City Council - Special Meeting

Thank you for doing that. We appreciate it. All right. Uh, welcome everybody. We're going to go ahead and call this special meeting of the city council um for this special agenda item. Call to order. Please rise for a moment of silence and then we'll have the pledge of allegiance. All right. Thank you. I pledge allegiance to the flag of the United States of America and to the republic for which it stands, one nation under God, indivisible, with liberty and justice for all. Right. Thank you. U Madame Clerk, roll call.

Mayor Jones here. Vice Mayor McPartland here. Council member Nun's excused. Council member Matthews excused. Council member Dodd here. All right. Uh thank you so much for that. Um now we have a presentation. Who's going to start? Mr. Benton.

Yep. Thank you, Mr. Mayor. Um so a as council is aware staff um has has brought this item before you all tonight. There has been discussion amongst um properties within the city and um in in the general area in regards to community development districts or CDDs and the city has not um had a CDD currently. We do not currently um have an ordinance in place. And I felt like as we're starting to go down discussions on on what continues to happen within the city of Sebastian, um it was, you know, prudent for us and for council to have a presentation on CDDs, understand what they are, um and and have a presentation from um a an attorney that that handles these across the state and is wellversed in this. So that there's he's going to give a presentation, but then it's going to be a Q&A where he can answer questions from council and then obviously we have public input um that can provide some some answers as well on that. So with that, I'm going to turn it over to Jair Early Wine. I hope I said it correctly.

And um so thank you, sir. Yeah, thank you all. Um

okay, great. Well, thank you guys obviously for having me. My name is Jar Earlywine. I'm with QTAC Rock. Um, I also have with me a number of other folks. Uh, Phil Hunt though will be uh presenting and doing some of the Q&A with me. Uh, Phil is with the firm of Rafel Hunt Associates. Um, briefly by way of background. QTAC Rock is a national law firm. We fundamentally focus on special taxing districts and municipal finance. Um, we've got over 500 lawyers around the country that do that. In Florida, we have over 20 lawyers that work on community development districts and, uh, stewardship districts, which are kind of their larger cousins. U, we got, as I said, about 20 plus lawyers doing that just in Florida. We represent probably half of the,00 or so CDs in Florida. And also among our ranks are some of the founding members of um, sort of the legal part of the industry, uh, with Jonathan Johnson and Cheryl Stewart, who actually just recently retired. So, we've got a lot of institutional knowledge about CDDs. Uh, Phil's group, whereas we sort of do the the legal part of it, he his firm, Ruthell Huntton Associates, is a management uh firm. Phil himself was a municipal underwriter, so he's done a lot of municipal bond finance. He's done a ton of CD uh financings as well, but his firm primarily does the management side of it. Uh they also work on hundreds of CDs in Florida. He's also uh helped advance legislation in other states that's very similar to the CDDs that you see uh here in Florida. So, he's a a really great resource on the management and the financing aspects as well. So, we're both really grateful for you all to make some time for us tonight. I've looked at you all's agenda. Looks like you all been working pretty hard yesterday. Today, are busy days for you. So, we appreciate you making some time for us. Um just to get you started, you know, the uh community development district is is actually kind of a straightforward concept. The way I like to conceptually think of it is it's really just a more capable version of a

homeowners association. It works a lot like an HOA. Um it it it allows uh developers to put in a little higher quality project, still keep your house cost affordable, and then it's a much better operation and maintenance entity than your traditional HOA. And I think that's why, and we'll talk about some of the benefits here in a minute, but that's why they've grown so much over the last, you know, 20 or so years. and why you have 1100 or so CDDs in Florida now. In fact, if you look across the nation, there's um master plan communities, 85% of them are actually have some form of special taxing district involved. So, it's not just Florida. All all the way from California up to New York down to Florida. Every state has some version of this. And I think the the the reason is is that growth has to pay for itself. And that's fundamentally what a CD is all about is making sure that that neighborhood pays for its own way and also has the resources and capabilities it needs to take care of that infrastructure long term. Um if you look at any particular uh given year the top 50 master plan communities in the nation uh you know Florida's a really popular state and 15 to 20 of those depending on the year you're looking at um are actually in Florida. And of those 15 or 20 Florida communities that are best sellers around the nation, all but two of those are CDD communities. And sometimes there's a third one, but it's the two Margaritavvilles and then maybe one or two others depending on the year are all CDD communities. And again, it goes back to the fact that there's a lot of advantages um to CDs and they include um you the bigger name ones you'll probably recognize uh Lakewood Ranch and Vier Stewardship District and Nagati uh the villages and those are the big name ones that you see but the vast majority over twothirds maybe um 75% of the cities in Florida are fairly small communities. there three, four, 500 unit uh communities um that um have these cities

in place to really sort of take on that role of operating and maintaining your your community infrastructure. So you sort of hear the big names, but there's a lot of them are just kind of regular day-to-day communities. Um so let's talk about kind of what it is and then kind of how they work. Um as I mentioned conceptually, think of it like an HOA that has more tools in its tool bag. What a CD does um to begin with is in order to get it established, we you know come to a city or county, ask the city or county to establish it. Once it's up and running, again, it operates a lot like an HOA. Your developer sits on the board in the early years of the project and eventually that'll turn over to resident control just like an HOA turns over. Um the CD board actually turns over earlier and it also usually has staggered terms. So you you have the developers and the residents on the board at the same time. They kind of learn from each other. It's really a much better uh turnover process. But in any event, we'll talk about that later. Um but once that board's established, the CD board will go out, they'll basically take out a loan. Uh they'll issue a tax exempt bond, which is basically a loan just just like a city loan would be. Um they issue the bond and they use the money to put in your roads, your storm water ponds, your utilities, your amenity centers, all the infrastructure that's needed uh for the community. they'll they'll put that in and then they can spread that cost over a period of uh 30 years and in order to repay that that 30-year loan, they'll put a special assessment on the property just within their boundaries, just within that community uh to fund the infrastructure. Once the infrastructure is in, which usually depending on the size of the project, may take a year or two. Um it turns into basically an HOA and starts the operation and maintenance. So, let me actually use my slides a little bit here. Let's see what we got here. Um, we talked about the thousand plus CDs. Uh, 85% of master plan communities have special taxing districts. We kind of talked about what they are. Um, all right. So, let's talk about some of the

benefits. So, you say, okay, well, that's that's great, Jar, but we understand what it is, but what are some of the benefits? Well, on the front end, as I mentioned, it allows us to put in infrastructure at less cost. We're issuing a tax exempt bond, so the money costs less than a traditional mortgage loan or something like that. you're also spreading it over a 30-year period. So, while residents might have a $1,200 payment or $1,300 payment today, you we all know from especially the recent inflation of the last couple years. And you know, 12 or $1,300 today is a lot different than 12 or $1,300 10 years from now or 20 years from now or 30 years from now, that capital assessment typically does not change at all. And so the um the amount that they're paying over time is practically nothing. If you think about $1,200 30 years from now, it's it's going to be almost nothing. So, it's a really efficient way to put in some of the the infrastructure and it allows us to have more money in the project. And that's why when you think about CD communities, and again, I'm going to use some of the bigger name ones, but the smaller ones are the same thing. Lakewood Ranch and Vieiera and Nagati, the reason that people buy into those is they look awesome, right? They got the big sign at the front and the nice landscaping and the beautiful amenity package. And that's because of the CD dollars and people can still afford to buy into them because of that CD money and means the infrastructure costs less. They can still afford the houses at the end of the day. So it's a really great program financially for the residents because you can spread that capital cost over such a long period of time and it's at a tax exempt rate. It doesn't just save you money at the front end. It also saves you money later on at some point. You guys know this as well as anybody as as people have to budget for for roads and aging infrastructure. CDs and uh communities have to do the same thing. And so when they come back and they got to fix up their roads or their storm water ponds or whatnot, unlike an HOA which either has to really struggle to, you know, set aside um

