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HomeMy WebLinkAbout1980-07-03 - City Commission Special Meeting Minutes5811 NORTHWEST 88TH AVENUE TAMARAC, FLORIDA 33321 TELEPHONE (305) 722-5900 NOTICE OF SPECIAL MEETING CITY COUNCIL TAMARAC, FLORIDA Please be advised of a Special Meeting of the City Council to be held on Thursday, July 3rd at 10:00 A.M. in Council Chambers of City Hall. The subject to be discussed is the Bennett vs Behring litigation. Council may consider such other business as may come before it. The Public is invited to attend. MARIL-YN BERTHOL7- CITY CLERK // MB/mt 6/30/80 CITY OF TAMARAC, FLORZDA SPECIAL MEETING BENNETT VS. BEHRING JULY 3rd, 1980 CALL TO ORDER: Mayor Falck called the Special Meeting to order on Thursday, July 3, 1980, at 10:00 A.M., in the Council Chambers. ROLL CALL: PRESENT: Mayor Walter W. Falck Councilman Irving M. Disraelly Councilman Irving Zemel Councilman Marjorie Kelch ALSO PRESENT: City Attorney, Arthur M. Birken- Clerk/Steno., Mimi Reiter ABSENT AND EXCUSED: Vice -Mayor Helen Massaro BENNETT VS. BEHRING LITIGATION SYNOPSIS OF ACTION: Mayor Falck authorized to sign the letter and an Attorney would be present at Monday's hearing before Judge Gonzalez, to represent the City. Mr. Birken advised that this case has been pending for many years, and at one point in time each member of Council was a member of the Class Action, with everyone being familiar with the litigation proceedings. He recalled the meeting at Piper High School, approximately 1 1/2 years previous, where a number of questions were raised as to certain people remaining in the Class, or opting out. Mr. Birken further stated that subsequent to the meeting, Judge Gonzalez granted summary judgment on a number of counts, with one count being left in the complaint, as to possible anti-trust violations. As a result of the Sunrise Lakes decision, which came down from the Florida Supreme Court a few months previous, the parties have determined on a settlement. This decision, he said, permitted and validated bonds in Sunrise Lakes, for special recreation taxing districts to buy-out leases. The compromised settlement, he said, was for the City to explore the possibility of creating special recreation taxing districts, or one dis- trict,and possibly three or four. It would be dependent on the method of structure in the opinion of the Bond Counsel, to sell bonds and pur- chase the facilities. Mr. Birken advised there were attorneys in attendance, namely, Mr. Platt, who is representing the Plaintiffs, and Mr. Krul, who is representing the Defendants. He further felt that these attorneys could outline the parameters of the proposed settlement to Council, and action could be taken on a letter similar to one that was previously sent to Council, by himself. This letter was reviewed by Bond Counsel, and it was deter- mined there were no problems with the letter being issued, if it is so desired, by Council, which is their legislative decision. He further stated that the Class Notice does not indicate a requirement of Class Members voting in favor of the creation of the districts. He also felt there may be some public policy questions raised, with language in the Class Notice, as to assessments by their Association, for those people whose payments are not up-to-date. This could be found on page 22 of the Notice. George I. Platt, with the Law Offices of Schlichte, Carbo and Platt, said that Harry A. Swagart was an Attorney of Record in the Federal Class Action, and suggested that he address the proposed settlement. Mr. Swagart said that he was representing the Plaintiffs, and advised that his notice of this meeting was a last minute one, because Mr. Krul was ill, and could not be present at this time. He additionally stated that he was not prepared to make a statement, but could give a brief synopsis of the settlement, as it relates to his clients. He said the settlement was framed in two parts, such as Tier 1 and 2, with Tier 1 involving the proposed bond issue, whereby recreation dis- tricts will be established for each subdivision, with bonds being issued and retired at pre-set rates, as to an escalated clause or a fixed rental. -1- 7/3/80 /mr Under a fixed rental, and Tier 1, it will involve a 30 year term for the bonds, with 80% of the current rentals, which would be a reduction from $10 to $8 per month. At the end of the 30 year terms, the owner- ship to the recreational facilities, he said, will be conveyed to the Homeowners Association. The settlement, he said, does provide an ade- quate period of time to make this bond proposal functional, because it provides three years from the date the settlement agreement is approved by Judge Gonzalez of the Federal District Court. With the escalator sub- divisions, he said, under Tier..l, it will be capped, and the rentals