BRADENTON, Fla. – A disagreement between two central Florida community development districts and their residents takes center stage this week in a bond-validation trial.
The Poinciana CDD supervisors contend in court filings that their plan to issue up to $102 million of tax-exempt bonds to purchase recreational amenities from the CDD developer complies with the required elements of state law and should therefore be validated.
“The concept of issuing the bonds for the purposes contemplated by the districts is not novel or unlike any of the recreational amenity facilities that courts throughout the state deemed to be permissible subjects of the expenditure of public funds,” the CDDs said in a July 13 filing.
Residents of the CDDs, however, are challenging the method that was chosen by the supervisors to value the purchase price of the amenities – a price they say is too high.
Polk County Circuit Judge Randall G. McDonald has set aside four days for the bond validation trial, which begins Tuesday.
The Poinciana CDD and the Poinciana West CDD want to use $73.7 million of the debt to purchase 17 existing amenities such as pools, parks, and restaurants that are owned by the developer, AV Homes.
AV Homes, which built the facilities in the Solivita retirement community, has charged residents club membership fees to use them. Most of the existing amenities are between 10 and 15 years old.
The CDDs have also inked a deal with AV Homes to use $14.3 million of bond proceeds to reconstruct some facilities, and to build a 500-to-1,000 seat performing arts building and a fitness center, according to the bond validation complaint.
Solivita residents will be charged assessments on their tax bills for 30 years to pay debt service on the bonds.
Through discovery and testimony in the case, Solivita residents uncovered documents that they say show that the deal is not an arms-length transaction between the CDDs and the developer.
They are also contesting the proposed purchase price of the amenities, which they say is based on a method that maximizes the amount of bonds that can issued by calculating the club membership fees paid by residents over 30 years.
The residents hired Urban Economics Inc., of Tampa, to appraise the amenities. The firm concluded they were worth a fee simple interest market value of $19.25 million.
“Here we are today trying to keep the CDD from paying an illegal profit to AV Homes for these 15-year-old amenities,” Solivita resident Brenda Taylor, a defendant in the case, told The Bond Buyer in a recent interview. “We came down here to retire.”
The residents have said that the CDD supervisors refused to obtain an appraisal for the existing amenities on which to base the fair market value of the purchase price, a point they hope will bring the validation to a halt.
The CDDs said in the recent court filing that assertions made by the challengers, including whether the districts properly valued the amenities, are without merit and have no bearing on the validation.
“As the club plan is a legally permissible concept of recreational amenity ownership and operation, it follows that the stream of revenues collected by the developer pursuant to the club plan should be considered when arriving at a value for the recreational amenity improvements,” the filing said.
The CDDs said they have met the elements necessary for the court to validate the bonds.
Those elements include that the districts must have the power to issue bonds and levy special assessments; that the purpose of the bond obligation is legal; and that the districts complied with Florida law in developing the plan of finance.
The losing side in the bond validation case can appeal it to the Florida Supreme Court.