HomeMy WebLinkAbout1992-1993 - NegotiationsCity/GDU Negotiation Documents
—3-26-92
GDC
Ltr.
to
GHR
- Offer to sell for $2.5 million
6-15-92
HAI
1TR.
TO
RSM
- Recommendations re: negotiations
7-7-92 RSM Ltr. to AGCI requesting to negotiate
8-14-92 HAI Ltr. to GDU - data request
,8-19-92 HAI Memo to file - Summary of 8-18-92 mtg.
X0-5-92 HAI Ltr. to GDU - Outline parameter of sale
10-9-92 RSM Memo to MCC - transmittal of 10-5-92 ltr.
12-10-92
HAI
Ltr.
to
GDU
- Request
to
continue
negotiations
3-3-93
HAI
Ltr.
to
GDU
- Request
to
continue
negotiations
3-19-93 GDU Ltr. to HAI - Willing to negotiate
3-23-93 RBV Memo to RSM - Data re: GDU remaining systems
systems
3-24-93 HAI Ltr. to RSM - Report call to GDU re: parameters
3-25-93 RBV Memo to File - Research report re: 1981 franchise hearing
4-12-93 HAI Memo to GDU - Minutes of 4-8-93 Neg. Session with draft
offer letter and draft contract
4-13-93 HAI to GHR et.al - Status of negotiations
4-14-93 HAI - Draft 20 year proforma
X14-93 HAI Summary & assumptions of purchase (used as back-up
for mtg./w City Council)
4-15-93
GHR
to
RSM
- Legal
opinion re:
acquisition provisions
--4-23-93
RSM
to
GDU -
Offer
to purchase
for $2.75 million
4-28-93
HAI
to
GDU
- Data request
4-30-93
RSM
to
MCC -
Transmit GHR
opinion
--5=11-93 GDU to RSM - Counter Offer $3.325 -million
r5=12-93 RSM to GDU- Best & final offer of $2.75 -million
Documents
Page # 2
5-12-93 HAI to CIN - data request
5-19-93 HAI to RSM - info re: Francher
6-16-93 RSM to GDU - Abandon Negotiations
Notes: CIN - C. Nash
HAI - Hartman Associates, Inc.
GDC - General Development Corporaton
GDU - General Development Utilities
GHR - Gra, Harris & Robinson, PA
MCC - Mayor and City Council
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` General Devftu, Corporation 4 D f d S _Z
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2601 XVTH BA4WOaE OAWp
141 W FL AN W-S+dl Thoo1N W. JFNFt
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PAIVILEOL'D AND 09NFIA9NT1ZIL
BETTLEIlmaT DISCOS920H pURpOggg ONLY
March 26, 1992
Gordon Harris, Esq,
Gray, Hdrric 6 Robinson, P.A.
201 East Pine Street
southeast Bank Building
Suite 1200
Orlando, Florida 32801
Re: GDU Systems in City of Palm Bay
&_.ut of Sebastian
Dear Hr. Harris:
In furtherance to our tclepnone conversation of this
afternoon, I have been directed by J. Larry Rutherford, President
and CCO of General Development Corporation ("GDC") and Charios E.
Fancher, sr., President of General Development Utilities, Inc.
( GDU ), to transmit to you the following conceptual offer in
settlement of pending and threatener] litigation concerning GDU's
utility systems (the "SYStOMO) in the City of palm Nay ("Palm
Nay") and the City of�lSebastidn ("SQbastian", Collectively with
Palm Bay, the Cities ).
sebastian for net pricesand CDU fof to bell the System9s to Palm say and
respectively, p $46.5 million and ,,2.5 million,
p y, for a net aggregate prioe of $49 millien realized
by GDC and GMT. This offer is subject, but not limited, to the
following terms aha conditions:
1. the timely acceptance of t.be oCCkr by both Cities;
the negotiation of mutually JaCcel,table final
agreements of purchase and Cala: and
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City of Sebastian
POST OFFICE BOX 780127 ❑ SEBASTIAN, FLORIDA 32978
TELEPHONE (407) 589-5330 ❑ FAX (407) 589-5570
M E M O R A N D U M
DATE March 23, 1993
TO Richard B. Votapka, Utilities Director
FROM GDU Negotiations
SUBJECT GDU systems remaining in operation to date.
Gerry Hartman of Hartman & Associates told me that as of
this date only four (4) utility systems remained under
GDU ownership. Ranking them from largest to smallest,
they are as follows:
1) Silver Springs Shores (near Ocala)
2) Sebastian Highlands
3) Port LaBelle (Central -South Florida area)
4) Vero Highlands (south of Vero Beach)
The GDU water and sewer systems in Port Charlotte on the
west coast and Port St. Lucie on the treasure coast are
currently involved in condemnation suits. The large
systems in Palm Bay and Northport were recently taken
over by others as a result of condemnation action.
(ebb,
For Yow MA .
� r c4, d-� '+
General Development Utilities, 111C.
An Atlantic Gulf Communities Corporation Subsidiary
2601 SOUTH RAYSHORE DRIVE
MIAMI, IFIL33133-5461
w
(305) 659-9-4331
Cbow
T
ftolved
� wnaQe��
ZL
Mr. Gerald C. Hartman, P. E.
President
Hartman & Associates, Inc.
201 East Pine Street
Suite 1000
Orlando, Florida 32801
AMU
Charles E. Fancher, Jr.
PRESIDENT
March 19, 1993
RE: SEBASTIAN HIGHLANDS WATER AND WASTEWATER SYSTEM
Dear Gerry:
I have received yourrecent letter on behalf of the City of Sebastian and disagree with
your characterization of prior communications and conduct of the parties. I do not
think it productive to comment on any implied characterization of the Franchise
Agreementin yourletter, but our failure to commentin this regardshould not be taken
as acquiescence. I offer the following comments relative to the present situation.
I think we both agree that preliminary discussions to date regarding the City's desire
to acquire GDU's Sebastian utility system have not been productive. We are willing
to pursue further discussions in good faith, but only in a confidential setting. We
welcome your thoughts as to how this can be accomplished. If the City is ultimately
to acquire the GDU system, it is in the best interest of both parties to do so in a
concertedmanner and avoid the time and expense invoivedin adversarialproceedings.
When I discussed the City's potential interest last Fall, I advised that GDU desired to
file a request for general rate increase. I also advised you and Mr. McClary that given
the City's interest in acquiring the Utility, a hearing on the rate increase should be
conducted by a hearing officer from the Department of Administrative Hearings to
avoid a conflict of interest which could result if the City Council were to try to decide
the case. More than six months have passed, and/ have received no response to this
suggestion. I believe the facts in this regard are unchanged, and I renew the
suggestion that the City request a DOAH officer to hear our request for rate increase.
afu
��®eN1
March 19, 1993
Mr. Gerald C. Hartman
Hartman & Associates, Inc.
Page 2
If the City wishes to proceed with a purchase under the franchise the process should
begin now since any actions of the City at a later date may interfere with our sale to
another party.
Very truly yours,
Charles E. Fancher, Jr.
President
CEF/cc
cc: J. Larry Rutherford
Thomas W. Jeffrey
Robb Mc Clary, City of Sebastian
Rick Votapka, City of Sebastian
Charles Nash, City Attorney
Tom Cloud, GHR
06/09/93 11:15 $407 839 3790 HARTMAN ASSOC SEBASTIAN MCCLAR 1a002/005
HA,RTMAN & ASSOCIATES, INC.
engineers, hydrogeologists, surveyors & management consultants
March 3, 1993 HAI #92-023.04
VIA FACSIMILE
Mr, Charles E. Fancher, Jr.
General Development Utilities, Inc.
2601 South Bayshore Drive
Miami, Florida 33133-5461
Subject: Sebastian Highlands Water and Wastewater System - Negotiations
Dear Charlie:
It has been about 11 months now that we have been trying to negotiate with you, and you have
yet to provide us with a proposal from General Development Utilities, Inc. (GDU). I cannot
recall all the different times that I have tried to call you, left messages and have written you
letters relative to the City of Sebastian trying to negotiate this acquisition with GDU.
Based upon your lack of action to date, even though both you and Larry Rutherford have
promised that you would get back to us with a proposal, I am forced to suggest to my client
that they consider exercising their option under Section 16, Conveyance of System, of the
Franchise Agreement with GDU (copy attached).
I think we all know the City has conducted itself with extensive good faith efforts to negotiate
a transaction with GDU, only to be faced with no response and no action from the company.
If this system is to transfer into public ownership, then it must be my recommendation to the
City to consider exercising our option under the Franchise Agreement.
If GDU wishes to negotiate this transaction, then please respond to me by March 18, 1993.
Your silence will be considered as rejection of the negotiation option, as would be a letter
which states the same.
201 FAST PINE STREET - SUITE 1000 - ORLANDO, FL 32501
TE "HONE (407) 8393955 - FAX (407) 939-3790
PRINcmALS:)AMFS E. CHRISTOPHER • CHARLI S 1Y'. DRAKE -GERALD C. HARTMAN • MARK I. LUKE -MARK A. RYNNING • HAROLD E. SCHMIDT, JR.
06/09/93 11:16 $407 839 3790 HARTHAN ASSOC
Kr. Charles E. Fancher, Jr.
March 3, 1993
Page Two
I look forward to hearing from you prior to March 18, 1993.
Very truly yours,
444 SEBASTIAN MCCLAR IZ003/005
Hartman & Associates, Inc.
C. H , P.E_
President
GCE/ch
C17/Fancher.gh
Attachment
cc: Larry Rutherford, GDU via facsimile
Robb McClary, City Manager, City of Sebastian
Rich Votapka, P.E., Utilities Director, City of Sebastian
Charles Nash, City Attorney
Tom Cloud, GHR
06/09/93 11:16 $407 839 3790 HARTMAN ASSOC — SEBASTIAN MCCLAR
APPENDIX A—FRANCHISES Art- I, § 16
Section 14. [Rights, liabilities, etc., binding on parties.]
This franchise and all the rights, privileges, obligations and liabilities hereunder shall be
binding on the said council and the said company, and their successors and assigns.
Section 16. [Consideration.]
That within thirty (30) days after the first anniversary date of this franchise and within
thirty (30) days after each suezeeding anniversary date of this franchise the company, its
successors and assigns, shall pay to the city and its successors, an amount which added to the
amount of all city taxes, licenses and other impositions levied or imposed upon the company's
property, business or operations for the preceding tax year will equal six (6) per cent of
company revenues from the sale of water service to residential and commercial customers
within the corporate limits of the grantor, but excluding contributions -in -aid -o£ -construction
and connection charges for the twelve fiscal months preceding the applicable anniversary date.
Any franchise fee to be collected shall be shown as a separate item on the company's bills to
its customers.
Section 16. (Conveyance of system.]
Within a reasonable time, which time shall not exceed one hundred eighty (180) days,
after the city has notified the utility of its intent to terminate the franchise and to acquire the
System, the franchise holder shall convey all of its facilities together with all easements to the
City of Sebastian. The time for conveyance of the system may, be extended by action of the city
council should the utility demonstrate to the satisfaction of the city council that it has expe-
rienced a delay in its ability to convey the system which delay was unintentional and beyond
its control. Said conveyance by the utility shall be without encumbrance. At this time the
franchise holder shall convey unencumbered all of its facilities together with all easements, to
the City of Sebastian, without charge as to all property contributed to the utility, provided
further, however, that the city shall have the right to purchase the remaining assets of the
utility based on the average of the net orf�,ina1 cost and a price as computed and agreed upon
by three (3) competent and qualified appraisers. The city shall select an appraiser, the utility
shall select an appraiser, and these two (2) appraisers shall mutually agree upon and select a
third independent appraiser and these three (3) appraisers shall arrive at the value of the
utility and the sales price involved_ However, the city shall not be required to purchase and no
value will be placed on additions or extensions to the system which were paid for as
contributions-in-aidokonstruction by any person, firm or corporation other than the utility_
At the and of the franchise period, the city shall not be required to pay to the utility any
amount for goodwill and the appraised value shall be based entirely upon physical assets only,
and provided further that in the event said board of appraisers cannot agree as to the price to
be paid by the city, then the city may file appropriate condemnation proceedings under Florida
law. Prior to the utility conveying the system to the city, a detailed and accurate set of record
drawings showing location, sizes, and types of water mains, fittings, fire hydrants, services,
and other pertinent information shall be furnished to the city o ra.pro uci e my ars Any
franchise granted by the city shall include the above requirement.
CDA 11
IR004/005
06/09/93 11:17 $407 839 3790
Art, I, § 17
Section 17. [Fire hydrants.]
HARTMAN ASSOC
SEBASTIAN CODE
444 SEBASTIAN MCCLAR
In any area to be served by the utility, the water distribution system must be designed to
provide fire fighting facilities and hydrants as necessary to meet requirements of the National
Board of Fire Underwriters, Class 8, except that no lot in a single-family residential area shall
be more than five hundred (500) feet from the nearest hydrant as measured along the public
right of way. Within ninety (90) days fallowing final completion of each particular section of
water distribution systems as approved by the State of Florida Department of Environmental
Regulation an updated map showing all of the Fine hydrants and their rated fire flow shall be
submitted to the city and the Sebastian Volunteer Fire Department. Failure to provide such
a map at the end of the ninety -day time period may result in a fine of fifty dollars ($50.00) per
day to the utility if so ordered by the city council until such time as the map is submitted.
Section 18. [Forfeiture of grant)
The failure on the part of company to comply in any substantial respect with any of the
provisions of this ordinance shall be grounds for forfeiture of this grant but no such forfeiture
shall take effect if the reasonableness or propriety thereof is protested by company until a
court of competent jurisdiction, with a right of appeal in either party, shall have found that
company has failed to comply in a substantial respect with any provisions of this franchise and
the company shall have six (6) months after the final determination of the question to make
good the defaults before a forfeiture shall result with the right in council, at its discretion, to
grant such additional time to company for compliance as necessities in the case required -
Section 19., [Repealer.]