reserve monies every year, um unlike an HOA, the CD can actually take out another loan later or they can refinance their bonds. They can take out a bank loan on a Texas uh basis and they can refurbish their roads and some more ponds when they need to. And and this especially helps if you run into a situation where um you've got some emergency crisis that comes up. You have a big storm event uh that damages the community. And God knows we all live in Florida. We see this all the time. Um and I I actually have homeowners from existing communities call me and say, "Hey, can we set up a CDD because um you know, we were just reclassified as a as a flood zone community and we need to raise the level of our roads and we can't get a bank loan because all we have is an HOA, right? CDs don't have that problem. They collect on the tax role and so banks will actually loan them money because they can collect on the tax role. It's a 99% you see the bullet up there at the top 99 plus percent collection rate. Even during the great recession, they were collecting at 95 plus percent on these communities. Great collection mechanism allows them to take out loans, fix up their infrastructure, and you don't end up with those one-time balloon assessments that HOAs have when they get into trouble and they've got to, you know, they've got to do something. They can't get the loan. They can't spread costs over time. they've got to they got to do a one-time assessment and and we've all uh probably seen that or heard of that through through friends and and others. So, that's one of the big advantages is financially it'll save you money on the front end, allows us to put in a better quality project. It saves them money later on, too. Uh beyond that though, there's so many wonderful operational benefits of CDs compared to HOAs, too. Um we mentioned sort of the emergency crisis response, but it's reinforced by the fact that CDs are FEMA eligible uh in most instances. They can also um they've they're part of that statewide mutual aid program, other emergency service programs. So, they can they can actually get emergency service and get FEMA funding um if there's storm events. We've had numerous CDs do that. HOAs typically can't get that kind of aid. Uh CDs also have um sovereign immunity

protection. And you can talk to Phil. He's got a um obviously the CD business, but he also has an HOA business. And if you compare the insurance and the liability for a CD versus an HOA, it's so much different with the CDD because it has sovereign immunity protection just like you guys do as the city. So does the CD. So you know slip and falls and tort liability is much less with the CD and the insurance responds to that and you get better insurance, less uh costly insurance uh that the residents have to pay for ultimately. Uh beyond that um CDs also are very transparent. Uh we are subject to sunshine laws and public records laws. we have to have public meetings just like today's meeting. Um, and we'll get into the transparency stuff in in a bit. Um, but overall, you know, the the the comment that I hear the most is that especially from people who live in CDs, in fact, I was down in another city, um, maybe a year or two ago, the biggest advocates for the CDD being established in that instance, uh, were two ladies who were on the city council, and they said, "It helps us maintain our property values better." And that's exactly what it does. It allows you to better take care of your stuff. uh than a traditional HOA. And in fact, I was in Marian County getting a CD established not too long ago. And the item on the agenda in front of me um was an HOA. They were coming to get their to ask the city to take over their roads and their storm water because they can't they can't go on the tax role, right? They have to they have to put little leans on individual homes and they couldn't collect to take care of their stuff. And so they're trying to get the city to take it back. And we saw a lot of that around the Great Recession when HOAs were failing. um CDs um you know were able to step in and take over things. Um same thing with sunset rules. Um CDs are much less likely to sunset uh than an HOA and so that can be a problem for HOAs as well. So there's a lot of upside on the operations uh aspect. Um just look at my slide here. Make sure I didn't miss anything. Um I think that's a lot of it. Let's see

what else we have here. So this is another chart u just comparing the CD versus HOA. Um you can see here too this is a letter from one of the water management districts where you know the water management districts would prefer to work with a CDD again because of their ability to gain capital. Our FEMA um emergency response is better. Um this letter basically says all things being equal a CD is a preferred operation and maintenance entity uh over an association. And in fact, we've gone to like the city of Dand north of here. There was a lake um Lake Winnmatet, which is a beautiful lake. There's a property being developed there. And we asked for a CD be established. And the principal reason that the um city was willing to do it is because they wanted uh to have the um conservation areas and the storm water managed by a CDD as opposed to an HOA because it's a more permanent structure and also because of its um you know, extra capabilities in terms of financing and and whatnot. Let's see here. Um I should point out too since we're talking to a city that um the CD does not take on any of the city's responsibilities. The CD if you think about it a lot like an HOA does the operation maintenance for the community and it's sort of the public developer like it develops the public aspects of the project. But beyond that role and its normal maintenance responsibility, it doesn't really have any other powers of authority. So it's not going to you know make zoning decisions. It's not going to issue permits and approvals. um it's not going to run a police force. It doesn't do any of those things. It's just a a community um entity to take care of the infrastructure and help uh finance it on the front end. You can also see that bullet point. It says a default on the bonds or obligations of a district shall not constitute a debt or obligation of a local general purpose government of the state. Basically, that means that yeah, CDD can take out a loan, but it's never going to be your all's problem. Um and we went through the great recession. Um

and um you know, never once in the history of CDDs has a city had to take on a debt or an obligation of a CDD. Um and we'll speak to default stuff here in just a minute. I do want to answer that question because I'm sure that'll come up. Uh CDD transparency, there's a lot of transparency about um CDDs. I would say more so than on an HOA side. For one thing, again, our meetings are public. Uh they're publicly noticed. They're publicly held. Uh we have when we do our um budgets and uh assessment increases uh we send out a mailed notice for the assessment increases and our hearings there um we have to have publicly uh available websites our records can be um disclosed and of course there's a ton of disclosure uh in the public record as well and you know when people come to buy a home um I was just buying a home myself actually you know you go and you look at the development you look at the home and then you turn over and you look at your closing statement and and the CD is listed on there. It's also listed in all the sales literature, too. And you can see what the costs are. And so, if you you know, if you if you like the price and you like the community, then you're going to buy in. And if you don't, you don't have to. So, the market kind of takes care of that. But there's a ton of disclosure um about uh CDDs. Um the establishment criteria is pretty straightforward as well, and we don't have to run through all that right now, but um essentially there's six criteria uh and and they're pretty straightforward in terms of getting one established. Um, so I I don't want to um I want to take as many questions as you guys have. Do you all have specific questions you want to um answer? I know how you want to handle the the Q&A part.

No, just hang on a second. Um Brian, yeah. Do Do we want to have the give public? I I do. I wanted to see if you guys wanted to say something before I do that. No, I mean I' I've got some questions, but I think Okay, that's very good. All right, then. Um we'll have um we're going to open it up to the public. If anybody want in the public want to have some questions first and then is there anyone present in the audience that have questions from the public? None. Do we have anyone on Zoom? I have one with their hand raised. All right. Thank you, sir. Bring them on.

Hello, Mr. Mean. Can you hear us? Can you hear me? Yes. Okay. Thank you. You can go ahead. Oh, I'm on the horn here. You are. You're You're up for questions, sir.

Thank you. Chuck Meckling, 100 Spirit Boulevard. I want to thank the gentleman for his very smooth and slick presentation and there are a million and one questions that hasn't been raised tonight that would really represent the true reality of these CDD districts. I would look forward to the day that we have our public hearings in front of the city with the full council in support and be able to actually discuss this in depth and have a thorough understanding. There's a lot of things that take place and I would question many of these comments because they're more of an opinion. I'll give you an example. We were using the example of large projects as the shining star of the CDDs, but at the same time there was an example that the vast majority of them are very large are very small projects of the 4 or 500 home range. These are the sort of situations that weren't really thoroughly discussed but would be part of the reality of passing some sort of legislation on the city level to have this take a part of. So my for instance with that is the Indian River County spent months and months an extensive amount of time looking at CDDs and did put a mo a uh ordinance in place. They have to be a certain amount of acreage. They have to be able to have a job generation center, a commercial center. They have to have some industrial component to it. They have to be able to prove that they take trips off the road. There is a lot of those sort of things. And I just believe that depending on what the ordinance in the end would say has

the varying point. If you're talking something that has a,000 2,000 acres, I certainly understand how this would be a um mechanism to be able to finance all the infrastructure that take place on that. But again, you take a look to the counties to the south of us, the counties to the north of us, and the CDDs and the unbridled development that takes place. And I'm not against development because I am a developer myself. What I'm against is some of the antics that take place in CDDs. Um, people don't have full disclosure that they're on the hook for 20 or 30 years on their property taxes or or on their tax bill that comes in. It's just one of these things that is part of the reality that these take place. And of course, it's not part of the presentation because that would be a negative in regards to passing these things. So, I would guard the city in whatever takes place and make sure that we have a variety of public hearings and meetings so that the ordinance or what would be proposed as an ordinance has a full uh disclosure in front of u the council and and the residents of Sebastian. That's about my thoughts for the moment. look forward to more meetings on this um and what the vision might be. Thank you.

