An Apopka City Council workshop is typically a time to learn about an issue in an informal and laid-back setting. There are no votes, although a consensus on how to move forward is a typical conclusion. Workshops rarely create tension except for the occasional cut to a department head’s budget, and city attorneys rarely go beyond a sentence or two in reply to a question by Council.

But none of that applies when Signature H brings its New Errol project to the City Council.

On April 11th, Helmut Wyzisk III, Vice President of Signature H Property Group, brought a team of attorneys, architects, economic, and investment consultants to present the New Errol plan to the City Council and a crowd of over 400 residents at the Apopka Community Center, many dressed in blue Staghorn t-shirts showing their support both visually, verbally, and passionately. Ultimately, the City Council approved their Planned Unit Development (PUD) and gave them the rezoning needed for the re-development of the existing Errol Estate into New Errol and the Staghorn Club and Lodge.

 Several meetings that preceded the final approval followed that pattern of multiple presentations, extreme community support, and affirmative votes. 

But at the Wednesday afternoon workshop following a long City Council meeting, no supporters were wearing blue Staghorn t-shirts, and Wyzisk only brought two members of his team –  Bob Carmichael of Developer Capital, and Russell Edghill of Fishkind and Associates.

“New Errol proposes to form a community development district to enhance the quality of the redevelopment and to assure New Errol’s infrastructure,” Wyzisk said in a statement the day before the meeting. “Especially its critical stormwater and lake systems, which are operated and maintained in perpetuity.”

 According to Signature H, the estimated average assessment for New Errol residents will be $840 per year, which is projected to finance approximately $21-million in public infrastructure.

 This assessment would not include current Errol residents.

According to the Florida Legislature’s website, a CDD is a local, special-purpose government framework authorized by Chapter 190 of the Florida Statutes as amended, and is an alternative to municipal incorporation for managing and financing infrastructure required to support the development of a community.