will be 85%, with the July 1979 figure. In all other respects, he noted, the process will operate in the same method as the non -escalator subdivi- sions. Mr. Swagart said that in the event the particular subdivisions are not able to accomplish a bond issue, there is an alternative position, under which the leases will run their term, but the escalators will be capped at the July 1979figure, with a reduction of 100, from $10.0.0 to $9.00 in the non -escalator subdivisions. Upon the expiration of the leases, the ownership of the facilities will be conveyed to the Homeowners Associations. Expert witnesses, he said, have projected the total monetary benefit to the Class, which ranges dependent upon an escalated or non --escalated subdivision, under Tier 1 or 2; also, depending upon the rate of inflation, which savings should range in the neighborhood of $52,000,000 to $5,000,000,000, based on the state of the economy. In addition, Mr. Swagart said there will be a cash settlement fund, ranging in amount from $675,000 to $750,000; and a portion of the fund will be used, as to what Judge Gonzalez feels is reasonable and fair to pay cost advance for the litigation and attorney's fees. Also, a pro- jection has been made for the recreation facilities ownership going to the Homeowners Association, with a total assessed value in the amount of $3,000,000. Mr. Swagart stated that an expert has made a projection in depreciation and appreciation, and the facilities would be worth between $6,000,000 and $8,000,000 at the end of Tier 1 and 2. He said everything will be detailed in full, and documented, with papers submitted and available at the Clerk of the Court's Office, with the U.S. District Court. Mayor Falck inquired whether his clients were supportive of the philosophy that they must vote for this proposal, to which Mr. Swagart said this question has not been presented to him, and would prefer to review this. prior to a response. C/W Kelch referred to page 11 of the agreement, or the Class Notice, on line 4,as relates to unpaid rent. She inquired as to those persons who have not paid the rent for a number of years involved, and whether they will be excused, with the burden being placed on those people who have made their payments. She additionally referred to page 22, subtitle "l", which involves the collection of past -due obligations. C/W Kelch in- quired as to the method of addressing the rent or amortization of the bonds. Michael Krul, Attorney for the Defendants, indicated they were dealing with a statute and a recreation taxing district would be acquiring these facilities, and would be the ultimate authority. But, he said, this district is controlled by the City Council initially, under the Statute. The City Council, he said, thereafter, would enter into an operating agreement, with the Homeowners Association, and pursuant to this, the Association will continue to maintain the facilities, by collecting the maintenance fees and the amortization of the bonds. Mr. Krul said this case has been pending in the Federal Court for 8 years because it .is a.diffioult case to settle, as it involves 31 subdivisions, with 6 associations that have bought their leases, and a number that do not have escalation clauses, and some that do have this; also, some sub- divisions are indicated where people have not paid a portion of their escalation, and was not collected from individual homeowners; and, areas where escalation was collected and was put in escrow There were some instances where rents were not paid, whether base or escalated, in escrow, and others where no rents were paid, and were not in escrow. He further stated that individuals did not pay rent, without regard to what other people in the subdivision were doing. Now, the attempt was being made to frame a uniform settlement, which will be fair in every situation, and then compromise. From the point :WM 7/3/80 /mr of view of the owners of these leases, as relates to the compromise, they were interested in obtaining back -due rent. But, the Plaintiffs, did not want to pay rent, and would like everyone to waive all the rent, he said. The conclusion, he said, would be for all the rents to be made current, in terms of this settlement agreement, and then assign through the purchase price additions, by assigning the same rent to the Homeowners Association, with an option. Mr. Krul said that back --due rent was being paid without interest over a period of 45 years, and not being paid up --front. The bond issue, he said, was being spread into a thirty (30) year pay -out, rather than being paid up -front. This, he said, would be fair, because everyone did not pay in this subdivision. But, he said, if a subdivision is involved where everyone did pay, except a handful of people, then the Board would take the position that some of