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CCWWA Minutes 12/17/2013 December 17,2013 FILED #43 FL0MINUTES OF THE MEE F THE COLLIER COUNTY WATER AND WA� A.'Ek.zS MHORITY CLERK OF COURTS Dec ibex 20 Naples, Florida LET IT BE REMEMBERED that the Collier County Water and Wastewater Authority, having conducted business herein, met on this date at 10:00 AM in REGULAR SESSION, at the Collier County Growth Management Division Building, Conference Room#609/610, 2800 N. Horseshoe Drive, Naples, Florida, with the following members present: CHAIRMAN: Lowell Lam Dr. Fay Biles, Ph.D Jerry Morgan Patricia Sherry Excused: Dr. Sherwin Ritter, Vice Chair ALSO PRESENT: Jamie French, Operations Director, GMD/P&R Ken Kovensky, Financial & Operational Support Manager, GMD/P&R Scott Stone, Assistant County Attorney Ashley Lang, Management/Budget Analyst, GMD/P&R. 1 December 17,2013 CALL TO ORDER,DETERMINATION OF QUORUM,AND ROLL CALL Chairman Lowell Lam called the meeting to order at 10:00 AM. Roll call was taken and a quorum established. Four voting members were present. II. APPROVAL OF AGENDA Jerry Morgan moved to approve the Agenda as presented. Dr. Fay Biles offered a Second in support of the motion. Carried unanimously, 4—0. III. APPROVAL OF MINUTES—OCTOBER 28,2013 MEETING Correction: • Page 3, under first paragraph, "Public Speaker:" o David Genson was incorrectly identified as the owner of the Ave Maria Utility Company. He is the Engineer of Record and a member of Senior Management for the Utility. Dr. Fay Biles moved to approve the minutes of the October 28, 2013 meeting as amended. Patricia Sherry offered a Second in support of the motion. Motion carried, 3— "Yes"/1— "Abstention." Jerry Morgan abstained;he did not attend the October 28th meeting. IV. ITEMS REQUIRING ACTION BY THE AUTHORITY A. Transfer of Franchise—Goodland Isles,Inc. Jamie French provided background information: • The Utility previously served the Coon Key Pass Fishing Village Condominium Association, Inc.,which consists of thirteen units (size: 850 square feet) • Plant capacity: 20,000 gallons per day for wastewater service • Collier County provides potable water,purchased from Marco Island, to the community • Goodland Isles, Inc. was a private Utility, owned by Bruce and Barbara Rackouski (husband/wife). • Mr. Rackouski dismantled the Utility, without notice to the Authority or Staff, and ran a line down East Palm to Goodland Drive where it interconnected with the service provided by the City of Marco Island, making Goodland Isles part of the City of Marco Island's wastewater service area. o Required permits had been acquired from the DEP • A line had been installed by the(failed)Dolphin Cove, located in the Goodland. Boat Park,but the line has been dry for a number of years. • Collier County, at one point, had tied into that line. • A number of residents on the Island purchased ERCs ("Equivalent Residential Connection,"or unit(s) of water usage)into the line, including Mr. Rackouski. • Mr. Rackouski negotiated contracts and permits to turn the land into a marina. 2 December 17,2013 • Due to the downturn in the economy,the property was sold at a loss to a Trust represented by James Inglis o Apparently Mr. Inglis did not know the land was attached to a Utility Mr. French continued: • After years of negotiation between Authority/Staff,the City of Marco Island, as well as working with the Coon Key Pass Fishing Village Condominium Association, Inc.,the City of Marco Island took possession of the assets owned by the Coon Key Pass Fishing Village Condominium Association, Inc., with the exception of (1)the lift station located on the Coon Key Fishing Village property, and (2) 80-feet of concrete line that ran in front of the Rackouski property. • An agreement was negotiated with Coon Key Pass Fishing Village to purchase the lift station after repairs were made and the 80-feet of line. • The Right-of-Way was deeded to Coon Key to provide access to make repairs. o The cost was $1.00. Mr. French stated a copy of the Agreement was included in the information packet provided to the Authority members and the Franchise is no longer in existence. He confirmed the lift station and line are the property of the Coon Key Fishing Village. • Collier County Ordinance#96-6 requires that Staff present the Agreement to the Authority for review and approval. • The Agreement will be presented to the Board of County Commissioners for final approval. He noted the County does not have authority over Homeowners' Associations or privately-held water systems that serve only a specific group. Staff recommended that the Water and Wastewater Authority approve the Agreement. Discussion: • Dr. Fay Biles stated she was asked to, and did, speak with the Marco Island City Manager to ensure that the City of Marco Island understood the terms of the Agreement. She confirmed Marco