CCFJ, Inc. RESPONSE
to CDD Survey
Senate Committee On Comprehensive Planning
DATE:      September 2, 2003 

TO:            David Cooper
                  Legislative Assistant, Senate Committee On Comprehensive Planning

Re: Survey On Issues Relating To Community Development Districts

FROM:  Joe Gorman
               President, The POA of The Villages, P.O.Box 1657, Lady Lake, FL 32158
               and Chairman, CDD Committee, Cyber Citizens For Justice (CCFJ)

As background for this response:  The Property Owners’ Association (POA) of The Villages is the original homeowners’ association in The Villages of Lady Lake, Florida.  The POA was founded in 1975.  The POA’s newsletter, “The POA Bulletin,” is distributed each month to 10,000 homes in The Villages. 

The Villages is an active adult community with a current population of about 36,000.  It spans three counties:  Lake, Sumter and Marion.  Current plans project the population to be about 100,000 within ten years.  All of this growth will be in CDDs. 

Currently, the established portions of The Villages consist of four residential CDDs and one commercial CDD.  Additional CDDs are planned for the development in Sumter County that will handle the anticipated future growth.  At least two more CDDs have already been formed in this new section of The Villages under construction. 

Residents in the four existing residential CDDs are gradually electing supervisors selected by the residents in a time frame, as originally planned in Chapter 190, Florida Statutes.  However even after 11 years, no residents live within the boundaries of the existing commercial CDD, known as VCCDD.  Founded in 1992, the Village Center Community Development District is still controlled by the original developer.  As the majority landowner, the developer has continued to elect its own supervisors during the past 11 years.  These supervisors are either business associates or employees of the developer.  The POA feels that this arrangement effectively disenfranchises residents. 

Because of a variety of financial and contractual arrangements with the residential CDDs and the developer, the VCCDD supervisors make all the big and important decisions in The Villages.  They do so without approval from residents, since the residents cannot vote for these supervisors.  Residents are forced to buy and pay for multi-million-dollar purchases of common property from the developer.  In these transactions, the developer’s hand-picked supervisors approve the transactions along with the developer.  Eleven years later, residents still have no ability to vote approval of either the purchases or the related debt repayment obligations, which they must assume.  The POA believes that this is an example of Taxation Without Representation. 

The POA would be happy to discuss this further with members or staff of the Senate Committee on Comprehensive Planning.  The POA president, Joe Gorman, can be reached by phone at (352) 259-0999, fax (352) 259-0722 or email [email protected]

The POA’s responses to the Committee’s questions are as follows: 

1.     ESTABLISHMENT AND DISSOLUTION OF COMMUNITY DEVELOPMENT DISTRICTS (CDDs).  CURRENTLY, CDDs OF 1000 ACRES OR MORE ARE CREATED BY THE FLORIDA LAND AND WATER ADJUDICATORY COMMISSION, WHILE CDDs UNDER 1000 ACRES MAY BE CREATED BY COUNTY OR MUNICIPAL ORDINANCE.  DO YOU THINK THIS ACREAGE THRESHOLD SHOULD BE AMENDED?  IF YES, WHAT SHOULD THE THRESHOLD BE?  WHAT JUSTIFICATION DO YOU OFFER FOR THIS RECOMMENDATION?  SECTION 109.046(2), F. S., PROVIDES FOR THE DISSOLUTION OF CDDS.  DOES THIS PROVISION ADEQUATELY PROVIDE FOR PROPER DISSOLUTION OF CDDs?

The POA does not favor increasing this threshold and would keep the cutoff point at 1000 acres.  Establishment of a CDD is an important process that would best be handled by the more thorough, professional, and objective review process that the Florida State Commission would provide. 

Florida Statutes (quote) Chapter 190.002   “(2)  It is the policy of this state: 
(a)  That the needless and indiscriminate proliferation, duplication, and fragmentation of local general-purpose government services by independent districts is not in the public interest.”

The idea of increasing the 1000-acre cutoff was to avoid the fractionalization of more CDDs, when fewer CDDs could serve the same purpose.  The resultant cost savings are thought by some to be the primary advantage of having fewer and bigger CDDs instead of more and smaller CDDs.  The intent was that local review would encourage developers to favor larger CDDs. 

However, if cost savings are an objective through bigger versus smaller CDDs, then the Florida State Commission can promote this objective through closer scrutiny of CDD applications from developers for any size development.  The commission can insist on better planning of developments and closer attention to cost savings in any size CDD. 

Finally, local governmental authorities (county officials) often do not have the professional staff and the resources to efficiently evaluate comprehensive plans from developers.  Also, local political considerations often favor developers, especially in smaller counties.  The POA believes that the Florida State Commission would be more objective and better equipped to perform these evaluations.

