you have a sewer cap on sewer usage
that if a customer uses more than the 9,875 gallons they no longer pay a volume
charge for their usage in excess of that amount. The concept is that if you are a residential
customer and you are using more than that amount of water it is probably not
being used for inside the house use, it is probably being used for irrigation, washing
your car or something else but not going into the sewer and as such they
probably shouldn’t be paying a sewer volume charge for that usage. It is very common to have a sewer cap for
residential customers and you find that almost everywhere in South
Florida. The level of that fluctuates
all over the place from as low as 7,000 to as high as 20,000 where that cap is
situated. You are about 10,000 and that
is not unusual. What is unusual is that
you currently have a cap also on your commercial customers. I think you are the only utility that I am
aware of that has a cap on sewer for commercial customers. It is unusual because you don’t have the same
expectations that if you are a high volume water customer in your commercial
activity you are not necessarily irrigating with that additional water, it is
probably being used in your business and going down the sewer. It is somewhat unusual to have that cap. We have looked at eliminating the cap for
just the commercial customers and it didn’t have a whole lot of impact on your
revenues. If you eliminated your cap on
just the commercial customers it would be another $27,000 per year in
revenue. If you eliminated it also for
the residential customers it would generate a lot of money, close to $488,000 but
the equity issue is that you have a lot of customers paying sewer volume
charges for water that really doesn’t go down the sewer. We made a couple of suggestions in terms of
modifications to your sewer structure, one is to eliminate the cap for commercial
users so you would no longer have that cap which would add to your revenues a
little bit but not significantly.
The
other thing I wanted to talk to you about is the recent drought that we have
had led the water management district to impose some water use restrictions and
that had an effect not on just your utility but virtually every utility in
South Florida of having their revenues being impacted much more than their
reduction of costs. Utilities as a rule
have pretty fixed costs, they don’t vary that much with the actual volume of
water that is used or wastewater flow that is handled, most of the costs are
fixed. Your revenues are not by the same
proportion you have probably over half of your revenues coming in through a
volume charge and half through the base charge.
We find that much stronger on your sewer side than your water side
because you have a much smaller base charge and volume charge on sewer than you
do on the water side, you have a $13.86 base charge on water but only an $8.65
base charge on the sewer. One of the
proposals we want to make to you was to possibly change your rate structure for
your sewer primarily to put any kind of rate adjustment on the base charge and
less on the volume charge. We did an
analysis and assuming we get rid of the sewer cap on the commercial customers
we can generate the same amount of money that if we have a 30% increase of the
minimum charge and 30% increase in the volume charge you would end up with
$11.25 minimum charge on the sewer and $1.74 per thousand on the volume charge. If you wanted to generate the same amount of
money but collect a little more of it through the minimum charge and less of it
through an increase in the volume charge you can increase the minimum charge by
about 49% and increase the volume charge by 26% and generate the same amount of
money. That would mean that your minimum
charge would go up to about $12.89 and instead of going up to $1.74 on the
volume you only go to $1.62. If you took
the furthest extreme which was to say we are going to increase all of the increase
in revenue that we need to generate on the minimum charge and nothing on the
volume charge then you would have to increase the minimum charge up to $14.53
but the volume charge would stay at $1.34.
All three of those options would generate pretty much the same amount of
revenue as the other options on the sewer.
We
did not propose a similar change on the water.
You are generating more of your revenues on the water side through the
minimum charge relative to the bond and your water minimum charge is quite a
bit higher than your current sewer minimum charge. We see the most disparity between the
sensitivity of your revenues to changes in consumption on the sewer side much
more so than on the water side. That is
why we focused in on your sewer rates.
Just
a quick summary in how you compare to everyone else. Right now you have some of the lowest rates
in South Florida. Your current bill for
most customers is around $41.27 for 7,000 gallons of consumption. If we did the 30% across the board increase
we would see that go up to about $53.65.
Mr.
Gray stated if we did the $90 we would be the highest by far in the entire
area.
Mr.
Green stated it is not on the chart but there are other utilities already at
$90. Typically we see about half the
utilities in the South Florida area increasing their rates every year by some
amount. Many utilities in the South
Florida area have had very significant increases in the last couple of years.
Mr.