Ordinances 175 and 208 are hereby specifically repealed in their entirety. Any and all
ordinances grantingGeneral Development Utilities, ane., or General Development Corpora-
tion a water franchise are hereby repealed in their entirety.
Section 20. Severability, clause.
It is declared hereby to be the intent of the council that, if any section, subsection,
sentence, clause or provision of this ordinance is held invalid, the remainder of the ordinance
shall not be affected,
Section 21, Effective date.
The Provisions of this ordinance shall become effective ten (10) days after the date of its
enactment, subject to the utility's acceptance of this franchise in writing.
QJ005/005
City of Sebastian
I4MIA
POST OFFICE BOX 780127 ❑ SEBASTIAN, FLORIDA 32978
TELEPHONE (407) 589-5330 ❑ FAX (407) 589-5570
Confidential
M E M O
DATE: October 9, 1992
TO: Lonnie Powell, Mayor & Sebastian City Council
FROM: Robert S. McClary
RE: GDU Acquisition
Enclosed is a letter from Hartman & Associates to General
Development Utilities outlining the current status of the GDU
Negotiations. This document is considered confidential under the
Public Records Act which authorizes an exemption for the purchase
of real estate. This becomes a public document once an option is
exercised or negotiations are abandoned.
I believe the letter provides an accurate assessment of the
City's position with one exception. The exception would be in
paragraph 3 considering mandatory connection of occupied homes.
The City Council dialogue on mandatory connections to date has
been to consider mandatory connections for new construction but
not to require existing homes to connect unless there is an
environmental or health problem.
Should you need additional information or wish to discuss the
status of negotiations or details of the offer please feel free
to contact Gerry Hartman, Tom Cloud or myself.
Gerald C. Hartman - 1-800-881-3955
Tom Cloud - 1-407-244-5624
Q
HAKE AN & ASSOCIATES, C
engineers, hydrogeologists, surveyors & management consultants
October 5, 1992
HAI #92-023.04
�N5c�7E97p�
of QbT W�
0
Mr. Charles E. Faucher, Jr. "'eceived
General Development Utilities, Inc. N C 41 Man> ves
2601 South Bayshore Drive �2 0"
Miami, Florida 33133-5461 9zs>� '-4
Subject: Sebastian October 2, 1992 Telephone Conversation
Dear Mr. Fancher:
m
Based upon my notes of our telephone conversation of October 2, 1992, relative to the
Sebastian system, you stated that the rate base or total investment situation which General
Development Utilities, Inc. (GDU) had in the system approaches $4 million, plus or minus.
I stated that the highest cash offer the City ever made to GDU was $2.1 million, and that offer
was not accomplished with the insights and investigation which have been done to date. To
my knowledge, no higher offer has ever been made to GDU for the Sebastian system.
Moreover, that offer did not include any futures, simply a cash situation. Finally, that offer is
no longer valid.
Based upon the situation which we find ourselves in, the following limits to forming a
purchase and sale contract without grant or federal funding involves the following:
1. The City will not institute rates greater than the Indian River County rates for water
and sewer.
2. The City will not assess a readiness to serve charge, guaranteed revenue charge, or
other similar charge for vacant lots which have not applied for capacity or which have
not paid for capacity in the system.
3. The City will consider mandatory connection of occupied homes within 300 feet of a
central water main or central wastewater collection system.
4. The City will consider, and will actively pursue and make its best efforts to expand the
customer base. Of course, we cannot manufacture residents or manufacture people in
the area, and therefore, we are limited to those who actually build homes in the area
and are within a cost-effective distance to our utility, or of a sufficient density which
201 EAST PINE STREET • SUITE 1000 - ORLANDO, FL 32801
TELEPHONE (407) 839-3955 • FAX (407) 839-3790
PRINCIPALS: JAMES E. CHRISTOPHER . CHARLES W. DRAKE • GERALD C. HARTMAN • MARK I. LUKE • ;MARK A. RYNNING . HAROLD E SCHMIDT,.IR
2
r
oft
Mr: Charles E. Fancher, Jr./1
October 5, 1992
Page 2
would make economic sense to bring those customers into the central sewer system or
water system.
5. The City will actively pursue the expansion of the water system.
6. The impact fee/connection fee level for water and sewer combined is approximately
$2,500.00 for the GDU system.
You indicated to me that you had not discussed this situation with Mr. Rutherford, even
though on the September 30, 1992, you stated that this would be discussed and a decision
made by October 2, 1992.
No counter proposal was provided by you, other than to say that our proposal was not good
enough. You stated that your staff had calculated present value of our proposal less than $1
million. I stated to you that could not be the case and that the present value had to be at least
$2 million, given that the numbers provided by GDU to us were correct for the number of
available customers along lines. We found out during the conversation that the number
provided by GDU to us was the number of lots and not the number of potential customers, and
that the number of customers was only in the order of 100 near existing lines and the
remaining 900 or so were vacant lots. You requested some additional information which
would clarify the proposal to you regarding the present value of the proposal. That will be
forthcoming as a separate letter.
You reiterated that $650,000.00 in cash was inadequate and that the proposal we made was not
adequate for GDU, in that GDU wished more money in up -front cash. I responded to you that
we had structured this proposal to maintain the highest total dollars transmitted to GDU. We
were given that instruction in our previous meeting. Now, it appears that we are getting a
conflicting desire from you relative to the highest cash up -front situation.
Given that situation, I responded that the highest up -front cash that we would consider at this
time, after some discussion with you, would be $1 million, yet, the futures would be
significantly reduced. Subject to the City's review and approval, the higher cash at closing
alternative which we commented on would be $1 million cash at closing, and $250,000.00 at
100% of the present connection fees. Once that value is reached, then the next $1 million at
60% of the connection fees; and once that number is reached, $750,000.00 for the futures in
the Highlands plat at 20% of the present connection fee. This would provide a total purchase
price of $3 million over and above the fust $1 million; all of the values are based upon future
connection fee revenues.
We are not in the habit of negotiating with ourselves and find it a little bit disheartening that
you did not provide a counter proposal on October 2, 1992, which you had promised to us.
We would appreciate receiving a counter proposal from your side at the earliest juncture.
Mr. Charles E. Fancher, Jr.^,
October 5, 1992
Page 3
/^
Of course, the parameters which you must consider are the parameters delineated above. If we
are in a situation that a reasonable transaction cannot be consummated and you are not willing
to provide a counter offer, then we would appreciate your stating your position to us, such that
the City does not waste its time and money on this issue. We would expect a counter offer
from you as a memorandum or one-page summary in writing on or before October 7, 1992.
All other aspects of the proposal that we provided to you would be maintained with the second
set of comments delineated above.
Very truly yours,
Hartman & Associates, Inc.
A- 0W.ae"z�—
Gerald C. Hartman, P.E.
President
GCH/ch
C 15/Fancher5.gch
cc: gRob McClary, City of Sebastian
Tom Cloud, Esquire, GHR
Hal Schmidt, HAI
Lary Rutherford, GDU - Miami
M
FART SAN & ASSOCIATES,
engineers, hydrogeologists, surveyors & management consultants
December 10, 1992 HAI #92-023.04
Mr. J. Larry Rutherford
General Development Utilities, Inc.
2601 South Bayshore Drive
Miami, Florida 33133-5461
Subject: Sebastian Highlands Water and Wastewater Systems
Dear Mr. Ruthe -lord: U
Now that both the North Port and Palm Bay systems have been closed or are pending closing,
I would appreciate the opportunity to renew our discussions relative to the Sebastian Highlands
water and wastewater system.
If I am not mistaken, the posture that we are at is for a counter offer from General
Development Utilities, Inc., or acceptance of our last offer to you. As we previously have
discussed, I believe that this transaction can be done in a rapid and cost-effective manner for
both parties without the need of any litigation, and in fact, we probably could have much of
the documentation and other aspects of the deal completed before incurring too much legal
expense.
I would appreciate your response in this matter.
Very truly yours,
Hartman & Associates, Inc.
e d C,CF�artman
President
GCH/ch
C16/Ruther.gch
cc: Rob McClary, City of Sebastian
Hal Schmidt, Jr., P.E., HAI
201 EAST PINE STREET • SUITE 1000 • ORLANDO, FL 32801
TELEPHONE (407) 839-3955 • FAx (407) 839-3790
PRINCIPALS: JAMES E. CHRISTOPHER • CHARLES W. DRAKE • GERALD C. HARTMAN . MARK 1. LUKE • MARK A. RYNNING • HAROLD E. SCHMIDT, JR.
r"4�
0
Fw
.�.
HARTTNA.< & ASSOCIATES, L N c.
engineers, hydrogeologists, surveyors & management consultants
MEMORANDUM
92-023.00
TO: File
4f 0-
� 1'2��°w
pUr 1992 -
FROM: Gerry Hartman �' � Received N
r city Managers w
0sOfflce
DATE: August 19, 1992 s� ��
�[n qL'
`rZLLtOl6
SUBJECT: GDU Negotiations Meeting
On August 18, 1992, la-rry Rutherford, Charlie Fancher, Hal Schmidt, Rob McClary and the
Writer met regarding the City of Sebastian water and sewer facilities. The following was
agreed to among the parties:
1. Relative to the meeting, we would tell the press that the parties are negotiating.
2. GDU is not exclusively negotiating with the City of Sebastian; rather, they are
determining an alternate strategy for the sale of their utility systems as one large
combined unit for the remaining five (5) systems.
During the meeting, Mr. Rutherford stated that he is willing to, of course, sell the system to
the City of Sebastian if the terms and conditions can be negotiated in a reasonable manner.
The parties stated their two (2) methods of negotiations. One would be a contract predicated
on the performance of getting a Farmers Home Administration grant loan for funding the
improvements and the acquisition. The second option is to do a cash down with a futures deal
based upon the revenues of the system and bondability of the same.
In either case, it appears that GDU will be applying to the City of Sebastian for a rate
adjustment for their utility system. Mr. Rutherford requested that Rob McClary present to the
City Council GDU's request to have the rate hearing in front of a hearing officer, and then
bring that hearing officer's recommended order to the City Council. Within three (3) weeks,
we will notify Mr. Rutherford of the decision of the City Council relative to this issue. Mr.
Rutherford directed Charlie Fancher to provide the data and information to Hal Schmidt,
within a two-week period and later on, he asked him to do it within a one-week period.
The Writer is to prepare typical purchase and sale agreements for the negotiated sale of the
Sebastian system. They are to reflect Option A, as well as Option B. This is scheduled to be
completed within two (2) to three (3) weeks. After approximately three (3) weeks, plus or
minus, a second meeting will be scheduled for the parties to negotiate the purchase price and
go over the technical information for one-half day, and then meet in the afternoon, following
up that technical session with a negotiations session.
201 EAST PINI: STREET • SUITE 1000 • ORLANDO. PL 32801
TELEPHONE (407) 839-3955 • FAX (307) 839-3790
PRINCIPALS:.IAMES E. CHRISTOPEII:R • (:IIARI.ES \X'. DRARI'. • GERALD ( IIAR'ITIAN• NIARR I. I.1'AP • \IARR A. M NN'INC • IIARMA I: SCIWIIITI'. IR.
_ N
V 1
p�
ly
MEMORANDUM (Continue
A`y;ust 19, 1992
Page Two
The above is a summary of the negotiation session conducted at GDU's offices on August 18,
1992.
End of memorandum.
GCH/ch
C14/Sebast.mem
cc: Hal Schmidt, HAI
_Robb McClary, City of Sebastian
Tom Cloud, GHR
-X
41-
City of Sebastian
POST OFFICE BOX 780127 o SEBASTIAN, FLORIDA 32978
TELEPHONE (407) 589-5330 ❑ FAX (407) 589-5570
July 7, 1992
VIA FAX
Mr. J. Larry Rutherford, President
Atlantic Gulf Communities, Inc.
2601 South Bay Shore Drive
Miami, F1 33133
Re: General Development Utilities -Sebastian
Dear Mr. Rutherford:
The City of Sebastian is considering exercising its option under the
terms of two franchises granted to General Development Utilities, Inc.
to operate water and wastewater services within portions of the City
of Sebastian. It is our desire to acquire the GDU Facilities within
the City by negotiating with you and without the extraordinary expense
Of litigation. In fact, it is likely that the utilities system would
be far too expensive if such litigation costs are incurred.
We would like to begin the negotiating process. In order to maximize
available funds for potential acquisition rather than legal and
engineering expenses involved in litigation, the City would appreciate
your cooperation in the investigation of the potential transfer of the
GDU Sebastian system to the City of Sebastian. In order to accomplish
this, full and complete access to all records, facilities, operational
staff, billing information, etc. is necessary.
We believe that it would be in the best interests of both GDU and the
City to effect a sale of the system through negotiations rather than
the City exercising its option under the terms of the franchises. Are
You willing to begin the negotiating process? If 90, will you extend
your complete cooperation with the City to minimize the cost
associated with the acquisition?
I will be calling you within the next few days to request an
appointment. Of course, we would be happy to meet with you in your
Miami office. While I do not believe it would be necessary to be
represented by legal counsel at the initial meeting, I will request
that our engineer attend this session with me so that he may begin the
data collection activity.
Thank you in advance for your cooperation.
incerely,
RoS. McClar
City
City Manaager
RSM/sg
HARTMAN & ASSOCIATES, INC.
engineers, hydrogeologists, surveyors & management consultants
/.August 14, 1992 HAI #92-023.00
Mr. Charles E. Fancher, Jr.
President
General Development Utilities, Inc.
2601 South Bayshore Drive
Miami, Florida 33133-5461
Subject: General Development Utilities, Inc. - Sebastian Highlands
Dear Mr. Faucher:
Thank you for scheduling a meeting with representatives of the City of Sebastian, their
engineers, representatives of General Development Utilities, Inc. (GDU), and Atlantic Gulf
Communities regarding the Sebastian Highlands water and wastewater facilities.