All right. Thank you so much for that, sir. Um do we have anyone else on Zoom? No one else at this time. Would anyone like to address anything that was stated?

Yeah, that'd be great. That'd be great. Um so just um a lot of good comments I think always always happy to talk about CDs. Um in terms of Indian River County they well let me back up. The ordinance there there is no ordinance that you need to adopt to have a policy about CDs. In fact River County did not adopt an ordinance. They do have a policy in place. It does have a 500 acre threshold, but they're, you know, probably less than uh that may be the one of maybe two or three in the state that has any sort of policy in place. Chapter 190 itself is the legislation that speaks to the establishment of CDs and what the process is and I think I had the factors up there um at the front. So all you need to do is follow chapter 190 and make a decision on each individual application that comes before you. So, you don't need to put a policy in place. Um, again, I think that people make this bigger than it is. This is really just a community association that takes care of your community a lot like an HOA. So, and I think that's that's why they're so popular. I mean, people don't hate these things. They buy into them all day long, which is why um they are the bestselling communities in Florida. And my point about making and I actually spoke a fair amount about the smaller communities and that's because that's what most of them are. They're just regular neighborhoods with better capabilities to take care of their road infrastructure and their stormwater ponds. In fact, if you go to places like Marian County and um uh you go to Charlotte County, Clay is like this. Pasco is the same. They they didn't set aside and I don't think most cities and counties have um general tax revenue for roads. And so if you don't have a CDD in place, they will put a special taxing district over your property and make that community pay for its roads. And that's all that we're talking about. These are um basically HOA type

structures that have taxing authority so that they can better take care of their infrastructure. It's really not that not that um big of a deal. And the and the the the financing aspect is disclosed as part of your closing statement and other documents. I don't know, Phil, if you had things to add. Yeah, this is uh Phil Hunt with Rathl Hunt and Associates for the Record. Uh appreciate you letting me come up here for a minute. So, you know, I I like to just kind of dumb it down. Really, the CDD has two powers. It does two things. It has the power to finance public infrastructure. It has the power to maintain public infrastructure. That's all we do. Like Jar said a while ago, we don't usurp any of the city powers, permitting, zoning, police, anything like that, entitlement. That's all we do. We finance public infrastructure. We maintain it. And what do we do with the money? We when we do a bond issue, the money is used generally one of two ways. Certain builders that are uh targeting the first-time home buyers, they can actually use some of that money to drop the price of their lot and therefore the price of the house. You'll see that sometimes in the firsttime home buyer communities. Others they'll use it for more stuff, more landscaping or water features or amenities or parks or trails, things like that. So that's that's really what it boils down to. Chuck, it's good to hear your voice again, but I'm going to take issue with something he said that there's not fair disclosure. The one thing that Florida has done compared to all the other states, we have over the last 46 years the law has been on the books. The one thing that gets adjusted every few years is more and more disclosure. You know, as as Jerry was saying on the front end, when we create a district, we record that in probate court. So, it shows up in any title search. After we come back in in uh levy assessments, we record that in probate court. Now, that shows up in title searches. And then we issue the bonds. We record something called a notice of

public financing. That shows up. Then also by law we have to have a public website. J referred to that. We have open meetings. We have records and and minutes. All of the things like a normal government does on the purchase contracts by law in like the states of Texas and Florida. There's a bold paragraph above the signature block that said buyer basically beware. You're buying in the Twin Creeks Improvement District or whatever the name is and you'll be paying assessment for the next 30 years. It's just disclosure level after disclosure level and that that's a fact. And I'll be happy to answer any questions also. All right. Thank you, sir. Thank you for that. You all can sit down. Okay.

Thank you so much. Did um you all want to say something, Brian, before we ask any questions? No, I mean, I have a few questions, but I want to give you all the opportunity to ask them just so I don't jump ahead of you and ask questions. But um that that's fine. We've been um I've been writing down some stuff and I know I have some questions. Um, we'll start with Bob online if you have any, if you don't mind, Ed. Uh, Bob, do you have any questions for them? Uh, no, sir. Good. Thank you. All right. All right. Um, Mr. Dodd, you have a few questions. Why not? Well, I know I have a few, but I just want to give

First, I'll make a statement. City governments do all of those things you just mentioned, and people still don't understand it, and they still come in here and scream at us every time we tell them we got to raise a fee to raise a tax. So, I personally don't believe that those notifications are really as as um as as as much of a proof that it worked correctly uh as because I'm I've been sitting up here for a long time listening to people do that and we do all of those things. Okay. First thing now um I have some confusion because of some conversations I've had maybe even with some people that are tell me about the the possibility of there being parallel parallel organizations CDD HMO for a given development is that something that is

Yes sir. So there there's usually an HOA also with every CDD because the CDD is a government. It funds public infrastructure. It maintains it, but it doesn't enforce covenants or deed restrictions. That's what the HOAs do. So you will have them for that purpose. All right. So the HOAs then have absolutely no maintenance responsibilities. They're not required under state statute to have reserves. They're not required to set up set up any type of accounts for for maintenance of facilities, things like that, which they would in an only HMO HOA only complex.

That's actually a great question. So, what happens? Because you have the HOA and because you have the CDD, you now have the choice of, you know, are we going to own and maintain the infrastructure in the CDD or do we want to put it over in the HOA? So, they could be either or. And we have developers that put as much as they can in the HOA and others that do as much as they can in the CDD. But at the end of the day, they know that the debt assessment plus the HOA fee plus the CDD and M is what people are looking at when they're shopping. They got to look at all three of them together.

Well, I I I don't want to disagree with you too adamantly, but I will tell you people don't listen to that until they get their first bill. Um, a lot of people don't listen that before they get there. I know there's probably every effort in the sales pitch to make sure people understand you're going to get another $500 bill every month to pay all these debts off and they're going to say, "I love this house." Okay? And and I So the the big problem from my perspective is making sure that that um that people I don't I don't want people coming to me and screaming you approved this CDD and now I'm bankrupt because I can't pay their fees. So that's just that's the whole concept. But let me get on to my questions. Um, okay. So, is there a is there a typical turnover process between the CDD and the HOA?