Gray stated unless they are about to do some new plants the only increases they
would have would be operational.
Mr.
Green stated by virtue of what has happened with the drought and the water use
restrictions some communities such as Boynton Beach had a rate increase 1 ½ to
2 years ago that I helped them with right before the drought they went into
that drought and they ended up having to have another 50% increase.
Mr.
Gray stated I understand in the past they had to because of the drought but
since they have already done that increase and they maxed out there won’t be
any future increases in the area except for people doing a plant as far as a
large increase.
Mr.
Green stated I think there are a lot of utilities that have avoided
implementing those rate increases because they were worried about the recession
and politically they didn’t think it was sellable, that they have run
themselves into a situation where they are running significant deficits right
now and they are going to find themselves paying the reaper.
Mr.
Gray stated 10%, 15%, 20% is reasonable but you throw 90% out there in four
years and you are going to have a riot.
Mr.
Colon stated the biggest capital projects that are going on to increase it
would be the wastewater plant which will be about $40 million and that is if
the wedge comes in. We pay a lot of
money to Broward County because we don’t have a wastewater treatment facility
and it is only going to get worse because I believe in 2025 they aren’t going
to allow ocean outfall anymore. The
rates we are paying to Broward County we would no longer pay and I believe it
is $1 million a year we are paying them.
This is worse case scenario that he is presenting. He is presenting this worse case scenario
based on no money in the bank which is not true, we do have a lot of money in
the bank and Kay has to get those figures together. The first phase is going to be about a 30%
increase. The second phase is going to
be in 2013 it is going to have to be redone but this is worse case scenario and
it is not going to be this bad. The
wedge is going to generate money. He is
predicting no more revenue coming in, the wedge would generate money coming in
from the connection fees and new customers and also the money we send to
Broward County we would not be doing that we would keep that revenue. I believe we are sitting on about $12 million
in the bank, we have to pay back maybe $3.6 million of that. We are not for profit and can’t have that
much money in the bank for long periods of time otherwise we will be considered
a for profit agency. We need to take some
of that money and put it into these capital projects but we are still funding
$1 million in renewal and replacement.
Mr.
Gray stated I understand the main water plant but the wastewater plant is an
issue. Even though you are saying we are
paying Broward County for it and that is going to go up obviously it is cheaper
to pay someone who already had a facility to do your wastewater than to build
your own facility from scratch.
Mr.
Colon stated the City of Parkland has mandated to do reuse. Since we are considering to do that we have
to go ahead and build them a reuse facility if we want to serve the wedge.
Mr.
Gray stated or change the City of Parkland’s mind about it or they don’t get
it.
Mr.
Colon stated it is in their comp plan.
The state is requiring them to do reuse.
That is going to make the fees go down because of the fact that people
will have a limited amount of reuse to irrigate 24 hours a day if they wanted
to. There are a lot of what ifs.
Mr.
Gray stated the problem with Parkland is a large percentage of irrigation water
comes out of lakes and they are not paying for that irrigation anyway. Reuse requires them to pay for the water
compared to getting it free now. There
is no savings to them it is an increase to them.
Mr.
Colon stated I understand that but basically the developer is going to be
mandated to put in reuse lines and he has to do it. There are a lot of what if scenarios. We are going to know a lot more in a couple
of years from now but Broward County is not going to allow us to send anymore
wastewater to them because they want to cut back on their wastewater. They have to do something with it. They have to drill deep well injection and
obviously they are going to pass those costs on to us. By us having our own wastewater facility and
being able to treat the wastewater we can control the costs and we are going to
be taking in that revenue. He is
presenting worse case scenario which is no money in the bank, no growth, no more
money coming in and that is not true, we still have the Centerline project
which is going to be more connections so the district is going to be taking in
revenues. We are going to know a lot
more in 24 months what it is going to be.
Just for now we are initially looking at a 30% rate increase on the
water side which is what we talked about in previous work authorizations that
they really do have to be done. We will
get a grip on what the second phase would be if we even want to go that route.
Mr.
Mendelson stated the wedge is going to be build up. This is in preparation for what is going to
take place later on.
Mr.