As part of evaluating a utility, a number of items must be taken into account; particularly, the
ten (10) requirements provided in the Florida Statute 180.301. In addition, the City and their
engineers must be able to inspect the water and wastewater facilities owned and operated by
GDU and within the City of Sebastian. I have attached for your use a preliminary data request
which we will need to obtain from GDU to evaluate the GDU-Sebastian Highlands facilities. I
understand that this data request. is quite lengthy, and in fact, some of the requested
information may not exist. However, we feel that this is a good starting point of which we
can discuss on Tuesday, August 18, 1992. With respect to any future utility inspections, I
believe that we can conduct these inspections in a similar manner to our previously conducted
inspections of your facilities. At which time when we have scheduled our facility inspections,
I will be more than happy to provide GDU with a schedule for our inspections, as well as a list
of all attendees.
201 EAST PINE STREET • SUITE 1000 • ORLANDO, FL 32801
TELEPHONE (407) 839-3955 • FAX (407) 839-3790
PRINCIPALS: JAMES E. CHRISTOPHER • CHARLES IXC. DRAKE • GERALD C.. HARTMAN • MARK L LUKE • MARK A. RYNNING • HAROLD E. SCHMIDT. JR.
n
W
.-.
Mr. Charles E. Fancher, Jr.
August 14, 1992
Page Two
AON
We look forward to meeting with you and others on Tuesday, August 18, 1992, regarding the
above referenced water and wastewater facilities. Should you have any questions in the
meantime, please do not hesitate to call me.
Very truly yours,
Hartman' && Associates-, Inc.
Harold E. Schmidt, Jr., P.E.
Vice President
HES/ch
C14/Fancher.hes
Attachment
cc: Rob McClary, City of Sebastian w/attachment
Gerry Hartman, HAI w/attachment
SEBASTIAN DATA REQUEST
A. UTILITY OPERATIONS
1. FDER monthly operating reports 1988 to July, 1992.
2. Daily operating reports kept at the WTP and WWTP showing pump run times,
chemical usage, and other information regarding these facilities for the years
1988 through July 1992.
3. All documents showing the following information concerning the raw water to
the WTP including:
a. chemical analysis;
b. historic groundwater levels; and
C. raw water pumping daily flow charts since 1988 through present date.
(Actual charts required will be identified after review of FDER MOR's).
4. All documents incorporating and/or showing all sludge hauling records from
1988 to present date. This information should include at a minimum the
following information:
a. sludge disposal site;
b. sludge quantity hauled per event;
C. sludge characteristics; and
d. contract hauler name, address, telephone number, etc.
5. All pump station run times disaggregated by pump station on a daily basis for
the years 1988 through July 1992.
6. A breakdown of and/or all documents showing all water mains, gravity sewers,
and forcemains by type of pipe (i.e. asbestos cement (AC), polyvinyl chloride
(PVC), etc.) including:
a. diameter (inches);
b. length (feet).
GJR/jb/M-1/Sab.gjr
HAI/190-023.00 1
7. A breakdown of and/or all documents showing all equipment installed at the
WTP and WWTP, including:
a. equipment;
b. manufacturer;
C. model number;
d. serial number; and
e. miscellaneous (i.e., electrical requirements, horsepower capacities, etc.).
8. One (1) set of mylar drawings and specifications indicating as -built conditions
of the following:
a. overall water transmission and distribution system (scale: V = 600' or
as appropriate);
b. overall wastewater collection and transmission system, including pump
stations (scale: 1" = 600' or as appropriate);
C. water treatment plant expansions from inception to present date; and
d. wastewater treatment plant expansions from inception to present date;
e. raw water supply wells.
9. All deeds and any other documents providing legal descriptions for the WWTP,
WTP, ground storage facilities, raw water supply wells, wastewater lift stations,
all piping not placed in the public rights-of-way and all easements or record
whether they are held in the name of General Development Utilities, Inc.
(GDU) or Altantic Gulf Communities, formerly General Development
Corporation (GDC) which pertain to GDU water and wastewater operations.
10. All documents showing individual and composite pump curves for the high
service pumps located at the WTP and the raw water supply wells.
11. All engineering reports prepared for the Sebastian water and wastewater
facilities since 1980.
GJR/jb/M-1/Sab.gjr
HAIN90-023.00 2
12. All documents showing fire hydrant tests data since 1988 and any information
regarding infiltration/inflow studies.
13. Opportunity to review the WTP and WWTP operator's log book for the years
1985 through present date.
14. Opportunity to review equipment/pipeline maintenance data.
B. FINANCIAL
1. All financial audits performed for the GDU Sebastian Highlands division for the
period 1989 through 1991.
2. A current list of all documents showing water and sewer customers presently
connected service. This information should at minimum include:
a. name;
b. location;
C. type (i.e., residential, commercial, etc.); and
d. meter size.
3. A list of and/or all documents showing all paid and committed water and sewer
equivalent units which have not been connected to the systems. The
information should be disaggregated between areas which have service (water
and sewer) currently available and areas that service is not available should at
minimum include:
a. name;
b. location;
C. type (i.e., residential, commercial, etc.); and
d. meter size.
4. Developer agreements (actual and pending) which would require capacity
utilization, commitment or service.
5. A listing of all documents showing all customer deposits on record including:
GJR/jb/M-1/Sab.gjr
HAI#90-023.00 3
a. account number;
b. name and address of customer;
C. date of deposit receipt by Company; and
d. amount of deposit.
6. A complete balance sheet for the GDU Sebastian Highlands Division only and
all footnotes of disclosure items and allocations to the division if such
assets/liabilities are on a total company basis of 1989, 1990, 1991 and any
tentative or draft balance sheets for 1992.
7. A breakdown of or all documents showing property taxes paid by parcel for
GDU for 1990 and 1991.
8. The 1989, 1990 and 1991 Operating and Capital Budget for the Sebastian
Division. This data should include all projections beyond the 1991 time frame
(e.g., Five Year Capital Budget, preliminary 1992 budgetary data, etc.).
9. A detailed breakdown of and/or all documents showing purchased power
expense for the water and sewer system by type of facility (treatment plant, lift
stations, etc.).
10. Provide a detailed monthly breakdown of and/or all documents showing the
source of other water and sewer revenues for 1988 through May, 1992 (i.e., not
sales revenue).
11. For the years 1989 to present date provide the following information or all
documents showing the following by month and by water meter size:
a. number of bills rendered (water);
b. amount of gallons sold (water);
C. amount of gallons produced;
d. number of bills rendered (sewer); and
e. amount of revenue gallons billed (sewer).
12. All supply and maintenance contracts for the water and wastewater facilities,
and information including:
GJR/jb/M-1/Sab.gjr
HAIN90-023.00 4
a. name of contractor, vendor, etc.;
b. address;
C. telephone number; and
d. type of service provided.
13. All annual operating reports filed from 1987 to present date detailing financial
operating results and statistic data for the Sebastian water and wastewater
facilities to include, but not limited to:
a. individual utility reports;
b. expense by individual Chart of Accounts;
C. depreciation expenses by specific plant accounts;
d. operating revenues by specific revenue type;
e. customers by meter size; and
f. production, treatment and sales data.
14. A detailed listing of and/or all documents showing all construction work in
progress balances including, by job number or contract number:
a. description of activity and purpose of addition;
b. total estimated project cost;
C. amount of expenditures spend to date (specify);
d. expected completion date;
e. asset life and salvage value of addition; and
f. asset retirement anticipated once addition is on line including historical
plant costs and accumulated depreciation reserve at time of asset addition
for each retirement.
GJR/jb/M-1/Sab.gjr
HAIN90-023.00 5
15. All least agreements involving tangible or intangible personal property
associated with the GDU Sebastian Highlands Division.
16. All Certificates of Insurance for the GDU Sebastian Highlands Division.
IT A detailed organizational chart and/or all documents showing all employees
(unnamed) by job classification. This information should include at minimum:
a. current salary range per job classification; and
b. description of activities performed.
18. A detailed listing of and/or all documents showing all plants in service (Fixed
Utility Assets) and all contributed plant in service and/or contributions -in -aid -
of -construction (CIAC).
a. a description of property (location, type of asset, linear feet pipe, etc.);
b. in service date;
C. work orders and work releases;
d. bid tabulations;
e. historical cost booked to gross plant in service;
f. accumulated reserve for depreciation on such plant balances;
g. estimated salvage value; and
h. average service life for depreciation accrued and estimated remaining
useful life of asset.
19. All documents that provide a description of and the methodology used to
allocate all common operating expenses and general plant to water and sewer
accounts.
20. All land sale contracts entered into by Atlantic Gulf Communities (formerly
GDC) or GDU for providing water and sewer utility service to customers.
21. All data, correspondence, memoranda and other documents relative to any water
or wastewater rate increases pending or contemplated, as well as all documents
GJR/jb/M-1/Sab.gjr
HAI#90-023.00 6
showing 1987 to present date any proposed rate base for the GDU Sebastian
Highlands Division.
22. Any accounting of and/or documents showing Capital Charges for Utility
Capacity which have been escrowed or deposited for future service which may
be associated with land sales agreements or deferred utility service agreements.
23. A complete inventory of and/or all documents showing all customer
connections, future customer commitments who have paid capital charges, and
future customer commitments who have partially paid capital charges and finally
future customer commitments who have paid capital charges.
24. The most recent income and expense statement for the GDU Sebastian
Highlands Division.
25. A detailed listing of and/or all documents showing management expenses
including the purpose, amount, and any other applicable information for 1988 to
present date. This information should be on an individual basis based on
expense need.
GJR/jb/M-1/Sab.gjr
HAII/90-023.00 7
M1
HARTMAN & ASSOCIATES, Li C.
engineers, hydrogeologists, surveyors & management consultants
June 15, 1992 HAI #92-023.00
ti1516 771a
rye, l0a,
Mr. Robb McClary JUN 1992
ty °° Received V
Ci Manager
to City Manager's ti
City of Sebastian s p �m
P.O. Box 780127 e ti
Sebastian, Florida 32978 2� 1! of oZ$2�
Subject: Negotiations and Data Collection Regarding General Development Utilities,
Inc.'s Sebastian Highlands Water and Wastewater System
Dear Mr. McClary:
The purpose of this letter is two -fold. First, enclosed is a copy of the recommended order of
$31.9 million for the City of Palm Bay. The combined Palm Bay and North Port awards total
$48.4 million.
The City of Sebastian, of course, cannot afford litigation as a cost associated with the utility
acquisition. That message must be transmitted to Larry Rutherford of Atlantic Gulf
Communities, Inc. The desire to move forward and negotiate with you without litigation or
extraordinary acquisition expense is necessary. You may wish to discuss this point with Mr.
Rutherford in stating that the utility would be far too expensive if such acquisition costs are
incurred.
In an effort to facilitate a smooth and appropriate acquisition, and to maximize the amount of
money available for a potential acquisition, the City would appreciate General Development
Utilities, Inc.'s (GDU's) full cooperation in the investigation of the potential transfer of this
system to the City of Sebastian from GDU. In order to accomplish the above, full and
complete access to all records, facilities, operational staff, billing information, and like
information is necessary.
Therefore, there are two (2) questions posed to Mr. Rutherford:
1. Is he willing to negotiate this system as an investigation of the possibility of acquisition
prior to exercising the City's option?
2. Is he willing to provide for full and complete cooperation with the City to minimize the
costs associated with the acquisition?
201 EAST PINE STREET • SUITE 1000 • ORLANDO, FL 32801
TELEPHONE (407) 839-3955•FAX (407)839-3790
PRINCIPALS: JAMES E. CHRISTOPHER • CHARLES W. DRAKE • GERALD C. HARTMAN • MARK I. LUKE • MARK A. RYNNING -HAROLD E. SCHAHDT, jR.
r_
rMN
If the answer to both of those questions is "yes" from Mr. Rutherford to you, then let us
schedule some times in which we can sit down and talk to him. Of course, you can tell him
that you are willing to meet with him in Miami. I would like to attend the first meeting, such
that we can pick up records and other materials associated with that session in order to have a
dual purpose and pick up records and materials associated with our data collection activity in a
cost-effective manner.
Very truly vours.
d C.
President
GCWch
C12.McClary.gh
Enclosure
cc: Tom Cloud, Esquire, GHR w/enclosure
Charles Nash, Esquire w/enclosure
Hal Schmidt, HAI w/enclosure
IN THE CIRCUI_ _'OURT OF THE 18TH JUDICIAL CIRCUIT,
IN AND FOR BREVARD COUNTY, FLORIDA
CITY OF PALM BAY, FLORIDA,
a municipal corporation created
under the laws of the State of
Florida,
Plaintiff,
VS.
GENERAL DEVELOPMENT UTILITIES,
INC., a Florida corporation,
et al.,
Defendants.
CASE NO. 89 -12576 -CA -T
We, the undersigned arbitrators, pursuant to the submission
made to us pursuant to the Franchise Agreement between the parties
dated November 23, 1959, and the Court's orders for arbitration,
and having carefully considered all the proofs, arguments, and
briefs presented by the parties, do hereby find and award as
follows:
The value �o`{f� t/h,e/� property to be purchased is
tel' 7 !/ i Q �. a e]
i
This award is in full and complete settlement of the sole issue
presented to this panel, and enforceable by either party upon
motion in the above -styled cause. This award covers all property
of whatever nature involved in Case No. 89 -12576 -CA -T.
Award dated: June /� , 1992
09/24/93 14:11 V407 839 3790 HARTMAN ASSOC 44- SEBASTIAN MCCLAR Z002
HAItTMAN & ASSOCIATES, INC.
engineers, hydrogeologists, surveyors & management consultants
March 24, 1993
VIA FACSIMILE
Mr. Robert S. McClary
City Manager
City of Sebastian
P.O. Box 780127
Sebastian, Florida 32978-0127
HAI #92-023-00
SUBJECT: March 23, 1993 Telephone Conversation with Charlie Fancher
Dear Mr. McClary:
After 5:00 A.M. on March 23, 1993, I received a telephone call from Charlie Faucher
regarding the City of Sebastian's desire to acquire the GDU facilities. After the first few
formalities, I responded to his letter verbally stating that we had previously sent him a letter
stating that a hearing officer would not be utilized in the review of a rate case by GDU, and
that the rate case would be handled in the fashion provided for in the City ordinances.
