Basic Financial Statement 09/30/2012 McGuireWouds LLP
7 Saint Paul Street
Suite 1000
Baltimore MD 21202-1626
Phone:410.659,4400
Fax:410.659.4599
www.mcguirewoods.com
Cheryl O'Donnell Guth MCGUIREWOODS cguth :rewoods.com
Direct:410.659.4420 Directct Fax:410.659.4525
May 27, 2014
VIA EMAIL AND FEDERAL EXPRESS
Richard Yovanovich, Esquire
Coleman, Yovanovich & Koester PA
4001 Tamiami Trail North
Naples, Florida 34103
Dear Mr. Yovanovich:
This firm is bond counsel to Fiddler's Creek Community Development District #2 (the
"District"). The District has previously issued (i) its Special Assessment Revenue Bonds, Series
2004 in the original principal amount of $17,905,000 (the "2004 Bonds") and (ii) its Special
Assessment Revenue Bonds, Series 2005 in the original principal amount of $39,250,000 (the
"2005 Bonds" and, together with the 2004 Bonds, the "Prior Bonds"). All of the Prior Bonds are
owned by Fiddler's CDD Investor LLC (the "Holder").
The Holder has agreed to (1) exchange all of the Prior Bonds for four series of new
bonds to be issued by the District (the "2014 Bonds"), the principal amount thereof to be equal
to the outstanding principal amount of the Prior Bonds plus all accrued and unpaid interest on
the Prior Bonds through December 31, 2012 (the "Exchange Transaction") and (2) waive any
and all other accrued and unpaid interest on the Prior Bonds. Upon the issuance of the 2014
Bonds and the completion of the Exchange Transaction, the Prior Bonds will be cancelled,
considered paid in full, terminated in their entirety and no longer outstanding. The 2014 Bonds
will accrue interest from their date of issue, payable on May 1 and November 1, beginning
November 1, 2014 and principal payments on the 2014 Bonds will be due on November 1 of the
years 2015 through 2038, inclusive. The Exchange Transaction is expected to be approved at
the District's June 25 meeting and to close on or about July 1.
Please let me know if you need any further information regarding the Exchange
Transaction.
• Sincerely,
Cheryl O'Donnell Guth
COG:clj
57374342_2.DOC
FIDDLER'S CREEK COMMUNITY
DEVELOPMENT DISTRICT #2
BASIC FINANCIAL STATEMENTS
September 30, 2012
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
BASIC FINANCIAL STATEMENTS
September 30, 2012
TABLE OF CONTENTS
PAGES
BASIC FINANCIAL STATEMENTS
Independent Auditors' Report 1-2
Management's Discussion and Analysis (Not Covered by
Independent Auditors' Report) 3-6
Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Assets (Deficit) 7
Statement of Activities 8
Fund Financial Statements:
Balance Sheet - Governmental Funds 9
Reconciliation of the Balance Sheet of Governmental
Funds to the Statement of Net Assets (Deficit) 10
Statement of Revenues, Expenditures and Changes in
Fund Balances - Governmental Funds 11
Reconciliation of the Statement of Revenues, Expenditures
and Changes in Fund Balances of Governmental Funds to
the Statement of Activities 12
Statement of Revenues, Expenditures and Change in
Fund Balance - Budget and Actual - General Fund 13
Notes to Basic Financial Statements 14-27
OTHER REPORTS OF INDEPENDENT AUDITORS
Independent Auditors' Report on Internal Control over Financial Reporting
and on Compliance and Other Matters Based on an Audit of Financial
Statements Performed in Accordance with Government Auditing Standards 28-29
Independent Auditors' Report to District Management 30-31
Schedule of Findings and Recommendations 32
BASIC
FINANCIAL STATEMENTS
Keefe, McCullough & Co., LLP
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT
To the Board of Supervisors
Fiddler's Creek Community Development District#2
Collier County, Florida
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, each major
fund, and the aggregate remaining fund information of Fiddler's Creek Community Development
District #2 (the "District") as of and for the year ended September 30, 2012, and the related notes to
the financial statements, which collectively comprise the District's basic financial statements, as listed
in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this
includes the design, implementation, and maintenance of internal control relevant to the preparation
and fair presentation of financial statements that are free from material misstatement, whether due to
fraud or error.
Auditors' Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the basic financial statements are free
of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditors' judgment,
including the assessment of the risks of material misstatement of the financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers internal control relevant to
the entity's preparation and fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An
audit also includes evaluating the appropriateness of accounting policies used and the reasonableness
of significant accounting estimates made by management, as well as evaluating the overall presentation
of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
6550 N.Federal Highway u Suite 410 * Fort Lauderdale,FL 33308 954.771.0896 954.938.9353(F J' www,knlccpa.com
1
Fiddler's Creek Community Development District #2
Opinion
In our opinion the financial statements referred to in the first paragraph present fairly, in all
material respects, the financial position of the governmental activities, each major fund and the
aggregate remaining fund information of Fiddler's Creek Community Development District #2 as of
September 30, 2012 and the changes in financial position thereof for the year then ended in
accordance with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management's discussion and analysis on pages 3 through 6 be presented to supplement the basic
financial statements. Such information, although not a part of the basic financial statements, is
required by the Governmental Accounting Standards Board, who considers it to be an essential part of
financial reporting for placing the basic financial statements in an appropriate operational, economic,
or historical context. We have applied certain limited procedures to the required supplementary
information in accordance with auditing standards generally accepted in the United States of America,
which consisted of inquiries of management about the methods of preparing the information and
comparing the information for consistency with management's responses to our inquiries, the basic
financial statements, and other knowledge we obtained during our audit of the basic financial
statements. We do not express an opinion or provide any assurance on the information because the
limited procedures do not provide us with sufficient evidence to express an opinion or provide any
assurance.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated October
23, 2013, on our consideration of the District's internal control over financial reporting and on our
tests of its compliance with certain provisions of laws, regulations, contracts and other matters. The
purpose of that report is to describe the scope of our testing of internal control over financial reporting
and compliance and the results of that testing, and not to provide an opinion on internal control over
financial reporting or on compliance. That report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the District's internal control over
financial reporting and compliance.
Kele,ncett6u t 8c LL-p
KEEFE, McCULLOUGH & CO., LLP
Fort Lauderdale, Florida
October 23, 2013
2
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
MANAGEMENT'S DISCUSSION AND ANALYSIS
September 30, 2012
Our discussion and analysis of Fiddler's Creek Community Development District #2's (the
District) financial performance provides an overview of the District's financial activities for the
years ended September 30, 2012 and 2011. Please read it in conjunction with the District's basic
financial statements, which immediately follow this discussion.
FINANCIAL HIGHLIGHTS
The following are the highlights of financial activity for the year ended September 30,
2012:
• The District's total liabilities exceeded its assets at September 30, 2012
by $ 39,732,177 (deficit).
• The District's total revenues were $ 5,729,557, $ 5,691,410 from non-ad
valorem assessments, $ 2,724 from interest income and $ 35,423 from
miscellaneous income. The District's expenses for the year were
$ 11,649,626.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the District's basic
financial statements. The basic financial statements are comprised of three components:
1) government-wide financial statements, 2) fund financial statements, and 3) notes to financial
statements.
Government-Wide Financial Statements
The government-wide financial statements, which consist of the following two statements,
are designed to provide readers with a broad overview of the District's finances, in a manner
similar to a private sector business.
The statement of net assets (deficit) presents information on all the District's assets and
liabilities, with the difference between the two reported as net assets (deficit). Over time,
increases or decreases in net assets may serve as a useful indicator of whether the financial
position of the District is improving or deteriorating.
The statement of activities presents information showing how the District's net assets
changed during the year. All changes in net assets are reported as soon as the underlying event
giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues
and expenses are reported in this statement for some items that will only result in cash flows in
future fiscal periods.
The government-wide financial statements can be found on pages 7 and 8 of this report.
Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources that
have been segregated for specific activities or objectives. The District has only one fund type:
governmental funds.
3
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
MANAGEMENT'S DISCUSSION AND ANALYSIS
September 30, 2012
Governmental funds are used to account for essentially the same functions reported as
governmental activities in the government-wide financial statements. However, unlike the
government-wide financial statements, governmental fund financial statements focus on near-term
inflows and outflows of spendable resources, as well as balances of spendable resources available
at the end of the year. Such information may be useful in evaluating a government's near-term
financing requirements.
Because the focus of governmental funds is narrower than that of the government-wide
financial statements, it is useful to compare the information presented for governmental funds with
similar information presented for governmental activities in the government-wide financial
statements. By doing so, readers may better understand the long-term impact of the District's
near-term financing decisions. Both the governmental fund balance sheet and the statement of
revenues, expenditures, and changes in fund balances provide reconciliations to facilitate this
comparison between governmental funds and governmental activities.
