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Agenda 12/03/2018 PELICAN BAY SERVICES DIVISION Municipal Services Taxing and Benefit Unit NOTICE OF PUBLIC MEETING MONDAY, DECEMBER 3, 2018 THE BUDGET COMMITTEE OF THE PELICAN BAY SERVICES DIVISION WILL MEET ON MONDAY, DECEMBER 3rd AT 9:00 AM AT THE PBSD OFFICE LOCATED AT 801 LAUREL OAK DRIVE, SUITE 302, NAPLES, FL. AGENDA 1. Pledge of Allegiance 2. Roll call 3. Agenda approval 4. Approval of 08/22/2018 meeting minutes 5. Audience comments 6. EOY 2018 results and related effects on the FY 2019 budget 7. Update on LT capital project planning 8. *Proposed PBSD funding policy change 9. Old Business 10. New Business 11. Adjourn *indicates possible action items ANY PERSON WISHING TO SPEAK ON AN AGENDA ITEM WILL RECEIVE UP TO THREE(3) MINUTES PER ITEM TO ADDRESS THE BOARD. THE BOARD WILL SOLICIT PUBLIC COMMENTS ON SUBJECTS NOT ON THIS AGENDA AND ANY PERSON WISHING TO SPEAK WILL RECEIVE UP TO THREE(3) MINUTES. THE BOARD ENCOURAGES YOU TO SUBMIT YOUR COMMENTS IN WRITING IN ADVANCE OF THE MEETING. ANY PERSON WHO DECIDES TO APPEAL A DECISION OF THIS BOARD WILL NEED A RECORD OF THE PROCEEDING PERTAINING THERETO, AND THEREFORE MAY NEED TO ENSURE THAT A VERBATIM RECORD IS MADE,WHICH INCLUDES THE TESTIMONY AND EVIDENCE UPON WHICH THE APPEAL IS TO BE BASED. IF YOU ARE A PERSON WITH A DISABILITY WHO NEEDS AN ACCOMMODATION IN ORDER TO PARTICIPATE IN THIS MEETING YOU ARE ENTITLED TO THE PROVISION OF CERTAIN ASSISTANCE. PLEASE CONTACT THE PELICAN BAY SERVICES DIVISION AT (239) 597-1749 OR VISIT PELICANBAYSERVICESDIVISION.NET. BUDGET COMMITTEE PELICAN BAY SERVICES DIVISION AUGUST 22,2018 The Budget Committee of the Pelican Bay Services Division met on Wednesday,August 22,at 9:00 a.m. at the SunTrust Bank Building, located at 801 Laurel Oak Drive, Suite 302, Naples, Florida 34108. In attendance were: Budget Committee Ken Dawson Mike Shepherd, Chairman Nick Fabregas (absent) Joe Chicurel Rick Swider Pelican Bay Services Division Staff Mary McCaughtry, Operations Analyst Neil Dorrill, Administrator Lisa Jacob,Associate Project Manager Marion Bolick, Operations Manager Barbara Shea, Recording Secretary Also Present None APPROVED AGENDA (AS PRESENTED) 1. Pledge of Allegiance 2. Roll call 3. Agenda approval 4. Audience comments 5. Long term needs a. Project identification 1. Sidewalks 2. Lake bank remediation 3. Stormwater collection structures/piping 4. Shop/office replacement 5. Other b. Cost identification c. Borrowing methods/timing d. Recommendations 6. PBSD Funding Stream a. Ad valorem vs. non-ad valorem b. ERU assignments for commercial members c. Recommendations 7. Other Business 8. New Business 9. Adjourn 1 Budget Committee of the Pelican Bay Services Division August 22,2018 Minutes ROLL CALL Mr. Fabregas was absent and a quorum was established. AGENDA APPROVAL Mr. Dawson motioned, Dr. Chicurel seconded to approve the agenda as presented. The motion carried unanimously. AUDIENCE COMMENTS None UPDATE ON THE PROPOSED PBSD FY19 BUDGET Mr.Shepherd updated the committee on FY19 budget related issues including(1)the FY19 budget was approved by the BCC at its June workshop, and final approval is expected in September, (2) ABB's current estimate for lake bank remediation for lake 2-9 is $340,000; the FY19 includes an accrued amount of$500,000, and (3) the lowest bid to complete the Gulf Park Dr. cut-through project is $73,000;the FY19 budget includes $40,000 for this project. LONG-TERM FINANCING Mr. Shepherd commented on the growing consensus of PB residents for the PBSD Board to obtain long-term financing for large projects which would address our 40-year old failing infrastructure. To obtain long-term financing,the PBSD Board would need to specifically identify those projects to be financed and quantify the total amount of funds to complete them. Mr. Shepherd suggested that any project with an estimated cost exceeding$1 million dollars should be included in our long-term financing package. Mr. Dorrill commented on his recent conversations with Mr. Nick Casalanguida, Deputy County Manager,who is on board with providing assistance to the PBSD with long-term financing. He suggested using a "commercial paper equivalent" as the financing tool with an approximate pay-back of seven years. This financing tool was suggested because the related administrative fees are much lower than are associated with issuing a municipal bond. To obtain this financing, engineering analyses to quantify the total funding would be necessary in order to get the issue "sized." Mr. Dorrill commented that the "borrower" would be Collier County. The committee suggested that Mr.Dorrill explore(with County staff)alternate financing terms(preferably at least 10 years). Mr. Dawson expressed concerns over engineering estimates for a group of projects to be funded through long-term financing, which may, in fact, result in inadequate funding resulting from projects being completed over 5-10 years, with increasing costs. LONG-TERM NEEDS SIDEWALKS Mr. Dorrill commented that the County has no funding model to replace sidewalk infrastructure. He commented on recent discussions with Mr. Casalanguida which indicate that the County would be agreeable to some level of cost sharing to replace sidewalks in Pelican Bay. Mr. Dorrill