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Sunday, Feb 23, 2014

Posted on Sun, Oct. 03, 2010

Special districts struggle against tide of defaults


By RICHARD DYMOND rdymond@bradenton.com MANATEE Waterlefe Golf and River Club developer WCI Communities Inc. went bankrupt in the thick of the real estate bust, leaving residents promises that no drastic changes would occur. That didnt prove to be exactly true. Waterlefes golf course was built in 1999 with a $9.5 million bond guaranteed in 2001 by the developer, who paid the annual bond payments and ran the golf course, making up annual operational losses that reached $200,000 in the early years. When WCI went belly up in 2008, the developer left enough money in reserves to cover two years of bond payments. Although Waterlefe has been able to turn its golf course fortunes around, even making a little profit this year, payments on the golf course bond, now at $8.370 million, are in arrears. Waterlefe now finds itself in the company of scores of other Florida community development districts in default on a bond. Miami Lakes-based financial advisor Richard Lehmann tracks what he says is a major problem from the real estate bust the defaulting of districts in his blog, Floridacddreport.com. Lehmann says 60 percent of the roughly 300 Florida districts that have issued bonds to build roads, swimming pools, sewer systems, golf courses and other amenities, are in default since the bust. The Manatee County districts on Lehmanns default list include Avignon Village, Buckeye Park, CrossCreek, Forest Creek, Legends Bay, Lexington and Waterlefe. The Manatee districts on the watch list for a possible bond default include Copperstone, Harrison Ranch and Heritage Harbour Market Place. The reason for these defaults and watches, in most cases, is that builders are not buying lots from the developers since housing sales have slumped. Some developers have gone bankrupt or residents have been unable to pay their district assessments. Manatee County has 41 total districts, said Bobbie Windham, assistant to the Manatee County property appraiser. The majority of Manatee County districts are not listed on Lehmanns troubled list. County on look-out Community development districts gained popularity in the 1980s. Lehmann describes how they work: A Florida developer can launch the project without a dollar at risk, Lehmann said. He or she buys some land, gets a first mortgage from a bank, pulls his or her money back out and then petitions for establishment of a district, Lehmann said. The developer goes to an underwriter and gets a bond issue to do the

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Bradenton.com | 10/03/2010 | Special districts struggle against ti...

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infrastructure for the district, like roads and sewers. As lots sell, the district moves closer and closer to being controlled by residents, who repay the bonds through county assessments. Lehmann believes the Florida Legislature should amend its laws so they are in step with Texas, where developers are required to use their own money to launch a community development district, which is not the case in Florida. Manatee County is limited on the requirements it can put on districts, said deputy county attorney William Clague. If they want to form one, you have to follow the Florida statutes, Clague said. We dont have to let them form. But they can go directly to the Florida Department of Community Affairs if we turn them down. They are separate governments, Clague added. They are almost like their own cities. They have their own debt, their own maintenance obligations and their own infrastructure. The county cant be sued for their defaults. Their defaults also do not impact the countys bond rating. Manatee County is concerned if residents are in unsafe situations in a district where a developer has walked away, but the county doesnt track bond defaults, Clague said. Our planners and public works officials are paying attention to neighbors in districts, Clague said. We know there are people living in communities where the developer has left. Although tracking the districts is not something county officials do, Clague has a concern about these little municipalities and does get information when he can. I confirmed with the developer of CrossCreek that they had a payment default on their CDD bond, Clague said of the community located at Old Tampa Road and Fort Hamer Road in Parrish. Buckeye Park, which is an industrial park, is no longer delinquent, said Pete Altman, regional district manager for District Management Services LLC of Tampa, the firm that provides services to Buckeye Park, CrossCreek and Lexington. Lexington is now in good shape with one bond that covers much of the resident community, Altman continued. But Lexington has deficiencies in a smaller phase bond. The key thing to note is that these communities are not all folding up. Altman did say this past week that CrossCreek does have some problems. When builders stop buying lots, the whole plan doesnt work because short-term bonds are short term and must be paid, Altman said. District managers from Avignon Village, Forest Creek, Legends Bay and Waterlefe did not return phone requests for this story. Waterlefe trying to manage The bonds that were issued about a decade ago to build Waterlefes roads, sewers and other amenities were separate from the golf course bonds, said Tony Maddaloni, chairman of the board of supervisors of the Waterlefe Community Development District. That was a fortunate move because the set of bonds for the community infrastructure, which have been paid down to $3.63 million from $4.26 million, are not in default, safely backed by 610 homeowners, Maddaloni said. In fact, those bonds are doing so well weve been approached by bond companies to refinance them at a better rate, Maddaloni said. But the golf course bonds are another matter. They were secured on WCIs name alone although the district owns the course.

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Bradenton.com | 10/03/2010 | Special districts struggle against ti...

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No one expected the market downturn, Maddaloni said. WCI was one of the top builders in the country. Like everyone else, I imagine they got overextended. In October 2008, the district board hired Escalante Golf Inc., a Colorado-based golf course management company, to run the course. Escalante had to figure out a way to stop the dollar bleeding. We did it through efficiencies, said Waterlefe general manager Doug Egly. We also had a reduction in staff. Waterlefe trimmed staff from about 60 to 37. Egly calls the remaining staff my A-players. We have only As and no Bs and Cs, and we get more done with less, Egly said. Escalante also has aggressively marketed the course. We are offering a promotion now to join now and play at no cost to the end of the year, Egly said. Richard Dymond, Herald reporter, can be reached at 748-0411, ext. 6686.
2010 Bradenton.com and wire service sources. All Rights Reserved. http://www.bradenton.com

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