[NJblue]

I think people need to recognize that there are two distinct entities at play here: the developer (Morse) and the CDD. There are also two distinct fees at play: the amenity fee that we pay monthly and the maintenance fee that we pay along with our taxes. In order to understand these four items one needs to know how they interplay.

A) Let's start with the developer. Morse currently owns and/or controls:

1) all undeveloped lands and unsold houses & lots
2) all commercial space (both in the town squares and other commercial areas in TV
3) SOME of the executive courses and recreation facilities - including much of what is south of 466.
4) The Entertainment Division which is responsible for entertainment at the town squares, Katie Bells and much of what is presented at the Savannah Center.


B) The CDD is a separate entity from Morse and owns/controls:

1) all executive courses and recreation centers that have been purchased from the developer. This currently includes all that above 466 and some below. The plan is for the CDD to purchase the remaining facilities south of 466. My guess is that this transfer of the fully developed parts below 466 is being held up to some extent by the IRS issue associated with the tax status of the bonds that will have to be issued to complete subsequent purchases.

2) infrastructure like the waste water treatment plants.

3) Maintenance and landscaping for all common areas.

4) The recreation staff.

5) The safety personnel.


C) The amenity fee is the fee that is used to support SOME of the above. Specifically it is used to pay for A-3, B-1, and B-4. Note that some of the amenity money goes to the developer. This makes sense because he still owns a lot of the amenities. The CDD collects the fees and then in turn gives them to the developer who in turn pays the CDD to operate the amenities that are still owned by the developer. In a presentation by Janet Tutt (head of the CDD), she said that she wants to see the transfer of more of the southern amenities to the CDD since she will then have the full amenity fees for these areas to work with rather than just the part that the developer pays the CDD to operate them for him. This implies that there are no subsidies. However, note that the amenities owned by the CDD (all of that above 466 and some below) are supported by the amenity fee only. An important thing to consider is that the purchase agreement that you sign when buying in TV is that the amenity fee is directly tied to the inflation rate - that is, it can only go up at the rate of inflation.

D) The maintenance fees are used by the CDD to maintain the common areas, including the landscaping (item B3). Unlike the amenity fee, there is no inflation protection for this fee.

Note, there are additional charges for fire/safety as well as water/sewer to pay for items B-2 and B-5.

From the above, you can see that there are some obvious subsidies (most notably item A-4, the entertainment.) While the exchange of amenity fees back and forth between the CDD and the developer for the operation of recreation facilities south of 466 leaves some potential for creative book keeping and hence some subsidies, one has to recognize that all CDD operations fall under the Florida Sunshine Laws and are subject to outside auditing. However, based on the statement by Tutt and the fact that the areas north of 466 are only supported by amenity fees, I tend to believe that the amenity fees are more than adequate to support the amenities.

So, where does this leave us at buildout? Presumably at some point after that all of the amenities will have been purchased by the CDD (by issuing bonds - see below) and the CDD will receive 100% of the amenity fees and will be able to operate the amenities with that inflow of money as they currently are above 466. Also, the CDD will continue to use the maintenance fees for common area maintenance and landscaping as they currently are. The big question may be about the entertainment that the developer currently pays for. That is anyone's guess. However, if the devloper maintains control of all of the commercial property in the town squares (which may be likely since it constitutes a huge ongoing cash flow), he has an incentive to continue to pay for the entertainment since this is what partially justifies the higher rent that he gets.

One caveat on this is the bonds that the CDD will have to issue to purchase the remaining amenities. If they turn out to be taxable versus tax free (as the current bonds were issued and are now being contested by the IRS), then the interest rates that they will have to pay for these bonds will have to go up and the cost to the CDD will be greater. This could put a crimp in the business case for this transfer of properties.