The dissolution procedure is complicated and most residents are almost overwhelmed by the magnitude of the decision.  Chapter 190 should be clarified to require that a comprehensive information package be sent to all residents before they are asked to consider this question.  This information package should give the pros and cons of dissolution and an analysis of the primary alternatives.  Then, a simple majority vote should be required for the dissolution. 

2.     IMPACT FEE CREDITS.  AT LEAST IN ONE CIRCUMSTANCE, IMPACT FEE CREDITS GRANTED BY LOCAL GOVERNMENTS FOR OFF-SITE IMPROVEMENTS FINANCED BY THE CDD WERE INITIALLY RETAINED BY THE DEVELOPER OF THE CDD AND WERE NOT CREDITED AGAINST THE DEBT OBLIGATIONS OF THE CDD.  DO YOU THINK THIS BUSINESS PRACTICE IS JUSTIFIED?  PLEASE EXPLAIN.

The POA believes that this business practice is neither justified nor equitable. 

These credits should flow to the CDD that paid for and performed the work in a particular CDD.  The funds should flow into the CDD’s general fund and be used as the supervisors decide.  Any legislation here should also provide for a retroactive return of credits and/or funds for any work done previously during the life of the CDD in question. 

It is acknowledged that some projects and expenses will be preformed by a developer, either before a CDD is formed or outside the boundaries of an existing CDD.  In these cases, earned credits can go to the developer. 

The point here is that any work done in a CDD and by a CDD should have the credits returned to that CDD. 

3.     DISCLOSURE TO PROSPECTIVE HOMEOWNERS OF POTENTIAL CDD ASSESSMENTS.  SECTION 190.048, F.S., REQUIRES THAT EACH CONTRACT FOR THE INITIAL SALE OF A RESIDENTIAL UNIT WITHIN THE DISTRICT INCLUDE A SPECIFIC DISCLOSURE ADDRESSING CDD IMPOSED TAXES AND ASSESSMENTS IN BOLDFACE AND CONSPICUOUS TYPE.  DOES THIS PROVISION PROVIDE ADEQUATE NOTICE TO PROSPECTIVE INITIAL RESIDENTIAL PURCHASERS?  IF NOT, WHY DO YOU THINK THE NOTICE IS INADEQUATE AND HOW SHOULD IT BE AMENDED?

The notice is much too general.  It is inadequate and should be revised.  There are several problems. 

First, the disclosure is not comprehensive.  Estimated dollar amounts for the first three years for each tax, assessment, monthly fee, and debt obligation repayment should be given.  The total debt obligation assumed by individual residents, the related interest rate, and repayment options should also be identified. 

Second, the notice is often given to buyers too late in the buyer’s decision- making process.  Notice is often delayed until closing or afterwards.  The disclosure should be given at least a week prior to closing or even earlier, if that is possible. 

Third, buyers often complain that the disclosure was never given or was delivered after closing.  Developers should be required to obtain from buyers a signed and dated receipt, indicating when the disclosure was delivered. 

Fourth, the disclosure is often buried in other lengthy closing documents.  The disclosure should be on a separate sheet of paper, clearly identified, with space for signature and date of receipt by the buyer. 

Fifth, any requirement like this for specific compliance by developers is substantially weakened if a penalty is not specified and enforced.  The POA suggests a penalty of $1000 for each violation of these disclosure rules by a developer. 

As a final point, it should be noted that many complaints in the past refer to sales representatives not following proper procedures or, at the worst, actually misleading prospective buyers.  The POA does not have a good recommendation on how to handle these situations.  However, the commission should investigate these problems to insure proper disclosure and compliance by sales representatives. 

4.     TRANSFER OF CDD GOVERNING BOARD.  PURSUANT TO s. 190.006, F. S., EACH CDD IS GOVERNED BY AN ELECTED FIVE MEMBER BOARD OF SUPERVISORS.  INITIALLY, SUPERVISORS ARE ELECTED IN A “ONE-ACRE, ONE-VOTE” ELECTION.  AFTER A PERIOD OF TIME, THE ELECTION OF THE BOARD SHIFTS TO THE RESIDENTS OF THE DISTRICT.  ARE THERE ANY ISSUES THAT YOU THINK SHOULD BE ADDRESSED CONCERNING THE TIMELY TRANSFER OF CONTROL OF THE CDD GOVERNING BOARD FROM THE DEVELOPER TO THE HOMEOWNERS?  ARE THERE OTHER ISSUES RELATED TO THE TRANSFER OF CDD GOVERNING BOARDS THAT YOU THINK SHOULD BE ADDRESSED?

In the situation of The Villages, the transfer is being accomplished as envisioned in Chapter 190 in the four residential CDDs that currently comprise this community. 