Island had no objection. • Jerry Morgan asked if electrical service to the lift station was included in the Agreement. o Mr. French responded he understood the electrical lines were not buried and were served by LCEC o He confirmed Coon Key Fishing Village is solely responsible for the electric bill and for maintenance. Coon Key is required to contract with a Class B Operator to operate the lift station. Coon Key will also be required to pay a monthly fee to the City of Marco Island. o When asked about payment of legal fees,Jamie French stated the firm of Cheffy—Passidomo may have handled the case pro bono. 3 December 17,2013 Chairman Lam called for a motion. Jerry Morgan moved to accept and approve the Agreement as previously discussed Dr. Biles offered a Second in support of the motion. Carried unanimously, 4—0. Jamie French stated the Agreement would be presented to the Board of County Commissioners in January, 2014. V. STAFF DISCUSSION A. Orange Tree Utility Company,Inc./Orange Blossom Ranch Jamie French stated Staff was contacted by Richard Yovanovich, Esq., of Coleman, Yovanovich, Koester, who represents OB-One, LLC,the current land owner. The issue centers around the prepaid capacity owed to the existing lands that are owned by his client. Richard Yovanovich stated: • OB-One, LLC purchased 300 undeveloped lots located in Orange Blossom Ranch from Pulte Homes. • Orange Blossom Ranch, located off Immokalee Road, is an approved PUD ("Planned Unit Development")and Pulte Homes is the intended(residential) Developer. • The Orange Blossom Ranch Project is served by Orange Tree Utility Company, Inc. • Orange Tree Utility Company, Inc. is also the developer of a competing project. • Other developers in the area have had problems dealing with the Orange Tree Utility Company, Inc. Background information: • In 2006, Pulte Homes prepaid the capacity charges for wastewater service to 300 lots. • Additionally, Pulte Homes was required to enter into a Refundable Advance Agreement with Orange Tree which, in effect, loaned money to the Utility to expand its capacity. • Pulte Homes has paid all invoices submitted for the plant expansion—Pulte Homes agreed to pay 72.5%of the cost to expand the plant. • The plant has been expanded. • There is sufficient capacity to serve the 300 units owned by Pulte Homes. • Orange Tree issued a letter confirming capacity was available for 188 of the units. Fourteen of the 188 are vacant lots. • Orange Tree Utility Company has honored 174 of the original 300 prepaid system capacity charges. • Pulte Homes sold the remaining lots to OB-One, LLC. • OB-One, LLC has since sold its lots to various builders. 4 December 17,2013 Mr. Yovanovich cited an example: Lennar Homes purchased one of the lots from OB-One, LLC and received a letter confirming capacity. When Lennar Homes contacted Orange Tree to activate service, Orange Tree refused to honor its letter and instructed Lennar Homes that it was required to pay capacity charges for the lot. He stated: • He was aware the Water/Wastewater Authority approves certain rates for the Utility including the system development charges. • Orange Tree Utility has forced his client to appear before the Authority because it will not honor its commitments to developers in the area. • It is hoped the County will take over the operation of Orange Tree Utility Company. • Orange Tree Utility will not back down from its demand that OB-One, LLC, pay the same capacity charges that were initially paid by Pulte Homes, in addition to the funds"loaned"to Orange Tree to expand its plant. • OB-One, LLC is requesting that the Water/Wastewater Authority take whatever action is allowed under the Ordinance to compel Orange Tree to honor the prepaid capacity charges for the lots. He further stated if the Authority initially approved Orange Tree's application to charge certain fees,the Authority should be able to require Orange Tree to honor the prepaid capacity fees. He also requested the Authority also require Orange Tree to submit an accounting of the fees paid by Pulte Homes and how such fees were disbursed, if they were disbursed. Mr. Yovanovich will meet with the County Attorney's Office to confirm that,when the County acquires Orange Tree Utility Company, the prepaid capacity charges will be honored by Collier County. Discussion: • Dr. Biles asked if there were any records of the payment that had been made. Mr. Yovanovich replied Orange Tree did not deny that payment had been made, it refused to honor the payment. Orange Tree's letter recognizing that prepayment had been made was part of the information packet provided to the Members. Orange Tree claims to have sent 188 letters confirming capacity. (14 of the 188 lots remain vacant.) He continued there has never been a question concerning whether or not payment was made; the issue is Orange Tree has demand a second payment of the same fees for capacity. • Jerry Morgan stated he thought the County had already taken over Orange Tree. Jamie French responded it is the County's intention to take over operation of Orange Tree but the County must remain at"arm's length"to avoid the appearance of a conflict of interest. 