commented that his next meeting with Mr. Casalanguida is scheduled for Aug. 30,and 2 Budget Committee of the Pelican Bay Services Division August 22, 2018 Minutes he requested that Mr. Shepherd attend this meeting. Mr. Dorrill suggested that it would be ideal to obtain a sidewalk cost sharing commitment from the County as soon as possible. Mr. Shepherd commented that the PBSD Board, at their Sept. board meeting, will vote on whether to approve a proposal by ABB to estimate the cost to replace all PB pathways with six- foot concrete sidewalks, not to exceed $40,000. Mr. Shepherd suggested that ABB also explore whether the County would require any additional sidewalks be added to a proposed replacement pathway project. LAKE BANK REMEDIATION Mr. Shepherd provided a 2017 schedule entitled"PBSD—Lake Bank Improvement Needs" of the ten worst PBSD lakes needing immediate lake bank remediation attention, with associated cost estimates utilizing four different methods of remediation. He also provided a copy of ABB's cost estimate of approximately$340,000 for lake bank remediation of lake 2-9,which incorporates three different methods of remediation. STORMWATER COLLECTION STRUCTURES/PIPING Mr. Shepherd provided ABB's rough estimate of cost of approximately $400,000 to identify and inspect all stormwater drainage pipes in Pelican Bay. Mr. Dorrill suggested that the PBSD could do an"invitation-to-bid" for this project,which may lower the cost. He commented that the PBSD and the County have not come to an agreement on who is responsible for the stormwater drainage pipes from PB roads to the"first lake,"and suggested that if the PBSD takes over this responsibility, then we would need some level of cost sharing from the County to be provided through an annual appropriation. SHOP/OFFICE REPLACEMENT Mr. Shepherd commented that Ms. Jacob has contacted an architect (Q. Grady Minor) to develop an estimate of cost for replacing our existing maintenance shop, and would incorporate space for office staff. He provided a document entitled, "Space planning for 6200 Watergate Way," developed by Mr. Bolick, which detailed all required features for a facility to house both Field Operations and Administration. OTHER Mr. Dorrill suggested that a reconstruction of the beach dune swale would cost at least $1 million dollars and should be considered as an addition to the list of projects to be financed. CONCLUSIONS Mr. Shepherd commented that the committee has identified four projects and suggested that the PBSD Board move forward with obtaining estimated total costs. Mr. Dorrill suggested that we move forward on pathways more quickly. By consensus, the committee agreed to concentrate on sidewalk replacement for now. PBSD FUNDING STREAM Mr. Shepherd commented on how the PBSD funds its operations through two parallel streams of funds collected through ad-valorem taxation and an annual assessment, calculated via ERUs,with no requirement to keep the funds collected separate. He commented that a number of 3 Budget Committee of the Pelican Bay Services Division August 22,2018 Minutes our commercial members, during our FY19 budget discussions, had requested that the PBSD Board take a second look at the methodology for funding our operations. Mr. Shepherd commented on his research into PBSD allocations of ERUs to commercial members and noted the following: • 6%of PB residents use the golf course (there are 450 full-time golf club members). • The golf course is comprised of 220 acres and is considered unimproved property by the County Appraiser's Office. • Commercial members are allocated 5.75 ERUs per acre. • Commercial unimproved property is allocated 1 ERU per acre. • The PBSD has control over its`ERU assignment methodology." • Since the golf course (17% of PB land) is considered unimproved property, "the Club" is receiving a huge "preference." • The PBSD maintains 20 of the lakes on the golf course. • The Club's shop area is incorrectly listed as unimproved property. • The County's park is listed as unimproved property. • The acreage at 6200 Watergate Way, owned by the County, is incorrectly listed as unimproved property. • If the ad-valorem tax income stream were increased, the ERU income stream were decreased, and the "unimproved property irregularities" were corrected, then the majority of commercial members would most likely be placated. Mr. Dorrill suggested that it would be helpful to review the original report which created the existing methodology for our two streams of revenue, including the ERU allocation methodology. He stated that staff would attempt to locate this report and provide it to the committee members. Mr. Dorrill commented that the PBSD administers the assessment roll. He will follow up on a possible administrative correction to the Club's shop area and County property at 6200 Watergate Way listings as unimproved land (a correction would provide an additional $40,000 annually to the PBSD). Mr.Dorrill commented that a change to the revenue stream formula would require BCC approval. ADJOURNMENT The meeting was adjourned at 10:30 a.m. ( Mike Shepherd, Chairman Minutes approved [ 1 as presented OR I 1 as amended ON I 1 date 4 Agenda items#6,7,8 Page 1 of 8 Budget Committee Meeting — Preparation Commentary First, some commentary on EOY 2018 