Financial Resolution

The proceedings of the BOCC meeting on 13 December 2011, assented to a suggestion of the County Administrator that the financial differences revealed between staff and the affected property owners should be resolved by dialogue between staff and the property owners' chosen representative. This document is respectfully submitted as basis for that process of dialogue.

Background

1. The City of Crystal River (City) was awarded a Disadvantaged Small Community (DSC) grant by contract⁽¹⁾ with FDEP dated 2 October, 2000, wherein clause 7.04 allowed the City a low cost long term Associated Loan should the City so apply. Otherwise, the Agreement provided for an 85/15 percent match.

2. The Florida Categorical Exclusion Notice⁽²⁾ (FCEN) on 15 November, 2002, confirmed the Project was for replacing failing and marginally operational septic tanks in ten un-sewered areas of the City and in three unincorporated areas of the County surrounding the Plantation Inn Golf Course. The amount of the DSC grant was for $10.9million.

   1. FCEN is a document prepared after circulation of the proposal to make a DSC grant through all divisions of FDEP and reflects their consensus. For example, assurance of City's STP capacity to support the Project loading was subject to adding a half million gallon surge tank with appurtenances.

3. With effect 8 November, 2004, City availed itself of a twenty year Associated Loan (instead of the matching funds) for construction related costs, including contingency amounts, up to $1.1million. The Associated Loan contract⁽³⁾ provided for interest plus the Grant Allocation Assessment (combined) at 2.45% p.a., and brought total available funding to $12million.

   1. This meant that from the date given in 3. above the state was under contract to disburse funds to cover costs for all contractors' eligible invoices to accomplish the Project, representing 85% DSC grant plus 15% Associated Loan.

   2. It is simply incomprehensible why the County should issue inflated preliminary assessment notice⁽⁴⁾ to property owners based upon only 57% subvention.

   3. Moreover, the expression "Expansion Fees (Impact)" derives from the City's 1991, Capital Finance Plan (CFP) submitted to the state solely to substantiate City's ability to supply any required matching funds or repay any Associated Loan to the state. Accepting the state's paying 100% of all costs to expand the sewer system with state disbursements, leaves no unpaid costs for City to recover from property owners as Expansion Fees, but does imply right to collect contributions from property owners enabling loan repayment over the term of the loan.

State Project Financial Arrangements⁽⁵⁾ (See Annex A)

4. Disbursements from public funds dedicated to the Project are paid by FDFS against contractors' eligible invoices, in accord with the FDEP approved Wastewater Facilities Plan of August, 2002, and the FCEN.

   1. The DSC and Associated Loan funds prior to the new process described at 6. below were completely at the discretion of the state as being proceeds from repaid loans from former Projects. The new source of the funds for state disbursement requires them to be classed as loans until Project completion when funds can be fully brought to account.

5. By Amendment 2 to the DSC contract on 12 June, 2006, system expansion work elements were specified and disbursements were restricted to $750,000 in any fiscal year. (The $750,000 per financial year cap was lifted by Amendment 4 to the DSC contract on 8 February, 2007.)

6. State funding for the unincorporated areas of the County - Areas 112, 113, 114 and Harbor Isle - follows a Principal Forgiveness Loan (PFL) process⁽⁵⁾ reflecting the above mentioned contracts of 2 October, 2000, and 8 November, 2004, whereby:

   1. The Project was defined to FDEP by City originally as a four year Wastewater Facilities Plan. Year One was defined as those ten segments within City bounds, Year Two was that now known as area 114, Year Three was area 112, and Year Four was area 113.

   2. A PFL amount is authorized by FDEP to cover 100% of estimated costs of each segment of work. At the conclusion of the segments of work all disbursements made are totaled. The City would not have to repay 85% of the agreed final total actually disbursed (the part forgiven).

   3. However, the 15% element of those agreed total disbursements actually made by FDFS does have to be repaid by City in 40 half yearly installments over 20 years at a special yearly low interest rate specified by FDEP. Adjustments are made by FDEP to allow for over or under estimation of the PFL quantum for the unincorporated areas (114, 112, and. 113).