How does that how does that step take place? Because there's I I I actually downloaded a piece of legislation 190. Yeah. And like all legislation, it's written it's written for people who don't know how to read it and can't figure out what's in it. Uh I didn't go to law school, so I can't I can't do that stuff. But it's I don't see anything in there that talks about I see stuff in there that talks about the termination of a CDD, the termination of the debt, what happens. How does that transition take place between the CDD and the

HOA? So, so with an HOA community, I think you all probably know when you get to 90 95% buildout is written into your covenants that'll start it'll basically the whole board will turn over. That's so toward the end of the project, your infrastructure is in, you reach a certain population, boom, it's it's done. CD works a little differently. A city has a five member board of supervisors. Um, in the early years, uh, every two years you have an election and the seats are staggered. So, you might have two, uh, seats up, uh, in one election and maybe the next one you got three seats up and so they kind of turn over like that. Um, and those seats that are coming up in the early years, um, are actually governed by landowner elections. So if you own 50% of the land within that community or 51% you basically win the election, right? So it could be a much earlier turnover than a 90 90% buildout, which means you can have residents on quite a bit earlier uh in a CD than in an HOA. Um the other type of election that happens in the early years, every two years you got these lander elections. When you get to year six, if you have 250 residents living there who are registered voters, it those seats that are turning over start to go on the um you know the regular election ballot and so they'll be filled by what's called qualified electors. They have to be residents of the community uh at that point. The nice thing about the statute as compared to the HOA um way is governed is that one, you're more likely to get earlier turnover. And when you start to get turnover, oftentimes you'll have residents on the board at the same time as developers, which is great because the residents, you've probably gone through a HOA turnover before. A lot of times they don't know what's going on, right? And so if you have the developer on there with the the residents, they can kind of understand what's going on. They can have a smoother handoff. They can kind of work together. And the transition actually works. I mean, the statute's set up to have that kind of transitionary um period.

Okay. So, but I'm still I'm still trying to understand. Yeah. You got the CDD, they sell the bonds. I mean, I I drew a little schematic. I I my world I came from engineers draw schematics. Sure. Um Okay. So, the CDD is established, they establish a board, they issue bonds, they they they generate revenue, they begin to build infrastructure. um you got a x acre complex with x number of houses and hopefully maybe a little bit of amenities um and and they they begin to uh to build that infrastructure. It's my understanding that there is a possibility that the CDD will do the infrastructure to a given point and then the HOA would complete that infrastructure. That's not the case.

No, the HOA typically doesn't do any development. The only thing an HOA typically does is the operation maintenance part. So if this but the CDD then can at what point in time they this is something I couldn't find. At what point in time will the CDD make a transition for maintenance between themselves and the HOA? It never does. The CDD just continues maintaining its stuff. So the CDD will always in perpetuality be responsible for maintain that infrastructure. Correct. And it's one of the benefits because it's much less likely to sunset. Like an HOA can sunset then there's nobody to take care of that stuff. So the HOA is going to have a fee structure that is purely for the purpose of them operation

of of them enforcing the covenants that are I mean you know getting mad at people because there's a stain on the side of their house and their sprinklers and all those kinds of things. Exactly. They're not going to have any type of a financial structure that they do through their assessments for maintenance of any of the facilities within the comp with

again it goes back to Phil's comment. You can set them up a little differently each each way but it's not that they cross over and they do the same things. is that they're doing different buckets. So, for example, you and I'm just going to give you the three typical scenarios. One scenario is um the CD owns a clubhouse and basically everything else at the community, right? And the only thing that the HOA does is the architectural control on the houses. That's one scenario. The other scenario is a little bit switched where the CD maybe did a small bond and they're just owning the storm water infrastructure and maybe they finance the utilities and they turn the utility system over to the city which is very typical. But the clubhouse and the rest of the stuff, the landscape entry, whatever is owned by the HOA. That's another scenario. And then there's kind of a a middle one where you kind of I don't know, maybe more of it. Maybe the CDD does the landscaping in the main boulevard and plus, you know, uh maybe they also own the the clubhouse, but maybe there's a gated area within the community and that's run by the HOA. So, there's different different kind of mixes of those two extremes, if that makes sense.

Well, then another way to think about it is the CDD generally finances and maintains uh governmental things or things public open to the public, whereas the HOA is owning and maintaining things that are private like a clubhouse. So, the CDD might build the clubhouse. I'm I'm just saying it. They may build the clubhouse because they want the amenity there so they can sell houses or they or the process, but then they could turn that clubhouse over to the HOA to maintain and not not typically pay for it using federal tax money. It's it's going to be they have legal responsibility for it going forward.

So we we separate like they do with utilities public and private side. So the public side CDD, private side H. Okay. So public and private side H. Matter of fact, one of the in the engineering report on the front end to your world, we have an engineers report and it basically shows the public, the private, and who will own and maintain each item.

So once the loan payments, let let's let's assume that at some point in time in our lifetime, in somebody's lifetime, all of these bond issues are paid off, which everybody would like to see, but most people don't ever really see. Uh what happens to the CDD? it it continues on as a perpetual maintenance entity. And we do have some CDs that have paid off their debt. Um either they paid off early or they've been around for 30 years and it's gone through that cycle, too. So, okay. All right.

And then this is a this is a question that I'll have to talk to our attorney about because what happens if the CDD actually goes does go bankrupt and folks? Right. That's my question. How's the city? Because you know, no matter what we say, the city has a responsibility to people that live within the boundaries of the city. So,

it it's a great question. It I sort of touched on a little bit on the slide, but I never really answered it. Um, and Phil will have a a more robust answer than I do, but just to get you started, you know, any project can fail. If you just have a regular project with an HOA on it, or you can have a CD project, either one of them can fail. The legislature when they created chapter 190 though one of the things they built into the statute is sort of these default procedures which actually makes it a better project if there is a recessionary environment and the reason is when you issue the CDD debt for one thing the money isn't sitting in the developer's pocket right um it is actually sitting in a trust estate bank US bank or regions bank or probably the two biggest trustee banks that hold this money the money can only be accessed through a requisition process that's signed off on by a manager, by an engineer um who's who's signed off saying that these are going for for proper purposes. And so there's a check and balance there. Also, the money's in that bond account and so it's there to finish out the phase of the project that you're working on. So if you didn't have that money there and you have a default, you developer gives up, the money's gone, the project just sits there. If you have the CDD issue debt, you actually have money typically for the first phase. Um, so so that money is there. And then there's also some special money in what's called a reserve account. That reserve money could be used um if there's a foreclosure on a large piece of property because someone's not paying their assessment, which is kind of your point. They can use that reserve money to keep your amenity center open, uh, to continue to water the grass, uh, keep the landscaping cut. Uh, and you're also going through a foreclosure. That's a foreclosure of a first priority governmental lean. um co-equal with taxes. And so the advantage there is you get through foreclosure more quickly. And we saw during the Great Recession, there were a small percentage of projects that that failed, both CD and

HOA, and the CD ones actually uh outperformed in terms of getting back into productive use more quickly. What would happen is you'd go through that foreclosure process. You vast majority of them were done in like six to 12 months. And you could uh park it in a special purpose entity controlled by the district's bond holders. when the market recovered, they sold it off. Um, I'll let Phil speak to his jump in real quick. Go ahead, Mike.

So, we, you know, in 2008, there were a lot of defaults and we learned more in the bad times than we learned in the good times. So, what we did was we we went through the foreclosure process and what happens, you'll read these articles that said a CDD failed. No CDD ever failed at this state. A project might have failed, a developer might have went gone bankrupt. The CDDs we found out, performed as they should. What happened is the bond holders, Goldman Sachs, New Vene, those guys stepped in. They had a first priority lean like a tax lean, they stepped in, they foreclosed, they got the property back, cleaned it up, sold it to subsequent developers. Here we are years later, we're out inventory, but it worked as it was supposed to. And we learned a lot of that through 2008.

And you had similar projects that were in with mortgage on them that sat there because the banker didn't have any cash to do anything with it, right? It really they just sat there much longer.

Okay. All right. Um I can thoroughly understand why a developer wants to do a CDD. Uh it allows them to finance through tax exempt bonds the infrastructure for a big pro for a project. Sell the property sell sell the property at a reduced price because they don't have to build that infrastructure cost into the property charges. They don't have to sell a lot for $190,000. They can sell it for $140,000 or whatever the number is. Getting in the house is cheaper. Uh they're able through the CDD to do something that quite frankly we can't do as a city because I couldn't we couldn't get our residents to approve it. They can give incentives to buyers, which I heard you say. Uh I I have some questions about what happens if you I get the CDD board has to approve that which means that the the rest of the people living the CDD have to pay those have to make up those differences in some way or another but they can do some things that maybe a city can't do. So I can understand why a developer wants to do a CDD. I still think about it from the perspective of somebody but I've lived through the savings and loan deboss. I've lived I'm kind of an old guy. I've seen a lot of that stuff and a lot of these fancy mechanisms over time have caused a lot of individuals to lose a lot of money because they bought into them. So that's my primary concern is that uh and so we'll have to

I'll have to work my way through that. Yeah. The other thing too help you.