the people should not be excluded from payment or penalty. Mr. Krul said that as a result of the settlement, there will be no escalation clauses or escalating rents in the City of Tamarac, with control being obtained, and title taken to their own Clubhouses. The 50 year leases were being reduced, with the oldest one having 40 years to go, and on the bond issue, there is a 30 year amortization. The newer leases are being reduced by 15 years, and is a major item which should not be over- looked. C/M Zemel said there is non -uniformity, because some communities have seven,eight or ten people having never paid,or very little over the period of years in the community. But, through this settlement, he said, the Association is requested to litigate and pay attorneys fees, by doing everything to collect these monies. Where, C/M Zemel said, there are communities of complete non-payment of the escalation clause, then the need for litigation is not required. Mr. Krul said that anyone who is a member of the Class will be acknowl- edging that aside from the modifications in these documents, there are no objections to their obligations to pay rent. They would also, he said, be acknowledging that they are a member of the plat, and owe this unpaid rent, and their defense is only a check, to indicate the payment. The lawsuit then becomes easier; also, attorneys fees are recoverable. Mr. Platt said that in every instance in Tamarac, it is e.nvisioned in the original Declaration of Restrictions and Leases, that the Associa- tions would be the lessees under the Rec Leases. The Associations have the right, in those instances, to collect the rent, he said, if not the obligation to collect the rent and monthly maintenance. They pay the rent over to the Lessor, Mr. Krul's clients, and keep the maintenance, and perform it by themselves. This is their obligation, and is not very different from a Condominium Association, which does the same thing, on a month -to -month basis. Mr. Platt said that he has fought some of these cases in the State Courts, namely, Jean Horne, for failure to pay rec rent, a foreclosure was brought against her by Mr. Schecter; which case went up to the Fourth District Court of Appeal. This was then sent back, with a Judgement of Foreclosure to be entered, and in that instance, Judge Gonzalez, forced the foreclosure; which was paid by Ms. Horne. He did agree that it was a problem, and the terms of the overall settlement, the most to be ex- pected, was to assign any additional rights to the Association, to collect. This right,. he said, was there since the day the subdivision was created, and not exercising this right is the decision of the individual Board of Directors of the Association. He additionally stated that Mr. Al Schecter owns 6 recreation leases in the Woodlands. C/W Kelch referred to page 14,as to the Association joining in the settle- ment agreement, and inquired whether a vote is required in each Civic Association. She also referred to members of the Class, and those per- sons who opted -out of the suit, in Mainlands 1 and 2, which involved at least 95% of the people, and consists of 529 homeowners. It was noted by her that it is a non -escalating section, and she would be interested in the procedures involved. Mr. Platt felt that particular language may have been put in inadvertently, and no-one can be mandated to vote. He also said that the value of the facilities, as indicated by Harry Swagart, does not take into account the calculation of the value of a lease, which is the paper value that is being bought -out. Also, he felt that a question should be addressed -3- 7/3/80 /mr I _1 to the pay -back and cost of attorneys fees, which hundreds or thousands of residents of Tamarac, to suit, in the early years. It is, he said, as he those monies will be paid back to the extent that around, and can be located. were paid by literally raise money for this understands it, that the people are still C/M Disraelly stated that he has been waiting for that terminology to Tape be stated, as to the pay -back of a lease. He said that if his calcula- Side tions were correct, at the end of 30 years, there would be a $720,000 #2 pay -out. He also added that those Associations, over the last three, four or five years, that have bought their recreation areas, have been paying approximately 8 1/2 to 9 1/2 times the lease value per annum. Mr. Platt said the standard buy-out at this time is somewhere in the range of 15 to 25 times the annual rent, which has changed over the years. C/M Disraelly referred to Vanguard 15 Association, and the escalation ---- clause that came into effect during his term_ of office, as President. He said the rate was raised from 15.00 to $20,13 at that time, and discussions were held towards the purchase of the clubhouse. It was agreed that the