   4. FDEP has accepted the process diagram attached as Annex A. as a correct depiction of the process. Funds are disbursed by FDFS to settle with public money 100% of eligible costs invoiced by Contractors.

Interlocal Agreement of 11 August, 2009⁽⁸⁾ (ILA)

7. The ILA is a contract between the two local government entities which, of itself, does not bind property owners, since they were not party to that contract. A previous interlocal agreement⁽⁶⁾ of 4 March, 1997, having similar objectives to ILA was represented to the Board of County Commissioners in 2008, as being inoperable by City. The consensus of the then serving commissioners was to work with City to achieve a more workable arrangement. The Agreement⁽⁷⁾ of 14 July, 2009 between the parties declared the provisions of the 1997 interlocal agreement "no longer required" and rendered it null and void from that date. Thus, any WHEREAS clauses need to be re-established facts as of 11 August, 2009.

   1. As its second WHEREAS, the 1997 interlocal agreement indicated that Citrus County, inter alia, "desires to provide to unincorporated areas a centralized sewer disposal system ...in order to protect the health, welfare and sanitary needs of its citizenry ..."

   2. Protection of public health, safety and welfare was not discussed according to the minutes of the joint meeting, held on 31 March, 2009, although similar wording to the above was included in ILA as the fourth WHEREAS of that Agreement.

   3. The joint meeting exposed financial advantages, water quality in the river system and development potential as the principal reasons for a new ILA.

   4. The minutes⁽⁹⁾ of the joint meeting on 31 March, 2009, indicate that agreement was conditional upon the approval of City's annexation of Crystal River Airport to circumvent a prior decision at law.

   5. Due diligence in regard to impact upon County's property owners was confined to supposition expressed in closing remarks.

   6. As recorded in the minutes, in response to a leading question from Commissioner Bartell about the 15%, the City Manager responded that, "it is City's intent that the cost would be covered through the assessment district."

   7. This response appeared to obscure the contract between City and FDEP of 8 November, 2004, which ensured that the DSC grant (85%) together with its Associated Loan (15%) as processed by FDFS disbursements paid all eligible contractors' invoices for expansion costs. The ILA consequently omitted these facts. (That the question was asked about the 15% asserts the existence of an 85%).

   8. Two issues discussed at the joint meeting which were beyond the scope of the FDEP approved Wastewater Facilities Plan⁽²²⁾ (WFP) of August, 2002, and the FCEN were; a. the use of so called Expansion Fees to help City finance a pipeline to the Progress Energy complex in return for the revenue potential from selling the recovered water. and b., the provision of sewer service the length of Fort Island Trail to unlock development potential for the County was also beyond the scope of the WFP.

   9. NOTE: Under current Florida law, reclaimed water is an alternative water source that is included in the statutory definition of "water" or "waters in the state." Thus, reclaimed water is currently considered a public resource. Florida law recognizes only a right to the "beneficial use" of waters in the state, including reclaimed water, subject to statutory and administrative permitting requirements. As such, reclaimed water is not considered the property of or exclusively controlled by an entity that produces it.

   10. Two issues apparently omitted from discussions included the existence of the contract of 2004, providing for the state cover of the 15% previously matching funds from City, and, the definition of which local government entity was responsible as first responder to, and for rectification of any sewage leakage. (The 1997 interlocal agreement required a performance bond by both City and County to provide for $1million cover for each and any event).

   11. Areas 112, 113 have had costs inflated by extension of area 113 to include a sewer section from that planned for area 114, that is, the Fort Island Trail portion from St Anne's Church to Plantation Inn/ Cutler Spur. This section is not shown as part of Area 113 either in the plans attached to the DSC grant application⁽¹⁰⁾ of 22 July, 1999, nor in the approved WFP, but was portrayed on a County GIS Map dated 23 November, 2010. A single Assessment District for areas 112, 113 and 114 should equably balance costs within the single project instead of being comprised of two separate Assessment Districts.