5 December 17,2013 He explained Public Utilities does notify the County when an action has taken place. He stated he was not aware of any items concerning Orange Tree that may have been discussed between Public Utilities and the Board of County Commissioners. He did not know the anticipated date when the County was to take over operation of Orange Tree. He further stated Staff's position is that we don't force Developer's Agreements. The Agreement is between the developer and the utility. The Agreement is reviewed by the parties' attorneys. The County's scope is very limited concerning a Developer's Agreement or a Refundable Advance Agreement. In the event a Utility enters into an Agreement and loses money, it is the Utility's problem and rates cannot be increased to cover the loss. He continued, in the Orange Tree situation, a Developer's Agreement was sent to Staff and it was presented to the Water/Wastewater Authority to review. It is possible there will be litigation between the parties concerning the Agreement if the terms are not fulfilled. Staff has had conversations with Orange Tree's staff. Orange Tree has referred to a"Notice of Transfer" clause in the Agreement as the basis for its demand. Orange Tree maintains the ERCs are non-transferrable unless certain stipulations in the Agreement are adhered to and claims Pulte Homes did not comply with the stipulations. Mr. French stated he has not spoken to the County Attorney's Office regarding the issue. He explained, based on the conversations with Orange Tree's staff, Orange Tree received the payment for 300 ERCs. He stated a Notice of Transfer was contained in Section 20 of the Agreement. When Bonita Bay transferred lots to Ronto, they filed the Notice of Transfer. Pulte Homes did not. Since the Notice of Transfer was not filed, Orange Tree maintains it is not obligated to honor the payment. Patricia Sherry stated the issue was between Pulte Homes and OB-One, LLC since Pulte did not follow the term of the Agreement. Jamie French concurred the matter could be decided by a Judge in a civil court suit. He stated he would continue to work with the Authority and the County Attorney's office. It was the first time since 1996 that the County was pulled into a civil matter where a Developer's Agreement was not honored or questioned. Richard Yovanovich stated he was not advised by Orange Tree that a specific piece of paper was the center of the disagreement, i.e.,that it was their"expressed rationale as to why Orange Tree is not honoring the system development charges." He acknowledged there was a Developer's Agreement between the parties. He further stated the Authority is the entity that permits a Utility to charge a fee for 6 December 17,2013 capacity and, if the fee is paid,the Authority must mandate the Utility is obligated to supply the capacity. He explained his client was not requesting the Authority to honor the terms of the Developer's Agreement. His client was requesting the Authority force Orange Tree to honor the rate it was allowed to charge. The Authority allowed Orange Tree to charge the fee. Since the fee was paid, service must be provided. He stated he will contact his client to determine if his client had any knowledge that specific paperwork was required to evidence the transfer. He further stated if he had known certain documentation was required,he would have asked Pulte Homes to write a letter to Orange Tree stating the property had been transferred to OB-One, LLC. He summarized: • Orange Tree Utility Company applied to the Authority to charge a fee for capacity. • The Authority approved the application. • Orange Tree charged a capacity fee to Pulte Homes for 300 units and Pulte Homes paid it in full. • Orange Tree admits Pulte paid the capacity fee. • Pulte Homes sold lots to OB-One, LLC. • The Authority should require Orange Tree to provide the capacity for which it has been paid. Jamie French: • It is the County's position that Impact Fees remain with the land. • If a landowner chooses not to build on a property,the credit for the paid Impact Fee (to provide services)remains with the land and is an asset to the land. • The credit is transferrable because it always remains with the land. • The Developer's Agreement contains standardized language. Mr. French said it was only his opinion that the owner of Orange Tree Utility was being advised by his Attorney in preparation of the County's takeover of the Utility in April, 2014. The County does not anticipate an "easy"transfer. He understands Mr. Yovanovich's client is attempting to secure his position with the County, i.e., have the ERCs recognized, to prevent being charged twice for the same Impact(capacity)Fee. He reiterated his recent conversation with Orange Tree's staff was only verbal and was not in writing. Orange Tree's Staff mentioned the day the sale of property from Pulte to OB-One, LLC was recorded, the Developer's Agreement was violated and Orange Tree owed nothing to OB-One. Richard Yovanovich: • Pulte Homes paid a lot of money for capacity. • His client bought the capacity when it purchased the vacant lots from Pulte. 