results.... It is too early to be formulating any final thoughts on the PBSD 2018 budget results, as the county is still in the process of entering closing journal entries for everything from Fleet Maintenance charges to transfers to the Tax Collector, BUT it would appear that we probably have a decent surplus going into 2019.... For once, the gods were shining on us. An analysis was provided at the November full PBSD board meeting, giving an early glimpse of those favorable variances for our most significant Account 109. Account 778 is essentially an accrual account on auto pilot and Account 320 does not represent enough money to justify a serious amount of energy in preliminary examination. We will eventually need to take a close look at the Capital Project Account 322. For example, we had anticipated paying for IRMA related street light and sign damage in FY2018. Because of the sluggishness in municipal government which we have all become accustomed to, those contracts and payments did not get executed until just recently. The work is still in the hopper and the charges will eventually come due this year, but because of the unfortunate timing of those flows, an uninformed observer might improperly conclude that we are awash in money. Such a conclusion would be premature. As soon as we get firmly along with those originally intended spending plans, we will take a final look at 2018 and gauge how the results might inform our planning for future budgets, specifically FY 2020. One thing we will need to do after we have an accurate understanding of our 2018 results is to "doctor up" our final approved budget for FY2019, both to correct any unintentional errors which found their way into the "official" county version, but also to repurpose any carry forward surplus to areas where the funds can be effective. For example, our budget for Reclaimed Water in FY2018 was $131,200. We had approved a final budget for FY2019 of exactly the same amount. Somehow during the final paperwork shuffling at the county, the budget line for Reclaimed Water was restated as zero ($0). Clearly, we will need to make a budget amendment to correct this. Likewise, we had planned to spend $40k from Account 322 in FY2018 for the Gulf Park cut. The final bill will be closer to $80k and fall into FY2019, generating a overrun and timing complication. Again, these considerations will need to wait until we have an authentic understanding of any actual surplus from 2018. Our choices will be to let the money "ride" and become part of the carry forward for FY2020, OR make a budget amendment to enhance any operational lines which might be viewed, in hindsight, as anemic, OR make a budget amendment to add dollars to specific project accounts (like the Gulf Park cut through). Agenda items#6,7,8 Page 2 of 8 As an aside, any funds which we do redirect to specific Capital Projects will remain in those projects until they are officially closed. This distinction will become more meaningful when we begin talks regarding the impact on the 2020 Special Assessment. In any event, these discussions will form the basis of some future meetings... but not this meeting. This meeting has two goals.... First to provide a FYI update on the LT Capital Project planning /funding which we discussed at the 8/22/2018 Budget Committee meeting, and second (and most importantly), to propose a significant policy recommendation regarding how we fund the PBSD. First, the FYI part.... at the August meeting, we agreed that five projects facing the Services Division in the immediate future are too expensive to manage through our normal, short term funding mechanisms. These initiatives are restated in the attached LT Project Summary (Exhibit 1). We agreed that the first important step for advancing these projects is to competently characterize the cost. Exhibit 1 shows the activity which our staff and others are currently pursuing to develop those costs, and includes an estimate of when we will be in a position to move forward with funding recommendations. We should be positioned to examine funding proposals early next year.... In anticipation of this schedule, Neil Dorrill has been working with his counterparts at the county to begin identifying the various funding mechanisms available to us and he will likely be making recommendations during the first quarter of next year. The early contours of our funding strategy are beginning to take shape, and would lead us to opening a "line of credit" with a local bank. The County would coordinate the "offering" to any interested banks and thereby create competition to provide the most attractive terms (interest rate, amortization period, ease of access, repayment, etc.) Because we are an affluent community with essentially unlimited taxing authority, the county believes that we will find several local banks anxious to participate, with very attractive proposals. The plan might be something along the following lines: • An open credit line for $25M, more than enough to satisfy the funding needs for our five major initiatives, along with a cushion for inevitable unknowns. • Funds could be accessed at times and in amounts of our choosing.... In other words, as fast as we can actually execute our plans. This is important because some of the intended