Yeah, I'd be happy to introduce you to you know we we represent a lot of developer clients but we also represent a lot of residential projects that have been around a long time. They got their bonds paid off and whatnot. I'll give you the phone numbers of the the chairman who are on those boards um because they really do like their CDD and the reason they like them is because they can do more things with them. Um in fact, I had a project down in um Southwest Florida. This is a couple years ago now. I'm trying to remember, but it was a smaller project. I think it had 190 homes in it. And they gave me a call and they said, "Hey, look, we got an H2O. We got a CDD. um would you come down and tell us how to dissolve the CD because we don't really need two administrative entities because it's a smaller project, right? I said, "Okay, fine." So, I go down there. Um I tell them what the process is to dissolve the CD. They list all the reasons, not all of them, but a lot of the reasons benefits of the like the audits came out, the their all their neighbors came out. They said, "We want to keep the CD for all the reasons you're talking about." And sure enough, the next year, they they ended up they didn't want to fight because the community was pretty harmonious. And so, they they just let it go. But the next year, hurricane came through and because they had their CDD, they got FEMA funding um and I think they ended up doing another project later um like the residents did and they they kept their CD place. CD is still in place today.

Oh, sorry. Sorry guys. Um but no, so literally

our CDD police was walking out here telling you but but my my point is like I'd be happy to introduce you to some of the folks we work with. They really do like them. And the reason is because you can do more stuff for your community. Um it's like I've got a community in um well it's it's my community I live in. We we have um septic tanks and we need money for utilities infrastructure and and roads and things like that. We can't raise the capital because we're in HOA. Um and I think I gave you the example earlier where I have people actually call me trying to get CDs established on existing projects because all of a sudden they've been in flood zones or something like that. So it's anyway there's some there's definitely some advantages and a lot of the residents you are they really like them. We can't raise that capital and we're a city. So

yeah and I'm Thank you, sir. Yeah. No, that's um a lot of this stuff has been answered that I want to talk about. But one thing I do want to ask and it was um to me it appears that it was glossed over at the beginning and that's under the summary of benefits when we talk about um CDDs won't sunset. Will CDD can CDDs sunset? Have they sunseted before? because it was said that they they won't sunset like an HOA, but there is a possibility and those things do happen. That's what I want to hear.

Yeah. So, that is a good question. HOAs are a little different in that they have like a term and then if you don't take certain actions, it can literally go away, right? We're familiar with that sunset process. CDs don't have anything similar to that. What they do have though is, you know, if you don't have someone filing your annual reports and doing what you need to do, um it'll flag folks up in Tallahassee to take some action. Um and so it can get dissolved that way. But that's the only similar sort of sunset. It's not that there's an automatic sunset. It's if the reports stop getting filed, people aren't paying attention, regulators will step in. So it's a little different type of

So if the regulators don't step in or they don't see it in time, I mean, what happens if it does sunset? They voluntarily dissolve after all the debts paid off and they can away. Yeah. Yeah. So, so that's that in fact that's the community I was talking about earlier. We don't get these requests too often, but I didn't have that one. Um there is a process you you know after your bond debt's paid off you could transfer the assets to an HOA and you can go through a dissolution process. So that is that is a possibility. Um so if residents like they get their bond debt paid off and they're not happy with the CD they can they can you know they can terminate it. Um, and then what happens with the infrastructure then that falls back on the uh it would go to the HOA. They have to transfer to the HOA in order to do the dissolution. There have to be an agreement between CDD and the HOA.

Yeah. And that's what was being proposed at that one in Southwest Florida I was mentioned. Yeah. The trigger is because it's uh tax exempt bond financing and it can't be transferred to a private HOA while bonds are outstanding. Once they're once they're paid off, then they could talk to the HOA about taking over and dissolving the CDD. That's how you do it. But there's no auto sunset like there is with an HOA. I hear you. Um Well, that's fine. I had um another question. I've lost my train of thought right now, but um

Mayor, while you're thinking about it, you I got a question. Give you a few few minutes. Yeah. Um, so we we've talked about what happens if you start a development, nothing really happens and you go into foreclosure and things like that. But what happens if you've started a development and obvious and you've got 50% capacity, 49%, let's use 49 so we don't reach that threshold of property owner takeover type situation. 49% capacity and all of a sudden the market just tanks.

Mhm. Are you now going to increase the assessments on the tax bill to those 49% of developed properties to make up for it because you're no longer going to be able to develop the other 51% of the community?

No, that's a great question. And that's the difference, one of the differences between HOAs and CDDs. So, when we come in, let's say it's a phase project, you got two phases. You're in the middle of the first phase and the thing uh goes into default. All we can assess is the is the amount of the assessments that were in the assessment methodology report that backed the bond issue. That that's all we could charge. And let's say you got 10 people in there that are dutifully paying their assessments. We can't foreclose on those guys. We can foreclose on the developers lots who isn't paying. And they're not they can't legally increase assessments. And one reason they can is because on the front end we've issued bonds. We've locked in the assessment. It's a 30-year amortization like a mortgage. That's the assessment level for the next 30 years for the debt. That's all locked in.

It's also benefit based. You can only charge them for the Yeah, sorry. Sorry. It's It's also benefit based. So, you can only charge them for the level of benefit they're getting. And just because you got some people aren't paying doesn't mean the people in the first 10 homes got more benefit, right? You can't go back and charge them more.

So, to kind of build off that question because you just brought up a little bit different. So, it's benefit based. The benefit is you've installed complete infrastructure, complete roads for the entire development upfront. You just haven't built the homes. So the benefit is complete. So you st still there's no way that you're now going to piggy back off the initial assessment. So let's use this as a as an easy number. When you ran your numbers initially and you went and and you got the tax exempt bond and you had a hundred properties and you figured out that the bond was going to be equal to $1,000 a year for 30 years on every one of those 100 properties, you're telling me that there's no way you're going to charge any of those properties more than $1,000 for 30 years?

That's exactly what happened in 2008. We cannot charge more. And what happens is the bond holders came in and foreclosed the nonpaying lots and those that paid were left alone. We cannot increase it. Okay. Yeah, it's exactly right. So what is the mechanism to increase it? Say we're build out. Say we're 100%. And you now have to increase it because we're build out. We're 13 years down the road and I now need to repave the street.

So you just told me you don't have an option to re to increase it, do an additional assessment, but now we're forced to. Is is that a possibility to increase it? So at that at that point 13 years in the board is now controlled by all the residents and at that point you know the first bond issue is is is set. Now, the residents as a community, like a city, can vote if they want to increase their own assessments and borrow more money, okay? But the developers long gone. That's between the residents, you know, is a majority vote. And and an HOA would have to do the same thing. I mean, if they're having to fix up their roads 13 years in, somebody's got to pay for it. And so, that's a new that's a new thing you're paying for. And then the residents would pay for it.

Well, and and frankly, that's one reason these residents like it because now all of a sudden they can borrow at tax exempt rates. Today's rates 30 years fixed rate is about 5.6%. It's it's a pretty good deal. And if it's a surprise, they you know with an HOA you get that balloon assessment, right? Whereas if it's a CD, they can actually get a loan to spread the cost over a period of time. So it's a lot better for the CD. I I've got a few more. Are you No, no, no. Go ahead. Um you just hit the point. I think Mr. Dodd is probably going to follow up on that, but you can go ahead. Do you want to follow up on it? And then I I got a different

Well, it was an interesting question because um I saw something about one of these another one of these katics HOA multiple CDDs. Is that done where there's where there is phase development within and where you where you want to build the infrastructure for a phase one and then do infrastructure for phase two and finance that separately? Was it possibly Was it possibly multiple HOAs? Because sometimes you'll have a big developer sell two pods, one to Dior Hordon, one to Lenor, one to PY, and they have their own HOAs.