The governmental fund financial statements can be found on pages 9 through 13 of this
report.
Notes to Basic Financial Statements
The notes provide additional information that is essential for a full understanding of the
data provided in the government-wide and fund financial statements. The notes to basic financial
statements can be found on pages 14 through 27 of this report.
GOVERNMENT-WIDE FINANCIAL ANALYSIS
As noted earlier, net assets may serve over time as a useful indicator of financial position.
The following table reflects the condensed government-wide statement of net assets (deficit) as of
September 30, 2012 and 2011:
Fiddler's Creek Community Development District #2
Statement of Net Assets (Deficit)
2012 2011
Current and other assets $ 10,491,102 $ 11,935,512
Capital assets, net 42,600,912 44,074,535
Total assets 53,092,014 56,010,047
Other liabilities 2,783,378 13,862,156
Long-term liabilities 90,040,813 75,960,000
Total liabilities 92,824,191 89,822,156
Net assets (deficit):
Invested in capital assets,
net of related debt (deficit) (45,353,434) (35,055,465)
Restricted for debt service 4,443,020 -
Unrestricted 1,178,237 1,243,357
Total net assets (deficit),
as restated $ (39,732,177) $ (33,812,108)
4
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
MANAGEMENT'S DISCUSSION AND ANALYSIS
September 30, 2012
Governmental Activities
Governmental activities for the year ended September 30, 2012 increased the District's net
assets (deficit) by $ 5,920,069, as reflected in the table below:
Fiddler's Creek Community Development District#2
Statement of Activities
2012 2011
REVENUES:
Program revenue:
Non-ad valorem assessments $ 5,691,410 $ 1,214,823
General revenue:
Miscellaneous income 35,423 78,794
Interest income 2,724 5,350
Total revenues 5,729,557 1,298,967
EXPENSES:
Interest expense 4,799,432 6,319,752
Allowance for assessments 3,752,576
Physical environment 2,446,614 2,465,615
General government 572,799 2,130,646
Other debt service costs 78,205 78,205
Total expenses 11,649,626 10,994,218
Change in net assets (5,920,069) (9,695,251)
NET ASSETS (DEFICIT),
BEGINNING OF YEAR,
AS RESTATED (33,812,108) (24,116,857)
NET ASSETS (DEFICIT),
END OF YEAR $ (39,732,177) $ (33,812,108)
ANALYSIS OF THE GOVERNMENTAL FUNDS
As noted earlier, the District uses fund accounting to ensure and demonstrate compliance
with finance-related legal requirements. The focus of the District's governmental funds is to
provide information on near-term inflows, outflows, and balances of spendable resources. Such
information is useful in assessing the District's financing requirements. In particular, unassigned
fund balance may serve as a useful measure of a District's net resources available for spending at
the end of the fiscal year. The General, Debt Service and Capital Project Funds comprise the total
governmental funds. As of the end of the most current fiscal year, the District's governmental
funds reported combined ending fund balance of$ 8,340,051.
5
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
MANAGEMENT'S DISCUSSION AND ANALYSIS
September 30, 2012
CAPITAL ASSETS AND DEBT ADMINISTRATION
The District's investment in capital assets for its governmental activities as of September
30, 2012 amounts to $ 42,600,912 net of accumulated depreciation and consists of land and
improvements, infrastructure, buildings and improvements, equipment, and construction in
progress.
At the end of the year, the District had total bonded debt outstanding of$ 91,747,584. The
District's debt represents bonds secured solely by a specified revenue source (i.e., revenue bonds).
Additional information on the District's long-term debt can be found in Note 5 on pages 20
through 23 of this report.
GENERAL FUND BUDGETARY HIGHLIGHTS
There was an amendment to the September 30, 2012 budget. Actual expenditures exceeded
budget due to certain litigation expenditures, including certain legal fees paid by the Trustee
without the District's consent. As more fully described in Note 11, the District filed suit seeking
to recover these amounts. The suit is ongoing, however, the District has obtained an order by the
trial court directing the Trustee to recommence paying construction draws and to pay the entire
amount of accrued withheld construction draws. This decision was upheld on appeal and the
Trustee has since repaid the District approximately $ 146,500 in accrued unpaid construction
draws in accordance with the appellate court decision. The District has moved for summary
judgment to collect the money that was previously taken by the Trustee for its legal fees from the
construction and the remedial accounts.
ECONOMIC FACTORS AND NEXT YEAR'S BUDGET
Revenues and expenditures for the fiscal year 2013 adopted budget for the General Fund of
the District total approximately $ 1,437,100.
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of Fiddler's Creek
Community Development District #2's finances for all those with an interest. Questions
concerning any of the information provided in this report or requests for additional information
should be addressed to the Fiddler's Creek Community Development District #2, 6131 Lyons
Road, Suite 100, Coconut Creek, FL 33073.
6
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
STATEMENT OF NET ASSETS (DEFICIT)
September 30, 2012
Governmental
Activities
ASSETS:
Cash and cash equivalents $ 9,145,471
Assessment receivable 42,035
Prepaid expenditures 5,000
Due from other government 308
Capital assets:
Non-depreciable 23,745,523�
Depreciable, net 18,855,389
Unamortized bond issuance costs 1,298,288
r �(Pi
Total assets 53,092,014 9
LIABILITIES:
Accounts payable 114,180
Due to other governments 14,629
Due to Bondholder :
Principal 180,000
Interest 433,218
Due to Developer 110,736
Accrued interest payable 403,844 4,Sl`1
Bonds payable, due within one year 1,526,771
Bonds payable, due in more than one year 90,040,813 i.'
Total liabilities 92,824,191
COMMITMENTS AND CONTINGENCIES (Notes 7 and 11) -
NET ASSETS (DEFICIT):
Invested in capital assets, net of related debt (deficit) (45,353,434)-"y
Restricted for debt service 4,443,020
Unrestricted 1,178,237
Total net assets (deficit) $ (39,732,177)
The accompanying notes to basic financial statements are an integral part of these statements.
7
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
STATEMENT OF ACTIVITIES
For the Year Ended September 30, 2012
Governmental
Activities
Net Revenues
Program Revenues (Expenses) and
Charges Operating Capital Change in
for Grants and Grants and Net Assets
Expenses Services Contributions Contributions (Deficit)
FUNCTIONS/PROGRAMS:
Governmental activities:
Interest expense $ 4,799,432 $ 3,747,062 $ - $ - $ (1,052,370)
Allowance for assessments 3,752,576 - - - (3,752,576)
Physical environment 2,446,614 925,018 - - (1,521,596)
General government 572,799 1,019,330 - - 446,531
Other debt service cost 78,205 - - - (78,205)
Total governmental
activities $ 11,649,626 $ 5,691,410 $ - $ - (5,958,216)
General revenues:
Miscellaneous income 35,423
Interest income 2,724
Change in net assets (5,920,069)
Net assets (deficit), October 1, 2011, as restated(Note 12) (33,812,108)
Net assets (deficit), September 30, 2012 $ (39,732,177)
The accompanying notes to basic financial statements are an integral part of these statements.
8
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FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF NET ASSETS (DEFICIT)
September 30, 2012
AMOUNTS REPORTED FOR GOVERNMENTAL ACTIVITIES IN THE
STATEMENT OF NET ASSETS (DEFICIT) ARE DIFFERENT BECAUSE:
Total fund balances of governmental funds in the balance sheet, page 9 $ 8,340,051
Capital assets used in governmental activities are not financial
resources and, therefore, are not reported in the funds:
The cost of capital assets is 52,614,105
Less accumulated depreciation (10,013,193)
Other assets used in governmental activities are not financial resources
and therefore are not reported in the governmental funds:
Deferred charge on issuance costs (to be amortized over
the life of the debt) 1,909,498
Less accumulated amortization (611,210)
Certain liabilities are not due and payable in the current period,
and therefore are not reported in the governmental funds:
Accrued interest payable (403,844)
Governmental revenue bonds payable (91,567,584)
NET ASSETS (DEFICIT) OF GOVERNMENTAL ACTIVITIES, PAGE 7 $ (39,732,177)
The accompanying notes to basic financial statements are an integral part of these statements.
10
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FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
RECONCILIATION OF THE STATEMENT OF REVENUES,
EXPENDITURES AND CHANGES IN FUND BALANCES
OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
For the Year Ended September 30, 2012
NET CHANGES IN FUND BALANCES - TOTAL
GOVERNMENTAL FUNDS, PAGE 11 $ 3,352,446
Amounts reported for governmental activities in the statement of
activities are different because:
Governmental funds report capital outlays as expenditures.