Next, we got into the restrictions for potential acquisitions and negotiations, and the ground
niles. He asked if the same restrictions are in force, and I reiterated the following restrictions
to him:
1. Consumer rates must not increase greater than Indian River County's.
2. The City will not require mandatory hookups or impose taxes or assessments to support
the acquisition.
3. The acquisition must function as an enterprise fund without subsidies and without
incurring a negative cash flow.
He stated that he had talked with Larry Rutherford and felt that he was also operating under a
few restrictions. Those restrictions were as follows:
1. Maximize the cash payment up front.
2. No impact upon a grouped sale of their other utilities.
3. A purchase price which is at least equivalent to the cost from the other entities that they
are talking to in their negotiations (.e., the sale to the City at the same cost as to other
entities desiring the purchase of this system.
201 EAST PINE STREET • Sl11TE 1000 • ORLANDO, FI. 32801
TELEPHONE (407) 839-3955 • FAX (407) 839-3790
PRINCIPALS: JAMES E. CIEUSTOPHEII . CTIARLES W. DRAKE - GERAI.D r. FLIRTMAN -MARK I. I.uKr... MARK A. RYNNl G I HAR01-T) E. SCHbIIDT. JR.
03/24/90 14:12 $407 839 3790 BARMAN ASSOC 441 SEBASTIAN MCCLAR 1a 003
Mr, Robert S. McClary
March 24, 1993
Page 2
4. Consideration of futures to a minor extent.
He stated that he wanted to reiterate his letter in that he would like to have a process developed
for proceeding. He wished to find out:
1. Whether he could negotiate an agreement which he could recommend to his superiors
and that I could recommend to the City of Sebastian for review and consideration.
Therefore, he wished to see if there was a common ground that could be attained
between the two of us in a private meeting,
2. If a common ground can be attained, he wished to have a second meeting which would
include review, consideration, questions and other discussions with the decision makers
on both sides.
3. If this second meeting is fruitful, then concurrent activities for operational transition,
asset transfers, real estate closings and associated activities, regulatory and
administrative matters, and financing, such that the third time period could be
accomplished in 60 days, plus or minus.
In the above manner, he felt that the activities could be accomplished possibly in the month of
June, 1993, and having closing occur in that month on the transaction.
At that juncture, the telephone conversation ended with my scheduling a confidential meeting
with him at 10:00 A.M. on April S, 1993.
This memorandum also serves as my request to the City of Sebastian to authorize me to
discuss this acquisition with Mr. Fancher in private in a confidential meeting to potentially
resolve a framework to get the deal done. This negotiation, of course, would be subject to
review, modification, approval and renegotiation to some extent within the bounds of the
framework of the deal and to include more specificity by the City. He just wants to know
whether we can get to a deal or not, and if he is not willing to get to a ballpark program which
we can live with, then I am of the opinion to recommend to the City to proceed with the three -
appraiser procedure associated with this acquisition.
It is my opinion that, at this juncture, GDU may still look for a settlement negotiation once
they see the resolve of the City to proceed with the procedures set forth in the franchise and to
minimize their expense, due to the fact that they may realize their expenses are not
reimbursable and that the City may still back out of the transaction if an appropriate, fair
purchase price cannot be attained. Even if GDU does not negotiate after we put in the
procedure for the appraisals, at least the City would then have three (3) independent appraisals
of the system, which would form the basis of value consideration for potential acquisition.
03/24/93 14:12 $407 839 3790
Mr. Robert S. McClary
March 24, 1993
Page 3
HARTMAN ASSOC -... SEBASTIAN MCCLAR Q004
I recommend that we have this last negotiation meeting with Mr. Fancher. If we cannot come
to a reasonable framework which I can recommend to the City as a fair and equitable price
within the bounds of comparable sales and in consideration of the City's franchise agreement,
then the City may decide to:
1. proceed with the formal three -appraisal process; or
2. negotiate themselves with GDU at that juncture.
I am requesting the City Manager's approval for me to meet with GDU on behalf of the City
in a confidential meeting and to approve this limited strategy and process stated above. Please
give me a call at your earliest convenience with your authorization.
Very truly yours,
Hartman & Associat ,
Gerald C. Hartman,
President
GCH/ch
C19/McClary.gch
cc: Rich Votapka, City of Sebastian
Tom Cloud, GHR
Hal Schmidt, HAI
City of Sebastian
POST OFFICE BOX 780127 ❑ SEBASTIAN, FLORIDA 32978
TELEPHONE (407) 589-5330 ❑ FAX (407) 589-5570
M E M O R A N D U M
DATE March 25, 1993
TO : File
FROM : Rich Votapka, h6✓
Utilities Director
SUBJECT : Special Meeting of Sebastian City Council in Regard to
the General Development Corporation Water & Sewer
Franchises held on April 1, 1981
Tape No. 2 of Meeting - right side of tape at [65)
Reference made to Section 3 Rates; Procedure for Fixing
and changing Article (2) Paragraph 3.
During the discussion on contribution -in -aid of construction, Flip
Lloyd, City Engineer, asked the question -"somewhere down there,
you (the City) annexes a piece of land, they (the residents) want
to come on the system. GDU says fine, we'll do it; you put these
facilities in. Five (5) years later, the City of Sebastian wants
to purchase the system; those items were put in by the contractor
and given to GDC will not be a capital cost that the City would
have to purchase, would they? GDU spokesman, Gerald Hosian
said "that is correct; they would not be." Flip Lloyd said "it
excludes that." Gerald Hosian said "absolutely! That is
considered, again a contribution as donated property, same as
donated dollars. Richard Votapka said "The City doesn't pay for
it, if GDU doesn't pay for it." Gerald Hosian said "essentially
that is correct."
"Conveyance of System" Discussion
Section 16 is on Tape 3 ---------------First 15'
Discussion pertains only to the time period, Richard B. Votapka's
recommendation to have a definite time limit of 180 days inserted
into the Section from notice of intent to conveyance of the system
to the City.
. CC: Robb McClary, City Manager
VIA FACSIMILE & U.S. MAIL
Mr. J. Larry Rutherford
Atlantic Gulf Communities Corporation
2601 South Bayshore Drive
Miami, Florida 33133-5461
April 12, 1993-ILATI{92-023.04
LO
APR 1993
I\P
LO
cReMeilled
officegers
\4. an
n,
A/V
Subject: Offer of Purchase of General Development Utilities, Inc. Sebastian
Highlands System
Dear Mr. Rutherford:
As you know, both Mr. Fancher and Mr. Hartman have met and discussed this potential
transaction. The City of Sebastian recognizes the desire of General Development Utilities,
Inc. (GDU) and its parent company Atlantic Gulf Communities Corporation to maximize the
cash -up -front situation and minimize the continuing nature of the transaction. Previously, as
a part of the offer to settle the Port Malabar acquisition, GDU offered a $2.5 million sales
price for the Sebastian Highlands system on a cash -at -closing basis.
We have reviewed and discussed the proposed purchase and sale agreement between the parties
with the full understanding that Section 5, Purchase Price and Payment, is the single major
item which has not been resolved. We also understand that the Rebate Agreement with the
Reflections would not be assumed by the City and would remain the responsibility of GDU.
The benefit of resolving this transaction at this juncture for both parties is an economy of cost
associated with the other scenarios and a time value of money situation.
In accordance with Mr. Hartman's commitment to Mr. Fancher, which the City has supported,
we have met with the City Council members individually as part of this negotiations. These
meetings were conducted on April 14, 1993. The purpose of these meetings were to discuss
the status of the negotiations and to allow individual Council members time to provide
inquiries relative to the negotiations to date.
As City Manager of the City of Sebastian, Florida, we are offering cash at closing, with the
above -referenced agreement, a total amount of $ for the GDU Sebastian Highlands
system. No futures or additional payments would be made over and above the amount shown
above. This amount and the agreement is subject to City Council review and approval, and
public hearings and the determinations therefrom, under the appropriate statutes of the State of
Florida.
Mr. J. Larry Rutherford
April 12, 1993
Page 2
This offer is good until April 23, 1993, and contemplates a closing on or before July 15, 1993.
If you have any questions regarding this offer, do not hesitate to give me a call.
Very truly yours,
City of Sebastian, Florida
Robert S. McClary
City Manager ..
RSM/ch
C20/Ruther.RSM
Attachment - Purchase and Sale Agreement
cc: Mayor, City of Sebastian
City Council, City of Sebastian
Richard Votapka, P.E., Utilities Director, City of Sebastian
Gerald C. Hartman, P.E., HAI
Thomas A. Cloud, Esquire, GHR
Charles Nash, Esquire
s
HARTMAN & ASSOCIATES, INC.
engineers, hydrogeologists, surveyors & management consultants
MEMORANDUM HAI #92-023.04
01111213 74 S
TO: Charlie Fancher ^�9
FROM: Gerry Hartman q APR 1993
M Received
`9 city Manager's
DATE: April 12, 1993 Office
`O�
SUBJECT: Minutes of April S, 1993 Negotiations Meeting
Sebastian Highlands - GDU System
This memorandum is being prepared pursuant to our mutual agreement that I would summarize
our meeting and provide a copy of a memorandum to you regarding the same. The meeting
was conducted by the two designated negotiators for the two (2) parties to resolve as many
issues as possible and to bring back to the decision makers a transaction which both negotiators
would support. Of course, we both notified each other and conditioned the entire negotiation
session to be subject to, on your side, Larry Rutherford and the Board of D'irector's reviews,
and on my side, Robb McClary's (Rich Votapka's) and the City of Sebastian City Council's
review. We both recognize that the tentative transaction which we may derive in the meeting
may undergo further revisions and modifications in an effort to facilitate a transaction. The
intent, at this juncture, is to attain a transaction without litigation, going through the appraisal
process and potential litigation, or without the additional cost of filing a formal rate proceeding
with its associated review and associated cost at this time.
It was discussed that litigation would cost a very high percentage of the potential value of the
system on both sides and combined may be a deterrent to an acquisition. Secondly, the
appraisal process and potential litigation would cost on the GDU side several hundreds of
thousands of dollars with, on the City side, a lower but commensurate cost due to the
investigations and partial appraisal which has already been conducted. Again, such activities
would spend significant sums of money without having the money used for the transaction
itself, in benefiting the seller and the customers of the system. Similarly, there will be a cost
associated with filing a rate case with the City Council. Mr. Fancher was informed previously
that the City Council would hear such a rate case and the ordinances that are in-place at the
City would apply on such a filing. Mr. Fancher has provided to Hartman & Associates, Inc.
(HAI) a partial initial draft of a possible rate filing previously. The cost of this activity, again,
would detract from the value ascertained in the negotiation due to the fact that the City can,
and would have to anyway, conduct a rate study due to the transition of ownership.
Therefore, the entire rate proceeding which would be conducted may have very short useful
life versus the last rate proceeding, which had a useful life of approximately seven ('n years.
These funds and expenditures by GDU, with the cost for application of a rate case and the cost
of the application review, would all be saved if a negotiation could be attained.
201 EAST PINE STREET • SUITE 1000. ORLANDO, FL 32801
TELEPHONE (407) 839-3955 • FAX (407) 839-3790
PRINCIPALS, JAMES E. CHRISTOPHER • CHARLES W. DRAKE • GERALD C. HARTMAN • MARK L LUKE -MARK A. RYNNING • HAROLD E. SCHMIDT, JR.
4. MEMORANDUM (Continued)
April 12, 1993
Page 2
It was with the above knowledge and consideration that these negotiations were held.
The initial positions of the parties were $650,000 cash at closing, plus futures for the City and
$4.5 million cash at closing for the Company. After some discussion, it was evident that the
Company desired as much cash at closing as possible, and the discussion focused on
maximizing that amount. The City's next position converted funds to cash at closing and
considered the market value of the system in a present value standpoint, which could be
supported by revenues of the system generating a cash at closing of $1.7 million with limited
futures.
Mr. Fancher stated that the Company should obtain as cash at closing the net original cost of
the system (this value includes the deductions for depreciation, CIAC, and is at the actual
original investment cost by the Company). That amount is $3.5 million.
At this point, limited discussion relative to excess capacity in the facilities and excess capacity
in the lines was conducted. Both sides understood the capacity situation. Mr. Fancher stated
that the Company invested $1.9 million approximately five or six years ago in a primarily 12 -
inch water transmission main with a water distribution system to the northeastern section of the
GDU development. He stated that the Company's original cost of $1.9 million was recent and
that it was made under the understanding that mandatory connection would be required of
those customers. He then pulled out maps which illustrated a number of homes which have
been constructed and not connected to the distribution system and water transmission system
constructed with invested funds by GDU, which were completed some five or six years ago.
He stated that this investment was at the request of the City and therefore, should be
recognized in the purchase price.
Then we discussed certain aspects of this negotiation with Mr. Robb McClary relative to
maximizing the amount of up -front cash, while minimizing the futures. The Company's
previous offer to sell the system for $2.5 million in conjunction with the Port Malabar (Palm
Bay) transaction was discussed as a value which the Company previously had, in some
respects, offered the City as a cash -on -closing, up -front deal for the system. This offer did not
include futures and was a total cash transaction. Mr. Fancher stated that was a previous and
combined type of offer, and was not independently valid. Mr. McClary then stated that cash
at closing of $2 million or in that order of how we were negotiating, would potentially be
acceptable to the City based upon other individuals' reviews. He stated that this value should
not constrain the negotiations and to keep going and try to resolve this issue to the best of our
abilities. One question that had surfaced was the value of the connection fees in a five-year
period as a subordinate "B" series type of bond. Mr. McClary provided the telephone number
of Barnett Securities in Jacksonville, and they were contacted at that time.