Enforcement of ILA

8. The state Department of Health had declined to lead on enforcement of mandatory connection to an operating sewer line, and their letter⁽¹¹⁾ to BOCC Chairman Bartell dated May 13, 2010, emphasized that part rationale for the wording in F.S 381.00655 was to indicate that enforcement was a local matter. The letter also enclosed a statement by Attorney General Bill McCollum, in AGO 96-09⁽¹²⁾, dated 2 February, 1996, with respect to another County saying, with reference to F.S 381.00655, "The statute itself clearly recognizes the authority of counties and municipalities to 'enforce other laws for the protection of the public health and safety.'"

   1. In the absence of any such laws it was interpreted by County staff that a County Ordinance could then be created and used to enforce mandatory connection to a laid sewer system by means of special assessment and lien law.

   2. Director, Robert Knight on 29 June 2010, advised County Administration how a staff member had drafted a dozen changes to County Code to allow such an enforcing County Ordinance to be prepared compelling property owners to connect under lien law on failure to pay any special assessment. County Ordinance 2010-04 was duly enacted on 7 December, 2010.

   3. As explained in my letter to Mr Knight of 19 October, 2011⁽¹³), the claim that a sewer system had been determined to be necessary to protect the public health and safety had been shown during the research not to be a matter of fact.

   4. Nevertheless, County Ordinances 2010-04 (7 December 2010) and 2011-03 (25 October, 2011) both aver a sewer system to be necessary for reasons of public health and safety in spite of the County having been informed to the contrary, as above.

   5. As worded in both County Ordinances 2010-04 and 2011-03, the only fact asserted by the fourth WHEREAS clause is that the Board of County Commissioners had determined or rather opined something. Simply to express corporate opinion about "it is necessary for the public health, safety... etcetera", no more establishes that necessity as a fact nor does it raise it to the level of being "other law" as demanded by the Buterworth Opinion on F.S. 381.00655, as quoted by Attorney General Bill McCollum, cited by Lisa Conti of the FDOH to The Honorable Gary Bartell, Chairman Board of County Commissioners, in her letter of May 13, 2010.

   6. It remains unclear whether the "other law" must pre-exist or be separate from any local enactment and raises question as to what fact emerged between 14 July, 2009, and 7 December, 2010 to warrant the "desire" of the 1997 interlocal WHEREAS (and that of ILA) to be become expressed as "determined" in the Ordinance 2010 - 04?

9. Moreover, as the Attorney General Butterworth in Attorney General's Advisory Opinion (AGO 90-75)⁽¹⁴⁾ also makes clear, a Special Assessment, "is an enforced contribution from the property owner imposed on the theory that the property assessed derives some special or peculiar benefit in the enhancement of value as a result of the improvement or service that is made with the proceeds."

   Furthermore, he cites necessary attributes of a Municipal Service Benefit Unit as incorporating an essential instrument and supplying a vital service, which are not attributes of the Ordinances since the installed septic systems had been approved for the purpose by DOH in the said County unincorporated areas and have not been determined to be failing or marginally operational (as required by FCEN).

   1. The definition of the word "Assessments" in the 2004 Associated Loan contract makes it clear that it refers principally to assessment made solely to repay the 15% loan element. It is viewed as a precedent.

   2. The contract⁽¹⁵⁾ providing for the funding of the Service Area (112, 113, 114 and Harbor Isle) applies state funding and not assessment proceeds.

   3. It also uses a different definition of Assessments including the words, "lawfully levied by the local Government (City) in accordance with its Interlocal Agreement against properties in the Service Area which will benefit directly from the Project." The ILA conveys no lawful right to recover anything from a property owner not party to that contract.

   4. The only direct costs appropriate to inclusion in a special assessment are those not paid for by the state disbursements, that is to say, the loan repayment elements only

   5. It follows that since it is the state disbursements made under contract which pay the contractors' eligible invoices to expand City's sewer system to enable it to be accessed from the property owner's property, and not the proceeds of special assessment, any levy or charges upon property owners for the same thing (to expand the sewer service) would constitute an unjust enrichment or "double dipping" by City and not an amount rightfully owed by the property owner and subject to the County's lien.

   6. Since such amounts were disbursed by the state for the purpose of enabling the sewer to be accessed from an intended property, it may be argued that charges to enable City to repay over twenty years the 15% loan elements due to the state might be payable by a property owner.