However, in the statement of activities, the cost of those
assets is depreciated over their estimated useful lives:
Expenditures for capital assets 80,677
Less current year provision for depreciation (1,554,300)
Certain amounts relating to prior year receivables are
considered expenses in the statement of activities but do not
affect the fund level statements. (3,752,576)
Certain items reported in the statement of activities do not require
the use of current financial resources and therefore are not
reported as expenditures in the governmental funds:
Provision for amortization of bond issuance costs (78,205)
Change in accrued interest payable (3,968,111)
CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES, PAGE 8 $ (5,920,069)
The accompanying notes to basic financial statements are an integral part of these statements.
12
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND
BALANCE - BUDGET AND ACTUAL - GENERAL FUND
For the Year Ended September 30, 2012
Amended
Original and Final
Budget Budget Actual Variance
REVENUES:
Non-ad valorem assessments $ 1,350,068 $ 1,944,348 $ 1,944,348 $ -
Interest income 1,000 565 565 -
Total revenues 1,351,068 1,944,913 1,944,913 -
EXPENDITURES:
Current:
General government: 231,347 990,403 526,115 464,288
Physical environment 1,119,721 898,768 892,314 6,454
Total expenditures 1,351,068 1,889,171 1,418,429 470,742
Excess of revenues
over expenditures - 55,742 526,484 470,742
OTHER FINANCING SOURCES:
Transfers in - 736,034 268,754 (467,280)
Net change in fund balance - 791,776 795,238 3,462
FUND BALANCE(DEFICIT),
October 1, 2011 (582,451) (582,451) (582,451) -
FUND BALANCE(DEFICIT),
September 30, 2012 $ (582,451) $ 209,325 $ 212,787 $ 3,462
The accompanying notes to basic financial statements are an integral part of these statements.
13
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
NOTES TO BASIC FINANCIAL STATEMENTS
September 30, 2012
NOTE 1 - ORGANIZATION AND OPERATIONS
Fiddler's Creek Community Development District #2 (the District) was established
November 19, 2002 under the provisions of Chapter 190 of the Florida Statutes by the Collier
County Board of County Commissioners. The District was established for the purposes of
financing and managing the acquisition, construction, maintenance and operation of the
infrastructure necessary for community development within its jurisdiction. The District is
authorized to issue bonds for the purpose, among others, of financing, funding, planning,
establishing, acquiring, constructing or reconstructing, enlarging or extending, equipping,
operating and maintaining water management, water supply, sewer and wastewater management,
bridges or culverts, roads, landscaping, street lights and other basic infrastructure projects within
or without the boundaries of the Fiddler's Creek Community Development District #2. The
District is governed by a five-member Board of supervisors who are elected for four year terms.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The basic financial statements of the District have been prepared in conformity with
generally accepted accounting principles as applied to governmental units. The District's more
significant accounting policies are described below:
The financial reporting entity:
The criteria used for including component units consist of identification of legally separate
organizations for which the Board of Supervisors of the District are financially accountable. This
criteria also includes identification of organizations for which the nature and significance of their
relationship with the primary government are such that exclusion would cause the reporting
entity's basic financial statements to be misleading or incomplete. Based upon this review, there
were no potential component units of the District.
Basis of presentation:
FINANCIAL STATEMENTS - GOVERNMENT-WIDE STATEMENTS
The District's basic financial statements include both government-wide (reporting the
District as a whole) and fund financial statements (reporting the District's major. funds). Both the
government-wide and fund financial statements categorize primary activities as either
governmental or business type. All of the District's activities are classified as governmental
activities.
In the government-wide statement of net assets, the governmental activities column is
presented on a consolidated basis, if applicable, and is reported on a full-accrual, economic
resource basis, which recognizes all noncurrent assets and receivables as well as all noncurrent
debt and obligations, when and if applicable.
The government-wide statement of activities reports both the gross and net cost of each of
the District's functions. The net costs, by function, are also supported by general revenues, other
revenue, etc. The statement of activities reduces gross expenses by related program revenues,
operating and capital grants. Program revenues must be directly associated with the function.
Operating grants include operating-specific and discretionary (either operating or capital) grants
while the capital grants column reflect capital-specific grants. For the year ended September 30,
2012, the District had $ 5,691,410 in program revenues.
14
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
NOTES TO BASIC FINANCIAL STATEMENTS
September 30, 2012
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
This government-wide focus is more on the ability to sustain the District as an entity and
the change in the District's net assets resulting from the current year's activities.
FINANCIAL STATEMENTS - FUND FINANCIAL STATEMENTS
The accounts of the District are organized on the basis of funds. The operations of the
funds are accounted for with separate self-balancing accounts that comprise their assets, liabilities,
fund equity, revenues and expenditures.
The District reports the following major governmental funds:
General Fund - This fund is used to account for all operating activities of the District. At
this time, revenues are derived principally from non-ad valorem assessments and interest
income.
Debt Service Fund - These funds are used to account for the accumulation of resources for
and the payment of long-term debt principal and interest.
Capital Projects Fund - These funds are used to account for financial resources segregated
for the acquisition or construction of capital facilities other than those financed by
enterprise operations, if applicable.
Measurement focus, basis of accounting and presentation:
Basis of accounting refers to the point at which revenues or expenditures/expenses are
recognized in the accounts and reported in the basic financial statements. It relates to the timing of
the measurements made regardless of the measurement focus applied. Governmental funds use the
current financial resources measurement focus and the government-wide statements use the
economic resources measurement focus.
Governmental activity in the government-wide financial statements is presented on the
accrual basis of accounting. Revenues are recognized when earned and expenses are recognized
when incurred.
The governmental fund financial statements are presented on the modified accrual basis of
accounting under which revenue is recognized in the accounting period in which it becomes
susceptible to accrual (i.e., when it becomes both measurable and available). "Measurable" means
the amount of the transaction can be determined and "available" means collectible within the
current period or soon enough thereafter to be used to pay liabilities of the current period. For
this purpose, the District considers revenues to be available if they are collected within sixty days
of the end of the current year.
As a general rule, the effect of interfund activity has been eliminated from the government-
wide financial statements.
Budget:
A budget is adopted for the General Fund and Debt Service Funds on an annual basis.
Appropriations lapse at fiscal year end. Changes or amendments to the total budgeted
expenditures of the District must be approved by the District Board of Supervisors.
15
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
NOTES TO BASIC FINANCIAL STATEMENTS
September 30, 2012
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The District follows these procedures in establishing the budgetary data reflected in the
financial statements:
a. Each year the District Manager submits to the District Board a proposed operating
budget for the fiscal year commencing the following October 1.
b. Public hearings are conducted to obtain taxpayer comments.
c. Prior to October 1, the budget is legally adopted by the District Board.
d. The budgets are adopted on a basis consistent with generally accepted accounting
principles.
Cash and cash equivalents:
Cash and cash equivalents are defined as demand deposits, money market accounts, and
short-term investments with original maturities of three months or less from the date of
acquisition.
Investments:
Investments, if held, are stated at their fair value, which is based on quoted market prices.
Unrealized gains and losses in fair value are recognized. Certain money market investments are
stated at amortized cost if they have a remaining maturity of one year or less when purchased.
Capital assets:
Capital assets are reported in the governmental activities column in the government-wide
financial statements. The government defines capital assets as assets with an initial, individual
cost of more than $ 750 and an estimated useful life in excess of one year. Such assets are
recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital
assets are recorded at estimated fair market value at the date of donation.
The costs of normal maintenance and repairs that do not add to the value of the asset or
materially extend asset lives are not capitalized.
Assessments:
Assessments are non-ad valorem assessments on all property within the District.
Assessments are levied each November 1 on property as of the previous January 1. Certain
assessments are collected upon closing on each lot sold and are used to prepay a portion of the
Bonds outstanding. In addition, annual assessments are levied and collected to provide funds for
the debt service on the portion of the Bonds which are not paid for from the prepaid assessments
and to pay for the operations and maintenance of the District. The fiscal year for which annual
assessments are levied begins on October 1 with a maximum discount available for payments
through November 30 and become delinquent on April 1.
Assessments on all non-platted lots within the District are directly billed to the Developer.
16
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
NOTES TO BASIC FINANCIAL STATEMENTS
September 30, 2012
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Deferred revenues:
Deferred revenues include amounts collected before the revenue recognition criteria are
met and receivables which, under the modified accrual basis of accounting, are measurable but not
yet available.