Colon responded no, this is worse case scenario meaning no money in the bank no
money coming in from the wedge and meaning if we did not get a penny this is
what you are going to pay. The worst it
is going to be is double the $41.27. It
is not going to be that bad. I want him
to present it based on what our research is now and it is going to be a 30%
increase now and we will have a lot more information.
Mr.
Gray stated you are charging current customers not the wedge people because
they are getting a deal on it. You are
charging the current people to meet the requirements that are going to be put
upon them by the wedge. It is not the
wedge people paying for that it is everybody.
Mr.
Green stated that is everybody at this point in time because we haven’t assumed
any growth to bring in that revenue.
Mr.
Gray stated you are going to tell people in the current communities by the way
we have to do this in order to do this and you are going to pay for it.
Mr.
Colon stated because their wastewater bills are going to go up anyway. We have to build a wastewater facility and if
we don’t you are probably going to pay this anyway to Broward County. The fact that we don’t have our own
wastewater facility in the district really hurts us. It is not helping us in any way because we
are at the mercy of Broward County. If
they have to do capital projects they are going to dump the cost on the
residents here.
Mr.
Mendelson stated we are going to see updates on all of this information.
Mr.
Colon responded yes, right now it is just going to be a 30% rate increase that
he is going to be proposing and from that point on we have a couple years
before we even figure out what actually is going to be happening. He is presenting the possible worse case
scenario that you could ever see.
Mr.
Gray stated I wouldn’t go for a 30% increase right now. You would have to split that into a couple of
years. You don’t throw a 30% increase
out there with people who are walking away from their homes left and right.
Mr.
Colon stated it will be a $14 a month increase.
Mr.
Gray stated on your average potable bill.
People who live in a lot of those foreclosed homes don’t have an average
bill. My bill is more than double that
and I live in a normal house out there.
I know what those people pay out there.
You are talking about a $30 a month increase for most of those people living
in there.
Mr.
Colon stated these are projects that really have to be done and the district
has paid money on previous work authorizations because we have been preparing
for what is about to happen. There were
improvements that the water treatment facility absolutely needs.
Mr.
Gray stated we have money in the bank I want to see it proposed as a split year
increase instead of a full 30%. To
present a 30% increase right now is crazy.
Mr.
Mendelson stated that is the worst thing to do.
Mr.
Gray stated maybe we need to do a little more the second year or the third year
and figure three years to balance it but a 30% increase in one year is not
good. We were talking a couple bucks a
year on the tennis court and we had a crowd in here and that increase was
nothing per person per year and that is a high end community and they came in
about the increase and we had a full room of people complaining about $30 a
year and you are telling them they are going to pay $30 to $40 more a
month. I’m just saying don’t throw it
into one year.
Mr.
Colon stated unfortunately we are not running out of water we are running out
of cheap water. The land acquisition
which we do have money in the bank for is really the biggest one would be in
2009 and 2010. We might or might not do
it. Obviously, we are not going to do it
unless we know that the wedge is going to come in. The other projects such as the reverse
osmosis plant, the lift station rehabs our infrastructure is very old and it
does have to be updated otherwise we are going to run into problems which we
are going to talk about in a little bit.
We are going to talk about that with some work authorizations that are
coming up but splitting it into a couple of years is not going to help us on
our projects.
Mr.
Mendelson stated the consumer is going to take a different look at it.
Mr.
Colon stated that is why all the other utilities may have to take a hit and we
are trying to minimize the cost to the residents as much as possible.
Mr.
Gray stated in 2010/2011 all I can see on your chart the biggest number is our
main reimbursement to WCI which is just our standard stuff. On new stuff you are talking about $1.2
million and the lift station restructuring of $1.5 million.
Mr.
Green stated yes.
Mr.
Gray stated that doesn’t seem like huge dollars. I think if you did 15% per year and we look
at our cash in the bank. You have three
years because you are saying two more years with nothing you hit another 15% in
the third year that has to pick up the difference of what we are talking about
compared to just the first year.
Mr.
Colon stated the engineering costs to plan for these projects are going to be
significant and to get the bonds we have to show this revenue coming in
otherwise we would just get the bonds and then increase the rates but it
doesn’t work that way.
Mr.