We then further discussed the ability to support a maximized cash -at -closing price. That value
attained $2.15 million -at lunch. This was following some three (3) hours of negotiation.
MEMORANDUM (Continued)
April 12, 1993
Page 3
Following lunch, Barnett Securities faxed back the pro forma for the level capital charges and
guaranteed revenue charges that the system had attained. Charlie indicated that the system
would have a combined annual level of approximately $175,000, combining both the
guaranteed revenues in the $30,000 to $40,000 range and the impact fees (capital charges) in
the $140,000 to $150,000 range. Using these values, an amount of $465,000 one (1) year
after closing was derived. This would be based upon the verification that at GDU's connection
fee level, sufficient revenues from the previous system would support this amount of
subordinate debt. The $465,000, then, would be additive to the $2.15 million, pledging both
the present value of connections for the next five (5) years and the maximum cash at closing
value of $2.15 million.
Mr. Fancher stated then that if he accepted a number less than $3.0 million in this negotiation,
there must be some type of sweetener, such that it can be shown that the Company was
regaining funds over and above that known cash amount. To attain the $3.0 million plateau, I
stated that the maximum cash at closing would be $2.15; therefore, pushing the contingent
cash flow amount to $850,000. To attain this level, the disputed operational cost was further
reviewed. HAI's position was that the operational cost of the system for fiscal year 1995
would be in the order of $500,000. Mr. Fancher's position was that this system was run in
1992 for $250,000, and that the operation and maintenance (0 & M) cost, exclusively, should
not exceed $300,000 by fiscal year 1995. Therefore, we both looked at the closing date of
July 15, 1993, and 12 months thereafter, which would be July 15, 1994, and taking that
period, what the 0 & M cost would be. Mr. Fancher maintained that the 0 & M cost would
be no greater than $300,000 for that time period, and we stated that the 0 & M cost would be
at least $400,000, or greater. To the extent that the value was less than the $400,000 (i.e.,
$300,000), with the splitting of the benefit such that there was incentive for the City to
minimize O & M cost, the Series "B" bond could be increased from $465,000 net proceeds to
seller to $850,000 net proceeds to seller (an additional $385,000 for that benefit). In other
words, if the cap revenues and guaranteed revenues for the July 15, 1993 through July 15,
1994 period attain $175,000 or more and if the operational cost for that period is $300,000 or
less, then a cash payment of $850,000 would be due and payable on July 15, 1994. Of course
a few days would be required to confirm the operational cost and the capital charges collected,
as well as the guaranteed revenues collected combined. To the extent the capital charges are
less than $175,000, i.e., half of that amount, then the supportable bond, one (1) year
thereafter, would only be $232,500. Similarly, if the operational cost in that 12 -month period
is $350,000, then the additional benefit would be $192,500. This would be reflective of the
system's performance and the ability of the City to pay these amounts based upon the
representations of the Company and the performance of the system. Mr. Fancher stated that
he wanted a defined payment amount, i.e., the $850,000 at a defined date, 12 months
following closing and Mr. Hartman agreed, given the performance of the system at the
$175,000 and the $300,000 per year level.
MEMORANDUM (Continued)
April 12, 1993
Page 4
At that point, a portion of the aspects had been tentatively agreed to at this level at $2,150,000
cash at closing and $850,000 payment one (1) year after closing based upon the $175,000 per
year cash flow stream for capital charges and guaranteed revenues combined, and the O & M
cost in the 12 -month period hitting $300,000 for the year. This is the O & M cost without
capital improvements.
Then the issue of futures was discussed and I stated that since we had already committed the
futures for the fast five (5) years in the above calculation, to attain the $465,000 of GDU's
capital charge, there were no futures to be provided in the fast 5 -year period; therefore, the
only futures we could provide as a sweetener would be from the sixth year through the tenth
year. Mr. Fancher said that he recognized that the City would increase their capital charges;
yet, the capital charges would not be increased greater than the capital charges of Indian River
County. Due to that increase in capital charges, then an amount should be available to GDU
for futures from closing through the 10 -year period. He stated that $250 for water and $250
per ERC for wastewater capital charges to be transferred to GDU on a per ERC basis annually
for the next ten (10) years would be the type of agreement for which he would be looking.
We looked up the connection charge for water for the GDU system and found it to be
approximately $1,140 per ERC; adding the $250 would render a $1,400 connection charge,
which would still be somewhat less than the Indian River County charge. Again, the same was
conducted on the wastewater side, showing that the connection fee would be somewhat less
than the Indian River County charge. I stated that the City had to have certain capital fees
coming in to provide for the capital improvements necessary to the system. There are
significant capital improvements necessary to meet regulatory requirements, including, but not
limited to:
1. Total trihalomethane problem.
2. The new sludge rule and sludge stabilization problems.
3. Limited capacity of the percolation ponds at the wastewater treatment plant.
Additional improvements to the effluent disposal capacity of the system would be required.
Each of the three items would increase the capital investment necessary simply to continue to
operate the systems. We continued and said that the connection charges should only be for
those new connections within the GDU plat, which was basically the whole City anyway, but
there is some distinction of those systems outside or those customers outside the GDU plat,
which may be connected to the system (i.e., Park Place), and the capital charge has already
been committed to the previous owner of that system, or some other situation.
In summary, the major points made by Mr. Fancher included the following:
MEMORANDUM (Continued)
April 12, 1993
Page 5
1. Approximately five or six years ago, the Company invested $1.9 million for the 12 -
inch water transmission and water distribution lines, and these are real costs and the
Company must be reimbursed for that, plus all the other value over and above that
cost.
2. The net original cost of the system is $3.5 million.
3. The method laid out in Section 16, page 1913, Appendix B, Franchises, stated that the
purchase price of the remaining assets is based upon the averagg of the net original cost
and a price as computed and agreed upon by three (3) competent and qualified
appraisers. If three (3) competent and qualified appraisers agree upon a price of $2.5
million, then the average of the two values would be $3.0 million.
4. In 1986, the rate base approved by the City, unadjusted for used and useful, had a net
book value of $3.7 million for water and $1.8 million for sewer, or $5.5 million. The
CIAC was also approved by the City as of December 31, 1995.
The points made by G. C. Hartman were as follows:
1. The value of the system is not as great as the net original cost and the averaging
method would not produce a value which is at the market.
2. There are only two (2) types of buyers available to GDU; those being the City of
Sebastian as the only city or county entity, or an investor-owned system. Any investor
who would look to purchase this system on its present rates, it would have little to no
value. A rate case would be required, additional costs for that rate case would be
required, and the system would have a "cloud over its head" for the next 18 years. The
level to which rates may be increased in the future would limit the value of the system
at that time and any knowledgeable buyer would discount this system due to the
franchise agreement which in-place and the representations of the Company to the City
in granting the franchise agreement. Such information would have to be disclosed to a
knowledgeable buyer, and therefore, the Company would not be able to attain as high a
value if such a franchise agreement had not been entered into.
3. The City of Sebastian does not need to acquire. The City can continue with the
wholesale water and wastewater agreement between the City and the County, and
continue to function in that manner, and develop its own utility systems with time and
just sit and wait relative to the GDU situation. The net original cost would continue to
decrease, as it had decreased by $2.0 million over the past seven or eight yeas, and it
would continue to decrease further over the next seven to eight years. In that time
period, the City could develop its own utility and serve those areas outside of the
franchise area for GDU. The Company would be forced to go through the cost of a
t MEMORANDUM (Continued)
April 12, 1993
Page 6
rate case, would be forced to go through the additional expense of negotiating and
trying to sell the system to someone else, and would also have to go through the
financial carrying cost of this system for several years. Moreover, the Company would
have to provide corrective capital improvements to the system for the areas discussed
above. Finally, if the Company found some potential buyer for the system, a
knowledgeable buyer would not close until after the capital improvements or threat of
potential fines had either been escrowed or provided for, rates had been adjusted, and
adequate assurances were provided by the Company to the potential buyer relative to
the franchise agreement and accounting associated therewith. All of the above would
require a significant period of time and in my opinion, would be at least a year or two,
and the system at that time, in GDU's hands, would be worth no more than it is now as
a net proceed to seller.
Charlie Fancher requested that I:
1. Prepare a separate letter to him delineating the City's view of the scenario and also
communicating to him the statements by Terry Pinto, which he has stated "it is the
County's position is to simply wait out GDU and buy whenever GDU has to sell."
This statement was made to the City of Sebastian by Terry Pinto during our discussions
of our potential acquisition of the GDU with him, and our negotiations of the wholesale
agreement approximately one (1) year ago.
2. It is agreed that this transaction would be based upon the City's impact fees and the
City's rates and charges, both of which would be required to be increased over the
GDU rates, that the cash at closing would be $2,150,000, with at the end of the first
year, an $850,000 payment contingent upon at least $175,000 first year capital charge
and guaranteed revenue combined cash flow and operational costs being at or below
$300,000 per year for the first 12 months. Moreover, in the next ten (10) years for
water and wastewater ERC's a capital charge payment of $250 per ERC would be made
to GDU.
3. The agreement entitled "City of Sebastian, Florida/General Development Utilities, Inc.
Water and Sewer System Purchase and Sale Agreement", with the footer
"77/33:367/0" from Gray, Harris & Robinson, P.A., exclusive of Section 5, purchase
price and payment (to be modified to reflect the negotiations of the values set forth
above) is acceptable to the Company and would be subject to any legal review by both
parties.
4. There is a commitment between both Mr. Fancher and Mr. Hartman to communicate
on all issues and to support this negotiation to their respective parties.
MEMORANDUM (Continued)
April 12, 1993
Page 7
5. Mr. Fancher stated that they may not have any prepaid connection fees and that as
such, there may not be any connection fees held for future customer use.
6. The Company would allow the City to refuse to take the Reflections Rebate Agreement
with the responsibility staying with GDU, such that no rebates for the Reflections
Agreement would be required on behalf of the City; GDU would assume that
responsibility and would make rebates from the amounts paid to GDU from this
transaction. The other agreement language is generally acceptable to GDU with the
acknowledgment that certain contracts would not be assumed by the City.
7. The tentative closing date would be July 15, 1993.
I committed to Mr. Fancher that based upon this memorandum and discussions with Mr. Robb
McClary, we would make our best efforts to contact and discuss this issue with the City
Council and report back to him by April 15, 1993.
End of memorandum.
GCH/ch
C20/Sebast. mem
HARTMAN & ASSOCIATES, INC.
engineers, hydrogeologists, surveyors & management consultants
PRIVILEGED AND CONFIDENTIAL
Attorney's Work Product
MEMORANDUM
TO: Tom Cloud
Charlie Nash 1
Robb McClary
Rich Votapka
Hal Schmidt
FROM: Gerry Hartman
DATE: April 13, 1993
HAI #92-023.04
SUBJECT: Status of Negotiations Between Gerald C. Hartman and Charles E.
Fancher, Jr.
Attached is my memorandum to Charlie Fancher sent to him via facsimile. The status of our
negotiations, subject to City Council review, is a purchase price of $2.75 million as the only
price to be paid and other facets simply to be in accordance with the draft agreement between
the City and General Development Utilities, Inc. (GDU) previously prepared by Mr. Cloud.
The major changes would be in Section 5, Purchase Price and Payment, as a single lump sum
payment versus the method that was delineated in the previous agreement. Other changes
would be in Section 6, Status of Title, with the City paying for the title insurance. The other
sections would remain essentially the same.
His understanding of this status of negotiation between the two of us and our commitment to
each other is that we would individually report to our respective decision makers regarding this
negotiation.
Mr. Faucher requested that the City write a letter to him with an offer of purchase of the GDU
Sebastian Highlands system at a price which the City Manager would feel is appropriate. It
would be as a cash -at -closing basis.
Following receipt of the letter from Mr. McClary, Larry Rutherford will respond to Charlie
Fancher on or about April 20, 1993, relative to his approval or response to the offer, and then
if approved by Mr. Rutherford, it should go to the Board of Directors of GDU by the second
week of May, 1993.
Subsequently, I had the opportunity to talk to Mr. Fancher in which he expressed that their
intentions for a rate increase were communicated to the City and to me on March 19, 1993,
201 EAST PINE STREET • SUITE 1000 • ORLANDO, FL 32801
TELEPHONE (407) 839-3955 • FAX (407) 839-3790
PRINCIPALS: JAMES E. CHRISTOPHER • CHARLES W. DRAKE • GERALD C. HARTMAN • MARK L LUKE • MARK A. RYNNING • HAROLD E. SCHMIDT, JR.
MEMORANDUM (Continued)
April 13, 1993
Page 2
and they would follow-up with another letter with the percentage increase that they were going
to file, but do not want to go through the expense of legal services, rate case expense and
review cost expense exposure to the City if a transaction is to be made sometime in the near
future.
The historic test year, 1991, illustrated rate relief for the Sebastian system based on GDU's
numbers in excess of the Indian River County rates.
Mr. Fancher committed to me on April 13, 1993, that he would address this issue in a manner
that would limit their cost exposure, but provide the information in which GDU believes
documents a significant rate increase. They believe they are deserving of a significant rate
increase in this system and have communicated that to us on several occasions.
End of memorandum.
GCH/ch
C20/Sebast.gch
Attachment
HARTNM & ASSOCIATES. INC.
engineers, hydrogeologists, surveyors & management consultants
MEMORANDUM
TO: Charlie Fancher
FROM: Gerry Hartman
DATE: April 13, 1993 4�
HAI #92-023.04
SUBJECT: Understanding of Negotiations Based Upon April 8 and April 13, 1993
Discussions - Sebastian Highlands - GDU System Acquisition by City of
Sebastian
This memorandum is being prepared pursuant to our mutual agreement that I would summarize
to you the results of both, our meeting of April 8, 1993 and our telephone conversation of
April 13, 1993, during which we clarified understandings and during which you discussed that
your understanding of our previous negotiations meeting was different than mine.