Equity classifications:
Government-wide statements
Equity is classified as net assets and displayed in three components:
a. Invested in capital assets, net of related debt - consists of capital assets including
restricted capital assets, net of accumulated depreciation and reduced by the
outstanding balances of any bonds, or other borrowings that are attributable to the
acquisition, construction or improvement of those assets.
b. Restricted net assets - consists of net assets with constraints placed on the use either
by 1) external groups such as creditors, grantors, contributors, or laws or
regulations of other governments, or 2) law through constitutional provisions or
enabling legislation.
c. Unrestricted net assets - all other net assets that do not meet the definition of
"restricted" or "invested in capital assets, net of related debt."
When both restricted and unrestricted resources are available for use, it is the District's
policy to use restricted resources first, then unrestricted resources as they are needed.
Fund statements
During the year, the District adopted GASB Statement No. 54, Fund Balance Reporting
and Governmental Fund Type Definitions. This statement requires that governmental fund
financial statements present fund balances based on classifications that comprise a hierarchy that is
based primarily on the extent to which the District is bound to honor constraints on the specific
purposes for which amounts in the respective governmental funds can be spent. The classifications
used in the governmental fund financial statements are as follows:
Nonspendable: This classification includes amounts that cannot be spent because
they are either (a) not in spendable form or (b) are legally or contractually
required to be maintained intact. The District classifies prepaid items and
deposits as nonspendable since they are not expected to be converted to cash or
are not expected to be converted to cash within the next year.
Restricted: This classification includes amounts for which constraints have been
placed on the use of the resources either (a) externally imposed by creditors
(such as through a debt covenant), grantors, contributors, or laws or regulations
of other governments, or (b) imposed by law through constitutional provisions
or enabling legislation.
17
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
NOTES TO BASIC FINANCIAL STATEMENTS
September 30, 2012
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Committed: This classification includes amounts that can be used only for
specific purposes pursuant to constraints imposed by formal action of the
District Board of Supervisors (the "Board"). These amounts cannot be used for
any other purpose unless the Board removes or changes the specified use by
taking the same type of action (ordinance or resolution) that was employed when
the funds were initially committed. This classification also includes contractual
obligations to the extent that existing resources have been specifically committed
for use in satisfying those contractual requirements.
Assigned: This classification includes amounts that are constrained by the
District's intent to be used for a specific purpose but are neither restricted nor
committed. This intent can be expressed by the Board or through the Board
delegating this responsibility to the District manager through the budgetary
process. This classification also includes the remaining positive fund balance
for all governmental funds except for the General Fund. The District classifies
existing fund balance to be used in the subsequent year's budget for elimination
of a deficit as assigned.
Unassigned: This classification includes the residual fund balance for the
General Fund.
The District would typically use restricted fund balances first, followed by committed fund
balances, assigned fund balances, and finally unassigned fund balances.
Bond issuance costs:
Bond issuance costs will be amortized over the life of the applicable bond issue using the
straight-line method.
Date of management review:
Subsequent events have been evaluated through October 23, 2013, which is the date the
financial statements were available to be issued.
NOTE 3 - DEPOSITS AND INVESTMENTS
Deposits
The District's deposits must be placed with banks and savings and loans which are qualified
as public depositories prior to receipt of public monies under Chapter 280, Florida Statutes. These
deposits are insured by the FDIC up to $ 250,000. Monies deposited in amounts greater than the
insurance coverage are secured by the banks pledging securities with the State Treasurer in the
collateral pool. At year end, the carrying amount of the District's General Fund deposits was
$ 373,878 and the bank balance was $ 440,188.
18
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
NOTES TO BASIC FINANCIAL STATEMENTS
September 30, 2012
NOTE 3 - DEPOSITS AND INVESTMENTS (continued)
Investments
The investment of funds is authorized by Florida Statutes, which allows the District to
invest in the Local Government Surplus Funds Trust or any intergovernmental investment pool
authorized pursuant to the Florida Interlocal Cooperation Act, SEC registered money market funds
with the highest credit quality rating, interest-bearing time deposits or savings accounts in qualified
public depositories and direct obligations of the U.S. Treasury. Investments of the Debt Service
and Capital Projects Funds are governed by the Bond Indenture.
Investments as of September 30, 2012 of$ 8,771,593 were in money market mutual funds.
These deposits and investments are reflected in the accompanying statement of net assets
and balance sheet - governmental funds in cash and cash equivalents.
Credit risk:
Florida Statutes require the money market mutual funds held by the District to have the
highest credit quality rating from a nationally recognized rating agency. The money market
mutual funds held by the District are rated AAAm by Standard and Poor's and Aaa by Moody's
Investors Service.
Interest rate risk:
Florida Statutes state that the investment portfolio be structured in such manner as to
provide sufficient liquidity to pay obligations as they come due. The average maturity of the
money market fund is 50 days.
Custodial credit risk:
For an investment, custodial credit risk is the risk that, in the event of the failure of the
counterparty, the District will not be able to recover the value of its investments or collateral
securities that are in the possession of an outside party. At September 30, 2012, the District's
investments were not subject to custodial credit risk.
NOTE 4 - CAPITAL ASSETS
Capital asset activity for the year ended September 30, 2012 was as follows:
Balance at Balance at
October 1, September 30,
2011 Additions Deletions 2012
Governmental Activities:
Capital assets, not being
depreciated
Land and improvements $ 16,226,776 $ - $ - $ 16,226,776
Construction-in-progress 7,438,070 80,677 - 7,518,747
Total capital assets, not
being depreciated 23,664,846 80,677 - 23,745,523
19
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
NOTES TO BASIC FINANCIAL STATEMENTS
September 30, 2012
NOTE 4 - CAPITAL ASSETS (continued)
Balance at Balance at
October 1, September 30,
2011 Additions Deletions 2012
Capital assets, being depreciated:
Infrastructure 16,100,762 - - 16,100,762
Buildings and improvements 12,760,696 - - 12,760,696
Equipment 7,124 - - 7,124
Total capital assets, being
depreciated 28,868,582 - - 28,868,582
Total capital assets 52,533,428 80,677 - 52,614,105
Less accumulated depreciation for:
Infrastructure 3,707,366 630,361 - 4,337,727
Equipment 1,612 1,018 - 2,630
Buildings and improvements 4,749,915 922,921 - 5,672,836
Total accumulated depreciation 8,458,893 1,554,300 - 10,013,193
Total capital assets,
being depreciated, net 20,409,689 (1,554,300) - 18,855,389
Governmental activities
capital assets, net $ 44,074,535 $ (1,473,623) $ - $ 42,600,912
Provision for depreciation was charged to functions as follows:
Governmental Activities:
Physical environment $ 1,554,300
NOTE 5 - LONG-TERM DEBT
a. Summary of Long-Term Debt of Governmental Activities
Long-term debt of the governmental activities at September 30, 2012 is comprised of the
following bond issues:
Special Assessment Revenue Bonds, Series 2003A; due in
annual installments through May 2035; interest payable
semiannually at 6.00% through November 2016 and then at
6.375%. $ 26,655,750
Special Assessment Revenue Bonds, Series 2003B; due in
one lump-sum payment November 2013; interest payable
semiannually at 5.75%. 4,179,591
Special Assessment Bonds, Series 2004; due in annual
installments through May 2037; interest payable
semiannually at 6.75%. 14,538,902
Special Assessment Bonds, Series 2005; due in annual
installments through May 2038; interest payable
semiannually at 6.00%. 46,373,341
$ 91,747,584
20
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
NOTES TO BASIC FINANCIAL STATEMENTS
September 30, 2012
NOTE 5 - LONG-TERM DEBT (continued)
The following is a summary of changes in governmental activities long-term debt for the
year ended September 30, 2012:
Balance
October 1, Balance Due
2011 September 30, Within
as restated Additions Deletions 2012 One Year
Special Assessment
Revenue Bonds,
Series 2003A $ 24,889,207 $ 1,865,474 $ 98,931 $ 26,655,750 $ 533,684
Special Assessment
Revenue Bonds,
Series 2003B 3,667,857 523,178 11,444 4,179,591 -
Special Assessment
Revenue Bonds,
Series 2004 14,507,687 66,714 35,499 14,538,902 227,485
Special Assessment
Revenue Bonds,
Series 2005 38,048,634 8,369,177 44,470 46,373,341 765,602
$ 81,113,385 $ 10,824,543 $ 190,344 $ 91,747,584 $ 1,526,771
b. Summary of Significant Debt Terms of Governmental Activities
Special Assessment Revenue Bonds, Series 2003A - The District previously issued
$ 26,385,000 in Special Assessment Revenue Bonds, Series 2003A for the purpose of
funding certain projects within the boundaries of the District. The Bonds are payable in
annual principal installments through May 2035. Interest at 6.00% is payable semiannually
on the first day of each May and November through 2016 and at 6.375% thereafter.