Gray stated I would like to see it re-analyzed in a different fashion other
than a 30% rate increase for the next half of this year. Look at the cash in the bank which we don’t
have presented before us, see how it would be affected based on our projected
cash flow, what we need to do for the projects for the next year and see how
that would work out without doing a 30% increase in a single year and then
nothing for two years.
Mr.
Green asked if we were to do a 15% in May and at the beginning of fiscal year
2011 another15%?
Mr.
Gray responded something that is not a single shot deal and spread it out.
Mr.
Green stated in order to issue bonds we have to show that we have coverage.
Mr.
Gray stated look at some other ways to rearrange that to make the funds
work. I know the total funding is still
the same in the end but let’s see if we can make it more palatable and for the
timeframe. If we are too optimistic on
the assumption that could be a problem as well.
If you are saying you are not including some amount of funds from
Centerline, obviously you don’t go over rosy but realistically let’s take a
look at it.
Mr.
Green stated most of the wedge development is a number a years out.
Mr.
Colon stated 2015 and 2018.
Mr.
Green stated that is beyond where we are looking here.
Mr.
Gray asked how many years does it take to do the plant? When you are talking about those expenditures
did you figure those as the total amount spent that year for the project or did
you figure that on the total cost of the project which may be spaced out over
three to four years?
Mr.
Green stated this is the total cost of the project. When you issue the bid you have to have the
money to pay for it all at that point in time so when you are issuing your bond
you have to have all the money in hand to do it.
Mr.
Gray asked did you figure any interest back on that? Once you have issued the bond and you haven’t
spent the proceeds you are earning interest on the money you have in the
bond. Did you throw that into the
equation?
Mr.
Green responded no that is not really part of the equation.
Mr.
Mendelson stated that is why everything has to be refigured.
Mr.
Gray stated we need to look at ways to split it up in some other fashion other
than hitting them at one time.
Mr.
Colon stated we understand it is not a good time for an increase but it is a
good time for capital projects because costs are down. It is going to cost us a lot less to do it
now than it would when the economy is good.
Mr.
Gray stated just see if you can work the numbers in a more linear progressive
fashion.
Mr.
Lyles asked what did you use as an assumption for a capitalized interest period
after the bonds are issued and before you start making bond payments out of
rate increases as opposed to the capital amount of the bonds?
Mr.
Green responded we are assuming we are issuing the bonds in 2011 and starting
to pay that bond immediately.
Mr.
Lyles stated it is very common in a bond issue to have a period of capitalized
interest where you borrow a little more at the front end put it into an account
and the first 2 maybe even 3 years you pay the interest payments out of the
capitalized interest fund. Where your
calculations are in fact caused by the wedge property coming in at a later time
it might make sense in a bond issue like this to use a capitalized interest
vehicle to defer the payments coming out of rates as opposed to coming out of
capitalized interest.
Mr.
Gray stated so you get a more gradual build up on it.
Mr.
Lyles stated the payments are being made but it is coming out of the users with
increases that kick in at a later time or over a longer period of time in
smaller increments.
Mr.
Green stated most of the wedge stuff is the later projects so it would be more
appropriate for the later bond issue for that purpose. We still could use that as a tool for the
first one as well.
Mr.
Hyche asked is it the board’s recommendation to come back with a restructured
analysis?
Mr.
Mendelson responded yes.
Mr.
Green stated in conclusion if you are going to issue the debt you are going to
need some kind of adjustment in your rates.
We were proposing an immediate adoption.
Mr.
Gray stated I think the recommendation of eliminating the cap on the commercial
was a good idea. I think we eliminate
that cap.
Mr.
Green asked are you interested in putting more of the bill on the minimum? We were talking about that shift.
Mr.
Colon asked why don’t you run both scenarios?
Mr.
Green responded okay.
Award
of Contract for Lift Station Rehabilitation Project 2010
Mr.
Hyche stated the next item is not in your agenda but is the award of the lift
station rehabilitation project 2010.
Mr.
Mendelson stated $398,865 from one company and $127,820 from the other company
when the material is $60,000 is unbelievable.
Mr.
Colon stated I haven’t heard of the other company. We tried to solicit a lot of bids and you
were there and only two showed up.
Mr.
Gray stated Century Building is someone we have used, someone you are familiar
with, someone you know is not going to go bankrupt in the middle of it or at
least we hope is not going to.