owners would not escalate the figure, during the period of bargaining, he said. He further stated that it took two years to find the means of raising the monies involved, which figure was nine times annual earnings, and based on $15.00 per month. The clubhouse was purchased, he said, in 1977. Mr. Platt said there were laws passed by the Legislature, and a number of cases were filed, in some initially encouraging decisions by the Appellate Courts. Unconscionability was considered a method of attacking the leases of the escalation clause statute, he said, which would pre- sumably ban escalation clauses in condominiums. It did, he said, cause people to believe that there would be some savings legislation or Court decisions, in order to rule out rec Leases, but which never came to pass. He added that the buy-outs he entered into, namely, Spyglass, Mainlands 7 and 13, did have tremendous bargaining strength in the case law at that time. But, since that time, there have unfortunately been some serious losses in the realm of rec leases, as well as statutes that have been overturned by the Florida Supreme Court. Mr. Platt said that it has affected the value of the buy-out, because the price has gone up. It was noted by him that three years previous good strong legislation, such as the anti-trust account was instituted in 1977, and due to the progressive suit of the litigation, and the possibility of the special taxing district, the people can reduce their monthly payments, without being requested to pay cash for the buy-out. Mr. Krul said that he never settled a case where the lease was lost, and never settled one on terms that were this good to the homeowners. He also said that Attorneys fees were never paid to the Plaintiff's side. He additionally stated that he writes a law review article every year, for the Miami Law Review, on the status of litigation over recrea- tion leases. From the homeowners viewpoint, he said, it has been an up- hill battle, which commenced in 1967. Since that time, as Mr.Platt noted, attempts were made to put a ban on escalation clauses, also, to have that statute apply to leases that pre -dated the statute. This, Mr. Krul said, went to the Florida Supreme Court, which decision was to not pass a statute this day, that referred to previous leases that were entered into at an earlier date. Wide -spread relief, he said, has not resulted against the recreation leases, despite tremendous efforts by the Florida Legislature and Florida Attorney General. Mr. Krul advised that two anti-trust cases have gone to juries in South Florida; with one resulting in a mistrial, and the second resulting in favor of the owner of the lease, which validity was upheld. Mr. Krul advised that there were no individual Homeowners Associations in the lawsuit, and a one-on-one was not being negotiated, but an attempt was to deal with availability. Also, a settlement was being attempted in that context; and it would have been easier to deal if the Homeowners Associations were in the lawsuit. He further stated that a settlement was made requesting them to join into the lawsuit, with an incentive as to the bond issue. At the end of the lease term, title would be given to the Homeowners Association, if the bond issue is not effective. The voting provision, he stated, was properly raised, and would be 1XIM 7/3/80 mr/ I removed. A normal provision, he said, indicates that "each of us will do our best efforts" to accomplish everything that is stated in the settlement. The settlement, he further stated, indicates the contempla- tion of setting --up recreation taxing districts, and the members of the Class are expected to use their best efforts for such accomplishment; as well as the Defendants. He also said that it is against public policy to direct people to vote in a particular manner, and the language has to be clarified to indicate that the members of the Class are to use their best efforts for the accomplishment of the settlement. Once the overall settlement is achieved, he said, a subdivision can approach the Homeowners Association, through its Board of Directors, and the owner of the lease, they can request removal of taxing districts, and so forth, by paying cash, and negotiate their own deal. This agree- ment, he said, does not prohibit this. A single subdivision is not in- volved, he stated, but an attempt was to settle the entire 31 subdi- visions. He also stated that costs and fees will be totally paid by the Defendants, which are substantial; also, the Plaintiffs were re- quired to hire experts in Washington, in order to prepare the data neces- sary for support of an anti-trust case. He further assumed that tremen- dous costs were put up by the Tamarac Homeowners, and others by the Counsel representing them, which monies were being paid by the Defendants. In