Yeah. Okay. I understand that. But if I'm going to if I'm going to develop if I'm going to develop a piece of property, and I I know we're not talking about 200 acre pieces of property when we talk about this. These are larger developments than that than two or 300 acres because chances are really good you're going to put all the infrastructure in for that whole 200 acre project. But there there are a couple there's not a lot of communities like that but there are a couple where it's a large development like you're talking about maybe it's got six pieces like the Veronos for example it's got six different CDDs but each piece is is huge right and so some of those there's multiple HOAs depending on where you're at but I think there is a master that covers some of it. Vier is a little bit like that as well. Okay. It's pretty rare.

But but but the reason that happens is it was a probably a 20 or 25 year development time frame. Every six years might be a new CDD. Yeah. That's when you see that. And and so the developer basically comes in, sets up a CDD, sells the property to builders, whether it's a large chunk or I mean I I lived in a gated community at one point in time before I moved to Florida that every every individual lot was owned by builders all over the place because they wanted it that way. architecturally. They didn't want houses to look the same. They wanted all different structures. Okay.

They sell it to the builder. The builder now is obligated to pay his CDD assessment to cover the cost of the infrastructure. So once they until they sell all the lots, they and I think this goes with what Brian's question. Until they sell all the lots to builders, is there a what mechanism do they do to re to to pay the CDD um loan payments for th for those lots that are not sold? So once those lots are platted, we as a CDD manager, we're keeping the assessment roles. So every year the assessment bill is going out to whoever the owner of record is. Hey, if it's PY, Dr. Horton, Lenar, they're the ones getting the bill and paying the bill.

But if it's Joe Blow who develops it and he's intending to sell that 200 houses to PY and 200 to somebody else and 200 to somebody else and he hasn't sold all of those lots yet, and it's the first payment on the note is due. How does how does that is does that get spread? That bill goes to Joe Blow. Yeah, he's got to pay Joe Blow developer. Okay. So So that's what I was Okay. Yeah. Again, and that's what we do like a tax collector's office because we interface with them

is the lots are changing hands. We're doing the estoppel letters with the title companies and keeping record who the owners are and whatever the you know the owners are that the list at that that uh end of the year. You know, some of the bills are going to home buyers, some are going to home builders, and some might be going to Joe Blow developer. Okay. The only um and I don't want to get too technical. If I'm going too much in the weeds, y'all just tell me to stop. I don't want to do that. You I was going to talk about too far. Were you going to talk about capitalized interest?

All right. I was just going to say a lot of times in the bond deals the you know, while they're doing the initial construction for the first phase, there's what's called capitalized interest. And it's basically it could either be construction money the developer is using but instead they want to use it to pay that first payment. So they'll set aside part of that debt for that purpose too just to get them through the construction phase. But that was the only exception I can think of to what you're talking about. And in the case that Brian was talking about uh where you where you've got 13 years down the line you're going to do maintenance on streets. That's a separate bond issue. Correct. And that se that bond issue is is assessed just the like like the original bond issue was and it's voted on by the citizens.

You're going to have separate bond issues for those things to take place. Right. So the question the question and I can understand from a city manager's point of view he comes about with what if the city board says I'm not going to do it where and and there's you know there's nothing the statute says they they they do maintenance but the statute has no penalties if they don't do maintenance. Well, it's just like a homeowners association. You know, you can you can have um you can have good people running an HOA and it works great. And the stories I read are all about bad people running. Yeah. Ex. Exactly. And you have good people running CDs, that works great, too. Yeah. Good people never get pressed, you know.

Yeah. But but but the CD is going to give you a little extra. And then if things go badly, the CD is much better able to recover. So if you have a bad board, bad CD board, you vote them out and put in a new a new set. I understand. But I mean in in in the case of an HOA, if Brian if if Brian sees I mean we've got some HOAs inside the city that are responsible for maintaining streets, right? And if the city sees that those streets are not being maintained, then we can take legal acts against that CD against that HOA. I'm not sure under 190 that we can take legal actions against the CDD. What? And well, you could talk about the the agreement on the front end petitioner.

Well, that Yeah, that's what I was going to say. If you all want to, we could enter into an agreement with your CDD on the front end. So you know what the responsibilities are and you kind of lock that down. We do a lot of interlocal agreements between CDs and cities um all the time. And so that's definitely something that give you that legal right that you're looking for. Okay. Can is is that something that we can also because we do this um have it on the plat the final plat have it prescribed on the final plat what those requirements are and how that all entails. Yeah. Or or reference. We'll talk to your old attorney about how you want to paper it, but yeah, I don't see why you couldn't.

And and is it common when you establish a CDD, let's say somebody comes into Sebastian and says, "We're going to we want to do a CDD and we agree that the CD is the right thing." Is it common to do a parallel development of the HOA's bylaws and articles of corporation so that they are they are codified at the time the CDA is codified? it it um I don't I haven't seen cities and counties do that, but a lot of times when they're doing their permitting, all that stuff actually happens earlier. So, for example, when you're getting your your water management district permit, you got to submit the HOA covenants and they'll submit that with their chapter 190 stuff, too. So, I think all that does happen concurrently. I don't see it on the agendas for the cities, you know, whether you're seeing both them at the same time, but that that work is going on at the same time for sure.

Yeah. I don't know if this uh was stated earlier, but um up front it said the tax exempt bond for um for some of the infrastructure. You stated some of the infrastructure. I wanted to clarify that and what you meant by some of the infrastructure on the tax exempt bond.

That's a great question. So, one of the things that the developer has to sign with the bond holders is a completion guarantee. So, let's say that phase one is going to have $20 million worth of public infrastructure in the engineers report. So we can only do let's say 10 million in bonds that that net them about 10 million. Well, they've got to show the financial wherewithal to Wall Street. They've got the other 10 million to finish the public infrastructure for that phase. At the end of the day, Wall Street security or finish platted lots. So they want to make dang sure that developer's got the money to finish the rest of the pipes and the roads to go with the bond money Wall Street's given them. So it's that's that's part of the game. That's how it works. So, so real quick, just to piggy back off that. So, what you're saying is

the developer can't take out 100% tax exempt bonds.

Correct. And you know why? Because the market cannot bear that high of an assessment. Florida's evolved with,00 CDDs. Right now, we'll give you the comps for every market. And you could see what level of assessment generally for a 40, 50, 60 foot lot is kind of the market norm. So, you know, kind of a common one would be say $30 per front foot per year. So, on a 50- foot lot times 30, $1,500 assessment. Okay? If you come in and say, "Man, I need to borrow all of this money and the assessment is going to be 5,000 a year." Well, you're not going to sell any houses and Wall Street's not going to buy the bond. So, it's a it's a self-regulating Wall Street thing. The that's the other thing is is the the buyers Goldman Sachs, New Bean, Franklin, names that you know, they know the Florida market. So when you come to market and you bring an offering that's got assessments twice as high as the rest of the market, they're not going to buy the bonds. It's a self-regulating thing.

Just just to give you a kind of a ballpark idea, you know, your capital st maybe need 80,000 or $100,000 per lot to develop it. You know, maybe 15 to 20,000 bucks is actually the CDD money. So there's a lot of capital that the developer still puts in out of their own pocket. Yeah. M.