   7. The suggestion that a property able to be connected with the sewer system benefits by increased value from the special assessment revenues when so many other factors condition property value such as position, age, type of construction, state of repair, general appearance, internal arrangement, etcetera, and, the need for a willing buyer, obscures any such conclusion.

Restoration of River System Water Quality

10. The commissioners have all voiced their opinions in favor of restoring water quality to Crystal River and Kings Bay. Indeed as a board, they invited Dr Todd Kincaid to speak on protecting our precious fresh water resources at their meeting on 13 December, 2011. During which he emphasized the need to embrace and engage the politics and economics of scarcity with respect to the finite and depleting resource, and the setting and enforcing of aquifer extraction limits.

    1. The Jones and Upchurch, 1994⁽¹⁶⁾, science study on page 107, refers to the then 17,000 inland septics as source of 212 tons/yr Nitrate directly discharged to ground water. Its Recommendation 2. on page 111, reads, " Planning for elimination of septic tanks in central Citrus County should begin immediately, with a target for county sewer service by the year 2015 ".

    2. USGS Open-file Report 96 -230⁽²³⁾, K.M Hammett, et al. 1996. - Tidal-Flow, Circulation, and Flushing Characteristics of Kings Bay, Citrus County, Florida, substantiates that degradation of waters in the Hunter Spring run area could not be attributed to septic system leakage from Areas 112, 113, or 114.

    3. The Biological Assessment study was triggered by failures of previous routine inspections of toxicity, biometric assessments and water quality sufficient to warrant evaluation of the facility's impact upon its receiving waters. The Biological Assessment of Crystal River Sewage Treatment Plant⁽²⁵⁾, Citrus County, - FDER, May 1992 , reported toxic effluent discharges into Kings Bay via an unauthorized dredged connection to a stream in violation of Florida statutes, together with uncommonly high levels of total ortho-phosphorous and nitrate-nitrite with extremely elevated algal growth potential.

    4. The algal growth once initiated is self perpetuating. The algae which are living microorganisms find the local waters perfect for reproduction, growth, and spreading from place to place on wind and water currents.

    5. No records were found at FDER or FDOH of any determination of failing on-site wastewater treatment systems (septics).

    6. Furthermore, no septic systems have been determined to be failing or marginally operational in the Areas 112, 113, or 114 to warrant the replacement contemplated by the FCEN (presumably should the owner have failed to rectify any deficiency).

Crystal River Sewer Assessment

11. At a meeting with a member of County staff on 1 July, 2011, I was handed a set of documents including a Cost Opinion Summary Sheet⁽¹⁷⁾ (COSS) for Areas 112 & 113, a five page Crystal River Sewer Assessment⁽¹⁸⁾ (CRSA), and a Citrus County GIS map⁽¹⁹⁾ dated 23 November, 2010.

    1. The first sentence of CRSA reads as follows, "Based upon environmental testing done in 1999, it was determined that installation of a wastewater collection and disposal system was necessary for the public health, safety and general welfare the County and its citizens in the Fort Island Trail corridor and other unincorporated areas of the County bordering and/or in close proximity of the Crystal River and Kings Bay."

    2. During our research we had been unable to trace any local record of the environmental testing having been done, and in particular, in a letter dated 19 October, 2011, County was advised that the above highlighted statement was not a matter of fact, (as indicated by e-mail received from FDEP⁽²⁰⁾ dated 17 October, 2011, and from FDOH⁽²¹⁾ dated 18 October, 2011).

    3. The said County GIS map, differs from depictions of the areas on maps attached to the DSC application In particular, on the GIS map, the areas have been extended most notably with respect to Area 113, extended along Fort Island Trail from St Annes Church toward the Plantation Inn, which was originally part of Area 114.

    4. The COSS uses a lesser figure (approximately 57%) for grant funding as opposed to that (85%) provided by the contract between the City and FDEP dated 8 November, 2004.

    5. Although posted on the County's website, no general circulation of the CRSA to include those without computer access has yet been made. This false information should be withdrawn until the Project is complete and accurate information can be given to all the property owners.