projects could be on-going for several years. We would only need to borrow (and pay for) funds at a rate which we could actually metabolize. Agenda items#6,7,8 Page 3 of 8 • Loan amortization schedule likely based on a fixed rate over 10-20 years, ideally with a renewal or maintenance option. • PBSD would introduce a new budget line in to amortize the credit line. • Issuance costs would be on the order of$50,000 or less, far lower than the cost of raising the money in the municipal bond market From an administrative standpoint, we already have the authority to open such a line of credit with an affirmative vote of the Division Board of Directors. The second goal of this meeting, and the real meat for our deliberation, regards a proposal for modifying the basic funding techniques which the PBSD uses to raise money for on-going needs. At the August meeting, we reviewed the basic underpinnings of our two distinct funding streams... an ad valorem stream based on the taxable value of each property in Pelican Bay, PLUS a non-ad valorem stream. The non-ad valorem stream assesses each residential owner a fixed amount which does not vary with property value. Commercial properties are assessed in accordance with an arbitrary formula based on the acreage and "improvement level" of the parcel. This non-ad valorem stream places a regressive burden on residential owners. The arbitrary burden for commercial properties results in some perverse assessments which are often difficult to justify and complicate the business plan for many of those members. At the time we approved our FY2019 special assessment, we made a commitment to those commercial members to reexamine the legitimacy of this funding technique. The current funding model has been in effect since 1993, the last time a significant change in methodology was adopted. The characteristics for FY2018 are displayed in Exhibit 2. In the course of our analysis, we identified two parcels which were being incorrectly assessed because of incorrect categorization between improved and unimproved property. We also observed that substantial acreage owned by The Club was classified as unimproved, thus providing a legacy advantage not shared by other commercial property owners. We looked at "revenue neutral" effects which would result from rebalancing our funding between the two existing streams, ranging from 100% ad valorem to 100% non-ad valorem, with several stops in between. Based on the examination at that August meeting and the take-away commentary, I have assembled an incremental compromise proposal, with the following attributes: Agenda items#6,7,8 Page 4 of 8 • Changes the current formula for assigned ERU's to commercial properties from 1.0 ERU per unimproved acre / 5.75 ERU per improved parcel TO 1.75 ERU per unimproved acre / 5.5 ERU per improved parcel. This change serves to incrementally balance the equity between the two defined usage categories (improved and un-improved) and also serves to increase the total number of ERUs (with a resulting reduction in the charge per ERU). • Administratively corrects the categorization of two improved properties which have benefited from inaccurately being categorized as un-improved properties (i.e. 5.5 ERU per acre in lieu of 1.75 ERU per acre). • Raises the mill rate for our ad valorem stream to a level which is suitable for funding our "accrual" needs (i.e. Street Lighting, Lake Bank Remediation, Beach Renourishment, etc) and simultaneously reduces the non-ad valorem assessment to a level required to fund our on-going operational needs, loan amortization (if any), and supplements to the ad valorem fund during extended periods of declining property values. The rebalancing would be made in such a way as to keep the aggregate funds generated unchanged compared to the funds raised by existing methods (in other words, a revenue neutral proposal). These simultaneous changes result in several moving financial parts, the combined effects of which for FY2018 are shown on the attached Exhibits 3 and 4. The total PBSD burden for all commercial and institutional members would be reduced. The total PBSD burden would also be reduced on residential properties with modest taxable values, accompanied by a corresponding increase in total burden placed on properties with high taxable values (and which are presumably owned by residents of better than average financial means). Notably, even with the proposed changes, the overall method of raising PBSD funds retains it's historically "regressive" nature. Entry level homes would still pay as much as 0.4% of taxable value annually, while homes with the highest valuations would be burdened with levies of less than 0.1%. The Club experiences a modest erosion of it's historical ERU preference, but remains well positioned relative to that of a fully "improved parcel". The increase per golf member would seem to be a tolerable $119 per year. Summary: This funding proposal is incremental in nature, directionally provides welcome relief for commercial and institutional members and reduces regressivity for residential members. co co Kt k / LO Rip E) co MI CD k k k 0 CD 0 2 \ E / / k % 0 \ 0 CD CD o m 9 0 \ 2 2 2 ^ G w2 k 0) c c k \ N $ \ \ a) / / G E > a § f j ■ q \ ° » . 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