addition, Mr. Krul said that monies which are left, from $650,000 to $750,000, will be split and paid to all members of the Class. The settle- ment agreement, he said, and the day it is effective for the next three year period, would completely eliminate payment of escalations by every- one in the City; including opt -outs and members of the Class. During the first three year period, while rec districts are being accomplished, opt -outs are covered by the agreement, but they will not receive monies, after Attorneys fees are paid, but will be distributed to the Homeowners. He further added that opt -outs will receive the rent benefit in the settlement agreement, and during the three-year period, the owners will be sending the opt -outs a document, for their signature, which releases owners of any legality or liability. C/M Zemel inquired about the opt -outs, and their protection after the three --year period, as to lease payments, to which Mr. Krul responded that after that period of time, if the document is signed, then they will receive the benefits of the agreement, and release the owners of the lease. Mayor Falck asked about -Tier 1_. not___apply_ing,_ . and the Association_ .Ugreeinq to take title at the end of the lease, under Tier 2? not. Mr. Krul replied that Tier 2 concept of rent payments would be the same, but title will not be conveyed at the end, with the owner still main- taining title. He did assume that the Associations want title at the end. Homeowners Association, he said, is defined loosely, "an Associa- tion existing or to be formed, of members living in a subdivision". C/M Disraelly inquired as to members of the Class who reside in buy-out subdivisions, to which Mr. Krul said this would include such areas and Homeowners Associations where the Councilman resides, and has already bought -out their rec lease. Mr. Krul also said a single or City-wide recreation lease would be determined by the Bond Counsel. Mr. Krul interpreted that the taxing district, which was enacted by the Florida Legislature, to resolve the rec lease problems, and once upheld in the Sunrise Lakes decision, was considered to be the ideal alternative. It involved,he said,three distinct advantages, which makes it possible to negotiate a deal under that concept; 1) an opportunity to pay off the buy-out at 7 1/2% interest, and 2) less cash is involved in a taxing district by the owners, and 3) low financing. C/M Zemel inquired whether the present lease payments were tax deductible under a taxing district, to which Mr. Krul responded they were not. Mr. Platt felt that Mr. Krul should explain the be charged to outsiders, who are not taxpayers attempt to use the public facilities. He said understood, which is relative to the settlement IM: concept of the fee to in the district, who may this has to be fully and its procedure. 7/3/80 mr/ J Mr. Krul said that once a district is controlled, a fee could be charged to anyone who does not reside in the district, but did feel that it was unlikely for anyone to come in and use the facility, especially at $25 per day for use. He said the duration of the bond issue will be for 30 years, and computed at 7 1/2% interest, and, if not at that interest, it will not go through, or be renegotiated. The bond district is a better deal for the homeowners and the clients. Mr. Krul said that a Bond Consultant was built into the formula, for determining the figures, as to.the net of all costs necessary to set up the recreation districts, pay for consultants, counsel, closing costs for the sale, and everything else involved. Mayor Falck inquired of the City Attorney whether the ultimate decision will be handled by referendum, to which Mr. Birken said that it could be handled, under the Statute, by referendum or a petition, which would be signed by a majority of the electors in the district. It would be, he said, easier to sell the bonds if it was one, two or three districts, rather than 31; which is being explored by the Bond Counsel. Mr. Platt felt that the City Council should determine this, and may possibly be divided into one district for the escalated and another for the non -escalated; also subdivisions..being included. Mayor Falck inquired about the letter which was drafted on June 30th,as to not binding the City, but to keep the negotiations open and moving, to which Mr. Birken concurred. Mr. Krul said that the actual settlement agreement, with exhibits, in - Tape volves approximately 140 pages. Both, Plaintiffs and Defendants, he Side said, will be asking Judge Gonzalez on Monday, to approve it as being a #3 fair statement of the settlement; authorizing and directing the Clerk of the Court to send it to all members of the Class. The Judge will be approached on Monday, for preliminiary approval of this settlement agree- ment, on the basis of his