This memorandum delineates what both you and I will support to the City Council and Robb
McClary on my side, and Larry Rutherford and your Board of Directors on your side. Based
upon all of our discussions, the transaction contemplated would be a cash -at -closing transaction
of $2,750,000, without futures or other payments. In addition, the City of Sebastian would
pay for the title insurancefor the closing.
r,,� .
The closing would occur on or before July 15, 1993, and GDU would provide all documents
and related information, etc., to facilitate the transfer of assets to the City. The above was tl3
contemplated in a manner to simplify the transaction and to not have future c mplications
relative to the facilities' operations and/or future connections. � { ,tA,2� QAycw a
C,
I would appreciate your review. of this memorandum and your lephone call back to me as L
soon as possible to verify that this memorandum represents our nderstanding. Thank you for
your time and consideration of this ma er.
End of memorandum. � � �t/ 1;,,�
r
GCH/ch
C20/Fancher.mem dlL�
4D �jTe-
201 EAST PINE STREET • SUITE 1000 • ORLANDO, FL 32801
TELEPHONE (407) 839-3955 • FAX (407) 839-3790 k op
PRINCIPALS: JAMES E. CHRISTOPHER • CHARLES W. DRAKE • GERALD C. HARTMAN • MARK I. LUKE • MARK A RYNNING • HAROLD L SCIDIIDT. JR.
04/13/39 13:57 $407 839 3790 HARTMAN ASSOC 2001
xaiffia$ffiiEffiiiaiiE$aYaffiiiiEai
xas ACTIVITY REPORT iax
isasaazESEazass:ssasxaYEas:
TRANSMISSION OK
TX/RX NO. 1556
CONNECTION TEL 1 305 859 4657
CONNECTION ID GDU
START TIME 04/13 13:57
USAGE TIME 00'42
PAGES 1
RESULT OK
HARTMAN ASSOCIATES, INC.
engineers, hydrogeologists, surveyors & management consultants
W011180FiIN,111iilTi
TO: Charlie Fancher
FROM: Gerry Hartman
DATE: April 13, 1993
HAI #92-023.04
SUBJECT: Understanding of Negotiations Based Upon April S and April 13, 1993
Discussions - Sebastian Highlands - GDU System Acquisition by City of
Sebastian
This memorandum is being prepared pursuant to our mutual agreement that I would summarize
to you the results of both, our meeting of April 8, 1993 and our telephone conversation of
April 13, 1993, during which we clarified understandings and during which you discussed that
your understanding of our previous negotiations meeting was different than mine.
This memorandum delineates what both you and I will support to the City Council and Robb
McClary on my side, and Larry Rutherford and your Board of Directors on your side. Based
upon all of our discussions, the transaction contemplated would be a cash -at -closing transaction
of $2,750,000, without futures or other payments. In addition, the City of Sebastian would
pay for the title insurance for the closing.
The closing would occur on or before July 15, 1993, and GDU would provide all documents
and related information, etc., to facilitate the transfer of assets to the City. The above was
contemplated in a manner to simplify the transaction and to not have future complications
relative to the facilities' operations and/or future connections.
I would appreciate your review of this memorandum and your telephone call back to me as
Qr n nQ "nccihlr to vrrifv thah this momnranr9nm rrnr .c k `mr nndrrctnndinv Thank vnn for
J. CHARLES GRAY
GORDON H. HARRIS
RICHARD M. ROBINSON
PHILLIP R. FINCH
PAMELA O. PRICE
JAMES F. PAGE, JR.
WILLIAM A. BOYLES
THOMAS A. CLOUD
BYRD F. MARSHALL, JR.
J. MASON WILLIAMS,$
LEO P. ROCK, JR.
G. ROBERTSON DILG
CHARLES W. SELL
JACK A. KIRSCHENBAUM
JAMES W. PEEPLES =
FORREST 5. FIELDS. JR.
RICHARD BII BURKE
GUY S. HAGGARD
FREDERICK W. LEONHARDT
GRAY, 1LAlYRIS
& ROBINSON
PROFESSIONAL ASSOCIATION
ATTORNEYS
AT LAW
SUITE 1200
GLASS BANK 9UILOING
201 EAST PINE STREET
505 NORTH ORLANDO AVENUE
POST OFFICE BOX 3068
POST OFFICE BOX 320737
ORLANDO, FL 32802-3068
COCOA BEACH, FL 32932-0767
TELEPHONE (407) 8438800
TELEPHONE (407) 783-2218
FAX (407) 2448690
FAX (407) 783-2297
WRITERS DIRECT DIAL
PLEASE REPLY TO:
Orlando
April 15, 1993
THOMAS C. SHAW
PAUL S. OUINN, JR.
DAVID L. SCHICK
JACK K. McMULLEN
SUSAN TASSELL SPRADLEY
TRACY A. BORGERT
MICHAEL K. WILSON
LILA INGATE MCHENRY
KENT L. HIPP
MICHAEL E. NEUKAMM
ROBERT L. BEALS
MALCOLM R. KIRSCHENBAUM
OF COUNSEL
PERSONAL AND CONFIDENTIAL
ATTORNEY/CLIENT COMMUNICATION
DO NOT DIVULGE TO OTHER PARTIES
Via FAX Transmission - 407/589-5570
Robb McClary, City Manager
City of Sebastian
Post Office Box 780127
Sebastian, Florida 32978
Dear Robb:
This letter is in response to your request that we review the
City's acquisition provisions contained in the franchise agreements
with General Development Utilities, Inc. (IIGDUII). We have reviewed
the agreements, the City's utility franchise ordinance and spoken
with several former GDU and City officials in an effort to
ascertain the original intent of the acquisition provisions. The
following analysis sets forth the results of our review.
BACKGROUND
In 1981, the City and GDU entered into sewer and water
franchise agreements based on the City's utility ordinance
regulating the City's grants of utility franchises. The franchise
agreements both contain provisions for the acquisition by the City
of GDU's sewer and water systems prior to the expiration of the
thirty year franchise period. Both agreements provide as follows:
Within a reasonable time, which time shall not
exceed one hundred eighty (180) days, after
the city has notified the utility of its
intent to terminate the franchise and to
acquire the system, the franchise holder shall
convey all of its facilities together with all
GaeY, 1EIw1412 & Eosrxsox
PROFESSIONAL ASSOCIATION
Robb McClary, City Manager
April 15, 1993
Page 2
easements to the City of Sebastian. The time
for conveyance of the system may be extended
by action of the city council should the
utility demonstrate to the satisfaction of the
city council that it has experienced a delay
in its ability to convey the system which
delay was unintentional and beyond its
control. Said conveyance by the utility shall
be without encumbrance. At this time the
franchise holder shall convey unencumbered all
of its facilities together with all easements,
to the City of Sebastian, without charge as to
all property contributed to the utility;
provided further, however, that the city shall
have the right to purchase the remaining
assets of the utility based on the average of
the net original cost and a price as computed
and agreed upon by three (3) competent and
qualified appraisers. The city shall select
an appraiser, the utility shall select an
appraiser, and these two (2) appraisers shall
mutually agree upon and select a third
independent appraiser and these three (3)
appraisers shall arrive at the value of the
utility and the sales price involved.
However, the city shall not be required to
purchase and no value will be placed on
additions or extensions to the system which
were paid for as contributions -in -aid -of
construction by any person, firm or
corporation other than the utility. At the
end of the franchise period, the city shall
not be required to pay to the utility any
amount for goodwill and the appraised value
shall be based entirely upon physical assets
only, and provided further that in the event
said board of appraisers cannot agree as to
the price to be paid by the city, then the
city may file appropriate condemnation
proceedings under Florida law. Prior to the
utility conveying the system to the city, a
detailed and accurate set of record drawings
showing location, sizes, and types of water
mains, fittings, fire hydrants, services, and
other pertinent information shall be furnished
to the city on reproducible mylars. Any
GRAY, HA$RIs & RoBIxsox
PROFESSIONAL ASSOCIATION
Robb McClary, City Manager
April 15, 1993
Page 3
franchise granted by the city shall include
the above requirement.
The language of this provision raises a number of questions of
interpretation. These questions are dealt with below. It should
be noted that these provisions are mirror images of Section 102-58
of the Sebastian City Code, which is part of the City's utilities
franchise ordinance.
1. How is the 180 day time frame applied?
Both agreements require GDU to convey all of its facilities
together with all easements to the City within a reasonable time,
not to exceed 180 days after the City has notified GDU of its
intent to terminate the franchise and acquire the system. The 180
day time frame contemplates that within 180 days:
(a) the City sends notice to GDU of its intent to
terminate the franchise and acquire the system;
(b) the City and GDU each select an appraiser and those
appraisers agree on a third appraiser;
(c) the three appraisers establish a value; and
(d) GDU is paid the appropriate price and conveys the
utility within 180 days from the date the City
notified GDU.
If the appraisers cannot agree upon a price, the agreements
provide that the City, "may file appropriate condemnation
proceedings." The condemnation provision raises the question
whether the City is required to file condemnation proceedings
against GDU within 180 days of its notice to GDU. Obviously, the
City should attempt to acquire the utility systems through the
mechanism of the franchise provisions rather than through eminent
domain proceedings which would require the payment of "just
compensation" for the systems including contributions in aid of
construction and going concern value or other intangibles. GDU, on
the other hand, might argue that the City must commence eminent
domain proceedings for that very reason.
However, a close reading of the language, together with a
comparison to a similar acquisition provision in Chapter 180,
Florida Statutes, indicates that the City is under no mandate to
G11A , HARuxs & RoBlxsox
PROFESSIONAL ASSOCIATION
Robb McClary, City Manager
April 15, 1993
Page 4
commence eminent domain proceedings within 180 days of its notice
to GDU in the event the appraisers fail to agree on a price.
Section 180.16, Florida Statutes (1991) provides:
When a municipality has granted to a private
company or corporation a privilege or
franchise ..., if at the expiration of the
term of the privilege or franchise and after
petition of the private company or
corporation, the municipality fails or refuses
to renew the privilege or franchise, then upon
further petition of the private company or
corporation, its property ... which is on hand
at the time of the expiration of said
privilege or franchise, shall be purchased by
the said municipality at a price to be
mutually agreed upon; provided however, if the
price for same cannot be agreed upon, the
price shall be determined by an arbitration
board consisting of three persons, one of whom
shall be selected by the city council or other
legislative body, one shall be appointed by
the private company or corporation, and the
two persons so selected shall select a third
member of said board; and provided further,
that in the event said board cannot agree as
to the price to be paid by the said
municipality, then the municipality shall file
appropriate condemnation proceedings under
chapter 73, within 6 months after the date of
filing the original petition. (emphasis
added)
The last clause of Section 180.16 clearly requires a
municipality to file condemnation proceedings within 6 months after
the date that a private utility has filed a petition requiring the
municipality to purchase the utility property. Although the
language of the two provisions is superficially similar, there are
significant distinctions between the acquisition provisions in the
GDU franchise agreements and Section 180.16.
First, Section 180.16, by its language and according to case
law, applies only to the unique situation of a municipality's
failure to renew a franchise at the expiration of the term of the
franchise. See, City of Palm Bay v General Development Utilities
Inc., 201 So -2d 912 (Fla. 4th D.C.A. 1967). Section 180.16 is a
GnAy, HAnRis & Rosi..rsoN
PROFESSIONAL ASSOCIATION
Robb McClary, City Manager
April 15, 1993
Page 5
requirement that a municipality purchase a private utility's
property, reflecting an effort by the legislature to be fair to a
private utility whose franchise has expired. Id. at 915. By
virtue of Section 180.16, a private utility can compel a
municipality to purchase its property. If arbitration is
unsuccessful, then the municipality "shall" file condemnation
proceedings.
The GDU acquisition clauses, in contrast, are mutually agreed
upon contractual provisions for the City's early termination of the
GDU franchises and purchase of the utilities. Franchises are
special privileges which are strictly construed in favor of the
municipalities granting them, See, e.g., Pond, A Treatise on the
Law of Public Utilities, Volume I, Section 152 (1932); Durham
Public Service Co. v. Durham, North Carolina, 261 U.S. 149 (1923);
Cleveland Electric R.Co. v. Cleveland, 204 U.S. 116,130 (1907);
Capital City Light and Fuel Company v. City of Tallahassee, 42 Fla.
462, 28 So.810 (Fla.); aff'd 186 U.S. 401 (1900).
In addition, the 180 day time frame, located in the first
sentence of the acquisition provision, is directed at GDU, not the
City. The language obligates the franchise holder to convey its
facilities within 180 days. The 180 day time frame is not
contained in the sentence which provides that the City "may" file
condemnation proceedings if the appraisers cannot agree on a price.
Furthermore, by use of the permissive term "may" in the sentence,
the agreement indicates that the City has no obligation to condemn
the property if the appraisers cannot agree. A conclusion that the
City must file eminent domain proceedings would be contrary to the
optional nature of the City's right of acquisition.
Thus, a proper reading of the 180 day time frame is that it is
directed at GDU's obligation to convey the system and does not
require the City to file condemnation proceedings within 180 days
of the City's notification to GDU.
2. How is sales price calculated under the option?
The acquisition clause raises several questions about the
sales price. First, inconsistent terminology creates some
confusion as to what assets are included in the conveyance. It is
somewhat unclear whether the valuation formula of the "net original
cost and a price as computed and agreed upon" by three (3)
appraisers applies to the entire conveyance or only to "remaining
assets." Second, must the City pay for contributed property?
Finally, must the City pay for intangible elements of value such as
going concern value, goodwill or any kind of future earnings? Does
GaAY, HARBIs & ROBINsow
PROFESSIONAL ASSOCIATION
Robb McClary, City Manager
April 15, 1993
Page 6
the phrase excluding payment for goodwill and providing for
valuation of physical assets only apply solely to an acquisition
which occurs "at the end of the franchise period"?
(a) Does the stated valuation formula apply to all
facilities or only to "remaining assets"?