On MOTION by Mr. Mendelson seconded by Mr. Gray
with all in favor the contact for the lift station rehabilitation was awarded
to Century Building Restoration in the amount of their low bid of $127,820.
FIFTH ORER OF BUSINESS Consideration of Agreement with Centerline
Homes for Parkland Reserve
Mr.
Hyche stated the next item is discussion of the Centerline agreement.
Mr.
Lyles stated we are recommending that the board defer for a brief period of
time a final decision on the Centerline agreement and I’m also going to
recommend that the board at the end of this meeting consider a recess and
reconvening at a time as short as a week from now. Does that work for you, Kay?
Ms.
Woodward responded that is not going to be real good for me because we have
audit and WCI computations.
Mr.
Lyles stated first let me tell you about the issue and then we will get to the
timing of the reconvened meeting. All of
this has come up in the last 24 hours and the recommendation to recess the
meeting is coming up right now for the first time. We have the same basic form of agreement
which has been distributed to you and which has been discussed and transmitted
back and forth between the district and Centerline. I am in support of the agreement and I’m
prepared to recommend it the way it reads at this moment. However, in doing some of the final touches
and more in terms of the presentation of the numbers that go into this and that
is really going to come from Kay, your CPA, yesterday midday another series of
payments surfaced that had not previously been accounted for and Kay gave all
the effort she could to try to run down all of those numbers, all those
invoices, all those checks, all those receipts and entries done by other
accountants prior to her becoming the district accountant. As of mid afternoon today she was not going
to be able to give you a final reconciliation and that is what we are talking
about in terms of a presentation. I
don’t anticipate any kind of a change in the recommendation in the terms and
conditions of the settlement agreement but we can’t today tell you that we have
run down every number 100% and show you exactly what the final numbers are and
I know in previous discussions when this has come up that has been important to
the board and obviously to the staff as well.
We contacted Centerline at the last minute, told them about this new
development. Obviously, they are very
unhappy about that they would like to get a decision today and they would like
to have a decision that approves this document.
All I can tell you is that knowing how you have addressed this issue
before and how complex it has been and we have been at this for about a year now
I was not comfortable saying, fine we are going to have it on for approval or
disapproval knowing that there is a small numbers gap in terms of the overall
numbers involved in this matter.
Apparently there was a previous developer prior to TOUSA. We had always referred to those funding agreements
in the drafts and in the final version of the settlement agreement as being
covered by this agreement and therefore covered by the indemnification under
this agreement but we only found out middle of the day yesterday that some
payments were made on behalf of that previous developer and only partial
reimbursement came back to the district.
We are trying to figure out what the gap is between approximately
$80,000 worth of engineering services that were made pursuant to a couple of
previous funding agreements and at least $28,000 and probably more that was
received by the district from that previous developer. Again, we are going back before TOUSA and two
developers before Centerline. Between
Kay and myself this afternoon we don’t have the final, final rundown on those
numbers to give you. We believe that we
will have it very quickly and at this point if you are prepared to go forward
and approve the settlement agreement with a follow-up presentation as to how that
all shakes out you could certainly do that.
If you want to have the final reconciliation on a spreadsheet that shows
you all the dollars in all the dollars out, how the credits are applied toward
any obligations that Centerline might have had pursuant to those original
funding agreements including any obligations the district would have had to
Centerline if we had gone through with the bond issue and the repayment for
infrastructure improvements, we can have that for you but we can’t have it for
you today.
Mr.
Mendelson stated basically the safest thing for us to do is to defer it.
Mr.
Gray asked how long are you saying it will take?
Ms.
Woodward responded I have a deadline of February 16th to meet with
Rhonda on WCI advances. I’m working on
that right now so I’m working on these simultaneously. My preference is that you don’t ask for this
any sooner than two weeks but definitely by next meeting.
Mr.
Gray asked have we done the research to know that this is it because it has
been a constantly moving target. We do
an audit every year so we must have our records in order so we should have
accessibility to those records in some type of format or fashion.
Mr.
Lyles stated in terms of how accessible the records are I don’t want to throw
Kay under the bus for an explanation but I have asked the same question you are
asking and part of the problem is we are on our third different accountant
since these transactions began and on your second management company and a lot
of these records have been boxed up, put into storage, transported here then
reopened.