Citrus County Property Owners' Petition

12. The principal cause of distress expressed by County property owners was that the County had effectively ceded to City its jurisdictional authority for on-site wastewater systems, leaving property owners without vote or recourse of any kind to charges proposed to be levied by the City. This is exemplified by their treatment at City Council meetings and in correspondence from City.

    1. In addition, reduction or elimination of the following specific charges in the County assessments were listed:

       1. any recovery of the 15% loan element repayable by City to the state with respect to expansion of the sewer system into County areas 112,113 and 114 should not be lump sum up front, (a total, c.$1.206million) but recovered over the twenty year term of the loan at a low interest rate as intended by FDEP⁽²²⁾. [ Refer 9, and 9b, above]

       2. offset the burden of all connection costs, for plumbing labor and materials and licensing, by applying for a Community Development Block grant as suggested by FDEP⁽²²⁾,

       3. levy no expansion costs as fees as they are paid by disbursements made by FDFS⁽⁵⁾, subject to A. above (a total, c. $1.452million).[ Refer 9. and 9a above]

       4. levy no discretionary elective surcharges of any kind, as they do not constitute unpaid direct costs.

SUMMARY

1. No trace was found of any determination of factual necessity to replace septic systems in the target unincorporated areas of Citrus County with sewer service to protect public health, safety and general welfare of its citizens.

2. No justification was found for recovery from County property owners of any so-called expansion fees, whether or not subject to elective surcharge, nor for levy upon them of any discriminatory surcharge for sewage collection services.

3. No justification was found for assessing vacant lots which should only arise when lots are built upon and connected to the sewer service.

4. The principal source of distress to County property owners, being the false indication of assessments, should be withdrawn until the Project is complete and accurate information can be given to all the property owners.

5. Rejection of the petition submitted to the County Commissioners on behalf of the County property owners on 27 July. 2011, to reduced the burden⁽²²⁾ of connecting to sewer service by County's application for a Community Development Block Grant is regrettable .

6. Failing to minimize distress caused to County property owners by exercising less than meaningful due diligence on their behalf is considered reprehensible.

7. County jurisdictional authority over wastewater treatment systems for County residents should be restored forthwith.

Annex A - Principal Forgiveness Loan process diagram.

Principal Forgiveness Loan process

List of References

1. Disadvantaged Small Community Grant Agreement dated 2 October, 2000.

2. The Florida Categorical Exclusion Notice dated 15 November, 2002.

3. The Associated Loan contract dated 8 November, 2004.

4. Preliminary assessment notice.

5. Principal Forgiveness Loan process diagram.

6. Interlocal agreement of 4 March, 1997.

7. Agreement of 14 July , 2009 rendering the 1997, Interlocal Agreement null and void.

8. Interlocal Agreement of 11 August, 2009.

9. The minutes of the joint meeting on 31 March, 2009.

10. City's DSC grant Application of 22 July, 1999.

11. FDOH letter to BOCC Chairman Bartell dated 13 May, 2010.

12. Attorney General's Advisory Opinion AGO 96-09.

13. Amy H Remley Foundation letter to Mr Knight of 19 October, 2011.

14. Attorney General's Advisory Opinion AGO 90-75.

15. The contract providing for the funding of the Service Area (112,113,114 and Harbor Isle).

16. The Jones and Upchurch, 1994, Origin of Nutrients in Ground Water Discharging from the Kings Bay Springs.

17. Cost Opinion Summary Sheet (COSS) for Areas 112 & 113.

18. Crystal River Sewer Assessment (CRSA).

19. Citrus County GIS map dated 23 November, 2010.

20. E-mail received from FDEP dated 17 October, 2011.

21. E-mail received from FDOH dated 18 October, 2011.

22. E-mail received from FDEP Bureau Chief dated 22 July, 2011.

23. K.M Hammett, et al. 1996.; USGS Open-file Report 96 -230 - Tidal-Flow, Circulation, and Flushing Characteristics of Kings Bay, Citrus County, Florida.

24. Minutes of City Council meeting 12 December, 2011, regarding Agenda Item C.

25. The Biological Assessment of Crystal River Sewage Treatment Plant, Citrus County, - FDER, May 1992.