However, the developer also created a commercial CDD in which no residents live.  Thus, the developer as the primary landowner, forever is allowed to appoint supervisors of its choosing.  These supervisors are either employees or business associates of the developer.  As the law is now written, voting control here will never flow to the residents. 

This procedure effectively disenfranchises residents and allows the developer to perpetuate control of the CDD.  This perverts the intent of Chapter 190 and denies the vote to CDD residents. 

Furthermore, through a variety of financial and contractual arrangements, this commercial CDD has emerged as a “super” CDD that retains administrative control of most significant decisions in this “family of CDDs,” known as The Villages.  These supervisors make all the big and important decisions here in The Villages.  Residents have no input in the decision-making process.  Residents cannot vote their approval or disapproval of these supervisors.  Residents cannot vote their approval or disapproval of the spending decisions of these supervisors, which often amount to hundreds of millions of dollars spent for purchases of common property from the developer.  Residents cannot vote to accept or reject the debt repayment obligation, which is forced upon them for these supervisor-approved spending programs.  This is a form of Taxation Without Representation. 

Key problem is that residents cannot vote for the supervisors in this developer-controlled commercial CDD, even 11 years after it was established in 1992. The developer of The Villages has designed this family of CDDs to include a CDD that is beyond the control of residents.  This perverts the original intent of Chapter 190.  The drafters of the original legislation never intended this. 

The solution would be to change Chapter 190 to allow all residents in a designated “family of CDDs” to acquire voting control to elect the supervisors of any CDD that exercises administrative control over other CDDs in that family of CDDs.  In The Villages, this would allow all residents of the four residential CDDs to acquire voting privileges to elect the supervisors in the special commercial CDD that makes all of the big and important decisions in The Villages. 

5.     ENFORCEMENT OF DEED RESTRICTIONS ON PROPERTIES WITHIN CDDs.  IT HAS BEEN REPORTED THAT SOME CDDs DO NOT HAVE MANDATORY HOMEOWNERS’ ASSOCIATIONS, AND THEREFORE DO NOT HAVE AN EFFICIENT MEANS TO ENFORCE DEED RESTRICTIONS ON RESIDENTIAL PROPERTIES WITHIN THE DISTRICT.  CHAPTER 190, F.S., DOES NOT GRANT THIS AUTHORITY TO THE CDD BOARD OF SUPERVISORS.  SHOULD CH. 190, F.S., BE AMENDED TO GRANT CDD BOARDS OF SUPERVISORS THIS AUTHORITY?  PLEASE EXPLAIN.

It is not true that CDDs do not currently have a means for proper enforcement.  Chapter 190 should NOT be amended to grant this authority to CDD boards. 

The Covenants and Restrictions for a residential property in a CDD must be approved by county supervisors and must be filed with the Clerk of Courts in the CDD’s county.  The county will have the police/sheriff department for enforcement as well as the county courts for judicial determination.  County supervisors can specify the appropriate penalties for violations of the Covenants and Restrictions through a Code Enforcement Board. 

CDDs are not currently allowed to have the police or judicial powers that would be needed to effectively enforce deed restrictions.  Moreover, it would be a financial and administrative burden for CDDs to fund any of these activities. 

Furthermore, granting these powers to CDDs would be similar to the situation now in which homeowners’ associations (HOAs) exercise these powers over their residents.  There are horror stories in the press almost every day of terrible abuses of HOA authority on these very same issues.  If the HOA horror stories are a warning, we must avoid creating the same problems with CDDs. 

The enforcement of Covenants and Restrictions should be left to other governmental agencies at the county level.  Those agencies are better suited to perform these functions and can do so with the appropriate local legislation and current police and judicial powers. 

6.     ARE THERE ANY ADDITIONAL ISSUES RELATED TO CDDs THAT YOU THINK THE COMMITTEE SHOULD ADDRESS?  PLEASE EXPLAIN.

A.     Residents should have the right to vote in an election to hire any of the top administrative staff of a CDD.  Residents should also vote in a “super” CDD in a family of CDDs, where the top staff people perform administrative functions for the “family of CDDs.”  As an alternative to this provision, residents should have a “right of recall” for these staff personnel in any election in which CDD supervisors are elected.  This would insure that the top administrative personnel are qualified professionals, responsive to the needs and interests of residents, rather than unqualified associates of the developer.  Without this provision, these top administrative personnel favor the developer that hired them rather than the community’s residents, who should have their attention and loyalty.   For example, thousands of residents of communities across this nation are able to elect mayors.  CDD residents should have the same opportunity. 

B.     Whenever supervisors purchase common property in excess of $3 million in the aggregate within any one year, three market-based appraisals (using the “comparable properties” technique) should be obtained from certified property appraisers.  Developers now favor the “income approach” appraisal technique, which greatly inflates property valuations for the benefit of developers. 