Mr.
Gray stated I understand the paperwork record but don’t we have a database?
Mr.
Lyles responded no. Everything has been
done on this by hand, pulling statements, canceled checks, bank records,
invoices, everything has been a pure paper exercise. There is no database for this.
Mr.
Mendelson stated let’s defer this. It is
reasonable for us to look at it and reexamine it.
Mr.
Lyles stated I understand about WCI and the schedule you have with Rhonda and I
know they want their money too that they are looking to get but that is sort of
a self imposed deadline and I want to suggest that Centerline has been very
patient for a long period of time and they have reluctantly agreed today that
as long as we can reconvene relatively quickly they are not even going to speak
and we will see how this discussion goes because I won’t hold them to that.
Mr.
Gray stated I would like to see it within a week and I’m fine with moving WCI
if it is a self imposed deadline. We
have had issues and been lenient on that side so I think they could also show
us a little latitude considering the circumstances because I agree they have
been waiting for a long time. Move WCI’s
deadline back with a little explanation to them and go ahead and take care of
this one.
Mr.
Lyles stated I didn’t discuss the timeframe because this happened as I was
leaving to come to the meeting. I threw
the week out there because I thought that would be a sufficient amount of time
for us to be sure.
Ms.
Woodward stated it is just that I know reservations have already been made so I
have to contact her tomorrow and see if she can cancel.
Mr.
Mendelson asked you want to tentatively do it a week from today?
Mr.
Lyles responded it can’t be tentatively, it has to be a time certain.
Mr.
Mendelson stated we have no way of knowing this other situation.
Ms.
Woodward stated I can call.
Mr.
Hyche asked is two weeks too long?
Mr.
Kronengold stated I am VP of operations and general counsel for
Centerline. We had discussed with Dennis
the possibility of an outside date of two weeks and if that is what it takes to
accommodate the district we are willing to wait two weeks.
Mr.
Lyles stated February 16th would be one day less than two
weeks. We can’t make that motion to
recess the meeting until the end of the regular agenda but I think the board
just for the record has indicated that we will reconvene on the 16th
and deal with this once and for all.
Mr.
Kronengold stated we appreciate that.
SIXTH
ORDER OF BUSINESS Staff
Reports
A. Manager
Replacement
of Force Main on Heron Bay Boulevard
Mr.
Hyche stated the next item came up to staff today.
Mr.
Colon stated we had 4,000 gallons of wastewater dumped on Heron Bay Boulevard
because we had a force main break. Back
in 2006 John Petty, the former district manager, settled a fine for $5,000 with
FDEP from a previous force main break for the same pipe. The same pipe has actually broken five
times. FDEP every time a wastewater
spill exceeds 1,000 gallons they want to fine us. I spoke with the lady after I spoke to Dennis
and they basically agreed not to fine us if we were to go ahead and replace the
pipe right now. We don’t have time to go
out to bid. Our estimator is basically
estimating this at about $40 per foot installed.
Mr.
Mendelson asked are we going to do this ourselves or do we have to contract it
out?
Mr.
Hyche responded we will have to contract it out.
Mr.
Colon stated we don’t have time to go out to bid and this is something that
really has to get done. The pipe is in
really bad shape.
Mr.
Hyche stated it is PVC pipe with bad bedding when it was installed so it shifts
and cracks.
Mr.
Colon stated the contractor who installed it is no longer in business I believe
it was Florida Sewer and Water.
Ms.
Early stated I’m not sure which section it was, there were quite a few
contractors there.
Mr.
Colon stated we were going to buy the material ourselves and save the tax and
then outsource the installation to a contractor who has the manpower to do it
immediately. They want it done yesterday
otherwise they are going to fine us.
There is no guarantee they won’t fine us but for right now I have
everything verbally. If we hurry up and
do it we can save the fine I believe.
Mr.
Mendelson asked how much are we talking about?
Mr.
Gray stated 2,000 feet at $40 a foot is $80,000. Is that a good price?
Mr.
Morretti stated $40 a foot is an average price.
Mr.
Gray asked where does it run?
Mr.
Hyche responded it is right along the canal side of Heron Bay Boulevard.
Mr.