 “This is something that is being proposed by Signature H,” said Community Development Director Jim Hitt at the beginning of the workshop. “There is still a lot of research to be done, and legal opinions to be drawn by attorneys before deciding if giving municipal powers to an independent group is good or not.”
 Wyzisk opened Signature H’s presentation with a disclosure that the CDD would only apply to New Errol, not to existing Errol Estate homeowners.
 “One thing I want to make very clear is that we are setting up the same boundaries that we had in our concept plan. This will not be applicable to any residents that are currently in Errol Estate. This is only for New Errol and the future residences.”
 Apopka City Commissioner Kyle Becker, the most vocal critic of Signature H on the City Council, asked the first question, which would prove to be a recurring theme.
 “My first reaction is why is this needed? During public comment at the last meeting, there was a lot of reference to financing that was already in place, one of which was infrastructure. So why are we coming back and using an alternative form of financing rather than the letters of intent described at the previous council meeting?”
Edghill, who is an economic consultant for Fishkind and Associates, explained that the CRR model is what makes the most sense for the New Errol project.
 “The developer has assembled a team. And the team includes Fishkind and Associates along with others who have helped developers throughout the state advance their vision to develop infrastructure much along the same lines as we are contemplating today. So in the process of embarking on exploring the different iterations of how to do this, there are models of how best these deals get done.”
 Becker also questioned how a CDD is created. He asked Apopka City Attorney Cliff Shepard about that, and Shepard not only answered Becker’s question but expanded the discussion into another area.
“From a legal perspective… from a trustee relationship… are the rules statutorily driven by the creation of a CDD like this?”
 “Some of both,” said Shepard. The statute describes how you create the CDD. A trustee has his own statute, but the CDD tells you the process by which you create the fund. It’s not that you’re not being told accurate information, but you’re definitely not being told all the information.”
In what sense? Edgehill asked.
 “How many of these CDs have been created since 2008 in the state? Shepard replied to Edghill.
 “I don’t know,” Edghill said.
 “Three-fourths (of the CDD’s) have been created between 2006 and 2008. Three-fourths of them. Do you agree? Is that a true statement?”
 “Possibly,” said Edghill.
 “So the question is since 2008, which was the crash, who is using them today?” Shepard asked.
 “I don’t have that information available,” said Edghill.
 “I think that everyone will find that enlightening,” said Shepard. “But here’s the point, this is something that is going to take a lot of investigation in my opinion as your counsel than a work session, particularly given the lack of understanding by those people we saddle with this tax burden which was never mentioned as even a possibility at any of the meetings. And I know because I attended all of them.”
According to the floridacddreport website:
 “There are 600 Community Development Districts in Florida, 438 of which were begun between 2003-2008. They have issued $6.5 billion in municipal bonds to finance their infrastructure. Since the collapse of the housing market, over 168 of these districts are in default on $5.1 billion of bonds and, in many cases, the project developer is in financial distress as well. Since some 204 of these projects were launched in 2006 through 2008, all have not yet completed their infrastructure build out, so they have not yet defaulted.”
 Apopka City Commissioner Alice Nolan echoed the website’s findings.
 “In the research I did, 40% of the CDD’s are filing for bankruptcy, with more to follow. What do you have for safety measures so you don’t fall into the same trap the others have fallen into?”
 “To address this you have to look at the project in question,” said Edghill. “Where is it being built? A small proponent is lodging. There’s an assisted living component to it, I think there’s a clear precedent for that. You look at the demographic trends in the state, socio-economic trends. There is clearly a need for that. I think it’s reasonable to think that an assisted living component has merit. The residential component of the project with the revitalization of the golf course and the whole vision I think this project aspires to do that. I think that it’s a manageable element to only build 260 homes. I think the market can absorb that.”
 Wyzisk also had figures from a CDD study by Thompson Reuters & Bloomberg (as of 12/31/2017) that he cited after the workshop.
“The CDD market is very strong. Since 2011, the CDD tax-exempt volume tops $5.1 billion including nearly $2.8 billion in new money issuance. Both 2016 and 2017 topped $1B in aggregate volume each year, with well over 100 new money land deals issued during that span. In addition, substantially all distressed real estate projects that utilized CDD financing have been repositioned.”  
 “I don’t think any of us are against this,” said Nolan. “We think New Errol is great. It helps Apopka. That’s not the issue. We just want to make sure whatever is put in is sustainable. That is our biggest issue.”
 Edghill responded by explaining how the process suits the addition of a CDD to this project.
 “As the developer embarks on this, they’re not going to get permanent capital on day one,” said Edghill. “They won’t be able to raise all of the dollars on day one, which is why this tool exists. You just create a more efficient system. You’re issuing it on a fixed rate basis and with time certainty. All of the safeguards as it relates to debt and manageability of debt. Having something like an adjustable rate mortgage where your rate can change in three years. Or if a bank changes their mind and decides ‘I don’t like this business anymore.’ These things happen.”

Apopka City Commissioner Doug Bankson was also skeptical of the CRR, and returned to Becker’s theme.

 “When looking at this as a benefit… as a financial tool… it sounds like the stability, like the longer-term stability, is there… but then we hear it’s not so stable. So that’s what we’re looking for. One question for me is if this is a commonly used and understood tool why wasn’t it brought up while we were going through the process as a tool you may be looking for? If it was simply something that hadn’t been considered at that point, why not? Again, we are looking for stability. Is this an ‘okay this sounds good let’s use this’ situation? I’m not saying you approached it that way, but we have to be convinced because we have to make the decision on behalf of the people. Tell us why it’s only coming up now versus if it was something to be considered along the process? Do you have an answer for that?”

Wyzisk responded by explaining that discussing a CDD before now would have been premature.