The District is required by the Bond Indenture to levy and collect special assessments
pursuant to Florida Statutes, Section 190.022. The collection of these assessments is
restricted and applied to the debt service requirements of the Bond Issue. Further, the
District covenants to levy special assessments in annual amounts adequate to provide for
payment of principal and interest on the Bonds as they become due.
The Bonds are subject to mandatory redemption at par plus accrued interest to the date of
redemption on a schedule of annual redemptions through May 2035, the maturity date.
The District is required to redeem the Bonds at par prior to schedule from the proceeds of
any assessments prepaid or if certain events occur as outlined in the Bond Indenture. The
Bonds are subject to redemption at the option of the District at par plus accrued interest
from payment date to the redemption date on or after May 1, 2013.
The Indenture requires a reserve fund equal to 7.47% of the 2003A Bonds outstanding. As
of September 30, 2012, the reserve fund account balance was not sufficient to satisfy this
requirement.
Due to the Plan of Reorganization described in Note 11, a new par amount equal to the
outstanding amounts plus unpaid and accrued interest of$ 1,865,474 was approved.
21
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
NOTES TO BASIC FINANCIAL STATEMENTS
September 30, 2012
NOTE 5 - LONG-TERM DEBT (continued)
Special Assessment Revenue Bonds, Series 2003B - The District previously issued $
9,905,000 in Special Assessment Revenue Bonds, Series 2003B for the purpose of funding
certain projects within the boundaries of the District. The Bonds are payable in one
principal installment in November 2013. Interest at 5.75% is payable semiannually on the
first day of each May and November.
The District is required by the Bond Indenture to levy and collect special assessments
pursuant to Florida Statutes, Section 190.022. The collection of these assessments is
restricted and applied to the debt service requirements of the Bond Issue. Further, the
District covenants to levy special assessments in annual amounts adequate to provide for
payment of principal and interest on the Bonds as they become due.
The Bonds are not subject to mandatory redemption prior to their scheduled maturity. The
District is required to redeem the Bonds at par prior to schedule from the proceeds of any
assessments prepaid or if certain events occur as outlined in the Bond Indenture.
The Indenture requires a reserve fund equal to 11.19% of the 2003B Bonds outstanding.
As of September 30, 2012, the reserve fund account balance was not sufficient to satisfy
this requirement.
Due to the Plan of Reorganization described in Note 11, a new par amount equal to the
outstanding amounts plus unpaid and accrued interest of$ 523,178 was approved.
Special Assessment Bonds, Series 2004 - The District previously issued $ 13,145,000 in
Special Assessment Bonds, Series 2004 for the purpose of funding certain projects within
the boundaries of the District. The Bonds are payable in annual principal installments
through May 2037. Interest at 6.75% is payable semiannually on the first day of each May
and November.
The District is required by the Bond Indenture to levy and collect special assessments
pursuant to Florida Statutes, Section 190.022. The collection of these assessments is
restricted and applied to the debt service requirements of the Bond Issue. Further, the
District covenants to levy special assessments in annual amounts adequate to provide for
payment of principal and interest on the Bonds as they become due.
The Bonds are subject to mandatory redemption at par plus accrued interest to the date of
redemption on a schedule of annual redemptions through May 2037, the maturity date.
The District is required to redeem the Bonds at par prior to the schedule from the proceeds
of any assessments prepaid or if certain events occur as outlined in the Bond Indenture.
The Bonds are subject to redemption at the option of the District at a premium on or before
May 1, 2015 and at par on or after May 1, 2016.
The Bond Indenture requires a reserve fund equal to 50% of the maximum annual debt
service requirements. As of September 30, 2012, the reserve fund account balance was not
sufficient to satisfy this requirement.
Due to the Plan of Reorganization described in Note 11, a new par amount equal to the
outstanding amounts plus unpaid and accrued interest of$ 2,401,710 was approved.
22
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
NOTES TO BASIC FINANCIAL STATEMENTS
September 30, 2012
NOTE 5 - LONG-TERM DEBT (continued)
Special Assessment Bonds, Series 2005 - The District previously issued $ 38,850,000 in
Special Assessment Bonds, Series 2005 for the purpose of funding certain projects within
the boundaries of the District. The Bonds are payable in annual principal installments
through May 2038. Interest at 6.00% is payable semiannually on the first day of each May
and November.
The District is required by the Bond Indenture to levy and collect special assessments
pursuant to Florida Statutes, Section 190.022. The collection of these assessments is
restricted and applied to the debt service requirements of the Bond Issue. Further, the
District covenants to levy special assessments in annual amounts adequate to provide for
payment of principal and interest on the Bonds as they become due.
The Bonds are subject to mandatory redemption at par plus accrued interest to the date of
redemption on a schedule of annual redemptions through May 2038, the maturity date.
The District is required to redeem the Bonds at par prior to the schedule from the proceeds
of any assessments prepaid or if certain events occur as outlined in the Bond Indenture.
The Bonds are subject to redemption at the option of the District at a premium on or before
May 1, 2016 through April 30, 2017 and at par on or after May 1, 2017.
The Bond Indenture requires a reserve fund equal to 50% of the maximum annual debt
service requirements. As of September 30, 2012, the reserve fund account balance was not
sufficient to satisfy this requirement.
Due to the Plan of Reorganization described in Note 11, a new par amount equal to the
outstanding amounts plus unpaid and accrued interest of$ 8,369,177 was approved.
The annual debt service requirements for the Series 2003, 2004 and 2005 Special
Assessment Revenue Bonds are approximately as follows:
Year Ending
September 30, Principal Interest Total
2013 $ 1,470,970 $ 3,212,295 $ 4,683,265
2014 5,820,665 5,482,735 11,303,400
2015 1,725,375 5,383,530 7,108,905
2016 1,834,180 5,157,370 6,991,550
2017 1,951,180 5,045,230 6,996,410
2018-2022 11,813,380 23,233,050 35,046,430
2023-2027 16,148,185 19,033,965 35,182,150
2028-2032 22,077,790 13,290,120 35,367,910
2033-2037 25,473,125 5,577,270 31,050,395
2038 3,432,735 205,965 3,638,700
$ 91,747,585 $ 85,621,530 $ 177,369,115
23
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
NOTES TO BASIC FINANCIAL STATEMENTS
September 30, 2012
NOTE 6 - RISK MANAGEMENT
The District purchased an insurance policy that provided coverage of up to a $ 1,000,000
maximum for each general liability occurrence in combination with a maximum annual aggregate
coverage of approximately $ 2,000,000 for the policy year ending September 30, 2012. Other
insurance policies carried by the District during the year included automobile, public official's
liability and employment practices liability. Deductible amounts ranged from $ 0 to $ 2,500.
Settlement amounts have not exceeded insurance coverage during the last three (3) fiscal years.
NOTE 7 - COMMITMENTS
The District has committed to acquire those portions of the improvements which have been
completed by the Developer for the actual reasonable costs incurred by the Developer up to the
amounts available in Series 2003, 2004 and 2005 Capital Project Funds.
NOTE 8 - INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS
A summary of due to/from funds for the year ended September 30, 2012 is as follows:
Receivables Payables
General Fund $ 44,596 $ 37,087
Series 2003 Debt Service Fund 275,549 51
Series 2004 Debt Service Fund 1,559 269,735
Series 2005 Debt Service Fund 29,765 -
Series 2003 Capital Projects Fund - 10,314
Series 2005 Capital Projects Fund - 34,282
$ 351,469 $ 351,469
These balances result from the time lag between the dates that (1) interfund goods and
services are provided or reimbursable expenditures occur, (2) transactions are recorded in the
accounting systems and (3) payments between funds are actually made.
A summary of interfund transfers for the year ended September 30, 2012, is as follows:
Transfer In
General
Transfer Out Fund
Series 2003 Debt Service Fund $ 13,672
Series 2004 Debt Service Fund 13,672
Series 2005 Debt Service Fund 13,672
Series 2003 Capital Projects Fund 85,200
Series 2005 Capital Projects Fund 142,538
Total $ 268,754
24
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
NOTES TO BASIC FINANCIAL STATEMENTS
September 30, 2012
NOTE 8 - INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS (continued)
The transfers from the Debt Service and Capital Project Funds to the General Fund are
related to legal fees that were paid by the Trustee with regard to the bond defaults. Certain other
transfers during the year were made to either fund operating expenses of the District or debt
service requirements. These transfers were necessary as a result of the District's financial position
(Note 11).
NOTE 9 - NET ASSETS (DEFICIT)
The District has a government-wide net assets deficit of$ 39,732,177 as of September 30,
2012. The deficit relates to the accrual of certain expenses, principally interest, which are not
currently recorded in the fund statements. When recognized as expenditures in the fund
statements, they will be recovered from the Developer or through assessment to benefitted
property owners. The deficit also relates to various infrastructure improvements, such as the
water and sewer lines, which have been financed through the issuance of long-term debt, but were
conveyed to other governmental entities.