7 December 17,2013 • If the issue is a simply that a letter is required by Orange Tree, Pulte Homes will send a letter notifying the Utility that certain property was sold to OB-One, LLC. He continued he has appeared many times before the Authority because Orange Tree's corporate policy prefers having a lawsuit filed against it, rather than compromising. Orange Tree's position is if it ties up litigation, a Plaintiff may simply capitulate because, in the long run, it would be less expensive. He stated he could litigate the issue and probably win but it would cost his client a great deal of money. He reiterated since the County allowed Orange Tree to charge a fee for capacity, it should force the Utility to honor the capacity. The County should not tolerate that Orange Tree is forcing OB-One to litigate merely because it is the way Orange Tree conducts business. He further stated he will discuss the issue with the County Attorney's Office. Mr. Yovanovich noted: • The County is entitled to receive the prepaid fees when it takes over the Utility. • The money paid for capacity does not belong to Orange Tree Utility Company, Inc. • By charging a second fee for capacity, Orange Tree is attempting to mitigate its losses. Chairman Lam stated in his opinion, the fee was paid but the Utility's refuses to honor it. He asked Assistant County Attorney Scott Stone to explain the responsibilities of the Water and Sewer Commission in the dilemma. Attorney Stone stated the issue was complex and before committing the County, he would research the matter. Jamie French stated Pulte Homes entered into a Refundable Advance Agreement and a Developer's Agreement with Orange Tree which claims Pulte Homes defaulted on the Refundable Advance Agreement. The Bond and Letter of Agreement became useless within a year and the Utility also claimed it was owed money. The Utility may be charging a second capacity fee in order to recoup some of the funds owed to it by Pulte Homes. Mr. French stated when the County takes over the Utility,the County will. assume all liabilities as well as the assets. The County will research further with the County Attorney's Office. Mr. Yovanovich stated the allegation that Pulte did not perform is false. He stated Pulte fully performed under the executed Refundable Advance Agreement because he negotiated it. 8 December 17,2013 He further stated the County should be aware that service was prepaid for 300 units but have received service only 174. There is money somewhere for the remaining 126 units. Jamie French stated the County has been provided copies of all Developer's Agreement but his office has not been involved in the auditing of those documents, nor in the takeover process during the past two years. Jerry Morgan asked if Orange Tree Utility Company had been invited to attend the meeting. Jamie French stated Orange Tree was not invited because their position is the matter is a legal issue that should go to litigation. Chairman Lam suggested the matter should be referred to the County Attorney's Office for further investigation and requesting Staff return with recommendations concerning how the Authority should proceed. Dr. Fay Biles moved to approve referring the matter to the County Attorney's office for further investigation and requesting Staff return with recommendations concerning how the Authority should proceed. Jerry Morgan offered a Second in support of the motion. Carried unanimously, 4—0. VI. PUBLIC COMMENTS (None) VII. AUTHORITY MEMBERS DISCUSSION • Jerry Morgan asked he remembered reviewing the Developer's Agreement and asked why the capacity fee wasn't transferred with the lots. Jamie French replied it is the Utility's position the Developer's Agreement was violated when the property was sold and it wasn't notified. Orange Tree has always hired very competent Counsel who is well versed in Utility Law. He stated Staff will provide its opinion to the Authority as will the County Attorney's office. VIII. ADJOURN There being no further business for the good of the County, the meeting was adjourned by order of the Chair at 10:55 AM 9 December 17,2013 COLLIER COUNTY WATER AND WASTEWATER AUTHORITY 7;;;' LQVVEI 'LAM,CHAIRM The Minutes were approved by the Board/Committee Chair on c9 °1, ,2014 "as submitted" [y 1 OR "as amended" [ 1. 10