It might be argued by GDU that the price referred to in the
sentence, the "average of the net original cost and a price as
computed and agreed upon by three" appraisers, applies to the
purchase price of the "remaining assets" of the utility and not to
"all of its facilities together with all easements". The
agreements do not define "system", "facilities" or "remaining
assets". Chapter 102 of the Sebastian City Code, which regulates
the grant of utility franchises, also does not define the words
"system", "facilities" or "remaining assets" but states that the
word "utility" includes wells, pumps, tanks, treatment facilities,
distribution systems, water meters, disposal facilities, force
mains, pump stations, collection systems, service lines and pipes,
real estate and easements necessary to such systems.
Without benefit of definitions or extrinsic evidence, it is
somewhat difficult to interpret this clause since the terminology
is inconsistent. However, a common sense reading suggests that,
although perhaps clumsily drafted, the clause sets forth a
valuation formula intended to apply to all the property conveyed,
as it makes no sense to set forth a formula for "remaining assets"
and not for all other facilities.
The correct interpretation of the meaning of the language is
made clear when reference is made to minutes of the City meetings
in 1980. Minutes from September 17, 1980 indicate that the utility
ordinance originally provided for the purchase of utility systems
by the City at original cost less depreciation. Gerald Mosian, a
GDU official, objected to this and asked that the ordinance be
revised to provide for an appraisal. Mr. Dan Kilbride, the then
City Attorney, indicated that GDU would be allowed come up with
additional language. Subsequent minutes from October 29, 1980
indicate that new language was inserted on second reading with the
consent of all parties. That language was "The City shall have the
right to purchase the remaining assets of the utility based on the
average of the net original cost and a price as computed and agreed
upon by three competent and qualified appraisers." The minutes
reflect that this amendment related to the "method of purchase of
a utility by the City."
GRAY, HAE$Is & ROBIwsox
PROFESSIONAL ASSOCIATION
Robb McClary, City Manager
April 15, 1993
Page 7
The fact that the franchise ordinances mirror the utilities
ordinance and that this language was inserted in the utilities
ordinance at the request of GDU should clarify confusion over the
meaning of these provisions. Furthermore, in a telephone conver-
sation with Mr. Kilbride, he indicated that was the intent of the
revision. Pat Flood, the mayor of Sebastian in 1981, also
indicates that this is the intent of that provision. Thus, the
average of the net original cost and a price as computed by the
three appraisers is the appropriate valuation formula for the
conveyance of all assets acquired by the City.
(b) Must the City pay GDU for contributions in aid of
construction?
The acquisition provision further provides that the City shall
not be required to purchase and no value shall be placed on
additions or extensions to the system which were paid for as
contributions -in -aid -of -construction ("CIACII) by any person other
than the utility. Thus, the issue of CIAC's is resolved by the
plain language of the agreements. However, if GDU were to assert
that CIRC should be included in the value, the City has tapes of
special hearings held by the City in 1981 on which Gerald Mosian
acknowledges that CIAC would not be included.
(c) Must the City pay for goodwill or other intangible
elements of value?
The acquisition provision states that, "At the end of the
franchise period, the city shall not be required to pay to the
utility any amount for goodwill and appraised value shall be based
entirely upon physical assets only...',
GDU will surely argue that since the franchise has a thirty
year term running from ten days after the 1981 enactment of the
franchise ordinances, an acquisition in 1993 does not fall, "at the
end of the franchise period," and the City is therefore required to
pay for such intangible elements of value as goodwill and going
concern value.
The utility ordinance does not further clarify this
Provision, which simply repeats Section 102-58(b) of the ordinance.
Tapes of meetings and minutes did not provide an explanation of the
intent of this provision. Case law indicates that the value of a
system should not include any compensation for expectations of
future profit when purchases occur at the end of a franchise period
or involve franchises of indeterminate duration. See, e o , Public
Service Company of Indiana. T„, u ----- -
GRAY. HARRIs & RoBINSON
PROFESSIONAL ASSOCIATION
Robb McClary, City Manager
April 15, 1993
Page 8
Membership Corporation, 360 N.E.2d 1022 (Ind. Ct. App. 1977).
However, a purchase (such as now contemplated by the City) which
cuts short the term of a franchise may be more likely to suggest to
an appraiser or a court that compensation for elements of value
above and beyond the physical assets is appropriate. On the other
hand, the City's right to terminate the agreement and acquire the
system is both a contractual right and a condition imposed on
franchises by the City's utility ordinance. This right to
terminate was contemplated by the parties at the time the
franchises were granted, and therefore limits GDU's expectation of
continuing the franchises for the full thirty year term.
In addition, the language does not state, "If the purchase
takes place at the end of the franchise ... Thus, the words "at
the end of the franchise period" could be interpreted to simply
mean at the time when the City acquires the System, whether it
terminates the agreement or purchases at the expiration of the term
of the franchise. This is consistent with Dan Kilbride's
recollection of the City's intent. He indicated that the City did
not plan to pay for goodwill or other intangibles. Similarly, Pat
Flood, the former mayor, stated emphatically that whether the City
acquired the System the day after the franchises were adopted or
thirty years later, the City wanted to make sure that GDU was paid
only for the money that they had actually put into the System.
However, without this type of extrinsic evidence, this language may
be difficult to resolve in favor of the City.
3. What are the City's remedies if the appraisers do not
unanimously agree or if the appraisers misinterpret the valuation
formula?
The agreements call for three appraisers to "agree" on a
price. As discussed above, the City may initiate condemnation
proceedings if the appraisers fail to agree.
However, eminent domain proceedings are not necessarily the
sole option. The agreements also provide that the 180 day time
frame may be extended by action of the city council if the utility
demonstrates that it has experienced a "delay in its ability to
convey the system which delay was unintentional and beyond its
control." A complete failure on the part of the appraisers to
agree on a price is an example of an "inability" to convey the
system. The city council could extend the 180 day time frame in
order to allow the appraisers more time to reach agreement.
It should also be noted that the agreement does not state
whether there must be unanimous agreement. Presumably the reason
GHaY, HaaRls & ROBINSON
PROFESSIONAL ASSOCIATION
Robb McClary, City Manager
April 15, 1993
Page 9
for an odd number of appraisers is to allow a majority to decide
the outcome and avoid a tie vote. Yet it could be argued by either
GDU or the City that a 2-1 vote does not result in a value "agreed
upon" by the three (3) appraisers.
In this event, or in the event the valuation formula language
of the agreement is misinterpreted, the City could seek a
declaratory judgment in circuit court under Chapter 86, Florida
Statutes, for a ruling on the correct interpretation of the
acquisition provisions.
SUMMARY OF POSSIBLE OUTCOMES
There are several aspects of the acquisition provisions which
could be interpreted in various ways. The acquisition proceedings
could therefore result in a number of scenarios, as follows:
1. City notifies GDU
2. City and GDU appoint appraisers.
3. Appraisers compute value.
(a) average of net original cost and appraisers price
is formula for all assets - if this is disputed
declaratory action may be filed - City's minutes
verify this.
(b) value includes physical assets only - if this is
disputed declaratory action may be filed - this is
the City's weakest issue.
(c) CIRC is not included - if this is disputed
declaratory action may be filed - City's tapes
verify this.
4. Appraisers cannot agree:
(a) City may initiate eminent domain proceedings, or
(b) City Council may extend 180 day period;
(c) City may seek declaratory judgment on need for
unanimity.
GRAY, HARRIS & Rosixsox
PROFESSIONAL ASSOCIATION
Robb McClary, City Manager
April 15, 1993
Page 10
5. Value is reached.
(a) City purchases systems.
(b) City chooses not to purchase if price is too high.
If you have any questions, please do not hesitate to call.
Sincerely yours,
-AVON A. , Esquire
GRAY, HARRIS & ROBINSON, P.A.
cc: Charles Nash, Esquire Signed for Mr. cloud in his absence
Gerald C. Hartman, P.E. to prevent delay in mailing.
City of Sebastian
POST OFFICE BOX 780127 ❑ SEBASTIAN, FLORIDA 32978
TELEPHONE (407) 589-5330 ❑ FAX (407) 589-5570
April 23, 1993
Via: Fax 305 859-4657
Mr. Charles E. Fancher, Jr.
President, General Development Utilities, Inc.
2601 S. Bayshore Drive
Miami, FL 33133 - 5461
Re: General Development Utilities, Inc., Sebastian
Highlands System
Dear Mr. Fancher:
This is to confirm our telephone conversation of April 20, 1993
regarding the City of Sebastian's offer to purchase the General
Development Utilities, Inc. ("GDU") Sebastian Highlands system.
I am pleased to enclose the proposed purchase and sale agreement for
the City's purchase of the GDU system. As City Manager of the City of
Sebastian, Florida, we are offering cash at closing, -with the above
referenced agreement, a total of two million seven hundred fifty
thousand dollars ($2,750,000) for the GDU Sebastian Highlands system.
No futures or additional payments would be made over and above this
amount. This amount and the agreement, of course, are subject to the
review and approval of the Sebastian City Council, and only after
determinations from public hearings under the appropriate Statutes of
the State of Florida.
This offer is good until April 30, 1993 and contemplates a closing in
mid July, 1993.
We look forward to closing this transaction. Should you have any
questions regarding this offer will you please call?
2=��,
Robert S. McClary
City Manager
RSM/jmt
Enclosure: Purchase and Sale Agreement
cc: Lonnie R. Powell, Mayor & Sebastian City Council
Richard B. Votapka, P.E., Utilities Director
Gerald C. Hartman, P.E., Hartman & Associates, Inc.
Thomas A. Cloud, Esq., Gray, Harris & Robinson
- HARTMAN c ASSOCIATES, INC.
engineers, hydrogeologists, surveyors & management consultants
Via Facsimile & U.S. Mail
16 29 7*d � X1993
APR 1993
Received
City Manager's p
Mr. Charles E. Fancher, Jr. office
President c625Ltt9tsLvv��ti
General Development Utilities, Inc.
2601 South Bayshore Drive
Miami, Florida 33133-5461
Subject: General Development Utilities, Inc. - Sebastian Highlands
Dear Mr. Fancher:
HAI #92-023.04
As you are aware, the above referenced purchase and sale agreement is nearing completion
with exception of the required exhibits. Preparation of these exhibits will require obtaining
substantial amount of information from General Development Utilities, Inc. (GDU). I have
attached for your use a preliminary data request which we will need to obtain from GDU for
preparation of the exhibits. I understand that the data request is quite lengthy and in fact,
some of the requested information may not exist. However, I feel its a good starting point.
Since time is of the essence for closing of this deal, it would be greatly appreciated if your
immediate attention could be directed to this matter. If you have any question please do not
hesitate to call.
Very truly yours,
Hartman & Associates, Inc.
Jon D. Fox
Project Engineer
JDF/dn/C-1/Fancher. jdf
Attachments
cc: Rich Votapka, Sebastian
Rob McClary, Sebastian
Thomas Cloud, Esq., GH&R
Gerald C. Hartman, P.E., HAI
201 EAST PINE STREET • SUITE 1000.ORLANDO, FL 32801
TELEPHONE (407) 839-3955 • FAX (407) 839-3790
PRINCIPALS: JAMES E. CHRISTOPHER • CHARLES W. DRAKE • GERALD C. HARTMAN • MARK L LUKE • MARK A. RYNNING • HAROLD E. SCHMIDT. JR.
Attachment
Sebastian Data Request
A. PRIORITY ITEMS:
• Provide all deeds and any other documents providing legal descriptions for the WWTP,
WT?, ground storage facilities, raw water supply wells, wastewater lift stations,
effluent disposal facility, all piping not placed in the public rights-of-way and all
easements of record whether they are held in the name of General Development
Utilities, Inc. (GDU) or Atlantic Gulf Communities Corporation (AGCC), formerly
General Development Corporation (GDC), which pertain to GDU water and
wastewater operations.
• Provide a breakdown of and/or all documents showing all equipment installed at the
WTP, well sites, WWTP, and pump stations, including:
a. equipment;
b. manufacturer;
C. model number;
d. serial number; and
e. miscellaneous (i.e., electrical requirements, horsepower, capacities, etc.).
• Provide a breakdown of and/or all documents showing all water mains, gravity sewers,
and force mains by type of pipe (i.e., ductile iron (DI), asbestos cement (AC), etc.)
including:
a. diameter (inches)
b. length (feet)
• A comprehensive inventory of movable assets to include:
a. Computers/Billing equipment
b. Transportation Equipment
C. Power Operated Equipment
d. Laboratory Equipment
e. Furniture
f. Miscellaneous Equipment
g. Tools and Maintenance Equipment
h. Inventory, Spare Parts, and Supplies
i. Radio Equipment
JDF/dn/Misc-1/Sab. jdf
HAI#92-023.04 1
Attachment (Continued)
Sebastian Data Request
• Provide one (1) set of mylar drawings and specification indicating as -built conditions of
the following:
a. overall water transmission and distribution system (scale 1"=600' or as
appropriate);
b. overall wastewater collection and transmission system, including pump stations
(scale 1"=600' or as appropriate);
C. water treatment plant expansions from inception to present date;
d. wastewater treatment plant expansions from inception to present date and;
e. raw water supply wells.
• Provide a copy of all vendor contracts, service agreements, developer agreements and
leases whether they are held in the name of General Development Utilities, Inc. or
Atlantic Gulf Communities Corporation.
• Provide a copy of all permits and other governmental authorizations and approvals
necessary to operate and maintain the water and wastewater systems.
B. ADDITIONAL INFORMATION
Utility Operations
• FDER monthly operating reports 1988 to April 1993.
• Daily operating reports kept at the WTP and WWTP showing pump run times,
chemical usage, and other information regarding these facilities for the years
1988 through April 1993.
• All documents showing the following information concerning the raw water to
the WTP including:
a. chemical analysis;
b. historic groundwater levels; and
C. raw water pumping daily flow charts since 1988 through present date.
(Actual charts required will be identified after review of FDER MOR's).
JDF/dn/Misc-1/Sab.jdf
HAIN92-023.04 2
Attachment (Continued)
Sebastian Data Request
• All documents incorporating and/or showing all sludge hauling records from
1988 to present date. This information should include at a minimum the
following information:
a. sludge disposal site;
b. sludge quantity hauled per event;
C. sludge characteristics; and
d. contract hauler name, address, telephone number, etc.