NOTE 10 - FUND BALANCE (DEFICIT)
The District has a deficit of$ 108,994 reflected in the governmental fund statements for the
Series 2004 Debt Service Fund as of September 30, 2012. This deficit is the result of the lack of
developer funding for non-ad valorem assessments and withdrawals made by the Trustee, as
discussed in Note 11.
NOTE 11 - CONTINGENCIES
Developer reorganization:
In prior years, the Developer was unable to provide the District with non-ad valorem
special assessments sufficient to satisfy debt service requirements.
In February 2010, the Developer of the District, Fiddler's Creek, LLC and its affiliates
filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. On August 29, 2011,
the Bankruptcy Court entered an order confirming Fiddler's Creek, LLC's second amended Plan
of Reorganization, as modified. The Plan provides for the Developer to emerge from bankruptcy,
implement the Plan of Reorganization and develop the property within the District. The court
approved a de-acceleration of the bonds outstanding, a two-year moratorium in regard to the
commencement of payments on certain of the "off-roll" bond claims. The court specifically
considered the $ 45 million "exit financing" in determining that the plan of reorganization is
feasible.
In addition, the Plan calls for amounts due to the District with respect to off-roll property
owned by the Developer shall have a new par amount equal to the outstanding amounts plus unpaid
and accrued interest. As a result, unpaid and accrued interest totaling $ 13,159,539 was added to
the outstanding bond principal balances during the periods ended September 30, 2012 (Note 5).
25
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
NOTES TO BASIC FINANCIAL STATEMENTS
September 30, 2012
NOTE 11 — CONTINGENCIES (continued)
The District is the Plaintiff in an action styled Fiddler's Creek Community Development
District 2 v. U.S. Bank National Association, as Trustee, The ITG Tax Free Income & Capital
Appreciation Fund, Ltd., ITG Fund II, LLLP, ITG Fund Management, Inc. and Oppenheimer
Funds, Inc., Collier County Circuit Court Case No. 11-CA-003947 (the "Contract Action").
Therein ,the District sued the Trustee for the misappropriation by U.S. Bank of approximately
$ 1,325,000.00 from a trust account which was earmarked solely for infrastructure construction.
and for its failure and refusal to fund construction draw requests both in violation of the parties'
Trust Indenture. Additionally, the District sued certain current and former bondholders, the ITG
entities and Oppenheimer, for their part in the conspiracy with the Trustee to commit the
aforementioned misappropriation. In response, the Trustee alleges the District defaulted on certain
special assessment revenue bonds; therefore, the Trustee is justified in its conduct. Notably, the
Trustee has not accelerated the bond indebtedness.
In the Contract Action, the District was successful in obtaining an order from the Court
which required U.S. Bank to pay all past-due construction draw requests which had been duly-
certified by the District Engineer. U.S. Bank appealed. Accordingly, the District was the
appellee in an interlocutory appeal brought by the Trustee before the Second District Court of
Appeal styled U.S. Bank National Association, as Trustee v. Fiddler's Creek Community
Development District 2, et al, Second District Court of Appeal Case No. 2D13-706 (the
"Appeal"). Following the submission of competing briefs and oral argument, the District
prevailed. The ruling from the lower court in the Contract Action was affirmed on September 20,
2013. The deadline for the Trustee to seek rehearing of the appellate court's opinion has passed,
and the District now awaits the entry of a mandate. In the meantime, the District has received
$ 145,000 from U.S. Bank which represents all of the accrued and unpaid construction draw
requests which has previously and impermissibly been withheld by U.S. Bank.
The District is a Defendant in an action styled U.S. Bank National Association, as Trustee
of the Fiddler's Creek Community Development District 2 Special Assessment Revenue Bonds,
Series 2003A and Series 2003B, Series 2004 and Series 2005 v. Fiddler's CDD Investor, LLC;
Fiddler's CDD Investor II, LLC; Fiddler's Creek Community Development District 2; and
Wilmington Trust, National Association, Collier County Circuit Court Case No. 13-CA-1143
(hereinafter referred to as the "Declaratory Action"). On March 8„ 2013, U.S. Bank was advised
that it had been terminated as trustee by the District and by the Co-Defendants, Fiddler's CDD
Investor, LLC and Fiddler's CDD Investor II, LLC (collectively, the "Bondholders"), and that
Co-Defendant, Wilmington Trust, National Association ("Wilmington") had accepted the
appointment as successor trustee. Notwithstanding, the termination of U.S. Bank and acceptance
by Wilmington, all done in accordance with the clear and unambiguous terms of the Master
Indenture, U.S. Bank has steadfastly refused to turn over the trust property to Wilmington.
Rather, U.S. Bank filed the Declaratory Action for declaratory judgment, feigning to be in doubt
of its rights under the Master Indenture, and refusing to turn over the trust property until this
Court adjudicates this manufactured "dispute" over the interpretation of the Indenture. The
Declaratory Action has been consolidated with the Contract Action.
In the Declaratory Action, the Bondholders have asserted numerous counterclaims against
U.S. Bank for the misappropriation by U.S. Bank of approximately $ 2,000,000 from the
District's Revenue and Reserve Account. Additionally, the Bondholders have sought the
appointment of a receiver to safeguard these accounts from further dissipation by U.S. Bank.
Similarly, the District has asserted counterclaims against U.S. Bank in the Declaratory Action
regarding U.S. Bank's misappropriation of the construction account funds, and has joined in the
Bondholders' demand for the appointment of a receiver.
26
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
NOTES TO BASIC FINANCIAL STATEMENTS
September 30, 2012
NOTE 12 - RESTATED NET ASSETS
The District has restated its beginning net assets to re-characterize the amounts collected by
the District and previously recorded as payments for the Trustee's legal fees and expenses as a
reduction of the principal outstanding on the Series 2003A, 2003B, 2004 and 2005 Bonds.
In addition, pursuant to the Bankruptcy Court order confirming the Developer's Plan of
Reorganization, the par amount outstanding for the Series 2003A, 2003B, 2004 and 2005 bonds
was adjusted to include unpaid and accrued interest.
Beginning net assets (deficit),
September 30, 2011 $ (32,321,725)
Increase in accrued interest (1,841,995)
Re-characterization of legal expenses
to principal payments 351,612
Beginning net assets (deficit)
September 30, 2011, as restated $ (33,812,108)
NOTE 13 - RELATED ENTITY TRANSACTIONS
The District has cost sharing agreements with Fiddler's Creek Community Development
District 1 and shares the same Developer. The District has a payable in the amount of$ 14,668 to
Fiddler's Creek Community Development District 1 for shared costs as of September 30, 2011.
27
OTHER REPORTS OF
INDEPENDENT AUDITORS
17 Keefe, McCullough & Co., LLP
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the Board of Supervisors
Fiddler's Creek Community Development District#2
Collier County, Florida
We have audited, in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States, the financial statements of the governmental
activities and each major fund of Fiddler's Creek Community Development District #2 (the
"District") as of and for the year ended September 30, 2012, and the related notes to the financial
statements, which collectively comprise the District's basic financial statements and have issued our
report thereon dated October 23, 2013.
Internal Control over Financial Reporting
In planning and performing our audit, we considered the District's internal control over financial
reporting (internal control) to determine the audit procedures that are appropriate in the circumstances
for the purpose of expressing our opinions on the financial statements, but not for the purpose of
expressing an opinion on the effectiveness of the District's internal control. Accordingly, we do not
express an opinion on the effectiveness of the District's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent or
detect misstatements on a timely basis. A material weakness is a deficiency, or a combination of
deficiencies, in internal control such that there is a reasonable possibility that a material misstatement
of the District's financial statements will not be prevented, or detected and corrected on a timely basis.
A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less
severe than a material weakness, yet important enough to merit attention by those charged in
governance
Our consideration of internal control was for the limited purpose described in the first paragraph
of this section and was not designed to identify all deficiencies in internal control that might be
material weaknesses or significant deficiencies. Given these limitations, during our audit we did not
identify any deficiencies in internal control that we consider to be material weaknesses. However,
material weaknesses may exist that have not been identified.
6550 N.Federal Highway a Suite 410 Fort Lauderdale,FL 33308 ug 954.771.0896 '' 954.938.9353(F j a www.kmccpa.com
28
Fiddler's Creek Community Development District#2
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the District's financial statements are free
of material misstatement, we performed tests of its compliance with certain provisions of laws,
regulations, contracts and grant agreements, noncompliance with which could have a direct and
material effect on the determination of financial statement amounts. However, providing an opinion
on compliance with those provisions was not an objective of our audit and, accordingly, we do not
express such an opinion. The results of our tests disclosed instances of noncompliance due to the
Series 2003A, 2003B, 2004 and 2005 Reserve Accounts reflecting deficits at September 30, 2012.