 “First, let me just say the project is not contingent on this. We want this. We think it’s better for the project, but this is not a dealbreaker. So bringing this up prior I think wasn’t part of the subject matter. We were there for entitlements, and although financing did come up, we addressed that accordingly. But to get into the granulars of exact ways to start talking about CDD’s at that point, we had not gone this far with Fishkind and Associates to explore it. Of course, we didn’t have our entitlements at that time so just like everything you don’t put the gas down until you know you have a green light. So we got the green light, we put the pedal down and we started digging in. It’s checking the boxes, and it’s a good project for this.”

 Carmichael, who is the Principal with the Blackwood Holdings Group, the Chief Financial Officer and member of the Developer Capital Investment Committee Advisory Board, added that there are benefits of security the City would experience because of a CDD.

 “This provides much more comfort for the City because you now have a draw schedule, a process. This is security for the City because it is long-term capital. That’s very important if we go into a slowdown. So any kind of a slowdown, this is the perfect solution for it.”

Apopka City Commissioner Alexander H. Smith pressed Carmichael on his assertion.

 “I’ve heard a couple of times that if we did a CDD, the City would have no liability. What liability would the City have if we did not go with it?

 “None,” said Carmichael. “There’s no difference. We don’t give you any less liability, but what does happen is that there is CDD documentation that the CDD has to abide by. Any individuals that are on the board. So minimum infrastructure, flowers, landscaping elements can be established and they have to be abided by.”

 “We keep on talking about benefit to the City,” said Becker. “The City does not benefit from it. The people that benefit from it are Signature H. I would err on the side of maybe the public would benefit from it if this included some of the amenities… that would be public facing amenities, but we’re talking infrastructure.”

 Becker asked another question of Shepard about the power of a CDD Board.

 “So I lean back to the $840 (projected annual assessment for New Errol home buyers) that would be fixed unless we do negotiate. Otherwise, it would be negotiated by what is in the CDD paperwork. From a legal perspective, there was a lot of talks and a lot of back-and-forths when it came to the PUD Master Plan and Developers Agreement (DA). From a legal perspective, what powers does a CDD Board have against agreements in place like a PUD Master Plan and a Developer’s Agreement?”

 “Developers are still held to the terms of the Developer’s Agreement, typically. And I say typically because I too have done CDD’s that didn’t work out during the crash, but the way it was done then, when disclosure was a thing… was in the DA. It said ‘by the way we anticipate coming to you after you approve this and go forward with the CDD, because it’s critical to our infrastructure financing.’ The reason they did that and did so freely and in full disclosure was because they owned all of the property. Here that’s not the case. So the question which was kind of glossed over in my view was why didn’t this come up before now? So is it a possibility it might work? Absolutely. Can it be done in a way that makes sense? I think it can. I’m not telling you not to do it, but what you’re getting now is a lot of surface, but there is a lot of digging to be done before you can say yes.”

 Although the workshop ended with no consensus to either advance or shutdown the New Errol CDD, Wyzisk was pleased with the outcome.

“It was a productive workshop, and we’re encouraged by the dialogue both during and since. Once it was clearly understood that the CDD does not affect any of the 2400+ residents living inside existing Errol Estate — all parties began to absorb the purpose and logic of a CDD. It is a tool used by the most experienced developers in Florida and many of the best-selling projects. Our team wouldn’t suggest using this tool if it wasn’t the best option for both the immediate and long-term success of New Errol.”

Apopka Mayor Bryan Nelson, however, believes more information will be needed to make a decision.

“We still have a lot of unanswered questions that need to be addressed before we move forward with the New Errol CDD proposal.”

Wyzisk is eager to continue the process.

“The purpose of the workshop was to discuss, educate and generate questions. We successfully achieved that, and it’s now our responsibility to continue providing Council the information needed to move forward. We look forward to this process and are confident the outcome will be positive.”

To gain approval, the City Council would have to vote in favor of the proposal at two separate meetings.

2 COMMENTS

  1. The City Council grills? I like my steaks well done, if you council members are cookin’……lol Happy Birthday to Young Sheldon ( although, I don’t know how much longer I can keep referring to you as young…LOL)

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