Colon stated in speaking with Dennis it is less than $150,000 we don’t have to
go out to bid plus it is an emergency and maybe the board can authorize us to
do a limited authorization not to exceed a certain threshold.
Mr.
Gray asked is there anything else involved besides the pipe? Is there landscaping?
Mr.
Colon stated we are thinking it is going to be less than $150,000 total. We do have the money for it and it has to be
done.
Mr.
Hyche stated I don’t think there is much landscaping it is only sod on the
canal side.
Mr.
Colon stated we have a contractor who is already mobilized he is doing our
booster station now and we just awarded him the lift station. We can get a quote from him he has an
underground utility license and is qualified to do the work.
Mr.
Hyche stated we can get some other quotes as well.
Mr.
Colon stated we are looking to make a decision in a day with contractors we
have dealt with that we know can do this type of work.
Mr.
Hyche stated staff is requesting board approval today.
Mr.
Colon stated money wise and use a vendor we have used in the past that we trust
to do the project right, one is Intrastate, Century, and there are two or three
other ones we have used. We just want to
use those that we know.
On MOTION by Mr. Mendelson seconded by Mr. Gray
with all in favor the replacement of the force main on Heron Bay Boulevard was
approved with the district purchasing the pipe and retaining a contractor to do
the installation as described by the manager’s office in an amount not to exceed
$150,000.
Utility
of the Year Award
Mr.
Colon stated North Springs competed with 35 utilities in Broward County for the
utility of the year award and North Springs won. This was awarded by the FWPCOA, we beat out
the City of Hollywood who has gotten it every year for the past five
years. It is a big accomplishment. They did our inspection on site, they looked
at our history, our historical trends, our safety record so there were a lot of
things taken into account. I’m very
proud the guys really stepped up to the plate and I’m very happy to have won
the award and accepted it on behalf of North Springs.
Upcoming
Projects
Utility
Billing Work Orders
B. Attorney
C. Engineer
Consideration
of Work Authorization No. 197 Parkland Golf and Country Club Buffer and Bond
Completion Work for an Estimated Amount of $35,000 Per Month for a 24 Month
Period for a Total of $840,000
This item was tabled.
Project(s)
Status Report
SEVENTH ORDER OF BUSINESS Approval of Financials and Check
Registers
On MOTION by Mr. Gray seconded by Mr. Mendelson
with all in favor the check registers were approved.
On MOTION by Mr. Mendelson seconded by Mr. Gray
with all in favor the meeting was recessed until Tuesday February 16, 2010 at
5:00 p.m. in the same location.
David
Gray Steve
Mendelson
Secretary President
MINUTES
OF MEETING
NORTH
SPRINGS IMPROVEMENT DISTRICT
The recessed meeting of February 3, 2010 of the
Board of Supervisors of the North Springs Improvement District was reconvened
Tuesday, February 16, 2010 at 5:05 p.m. in the district office, 10300 N. W. 11
Manor, Coral Springs, Florida.
Present
and constituting a quorum were:
Steve
Mendelson President
David
Gray Secretary
Vincent
Morretti Assistant
Secretary
Also
present were:
Dennis
Lyles District
Counsel
Brenda
Schurz Administrator
Kay
Woodward Accountant
Donna
Holiday GMS-South
Florida, LLC
Robert
Stiegele Centerline
Homes
Jeff
Kronengold Centerline
Homes
Ken
Cassel Severn
Trent
FIRST
ORDER OF BUSINESS Roll
Call
Ms.
Schurz called the meeting to order at 5:05 p.m.
SECOND
ORDER OF BUSINESS Supervisors
Requests/Audience Comments
There
not being any, the next item followed.
THIRD ORDER OF BUSINESS Consideration of Agreement with Centerline
Homes for Parkland Reserve
Mr.
Lyles stated this is the real item of business before the board today. We asked you to recess your meeting that was
conducted back on February 3rd and reconvene today so that we would
have a chance as staff, engineering, financial, management and legal all to
cover some last minute financial information that had come up during the
accounting exercise to reconcile all the various payments and expenditures
regarding infrastructure improvements within the Parkland Reserve
sub-assessment area. We have done that,
Kay Woodward is here and she has prepared an update to her reconciliation and I
can summarize that for you and tell you that there were approximately $80,000
of payments that were processed through the district involving a predecessor
for Centerline and Parkland Reserve and a predecessor of TOUSA’s and that is Town
Park Homes which is another entity that was originally going to develop this
area. We have accounted for all those
payments, we have accounted for moneys that came in from Town Park and were
paid and 100% of those expenditures were for engineering and design
services. All of that has been resolved
by Kay through her exercise as your CPA.
