Florida bond validation fight continues despite dismissal of appeals

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Florida retirees challenging their community development district’s financing plans won’t get to argue their case before the state's high court.

The Florida Supreme Court dismissed Solivita community residents’ two consolidated appeals of the Poinciana CDD bond validation case. Justices said they reviewed briefs and a lower court ruling that did not validate the $102 million of bonds the CDD wants to issue.

The ruling means oral arguments planned for April 4 have been canceled.

“The Supreme Court dismissed my appeal and I'll never know why. They don’t say,” 93-year-old Martin Kessler said in an email. “We founded a Democracy because we believed men have rights. But they apparently do not have the right to question the court.”

Kessler, who is representing himself, filed a motion asking the justices to reconsider their ruling. His appeal should not have been consolidated with a separate appeal filed by two other residents, Brenda Taylor and William Mann, he said in a filing.

“The two subject cases were combined as a result of inadequate information offered to the court seeking consolidation,” Kessler wrote March 13. He said there were “no meritorious or reasonable grounds” for the cases to be heard together.

The justices have not responded to his motion.

If the ruling to dismiss the appeals stands, residents will be forced back to the lower court a second time to challenge a new bond validation case, which the Poinciana CDD and Poinciana West CDD filed on Oct. 24. It has been assigned to Polk County Circuit Court Judge Steven Selph.

The Supreme Court ruling included language that said the residents can appeal again “without any limitation or defense that is barred,” according to a bond attorney not associated with the case, who asked not to be named.

“You can appeal any decision of the circuit court to the Florida Supreme Court - whether on the losing or winning side - but you must have intervened at the lower court to appeal,” the attorney said.

Kessler and attorneys for Taylor and Mann have filed notices stating that they intend to participate in the second validation case.

The three are among the residents living in the Solivita master-planned senior community encompassed by two developer-created community development districts about 25 miles south of Orlando.

The Poinciana CDD and Poinciana West CDD cover a combined 4,200 acres and include 5,595 residential units already built or planned for construction by Avatar Properties, a subsidiary of AV Homes.

Although a court hearing has not been scheduled yet, the new bond validation case is likely to include the same issues residents argued in the first case before Polk County Circuit Judge Randall McDonald.

McDonald in an Aug. 31 ruling refused to validate the bonds because the special assessments to be placed on homeowners’ tax bills were not uniform even though each resident had an equal benefit in the amenities to be purchased. He rejected other arguments made by Kessler and Taylor.

“The districts have addressed the concern over the assessment allocation expressed by the trial court in the initial bond validation proceeding,” said Mike Eckert, the CDDs’ attorney who is with Hopping Green & Sams PA. “Each platted unit has received an assessment lien for an equal amount.

“The districts are focused on completing the second bond validation case that is pending in circuit court,” he added. “There was a case management conference on Monday, and there will be another case management conference toward the end of April.”

If the bonds are validated and sold, about $17,000 per unit will be charged on property tax bills to pay debt service over 30 years. The final amount depends on the amount of bonds issued, according to district documents.

The districts are requesting validation of up to $102 million of bonds, and plan to use $72.9 million to buy existing amenities, most of which are 15 to 17 years old. The pools, parks, restaurants, offices and meeting facilities will be purchased from the developer.

Another $11.2 million of bond proceeds would be used by the developer to build a new wellness center and a 600-seat performing art theater, and $11.4 million would go toward issuance costs.

The CDDs did not hire a licensed appraiser to value the property. Some residents, including Kessler, contend that Florida law requires the CDDs obtain an appraisal to determine just value of the existing amenities before purchasing them.

“I'm stuck with coming forward and making the same objection I made last year,” Kessler said. “The CDD does not know the fair value of the property. All they know is what they want to pay for it.”

“I really don't care if the CDD wants to buy the property or not, I never use the amenities anyway, but if they do I just want it to be bought at its fair market value.”

Attorneys for Taylor and Mann hired Urban Economics Inc., a state certified real estate appraiser that found the market value of the amenities to be $19.25 million.

Taylor and Mann have contended that the CDDs and the developer improperly used an income-based approach – as opposed to obtaining a just value from a certified appraiser as required by Florida law - to capitalize 30 years of future club membership fees currently charged by the developer in order to value the amenities in excess of their worth. Residents must pay the club fee to use the facilities.

“I’d be little surprised if they don’t have to get an appraisal of the property before selling” the amenities in Poinciana, said Tim Becker, director of the Bergstrom Real Estate Center at the University of Florida’s Warrington College of Business. The center follows Florida’s CDDs but does not conduct research on them.

Becker said CDDs are a valuable tool for large developers to finance core infrastructure such as roads, water and sewer facilities with tax exempt bonds. Some CCDs, such as the Villages in central Florida, also issued bonds to pay for amenities like swimming pools, he said.

In Poinciana’s case, Becker said he believes the developer is matching an income stream based on the club fee to support a 30-year bond issue. “Whether that should be true value of the club is a different story,” he said.

“I applaud the homeowners for stepping up and saying we don’t agree with the financing we’re being charged,” said Becker. “At the end of the day if [developers] are building amenities for the benefit of the community, the community should own them.”

Before joining the Bergstrom Center, Becker said he worked for a developer in southwest Florida and served on four CDD boards.

In those projects, he said the cost of amenities was “baked” into the price of lots sold to homeowners. Eventually, the facilities were turned over to the residents’ homeowners association. Before the transfer, appraisals were obtained.

An attempt to require CDDs obtain a licensed valuation of property they purchase failed during this year’s legislative session which ended March 11.

House Bill 337 and Senate Bill 1686 would have required all community development districts to obtain appraisals. Neither bill received a hearing.

In addition to the new bonds the Poinciana CDDs plan to issue, both districts have outstanding debt.

The Poinciana CDD had $17.3 million of outstanding special assessment bonds as of Sept. 30, 2016. They are rated A-minus by S&P Global Ratings.

The Poinciana West CDD had $13.4 million of bonds outstanding at the end of fiscal 2016. After the fiscal year ended, the district issued $14.2 million of refunding bonds. They were assigned a BBB-plus rating by S&P. Neither district has released audits for 2017.

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