C.     The conflict-of-interest exception in Chapter 190.007(1) should be eliminated.  There are too many problems with this exception that lead to blatant conflicts of interest.  The POA believes that when friends, employees and business associates of developers act as supervisors in CDDs, they often make decisions that favor developers over residents.  CDDs need objective and unbiased decision making. 

D.     Monthly fees charged to residents should be clearly defined as to use and application. 

E.      Any bond indebtedness assumed by residents, or paid by fees collected from residents, should receive prior approval from residents.  Any purchase of common property, which is to be paid by fees collected from residents, should receive prior approval from residents.  Bond referendums are commonplace in other communities when large purchases or large debt obligations are contemplated.  CDDs should have the same procedures.

F.      One of the inherent problems with the early decision-making in the life of a CDD is that developers prepare a plan, which is the “road map” for the initial development phase.  The early decision-making is performed according to this “road map” by supervisors appointed by the developer.  Then as soon as the CDD is formed, the developer is almost out of the picture as the CDD supervisors make the important early decisions.  Developers then deny responsibility for problems in the development and say that the CDD is responsible.  The POA believes that the developer is ultimately responsible, since it prepared the original “road map.”  Developer responsibility and developer liability should continue through the final build-out.


 
Community Development District Survey
The Senate Committee on Comprehensive Planning wants to know!

Posted 8-21-2003

In 2003, legislation was filed to address a number of issues related to community development districts (CDDs) in Florida. Because of the interest this legislation generated, the Senate President has approved an interim project to identify problems or issues related to:

  • establishment and dissolution of CDDs;
  • disclosure to prospective homeowners of potential CDD assessments;
  • assumption of district financial obligations by homeowners;
  • enforcement of deed restrictions on properties within CDDs that do not have a mandatory homeowner’s association; and
  • intergovernmental relations.
The Community Development District Committee of CCFJ, Inc. has been asked to offer recommendations for amending Chapter 190, F.S.
Since we are a consumer advocacy group we would like to hear from other citizens living in Florida CDDs. We value your input and suggestions!

1     Establishment and Dissolution of Community Development Districts (CDDs)
Currently, CDDs of 1000 acres or more are created by the Florida Land and Water Adjudicatory Commission, while CDDs under 1000 acres may be created by county or municipal ordinance. 
Do you think this acreage threshold should be amended?
___YES___NO___NO Opinion

If YES, what should the threshold be?

àCDDs under ______ acres may be created by county or municipal ordinance. 

What justification do you offer for this recommendation?

Section 190.046(2), F.S., provides for the dissolution of CDDs. Does this provision adequately provide for proper dissolution of CDDs?

___YES___NO___NO Opinion

If NO, under what circumstances is the provision inadequate and how should it be changed?

2     Impact Fee Credits

At least in one circumstance, impact fee credits granted by local governments for off-site improvements financed by the CDD were initially retained by the developer of the CDD and were not against the debt obligation of the CDD.

Do you think this business practice is justified?

___YES___NO___NO Opinion

Please explain your response.

____________________________________________________
3     Disclosure to Prospective Homeowners of Potential CDD Assessments
Section 190.048, F.S., requires that each contract for the initial sale of a residential unit within the district include a specific disclosure statement addressing CDD imposed taxes and assessments in boldfaced and conspicuous type. 
__________________________________________________
Does this provision provide adequate notice to prospective initial residential purchasers?
___YES___NO___NO Opinion

If NO, why do you think the notice is inadequate and how should it be amended?

4      Transfer of CDD Governing Board

Pursuant to s. 190.006, F.S., each CDD is governed by an elected five member board of supervisors. Initially, supervisors are elected in a “one-acre, one-vote” election. After a period of time, the election of the board shifts to the residents of the district. 

Are there any issues that you think should be addressed concerning the timely transfer of control of the CDD governing board from the developer to the homeowners?

___YES___NO___NO Opinion

If YES, please explain.

Are there any other issues related to the transfer of CDD governing boards that you think should be addressed?

___YES___NO___NO Opinion

If YES, please explain.

____________________________________________________
5     Enforcement of Deed Restrictions on Properties within CDDs
It has been reported that some CDDs do not have mandatory homeowners’ associations, and therefore do not have an efficient means to enforce deed restrictions on residential properties within the district. Chapter 190, F.S., does not grant this authority to the CDD board of supervisors.
Should ch. 190, F.S., be amended to grant CDD boards of supervisors this authority?

___YES___NO___NO Opinion

If YES or NO, please explain your response.

____________________________________________________
6     Other Issues
Are there any additional issues related to CDDs that you think the committee should address? 
___YES___NO___NO Opinion

If YES, please explain.

_________________________________________________
Your input is much appreciated!
DEADLINE FOR RESPONSES : 08 - 31 - 2003

 
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