knowledge, which is considered to be a fair, reasonable and adequate settlement in the best interest of the Class. Thereafter, once approval is given, a direction will be to send notices to all the Class,.Members, and another hearing will be set, approximately 45 to 60 days after Monday, in order for people to come in and present objections. At that time, the full determination has to be made, and the agreement will be effective, if approved. Mayor Falck requested that copies of the proposed settlement be made available to the library and City Hall,for people who are interested. He also inquired whether all parties involved would dismiss their claims against the City, if the Schecter case does become part of the settlement. Mr. Platt said the City is a Defendant in the Schecter case, and for a period of time, the City of Tamarac was the lessee, under the rec leases in Woodlands, and many other subdivisions, collecting rent and doing the maintenance. When Al Schecter sued the various Woodlands Associations, Attorney General Shevin, Phil Shailer, the State Attorney, the City of Tamarac, and Leadership Housing, the main thrust of his case was to in- quire as to who was the lessee, and order them to pay the current and back rents. Mayor Falck referred to a bond indenture in the first three sections. that were built in the City, east of Route #441, and anticipated that it has been resolved. Jeffrey Weissman, an Attorney with the law firm of Brown, Malman, Salmon & Collins, was representing Kenneth and Patricia Behring, the bond holders of the Bond indenture that Mayor Falck referred to, and Tamarac Enterprises, Inc. He said they felt all the possible problems have been clarified, and indicated there was a general provision in the settlement agreement, that the parties will execute the necessary documents. Mayor Falck felt that the City would need a release from Tamarac Enter- prises, that would relieve the responsibility of monies not paid to the City, over the past years. Mr. Weissman said the same procedure will be followed as the settlement agreement, and, if necessary, additional documentation will be executed for such release. If, he assumed, Judge Gonzalez did approve the entire settlement agreement, the mutual exchange of releases could be effected. 7/3/80 mr/ C/W Kelch will be a as relates inquired whether prior to entering into the agreement, there one -by -one communication between the individual clubhouses to their particular situation. Mr. Platt said that in the interim, between the time the notice goes out and the time of the final hearing, an effort will be made to schedule public meetings at each of the clubhouses for questions to be presented by the Associations, from their residents. He said that previously formats of questions and answers were imprinted in the newspaper, also, having them available at these meetings, in a very clear, understanding language. He felt that it would be unfair to expect the City Council to have this responsibility, and they, in turn, would be absolved from this. Mr. Swagart responded to an earlier question of Mayor Falck, by stating that troublesome language will be deleted from the settlement agreement. He also said there is a local rule in the Federal District Court, which prohibits Attorneys on either side from conversing with Class Members, but felt that an attempt will be made to establish the recreation dis- trict concept because it is beneficial. Mayor Falck said that he posed a question of the letter to Mr. Birken, and felt that additional discussion, review and research should be made by Council, and also the general public. The City Attorney did state that the City is not bound by the letter, but is for the purpose of keeping negotiations open, and would recommend a motion to autho- rize the proper person to sign such a letter. C/M Disraelly said this letter, as prepared for the City Council, by the City Attorney, addressed to various members of the legal profession that are involved for both the Plaintiffs and Defendants;, and then MOVED that the letter,as proposed,should be signed by the Mayor of the City. C/W Kelch SECONDED the motion. Mayor Falck suggested an AMENDMENT TO THE MOTION, authorizing someone to attend the hearing on Monday, in order for the City to have official representation. C/M Disraelly AMENDED HIS MOTION to read that an Attorney should repre- sent the City on Monday, at the hearing before Judge Gonzalez, to which C/W Kelch concurred. VOTE: ALL VOTED AYE: MEETING WAS ADJOURNED AT 12:00 NOON. ATTEST: ASSISTANT CITY CLERK This public document was promulgated $,5"'.10 per copy, to inform the and employees about recent opinions of the City of Tamarac. SC at a cost of $/c;? , -,or- general public and public officers and considerations by the City Council APPROVE 0 CITY COUNCIL ON /o /y gD 7/3/80 mr/