So another one kind of going back to something you mentioned earlier when you were talking about the potential for a CDD to fail and I I've heard this said and I I kind of want to walk through it a little bit. Um if a CDD fails, say for this sake, let's say we're close to buildout. um and the CDD fails somehow someway. Um can can that be turned over? Not to say we want this, but I'm asking for theoretical questions. Can that be turned over to the city so that there is still an assessment mechanism on the tax bill for the city to handle the the infrastructure improvements if the CDD goes under? So, I'm going to answer my way and I'll let him answer. In '08, we did not see a CDD fail, a project failed or a developer fail, but a CDD was the governmental entity that still collected the assessments, paid the bills, maintained their project. So, I hear the hypothetical question, but we've not seen a CDD fail. It's like I said, project developer, somebody not paying their bills, that type stuff. Uh, but you know, you just come in and foreclose those properties.

Yeah. Yeah. I I think that's that's the answer. Um, if you wanted to get creative about it, I'm pretty sure check with y'all's internal council, but I think y'all can come in and put in place your own uh dependent special taxing district behind it. So, that's that's another thing y'all I mean, Pasco County does that all day long with neighborhoods that don't have CDs. They'll put those in. Well, that that's what I was going to say is is it's it's actually funny because over time

and a lot of this happened I think after '08 because a lot of HOAs were having trouble and you know to to your point earlier in an HOA you got to raise the dues maybe if somebody's not paying not not in a CDD but you've got places like Marian County that basically demand developers use a special taxing district so they don't get burdened with the maintenance of a failed uh HOA and roads. So I I know Marian County is one. There's a few other Pasco. They're all like that. Yeah. So So you know, it's kind of flips the argument. I mean there the these counties are demanding a CDD or another comparable MSBU to fund it and maintain it because it's so such a good mechanism.

Hey, can we um get a second mic over there just in case because when the other one talks it's not getting out, right? There there is one. So yeah. Yeah, right underneath there. Oh, now they can tag team. Yeah. Well, they were tag teaming. Just wasn't hearing it. Well, so test team. Yeah, I'll make him get up and drop. Okay, there you go. Make him get up there then. And don't touch the mic. No. Yeah. Are you finished, Mr. Mr. Smith?

I right now I don't have anything. Um, that's all the questions I had written down, but if you guys have question um, did you need anything from No. All right, Mr. Mayor. Yeah,

I think I think we do need to hear about a a couple things. One is um, about whether these communities are going to be gated and closed to the public considering the roads are being paid for by tax dollars. and and I believe they have a theory behind this and I'm not necessarily sure I agree with that theory but I I think we probably need to have that discussion because it becomes important especially as they're talking about using this this public money for parks and community centers too. That's a lot of public infrastructure that by state law has to be open to the public and yet I also heard talk about gated communities. So I I think that I we need to hear about that.

Yeah. So the the simple answer on that is excellent question because it does come up. Um it's literally a matter of federal tax law. If you issue bonds, use tax u exempt money, public money, um behind a hardgated community where if you drive up and you cannot get in that gate, the only things that were able to finance behind those gates are storm water uh utilities, which is basically storm water ponds, your storm water system, and then your water sewer reclaim. um those are the only things that we can finance and of course the water sewer reclaim ultimately gets turned over to the city as public infrastructure and then the CD would just maintain the storm water ponds. Um generally speaking that's worth about $20,000 a lot. So that'll empty out your bond account. So it works with gated communities. Um that's the hardgated communities and Phil's going to throw something at me but make it more complicated. So the other type of gate you can have is what's called a soft gate. And the idea there is, if you've heard of like Invera system or something like that, it's like a remote uh monitored uh gate system where there's a remote virtual gate guard. You drive up to the gate, it has a visual deterrent because the gate's there. It's also taking camera photos of the people coming and going. So, it does have a little measure of security. Um but you can't you can't keep people out. And uh and the the standing gate orders are if someone drives up and they say, "Hey, I want in." you've got to open the gate and the gate guard will let them in. And so we do have that soft gate concept that effectively converts the roads to public roads. So

well that that sounds troubling to me. Listen, there's nobody from the general public is going to just drive up to a community like that and say, "Let me in. I want to come in because I want to see what's there." That's generally not going to happen. Well, and and the other part of it, too, I mean, we're talking about storm water ponds, so there's not really like a good reason for people to drive into other people's neighborhoods to use the storm water pond, right? people don't really do that. But um but now if you have like an amenity or something like that, you know, then you want to make sure that people have access to the amenity and things like that, but I don't know of a lot of places that have hard or soft gated um gates and then also have an amenity. So So were you saying that the streets are not built with the tax bond money

in a gated community? The answer is no. That's exactly right. So So that's what I was gonna step up. You got a great question. So depending on whether you're gated or not is what we can publicly finance behind the gate and there is a difference. So that's a great question. Yeah. Okay.

Then one other question is where well two questions. Um but it both deals with your boards and the meetings. Um one of the things that that I've seen over and I've dealt with CDDs everywhere I've been. Um, initially when the developer controls all the seats of the CDD, um, there's there's usually at the very least a suspicion if if not uh fact that uh that there's sunshine problems um because the developer is building this community and to say that five members of that development team are board members but aren't talking at all about that development um at work um just doesn't seem to to pass a smell test to most people as to how you keep that. So, who would you anticipate being those initial board members and how do you keep them from making sure all their conversations are in the public?

Yeah, that's a great question and and over the years, you know, we we we kind of agree with you. So a lot of what we'll tell folks to do is you might put one person from the development team on the board or you know one person from the back office and after that it's it's other people that are not related to the actual daily dayto-day development just for that reason and you know so that that's a great question and that's how you handle it and the the statute um allows us to pay each supervisor $200 a meeting. So there's like some retirees and stuff that actually serve on some of these developer boards. Um so that that fills some of the seats for us too.

And then the last one would be where do you anticipate your board meetings being? Uh this is another common complaint is that you have a little development here in Sebastian but your board meetings are a two-hour drive away or whatever. Um where where would you and and I realize that there are some limitations but even like you look at like Bard County which is like 2hour drive from north to south border. Um and yet a development at Southoun they'll say well their meeting is going to be all the way up in Mims or something. I mean what what just what do you anticipate if you did anything

what our policy is we do it by jurisdiction. So if we create it in the city of Sebastian we do it in the city limits of Sebastian. So you know my my uh administrative lady you generally deals with you know the city folks and the and the developer says okay let's pick a public place. Is it are we renting the Holiday Inn uh you know conference room or you know going to the city public library? We do that a lot. So you know that that's that's open for whatever people want. And we've got we've got cities too um where we've done some of those interlocals and we'll put that actually in the in the interlocal and so meet the city of Lake Alfred every time. So and and yeah the notifications with that as well. Where where does the notifications go for the public meeting?

For the public meeting. Well, they they run on the um on the website. So, that's that's one place they run called the CDD. Yes, sir. And then they'll also run in a newspaper of general circulation, right? As the state law requires, right? Yes, sir. Yeah. I don't know if anyone reads newspapers, but All right, hang on a second. See if they may have something else here. But Bob just arrived. Yeah. So, I'm Bob got tired of listening on Zoom, so he wanted to come in and see you all face to face. So, I'm I'm glad we peaked your interest. I left Elichchobee when the meeting started so I was able to make it. My daughters were playing tennis out there in the day one which was great.

Uh I've been listening. You guys had some great questions and you know my grandmother always taught me my mother told me you know if it's too good to be true. I have not heard one thing negative. Now the one thing you mentioned was in most cases the CDD could get FEMA reimbursement. What are the ones that can't get FEMA reimbursement?