I have reviewed the matter with her as well, management has as well
reviewed it and engineering has signed off on it so we have all agreed that we
are now at a position where we can advise the board that we have accounted for
all the payments into and out of the district, all the payments that went to
contractors for infrastructure, all of the matters that were picked up by
Centerline through the entity that was created for this project which is the
Parkland Reserve entity. We are now
ready to recommend that you approve the settlement agreement covering our
agreement not to issue bonds as a CDD for the current infrastructure plans that
exist and were designed by our engineer.
Our assessment of all of the funding agreements and they are outlined on
page 2 in the document before you there are ten in number that the funding
agreements are ready to be in effect no longer in effect. We are going to take whatever payments were
made they are being applied to the project, Centerline is given credit for
payments made by its predecessors pursuant to these funding agreements. Expenditures that came out of NSID funds that
you have identified before and discussed before have all been accounted for as
well. At the end of that whole process
what we come down to is $3,809.15 that has been paid out by NSID that does not
have a corresponding incoming payment from a developer or development entity or
landowner and that includes GMAC, Town Park Homes and TOUSA. That figure does not take into account future
connection fees for the commercial parcel which is within this because the
plans are uncertain. We know there will
be connection fees but because the plans are uncertain for the commercial
parcel we have assigned a value of zero even though we know that connection
fees will exceed the $3,809.15 and it does not take into account the
infrastructure improvements, roadways, lake banks, drainage, some of the
remedial work and design work that Centerline took on and paid out of its
pocket. We don’t have an exact number
for that but it is well in excess of $100,000.
I can represent to you today speaking for all the staff members that
have worked in this matter that the district is not out any money, the district
is in fact ahead of the game over and above where it would have been had it
issued bonds and then gone forward with the project as planned. We are spending less than we otherwise would
have.
Mr.
Mendelson asked as homes are sold a percentage of
that money will be coming back to the district, correct?
Mr.
Lyles responded through connection fees.
Mr.
Kronengold stated we already have been paying
connection fees and we will continue to do that with respect to the single
family homes.
Mr.
Lyles stated those connection fees for the residential part of the project as
presently approved by the city is how we get to that $3,809.15 figure. It just doesn’t take into account any
potential connection fees from the commercial parcel. Very important to you and you will remember
we talked about this a year ago, Centerline not the LLC that was created,
Parkland Reserve, but Centerline the corporate parent has acknowledged and
signed on the dotted line to indemnify the district should any entity, any
creditor anywhere come forward or any other person real or corporate surface
making a demand upon the district for payment of any of these funds that are
being credited to Centerline, they are going to indemnify and hold us harmless. They are going to defend the lawsuit if there
is one, if there is a claim they will have to handle it. That covers payments made by or on behalf of
GMAC, TOUSA and Town Park Homes. That
was a very, very important part and feature of this whole thing. We need to make sure that we are in essence
through with this process in terms of any future claims or litigation. You know there has been pretty nasty
bankruptcy litigation involving TOUSA, they are still not through with claims
against lenders, creditors but we are going to be off the hook for any such
claims once this agreement is signed by you.
It has been signed by the Parkland Reserve, LLC and it has been signed
by Centerline, the parent corporation.
It is submitted to you for signature today. I am here to answer questions, your staff is
here, a representative of your previous management entity is here, Centerline
is here and if the board needs to know further about this we believe we have
the answers to all the questions at this point.
On MOTION by Mr. Gray seconded by Mr. Mendelson with all in favor the proper district officials
were authorized to execute the agreement regarding payment for water, sewer,
paving and drainage improvements, termination of funding agreements and
conveyance of east/west road between NSID and Parkland Reserve, LLC.
On MOTION by Mr. Mendelson
seconded by Mr. Gray with all in favor the meeting adjourned at 5:14 p.m.
David
Gray Steve
Mendelson
Secretary President