The District's response to the finding identified in our audit is described in the accompanying
Schedule of Findings and Recommendations. We did not audit the District's response and,
accordingly, we express no opinion on it.
Purpose of this Report
This report is intended solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of the
District's internal control or on compliance. This report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the District's internal control and
compliance. Accordingly, this communication is not suitable for any other purpose.
Kee e,Te e"llO & co.,LLB
KEEFE, McCULLOUGH & CO., LLP
Fort Lauderdale, Florida
October 23, 2013
29
Keefe, McCullough & Co., LLP
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT TO DISTRICT MANAGEMENT
To the Board of Supervisors
Fiddler's Creek Community Development District #2
Collier County, Florida
We have audited the financial statements of Fiddler's Creek Community Development District #2
(the "District"), as of and for the fiscal year ended September 30, 2012, and have issued our report
thereon dated October 23, 2013.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America; the standards applicable to financial audits contained in Government Auditing
Standards issued by the Comptroller General of the United States. We have issued our Independent
Auditors' Report on Internal Control over Financial Reporting and Compliance and Other Matters
Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing
Standards and Schedule of Findings and Recommendations. Disclosures in that report and schedule,
which are dated October 23, 2013, should be considered in conjunction with this management letter.
Additionally, our audit was conducted in accordance with the provisions of Chapter 10.550, Rules
of the Auditor General, which govern the conduct of local governmental entity audits performed in the
State of Florida. This letter includes the following information, which is not included in the
aforementioned auditors' reports or schedule:
Section 10.554(1)(i)l., Rules of the Auditor General, requires that we determine whether or not
corrective actions have been taken to address findings and recommendations made in the preceding
annual financial audit report. The findings and recommendations made in the preceding annual
financial audit report have been partially resolved and the one repeated in the current fiscal year is
listed in the Schedule of Findings and Recommendations.
Section 10.554(1)(i)2., Rules of the Auditor General, requires our audit to include a review of the
provisions of Section 218.415, Florida Statutes, regarding the investment of public funds. In
connection with our audit, we determined that the District complied with Section 218.415, Florida
Statutes.
Section 10.554(1)(i)3., Rules of the Auditor General, requires that we address in the management
letter any recommendations to improve financial management. In connection with our audit, our
recommendation to improve financial management is included in the Schedule of Findings and
Recommendations on page 32.
Section 10.554(1)(i)4., Rules of the Auditor General, requires that we address noncompliance with
provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have
occurred, that have an effect on the financial statements that is less than material but which warrants
the attention of those charged with governance. In connection with our audit, we did not have any
such findings.
6550 N.Federal Highway Suite 410 7, Fort Lauderdale,FL 33308 a 954.771.0896 a 954.938.9353(F) www.kmccpacorn
30
Fiddler's Creek Community Development District #2
Section 10.554(1)(i)5., Rules of the Auditor General, requires that the name or official title and
legal authority for the primary government and each component unit of the reporting entity be
disclosed in this management letter, unless disclosed in the notes to the financial statements. The
District was established on November 19, 2002 by Ordinance No. 02-61 of the Collier County
Commission, pursuant to the provisions of Chapter 190, of the laws of the State of Florida. The
District does not have any component units.
Section 10.554(1)(i)6.a., Rules of the Auditor General, requires a statement be included as to
whether or not the local governmental entity has met one or more of the conditions described in
Section 218.503(1), Florida Statutes, and identification of the specific condition(s) met. In connection
with our audit, we determined that the District did not meet any of the conditions described in Section
218.503(1), Florida Statutes.
Section 10.554(1)(i)6.b., Rules of the Auditor General, requires that we determine whether the
annual financial report for the District for the fiscal year ended September 30, 2012, filed with the
Florida Department of Financial Services pursuant to Section 218.32(1)(a), Florida Statutes, is in
agreement with the annual financial audit report for the fiscal year ended September 30, 2012. In
connection with our audit, we determined that these two reports were in agreement.
Pursuant to Sections 10.554(1)(i)6.c. and 10.556(7), Rules of the Auditor General, we applied
financial condition assessment procedures. It is management's responsibility to monitor the District's
financial condition, and our financial condition assessment was based in part on representations made
by management and the review of financial information provided by same.
Our management letter is intended solely for the information and use of the Legislative auditing
Committee, members of the Florida Senate and the Florida House of Representatives, the Florida
Auditor General, Federal and other granting agencies, and applicable management, and is not intended
to be and should not be used by anyone other than these specified parties.
keel e, e C 4(ou .£. Co.,LLP
KEEFE, McCULLOUGH & CO., LLP
Fort Lauderdale, Florida
October 23, 2013
31
FIDDLER'S CREEK COMMUNITY DEVELOPMENT DISTRICT #2
SCHEDULE OF FINDINGS AND RECOMMENDATIONS
September 30, 2012
CURRENT YEAR FINDINGS AND RECOMMENDATIONS
Other Matter:
Finding 2010-01
Condition:
The Series 2003A, 2003B, 2004 and 2005 reserve accounts reflect deficits at September
30, 2012.
Criteria:
The bond indentures of the Special Assessment Revenue Bonds, Series 2003A, 2003B,
2004 and 2005 require a reserve account equal to a certain percentage of the bonds deemed
outstanding.
Effect:
Non-compliance with bond covenants.
Recommendation:
We recommend that the District maintain the required reserve account balance.
Management's Response:
The District has disagreed with the determination pursuant to the two-year moratorium
provided in the plan of reorganization approved by the bankruptcy court. The court approved
the de-acceleration and the restructuring of the bonds. The Trustee has taken no action to
enforce any alleged non-compliance.
Management notes that the reserves have been reduced by the unauthorized
misappropriation by the Trustee. The principal balance of the bonds has been reduced by this
amount.
PRIOR YEAR FINDINGS AND RECOMMENDATIONS
2010-01: Failure to meet debt service requirements - Matter resolved.
2010-01: Failure to maintain adequate reserve account balances - Matter continued in
2012 and is repeated in the current year.
2011-01: No Supporting Documentation Provided for Certain Expenditures - Matter
resolved.
32
EXECUTIVE SUMMARY
Recommendation to approve (Adopt) an Ordinance amending Ordinance No. 2002-61,
which established the Fiddler's Creek Community Development District No. 2, in order to
increase the acreage of the District; Providing for Severability; and Providing for an
Effective Date.
OBJECTIVE: The objective of this public hearing is for the Board of County Commissioners
(Board) to review and consider a petition for amending Fiddler's Creek Community
Development District (CDD) No. 2 Ordinance No. 2002-61, by consenting to specific powers to
include parks and recreational facilities, and security activities and facilities, and annexing
acreage to include an additional±69.30 acres, for a total of±1,068.09 acres.
CONSIDERATIONS: On May 1, 2014, the Board of Supervisors of Fiddler's Creek
Community Development District No. 2 (CDD2) filed a petition with the Planning and Zoning
Department, Growth Management Division, for the modifying the boundaries of Fiddler's Creek
CDD2 and requesting special powers. A mandatory $1,500 application fee was submitted with
the amendment petition.
The existing District is located entirely within Collier County, Florida. The existing District
covers±998.8 acres of land. The site is located in portions of Sections 11, 13, and 14, Township
51 South, Range 26 East, and Section 18, Township 51 South, Range 27 East. A map showing
the location of the land area serviced by the District and metes and bounds description of the
existing CDD2 is provided in petition Exhibit "A".
The proposed District annexation area is located entirely within Collier County, Florida. The
proposed District annexation area covers ±69.3 acres of land. The site is located in portions of
Section 13, Township 51 South, Range 26 East, and Section 18, Township 51 South, Range 27
East. A map showing the location of the land area to be serviced by the District annexation area
and metes and bounds description of the proposed CDD2 annexation area is provided in petition
Exhibit "D".
The location map of the existing and proposed Fiddler's Creek No. 2 is provided in petitioner's
Exhibit "E". The metes and bounds description of the full, modified CDD2 is provided in
petition Exhibit "G".
The proposed CCD2 includes an area planned for approximately 155 additional residential units
and amenities on ±69.3 acres. As of June 4, 2014, the date of advertising for the amendment of
this CDD, no PUD amendment petitions for this project had been filed with Collier County.
However, on January 22, 2003, the District Board of Supervisors for the current Fiddler's Creek
Community Development District No. 2 adopted a Resolution to request consent from the
County to exercise additional specific powers authorized by Section 190.012(2),Florida Statutes.