• All pump station run times disaggregated by pump station on a daily basis for
the years 1988 through present date.
• All documents showing individual and composite pump curves for the high
service pumps located at the WTP and the raw water supply wells.
• All engineering reports prepared for the Sebastian water and wastewater
facilities since 1980.
• All documents showing fire hydrant tests data since 1988 and any information
regarding infiltration/inflow studies.
FINANCIAL
• All financial audits performed for the GDU Sebastian Highlands division for the
period 1989 through 1992.
• A current list of all documents showing water and sewer customers presently
connected service. This information should at minimum include:
a. name;
b. location;
C. type (i.e., residential, commercial, etc.); and
d. meter size.
• A list of and/or all documents showing all paid and committed water and sewer
equivalent units which have not been connected to the systems. The
information should be disaggregated between areas which have service (water
and sewer) currently available and areas that service is not available should at
minimum include:
JDF/dn/Misc-1/Sab. jdf
HAI//92-023.04 3
Attachment (Continued)
Sebastian Data Request
a. name;
b. location;
C. type (i.e., residential, commercial, etc.); and
d. meter size.
• A complete balance sheet for the GDU Sebastian Highlands Division only and
all footnotes of disclosure items and allocations to the division if such
assets/liabilities are on a total company basis of 1989, 1990, 1991 and 1992.
• A breakdown of or all documents showing property taxes paid by parcel for
GDU for 1991 and 1992.
• The 1989, 1990, 1991 and 1992 Operating and Capital Budget for the Sebastian
Division. This data should include all projections beyond the 1992 time frame.
• A detailed breakdown of and/or all documents showing purchased power
expense for the water and sewer system by type of facility (treatment plant, lift
stations, etc.).
• Provide a detailed monthly breakdown of and/or all documents showing the
source of other water and sewer revenues for 1988 through December, 1992
(i.e., not sales revenue).
• For the years 1989 to present date provide the following information or all
documents showing the following by month and by water meter size:
a. number of bills rendered (water);
b. amount of gallons sold (water);
C. amount of gallons produced;
d. number of bills rendered (sewer); and
e. amount of revenue gallons billed (sewer).
• All annual operating reports filed from 1987 to present date detailing financial
operating results and statistic data for the Sebastian water and wastewater
facilities to include, but not limited to:
a. individual utility reports;
b. expense by individual Chart of Accounts;
C. depreciation expenses by specific plant accounts;
d. operating revenues by specific revenue type;
e. customers by meter size; and
JDF/dn/Misc-1/Sab. j df
HAI#92-023.04 4
Attachment (Continued)
Sebastian Data Request
f. production, treatment and sales data.
• A detailed listing of and/or all documents showing all construction work in
progress balances including, by job number or contract number:
a. description of activity and purpose of addition;
b. total estimated project cost;
C. amount of expenditures spend to date (specify);
d. expected completion date;
e. asset life and salvage value of addition; and
L asset retirement anticipated once addition is on line including historical
plant costs and accumulated depreciation reserve at time of asset addition
for each retirement.
• All Certificates of Insurance for the GDU Sebastian Highlands Division.
• A detailed organizational chart and/or all documents showing all employees
(unnamed) by job classification. This information should include at minimum:
a. current salary range per job classification; and
b. description of activities performed.
• A detailed listing of and/or all documents showing all plants in service (Fixed
Utility Assets) and all contributed plant in service and/or contributions -in -aid -
of -construction (CIAC).
a. a description of property (location, type of asset, linear feet pipe, etc.);
b. in service date;
C. work orders and work releases;
d. bid tabulations;
e. historical cost booked to gross plant in service;
f. accumulated reserve for depreciation on such plant balances;
g. estimated salvage value; and
h. average service life for depreciation accrued and estimated remaining
useful life of asset.
• All documents that provide a description of and the methodology used to
allocate all common operating expenses and general plant to water and sewer
accounts.
JDF/dn/Misc-1/Sab.jdf
HAIN92-023.04 5
Attachment (Continued)
Sebastian Data Request
• All land sale contracts entered into by Atlantic Gulf Communities (formerly
GDC) or GDU for providing water and sewer utility service to customers.
• All data, correspondence, memoranda and other documents relative to any water
or wastewater rate increases pending or contemplated, as well as all documents
showing 1987 to present date any proposed rate base for the GDU Sebastian
Highlands Division.
• Any accounting of and/or documents showing Capital Charges for Utility
Capacity which have been escrowed or deposited for future service which may
be associated with land sales agreements or deferred utility service agreements.
• A complete inventory of and/or all documents showing all customer
connections, future customer commitments who have paid capital charges, and
future customer commitments who have partially paid capital charges and finally
future customer commitments who have paid capital charges.
• The most recent income and expense statement for the GDU Sebastian
Highlands Division.
• A detailed listing of and/or all documents showing management expenses
including the purpose, amount, and any other applicable information for 1988 to
present date. This information should be on an individual basis based on
expense need.
JDF/dn/Misc-1/Sab. jdf
HAI1192-023.04 6
City of Sebastian
POST OFFICE BOX 780127 ❑ SEBASTIAN, FLORIDA 32978
TELEPHONE (407) 589-5330 ❑ FAX (407) 589-5570
M E M O R A N D U M
DATE: April 30, 1993
TO: Lonnie R. Powell,Ma o(r& Sebastian City Council
FROM: Robert S. McClary4Z4
RE: Legal Opinion
Attached is a written opinion from Thomas A. Cloud, our special
Legal Counsel for water and sewer matters. This was work
authorized by City Council in relationship to the acquisition of
GDU. The letter is in response to a number of specific questions
and issues which were raised in the event the City would pursue
the acquisition of GDU under the terms of the franchise for a
forced sale. Hopefully, all of this will be moot if we acquire
GDU through the negotiating process. However, I wanted you to
have a copy of this for your information.
Should you have questions or concerns about this legal opinion,
please feel free to call either Richard Votapka or me.
/jmt
Enclosure:
cc: Richard B. Votapka, P.E. (with enclosure)
Charles I. Nash, Esq. (with enclosure)
MAY 11 '93 13:03 GENERAL DEVELOPEMENT UTILITIES
General Development Utilities. Inc.
An AftnUC Ourt Communhiee Corporation Subsidiary
2601 SOUTH SAYSHORE DRIVE
MIAMI, FL 33133-6661
(305) 8591331
May 11„
Mr. Robert S. McClary
City Manager
City of Sebastian
P.O. Box 780127
Sebastian, Florida 32978
Re: Sebastian Highlands System
Dear Mr. McClary:
After having considered the City of Sebastian's offer to purchase
Utilities, Inc's. (GDU) Sebastian highlands System, GDU's Bot
not accept your offer. However, I have been authorized to advise
favorably consider an offer of three million, two hundred fifty thot
payable in cash at closing.
I know the offer of $2.75 million was viewed as being justified in
interpretation of the purchase formula referred to in section 16 of
between GDU and the City. When you average the book
approximately $3.5 million and the appraised value of approximate
by Hartman Associates, the City's consultants, the result is $2.75
P.2/3
E711
Charles E. Faneher, Jr.
PRESIDENT
1993
General Development
has determined it will
u that the Board would
id dollars ($3,250,000)
ut by considering one
franchise agreements
ie of the system of
$2.0 million prepared
The franchise agreement calls for three appraisals to be perfo' ed. The only other
appraisal that currently exists for this property results in a value crf $4.3 million, and was
performed by the property appraiser for Indian River County. The average of the GDU
book value with the average of these appraised values results in a rgure of $3.325 million
calculated as follows:
[ $3.5 + [$2.0 + 4.3) /2 ] /2 = $3.325
This calculation, which does not use any appraisals performed ' t the request of GDU,
supports GDU's offer to sell the Sebastian Highlands System for $325 million. While other
details of the transaction would need to be clarified, I believe all Could be worked out.
I need to have a response from the City within 30 days of your r=ipt of this offer.
City of Sebastian
POST OFFICE BOX 780127 ❑ SEBASTIAN, FLORIDA 32978
TELEPHONE (407) 589-5330 ❑ FAX (407) 589-5570
May 12, 1993
Via Fax: 1-305-859-4657
Mr. Charles E. Fancher, Jr., President
General Development Utilities, Inc.
2601 South Bayshore Drive
Miami, FL 33133-5461
RE: GDU Sebastian Highlands Water and Sewer Systems
Dear Mr. Fancher:
This is in response to your letter of May 11, 1993 rejecting the
City of Sebastian offer dated April 23, 1993 of two million seven
hundred fifty thousand dollars ($2,750,000) to purchase the
General Development Utility, Inc., Sebastian Highlands water and
sewer system. Your letter further presented a counter offer of
three million two hundred fifty thousand dollars ($3',250,000).
The $2.75 million offer was negotiated in good faith by both
parties. Both parties agreed to request ratification of our
respective boards of this offer. I am disappointed and
disheartened that you were not able to persuade your Board of
Directors to accept our negotiated offer.
After careful consideration, we find your counter offer of
$3.25 million to be unacceptable.
We extend our offer of $2.75 million until noon on May 20, 1993.
This is our best and final offer.
I respectfully request that you withdraw your request for a rate
increase on the Sebastian Highlands water and sewer system until
the extension date of May 20, 1993.
Should you have any questions or concerns regarding this matter,
will you please call?
Sincerely,
00Robert S. McClary
City Manager
RSM/jmt
MAY 11 '93 13:03 GENERAL DEVELOPEMENT UTILITIES
Robert S. McClary
May 11, 1993
Page 2
In the meantime, please call should you wish to discuss
to a mutually satisfactory resolution of this matter.
Sincerely,
Charles E. Fancher,
CEF:gi
cc: J. L. Rutherford
P.3/3
further. I look forward
HARTMAN & ASSOCIATES, INC.
engineers, hydrogeologists, surveyors & management consultants
May 12, 1993
Fascimile/U.S. Mail
10�,112137g7676'
n
Mr. Charles Nash, Esquire
< MAY 1993
Frese, Nash & Torpy, P.A.
Received
930 S. Harbor City Blvd.
City Managers
Riverside Center, Suite 505
Office
Melbourne, FL 32901
Subject: City of Sebastian/General Development Utilities
Water and Sewer System Purchase and Sale Agreement
Dear Mr. Nash:
HAI //92-023.04
As you are aware, the above referenced purchase and sale agreement is nearing completion
with exception of the required exhibits. Preparation of these exhibits will require obtaining
information from the City of Sebastian relative to fee simple parcels of property, held in the
name of General Development Utilities, Inc. (GDU) or Atlantic Gulf Communities
Corporation (AGCC), formerly General Development Corporation (GDC). The information
on such parcels should include parcel maps and legal descriptions.
If you have any questions, please do not hesitate to call.
cc: Rich Votapke, Sebastian
Rob McClary, Sebastian
Thomas Cloud, Esq., GHR
Gerald Hartman, P.E., HAI
JDF/dn/cUC-1/Nash. jdf
ORLANDO
Very truly yours,
Hartmann & Associates, Inc.
Jon D. Fox
Project Engineer
201 EAST PINE STREET • SUITE 1000 • ORLANDO, FL 32801
TELEPHONE (407) 839-3955 • FAX (407) 839-3790
JACKSONVILLE
TALLAHASSEE
PRINCIPALS: JAMES E. CHRISTOPHER • CHARLES W. DRAKE • GERALD C. HARTMAN • MARK L LUKE • MARK A. RYNNING • HAROLD E. SCHMIDT JR.
05/21/93 08:00 '0407 Baa 3780 &1RTMAN ASSOC 2002
HARTMAN & ASSOCIATES, INC.
engineers, hydrogeologists, surveyors & management consultants
MEMORANDUM
TO: Robert McClary
FROM:
Jon D. Fox &'—�
DATE:
May 19, 1993
SUBJECT: GDU Sebastian Hiehlands 'Water And Sewer Systems
Through a telephone conversation I had today with Mr. Leighton Hew of General
Development Utilities (GDT). I was informed that Mr. Fancher will be out of the office until
the 28th of this month. Therefore, Mr. Faucher probably will not respond to your letter dated
May 12, 1993, concerning the system purchase price until around that time.
End of memorandum
201 FAST PINE STAT -T-7 • SUITE 1000 , ORLANDO, FI. 32901
JDF/dn/C-1/MCClary.Jdf T=- HONF. (407) 9393955 • FAX (407) 839-3790
PRINCIPALS: JAMES F. CHRISTOPI1F,It • CHARLES W. DRAKE - GERALD C. MARTMAN - MARK 1. LUKE - MARK A. XYrvNLNG - HAROLD E. SCHMMI- JR.
City of Sebastian
POST OFFICE BOX 780127 ❑ SEBASTIAN, FLORIDA 32978
TELEPHONE (407) 589-5330 ❑ FAX (407) 589-5570
June 16, 1993
Mr. Charles E. Francher, Jr., President
General Development Utilities, Inc.
2601 South Bay Shore Drive
Miami, Florida 33133-5461
Re: GDU Sebastian Highlands Water & Sewer Sytems
Dear Mr. Francher:
This will confirm our telephone conversation of June 15, 1993
regarding the City of Sebastian's attempt to purchase the General
Development Utilities Sebastian Highlands Water & Wastewater
System. During our phone conversation, you confirmed that your
lack of response to the City's final offer of May 12, 1993
represented a rejection of that offer. Further, we both agreed
that negotiations are now abandoned.
Pursuant to Chapter 119 Florida Statutes all documents which were
heretofore confidential are now a matter of public record.
Thank you for the courtesies' extended during the negotiating
process.
Sincerely,
Robert cClary�
City Manager
cc: Lonnie Powell, Mayor & Sebastian City Council
Richard B. Votapka, Utilities Director
Thomas A. Cloud, Esq.
Gerald C. Hartman, P.E.
RSM/sg