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Seawall and Litigation Update

Seawall and Litigation Update

Who is suing the District?
Jeffrey Lilly, Celeste A. Nicholson, Robert Warner, William Hayman, Linnea Phillips, Scott Cavin, Richard Wolf and Randy Blauser (“Plaintiffs”) filed a lawsuit suit against the Harbor Bay Community Development District (“Lawsuit”) in April of 2017. It is important to note that all of the Plaintiffs reside on property adjacent to a seawall.

What do the Plaintiffs want?
In the Lawsuit, the Plaintiffs make the following claims:
1) Petition for Writ of Mandamus – demanding the Court to order a particular reconstruction method for the seawall
2) Declaratory Relief – demanding the Court to declare the seawall must be reconstructed in the manner Plaintiffs’ desire
3) Injunctive Relief – demanding the Court prohibit the Harbor Bay Community Development District (“District”) from using rip rap
4) Inverse Condemnation – seeking monetary damages to be paid to Plaintiffs by the District

What is the District’s assessment of the Lawsuit?
The District strongly disputes the claims and legal conclusions asserted by the Plaintiffs in the Lawsuit, and believes the Lawsuit has no merit.

The District believes the Board of Supervisors is responsible for determining how the seawalls are stabilized, not a few select residents. Furthermore, the District believes it must vigorously defend the Lawsuit and protect the financial interests of the District and its residents from the Plaintiffs’ claims.

What is the status of the Lawsuit?
The District filed a Motion to Dismiss the Lawsuit on May 5, 2017, asserting the Lawsuit has no merit as pled. A hearing was held on July 31, 2017, and the Court has not yet ruled on the Motion to Dismiss.

Why hasn’t the District sought to settle the Lawsuit via mediation?
On March 10, 2017, the District received correspondence from the Plaintiffs’ attorney, Trent Cotney, threatening to sue the District. On March 15, 2017, the District’s Counsel, called Mr. Cotney in response to his letter and Mr. Cotney stated his clients would be providing a lower cost solution. On April 3, 2017, District Counsel again reached out to Mr. Cotney because he had not received the proposed, lower cost solution Mr. Cotney referenced on March 15, 2017. On the same day, Mr. Cotney replied that he did not have a less expensive “viable alternative” to propose.

The District also attempted to schedule a meeting between the District’s Chairman, District Counsel, Mr. Lilly and Plaintiffs’ counsel; however, the Plaintiffs never proposed a meeting date.

Following the Bond Validation hearing on May 11th, the District once again asked the Plaintiffs’ counsel to make an opening settlement offer for the District Board of Supervisors to consider. An opening offer is necessary to help gauge if mediation has a reasonable chance of being productive. Surprisingly, the Plaintiffs refused to make a settlement offer and instead filed a motion with the Court demanding the District mediate.

The District has no way of knowing if a mediated or out-of-court settlement is remotely possible, as the District has no idea what the Plaintiffs might demand to resolve the Lawsuit short of trial. Mediating without having basic advance knowledge of what the Plaintiffs might be willing to do to resolve the case likely would result in a waste of time and community resources.

In sum, the District has no desire to engage in costly mediation with a party who refuses to disclose a reasonable opening settlement position, particularly when the District believes the case has no merit. The District remains willing to consider any settlement proposal that is in the best interests of the community, not just a few select residents.

How can the District pay for litigation costs as well as any potential monetary judgements imposed by the Courts?
The District’s primary source of funds is special assessments levied on the residential lots and developable lands within the District. This means all legal fees and any judgment against the District, if not covered by limited insurance, will be part of a new special assessment against all the lot owners (including those who did and did not sue the District). The District believes it must do everything it can to prevent unnecessary assessments from happening.

What is the status of the proposed bond financing?
The District now has the legal authority to issue bonds to fix the seawall, i.e., the bond validation process has been completed; however, the District cannot realistically market bonds due to the pending Lawsuit.

Are other financing options available to the District?
The District is pursuing all available options to finance the seawall repair, including discussions with the developer and banks; however, to date, none of these alternatives appear to be viable. Another alternative the Board is considering are new special assessments in lieu of the bond special assessment, at least until bonds can be sold. Consequently, unless the District levies new special assessments, the District cannot stabilize the seawall until this litigation is concluded. The Plaintiffs’ counsel is aware of this reality.

Why is the Board considering levying a new special assessment?
The District’s total repair costs will increase substantially, if seawalls are not stabilized in a timely manner. Since the Lawsuit appears to present an insurmountable obstacle to bond financing and alternative financing options, the only recourse available to the Board may be new special assessments.

What is the District doing to protect the interests of the District and its residents, if the delays caused by the Lawsuit increase the costs to repair the seawall and/or upland damage?
Since the District has fulfilled all of the legal requirements to initiate the repair of the seawall, the Board approved, at the August 17th meeting, the District taking steps to document the current condition of the seawall and upland structures. This is intended to accomplish two things. First, it will provide evidence for the District to use against claims of upland damage asserted by those individuals who are causing the delay in the financing process. Second, it will document the amount by which the legal delays are increasing the costs to repair the seawall and to evaluate and resolve uplands claims.

What repair solutions are being considered?
The District plans to post a Design Build RFP in September 2017. In conjunction with District Staff and, as appropriate, other Consultants, the Board will consider all repair options meeting the qualifications specified in the RFP.

How will the Board decide which repair solution(s) to implement?
The Design Build RFP outlines the Decision Criteria the Board will utilize to pick the repair solution that will be utilized for each section of seawall in the District.

How will the Board decide which walls to repair next?
Our District Engineer, Cardno, is determining which, if any, seawalls require emergency or prioritized repairs. In reaching their recommendations, Cardno is evaluating total cap rotation, speed of cap rotation, condition of the wall and wall seams, canal-side berm condition as well as other relevant factors.

After reviewing Cardno’s recommendations, the estimated cost of repair and available funding, the Board will decide which and how many linear feet of seawall should be repaired.

When will the Board initiate repairs of the highest-risk lots?
Factors impacting timing include:
• Time Cardno needs to certify the proposed repair solution
• Whether the required funding is immediately available or needs to be raised via a new special assessment
• Whether the District needs to bid the work
• Identifying a qualified contractor who can initiate work in a timely manner

Future updates
As the Lawsuit progresses, the District will periodically update the community on the litigation status. In addition, the District encourages residents who are interested in accurate information to attend the District’s Board meetings rather than relying on social media posts. For your convenience, audio recordings of each Board meeting are available on the CDD website, https://harborbaycdd.org//meeting-records/ .

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