Yeah. So, um, you you mentioned some of the shortcomings. Um, and let's talk about those, too, right? I mean, that's kind of one of your questions, but on the FEMA reimbursement, FEMA is a a stubborn beast. If you've ever done FEMA reimbursement work, first of all, it's very it can be very expensive to hire the consultants and stuff to get that done. Um, so you're going to do it on the larger, you know, the larger damage, uh, uh, storms or whatnot, right? Um and if you have a hardgated uh CDD, they I I we have gotten some FEMA funding at some of those places depending on the year that was we were applying. And then for other storms, they were taking a different position saying, hey, if you have a hardgated community, we're not going to treat it like it's it's public for purposes of FEMA funding. I honestly think a lot of it has to do with the administration that's in place at the time and also how much money they've got at that time, too. So

they they won't fund inside of a gated community right now. that yeah that yeah we've had that trouble but but I've got one I'm not going to name names but I got one that did get some money too is skated so well and let me jump in one of the downsides really is is the whole nature of this thing if we're charging assessments right and it's above and beyond what all the neighborhoods uh nearby are you know you you've got to sell that community you got to sell why you have assessments why are you paying more to live here and to the extent that the developer can't do that he's going to start discounting either his assessments or the sales face on the house. So, that's a downside. Yeah, that's right.

Yeah. The other part is when the storms come in though, when we get these storms come in, if you have a lot of damage, trees down and everything else, is the CDD going to have enough money to do what they need to do for the storm.

Yeah. I mean, it's look to your point, you know, there's no perfect structure, right? The CD just gives you a few a few more tools. And so, we had u for example, we've had communities get hit by a big big storm. they'll get some FEMA money and then some stuff isn't covered by FEMA. So, they got to take out a bank loan for five years or something like that. But if you didn't have the CD, you'd have an HOA. They wouldn't get any FEMA money and then they'd also have to deal with trying to not you they'd have to do a onetime balloon assessment. So, it's not like there's a perfect structure, it's just a better structure than an HOA.

And then the other one I heard is no CDDs have ever failed. It's the project that failed. Okay. In those instances when the project failed, how long did it take for the bond holders to foreclose on them and what was the impact at that time on the cities where they were? Go ahead.

There was no impact on the cities their debt ratings or date debt capacity whatsoever. These are totally standalone, you know, quasi governmental entities. So if you if you talk to S&P, Moody's, Fitch, the rating agencies, no city's ever been dinged or downgraded because of a default of a de developer financing. How long did it take? I mean, it was a court process, you know, for foreclosures. I think it was probably a couple years, wasn't it?

Well, no. Actually, most of them would go through in 6 to 12 months because the developer basically just hand off the property. You'd file that foreclosure complaint. It's a first priority um foreclosure. Goes through pretty quick. the ones that were heavily contested and there were a couple ugly ones. Um they could take a couple years just like any you know mortgage foreclosure. So but it's a it's a better foreclosure process because one you got money to fund it which is in that reserve account and two you're forclosing a first party lean. So again it ain't perfect but it's better than the alternative and I understand there was no impact on the city but

Mr. Dodd had mentioned once they're in here they're our residents. So if there's like the 10 people that are left and it takes two or three years and you know they they come here you know and again we don't want to just leave them in the lurch and also you know when we had all the foreclosures in the mid two early 2000s here a lot of those properties they sat for years. You know what happened is actually it moved pretty quickly because the trustee bank on behalf of the bond holders had the money that was left over in the reserve funds and things like that. So they stepped in and basically

helped maintain the project. You know, there was I can't remember the name of it. There was one project I went to down in Cape Coral and it was maybe 50 residents and hundreds and hundreds of defaulted lots, but they had a very well-maintained community until it sold out many years later. Yeah. And and you're sort of making our point. You're sort of making our point too because you said that there were for foreclosures down here too that lasted and they sat for a long time. Those are not CDD communities presumably because you don't have CDDs down here. So like I what I'm saying is you can have either type of project fail. It's just the CDD has the bond trustee. They've got the reserve money and they got the first priority lean. So the foreclosure is better and there's cash to actually get it done. So

yeah, and and that was my concern with the uh storm stuff when I was speaking to that. Those are our residents and if the CDD can't handle a massive amount of damage or whatever, then what are we going to have to do for those residents in our city? So, right. And and just very quickly, CDDs have much more ability to finance than HOAs. I mean, HOAs can go to a bank and but bank loans have short terms and CDDs can borrow for 30 years, keep the payments very low. It's just it's it's just better financing with tax exempt bonds. All right, Mr. Bon,

another question popped in my head while we're talking about storm water and kind of and looking at at that what what is Don't touch the mic. He's the HOA cop in the in the CDD. I know you have a board that's five members that you said you could pay $200 a meeting. What other staff do you have that would fall on the backs of those residents?

So, it looks pretty similar to a city. My company, for instance, is a uh CDD manager. So, we're like the de facto city manager, tax collector, tax assessor office rolled into one. They have a CDD attorney, which is like a city attorney. So, that's that's basically Oh, and then they also have a CDD engineer. So, that's basically the staff. That's it. Yeah. Uh, you know, most HOAs also have uh a manager and lawyer. Typically, they generally don't have an engineer, though. They probably need one to be honest with you, um, if they're maintaining infrastructure long term. But we we find having our engineers on hand is is pretty helpful. Okay. Is that with the record keeping on that too? Um, talk about the

Oh, and you also have someone who serves like as a clerk for your record. That's that's us, the manager, too. So, you know, it's it's all the books and records. We have to do audits annually, uh, annual budgets, you know, all of that type stuff like a city would. Yeah. The statute covers all that. They have the same basically reporting requirements that we do. Yeah. They're a mini city. What each the CDD becomes a mini city. Well, and that's why I said at the beginning, it may look like a mini city, but we have two powers. The power to finance infrastructure, power to maintain it, and that's it. We don't usurp any other powers of city, county, utility boards. Nothing like that. All right, I think that's it for me. Mr. Stokes, do you have anything else? Thank you.

All right. Um, anything else for me? Well, this has been a very unusual meeting because of the structure of it, but it was very helpful. Yes. And um I'm I'm hoping some people out there that are not part of Sebastian maybe listen to this because these kinds of educational things are very good. They're very good for us. I mean, as as we get people come in and bring in applications for a CDD, it gives us a little bit more insight in how to review those as well as insight in how we want to structure an ordinance because we need to have an ordinance on on the CDDs. Yeah. All right. Um, you guys, is there anyone from the public wanting to speak on anything that we spoke about here tonight?

Seeing none, do we have anybody on Zoom with final comments or anything? I do have a hand raised on Zoom. All right, let's hear him.

It's Chuck Meckling again. And I will look forward Can you hear me? Yes.

I look forward to the next time we have a public meeting. I apologize, Phil, that I'm not there tonight to be able to debate this issue and peel back some of the shades of confusion and and be more realistic about the CDD elements because many of the things that have been discussed tonight are handled appropriately and well by an HOA. So, I take exception to the constant that they're better than an HOA. HOA is going to be charging fees and association dues on an annual basis and there'll be an expense to the board and everything of the CDD district as well. But I I'll look forward to the next time that we can be uh together and have a more lively conversation. There's a lot of information that was discussed tonight that uh and there were plenty of them in St. Lucy County that were CDDs that went under and sat for years upon years upon years. So, it's not quite as clean as a whistle. And at the same time, when we talk about some of these counties like Pasco, I know that we don't feel that we want to be a Pasco County and the unbridled development and growth that those places have had. I do agree that there can be a spot for a CDD. I think that the again it goes back to the issue that the county took a lot of time to come up with some good visioning process on this that you have a community of a certain size that has a certain group of elements commercial industrial etc that take trips off the road that are job generators. These are the sort of things that create um some proper and and sorely needed potential tax revenue for the city of Sebastian as well. So, I'll

look forward to the next meeting on this. Thank you. All right. Uh thank you so much for your input, sir. Um do we have anyone else on Zoom? Not at this time. You have final statements, sir. I was just going to say I look forward to seeing you, Chuck. It's been a long time. Thank you all very much. We really appreciate it. Enjoy talking to you. U Bob. Yep. All right. Uh we're going to go ahead and um adjourn this meeting. Thank you so much. Thank you.