The specified powers are limited to the operation of parks and facilities for indoor and outdoor
recreational, cultural, and educational uses, as well as security, including, but not limited to,
guardhouses, fences and gates, electronic intrusion-detection systems, and patrol cars, with
certain exceptions. Pursuant to the 2003 District Resolution the Fiddler's Creek No. 2 District
Board of Supervisors has filed a petition requesting consent from the County to exercise
additional specific powers and to amend its boundaries.
1
By adopting Ordinance No. 2002-61 the Board of County Commissioners authorized the District,
through its Board of Supervisors, to manage and finance certain basic infrastructure for the
benefit of the landowners and residents of this portion of the Fiddler's Creek Development. This
infrastructure, under section 190.012(1), Florida Statutes, includes basic urban systems, facilities
and services: water supply, sewers and wastewater management, surface water control and
management (drainage), and roads, bridges and street lights. If adopted, this Ordinance would
constitute consent by the County to the petition for the exercise of certain additional special
powers authorized by Section 190.012(2), Florida Statutes. These powers may include the
operation of parks and facilities for indoor and outdoor recreational, cultural, and educational
uses [ss. (2)(a)J, as well as security, including, but not limited to, guardhouses, fences and gates,
electronic intrusion-detection systems, and patrol cars, when authorized by proper governmental
agencies; except that the District may not exercise any police power, but may contract with the
appropriate local general-purpose government agencies for an increased level of such services
within the District boundaries [ss. (2)(d)]. In order to gain these additional powers, the District
Board has further petitioned the Board of County Commissioners.
Section 190.046, Florida Statutes provides that the exclusive and uniform method for amendment
of a CDD, as follows:
190.046 Termination, contraction,or expansion of district.—
(1) A landowner or the Board may petition to contract or expand the boundaries of a
community development district in the following manner:
(a) The petition shall contain the same information required by s. 190.005(1)(a)1. and 8.
1. A metes and bounds description of the external boundaries of the district. Any real
property within the external boundaries of the district which is to be excluded from
the district shall be specifically described, and the last known address of all owners
of such real property shall be listed. The petition shall also address the impact of the
proposed district on any real property within the external boundaries of the district
which is to be excluded from the district.
8. A statement of estimated regulatory costs in accordance with the requirements of s.
120.541. [The statement of estimated regulatory costs is provided in petition Exhibit
In addition, if the petitioner seeks to expand the district, the petition shall describe the
proposed timetable for construction of any district services to the area, the estimated cost of
j constructing the proposed services, and the designation of the future general distribution,
location, and extent of public and private uses of land proposed for the area by the future
land use plan element of the adopted local government local comprehensive plan. If the
petitioner seeks to contract the district,the petition shall describe what services and facilities
are currently provided by the district to the area being removed, and the designation of the
future general distribution, location, and extent of public and private uses of land proposed
for the area by the future land element of the adopted local government comprehensive plan.
[Construction costs for the CDD2 expansion area are estimated to be $3,902,415 rr
• Roadway construction costs for the CDD2 expansion area are estimated to be
$833,750;
2
• Potable water, sewer/wastewater and irrigation water utilities construction costs for
the CDD2 expansion area are estimated to be $1,150,000;
• Stormwater management system costs are$373,750;
• Earthwork and clearing construction costs for the CDD2 expansion area are estimated
to be $759,000;
• Roadway lighting construction costs for the CDD2 expansion area are estimated to be
$201,150;
• Landscaping and hardscaping construction costs for the CDD2 expansion area are
estimated to be$230,000;
• Contingency costs for the CDD2 expansion area are estimated to be $354,765;
These costs are provided in Table 1 and Table 2 of petition Exhibit"I".]
County legal, planning, transportation and public works staffs have reviewed the petition and
exhibits submitted by the petitioners (attached) relative to these factors and have found the
proposed Fiddler's Creek CDD2 amendment petition to be compliant.
LEGAL CONSIDERATIONS: The Petition seeks to obtain Board authorization for special
powers for parks and security pursuant to Section 190.012(2), Florida Statutes. The Ordinance as
drafted reflects Board approval as sought in the Petition, which was required for advertising and
public notice purposes. However, it is the position of the County Attorney's Office that
Ordinance 2002-61, as previously approved by the Board intended to require authorization for
such powers on a project-by-project basis, which would require the CDD to come back to the
Board with each project for parks and security. What is being sought today would authorize
complete discretion on the part of the CDD with regard to improvements for parks and security
without the input of the Board of County Commissioners as to the compatibility of the
improvements to the surrounding communities and the County as a whole.
If it is the will of the Board to authorize full discretionary powers to the CDD,the Ordinance can
be approved as attached in the back-up. If the Board wishes to continue with the previously-
approved policy involving Board approval on each project, the County Attorney's Office will
amend the Proposed Ordinance to delete Section Three.
In making its decision the Board must consider the record of the public hearing and the following
factors:
1. The petition is complete in that it meets the requirements of Sections
190.005, Florida Statutes; and all statements contained within the petition are
true and correct.
2. Establishment of the proposed District is not inconsistent with any applicable
element or portion of the local comprehensive plan of Collier County, known
as the Collier County Growth Management Plan, or the State Comprehensive
Plan.
3
3. The area of land within the proposed District is of sufficient size, is
sufficiently compact, and is sufficiently contiguous to be developable as one
functional interrelated community.
4. The District is the best alternative available for delivering community
development services and facilities to the area that will be serviced by the
District.
5. The community development services and facilities of the District will not be
incompatible with the capacity and uses of existing local and regional
community development services and facilities.
6. The area that will be served by the District is amenable to separate special-
district government.
This item has been approved as to form and legality and requires a majority vote for Board
approval.—ERP
FISCAL IMPACT: As previously noted, a $1,500 filing fee was submitted with the
amendment petition. Exhibit "K" of the petition, "Statement of Estimated Regulatory Costs,
Fiddler's Creek Community Development District No. 2" delineates the fiscal impacts and timing
of impacts to be managed by the District. It is noteworthy that the estimated internal
infrastructure and services to be financed by Fiddler's Creek CDD2 amendment is $3,902,415,
consisting of roadway construction, utilities work, earthwork and land clearing, stormwater
management, roadway lighting, landscaping/hardscaping, and contingencies. Utilities will
eventually be turned over to Collier County. No cost estimates are provided in petition materials
for park and recreational facilities, and security facilities and services.
DISTRICT RESPONSIBILITIES: According to the petition, the Fiddler's Creek Community
Development District No. 2, if the Ordinance is adopted, will assume responsibility for the
fol lowing:
(1) Parks and facilities for indoor and outdoor recreational, cultural, and educational uses;
(2) Security, including, but not limited to, guardhouses, fences and gates, electronic
intrusion-detection systems, and patrol cars, when authorized by proper governmental
agencies; except that the District may not exercise any police power, but may contract
with the appropriate local general-purpose government agencies for an increased level of
such services within the district boundaries; and,
In addition to the present responsibilities for the following:
(1) General development of the approved uses within the District;
(2) Roadways;
(3) Street Lights;
(4) Stormwater Management;
(5) Water& Sewer Utilities;
(6) Earthwork and Land Clearing for development;
(7) Landscaping;
(8) Wetland Permitting & Mitigation; and,
4
(9) Other matters related to the above tasks.
GROWTH MANAGEMENT IMPACT: The ±998.8 acres of Fiddler's Creek CDD2 lie
within the Urban Coastal Fringe and Urban Residential Fringe Subdistrict designations on the
Collier County Future Land Use Map. Although the amendment of this District does not
constitute any development approval, the plan of development previously approved for the
subject property has been determined to be consistent with the Collier County Growth
Management Plan (GMP). Accordingly, any future petitions for rezone or development permits
will be subsequently reviewed at the time of submittal, and will be subject to the requirements
and limitations specified in the Collier County Land Development Code (LDC), and will be
required to be consistent with the GMP in effect at that time.
RECOMMENDATION: Staff recommends that the Board of County Commissioners adopt
and enact the proposed Ordinance amending Fiddler's Creek Community Development District
No. 2.
Prepared by: Marcia Kendall, Senior Planner, and Corby Schmidt,AICP, Principal Planner
Comprehensive Planning Section, Planning and Zoning Department
Attachments:
1) Ordinance with Exhibit"A"and Exhibit"B"
2) CDDA Petition and Petition Exhibit Information ❑ due to the size of the document it is
accessible at:
http://www.colliergov.net/ftp/AgendaJune24/GrowthMgmt/PL20140000683 Fiddlers Creek
%20%232 %20Petition.pdf
G:CDES Planning Services\Comprehensive\CDDs\CDD Petition Folders\Pending Process CDDs1CDDA-2014-1 Fiddlers CreekEx.Summary/fiddler's Creek 2
CDDA ExecSummjune 5.docx
5