Submitted by Adam Kaufman
- Judge Brian Davis presides over two day Impact Fee Bond Validation trial
In an opinion made public today, Judge Brian Davis has ruled that the City of Fernandina “lacks the authority” to issue $5,000,000 in refunded bonds that are secured by water utility “impact fees” and that those “impact fees” do not comply with Florida Law. The Court found that the “Impact Fees” were used to purchase the water facility as a whole in violation of law and that the amount of the “Impact Fees” were arrived at “through a wholly arbitrary negotiation process.”
In a 25 page opinion Judge Davis found that “there is no documentary evidence of any calculation or analysis performed by the City or its consultant in connection with the imposition of the Impact Fees in 2002-2003 to insure that the fees complied with Florida’s “Dual Rational Nexus Test.” The Dual Rational Nexus Test analysis requires the demonstrated need for additional capital facilities related to the growth in population in the Water Utility service area and a rational nexus between the expenditures of funds collected [the “impact fees”] and the benefits accrued. Further, it must be established that the City met the requirement that the ordinance authorizing impact fees must specifically earmark the funds for use in acquiring capital facilities “to benefit the new residents.”
The Court found that the City’s consultant Gerald Hartman’s “calculations” to support the imposition of Impact fees “were at best perfunctory, inaccurate and incomplete.” The consultant’s Impact Fee calculation, said Davis, “imposed” an “arbitrary and irrational fee” on new users of the Water Utility. (Click here for “Impact Fees – A paper napkin calculation?”
The Court found that the consultant’s contemporaneous notes show that the “amount of the Impact Fees was arrived at solely in order to fund the amount of the purchase price” of the City Water Utility in excess of what the City would pay in cash from the amount it had borrowed. Davis stated that the consultant’s notes “did not show any analysis that equated the Impact fees with either the cost of the facilities to accommodate new growth or with the benefit new customers received from hooking up to the utility.”
Davis found that the City’s consultant’s “failure to recall or acknowledge…significant aspects [of the] transaction, his failure to candidly respond to questions during cross examination and his demeanor in providing testimony” caused him “to conclude that his testimony lacked complete candor and credibility.”
The Court noted that John Guastella, the expert witness who testified on behalf of the Impact Fee payers, testified “that the cash generated by the water utility following the day it was acquired by the City was sufficient to pay the indebtedness for the full amount of the negotiated purchase price ($26,450,000) without the need to impose the Impact Fees on new customers.”
The Court, in ruling that the “Impact Fees” in this case do not comply with Florida law and are unlawful, found that:
· These “Impact Fees” have not been used to expand the Water Utility to accommodate new customers or to add additional infrastructure;
· The revenues generated from water usage rates paid by both new and existing customers have been sufficient to pay for the Water Utility without additional fees;
· There is no rational relationship between projected growth in the service area of the Water Utility and the need for new or expanded facilities of the utility; and
· Persons paying the “Impact Fees” have “received no benefit from their fees which is rationally related to the payment of that fee.”
“At this time the City Attorney’s office has no comment,” says Attorney Tammi Bach. “The City Commission will be scheduling an attorney/client session to discuss next steps.”
To read Kaufman’s previous coverage of the two day hearing, click on the following: “The $5,000,000 – Impact Fee Lawsuit Day 1” and ‘Impact Fees – “A paper napkin calculation?”‘
Adam Kaufman is a city resident who is a semi retired labor arbitrator, mediator and attorney. Kaufman attended the two day trial before Circuit Court Judge Brian Davis. We appreciate Adam’s contribution to the Fernandina Observer.
January 2, 2014 2:27 p.m.
As always, Adam did a great job explaining this lawsuit! Well done, and thank you
Gerrity’s folly?
Good summary. A monkey following the facts in the case could see that the judge was going to eventually rule against the City. The bigger question beyond why the impact fees were imposed in the first place … was why the City and the City attorney were not smart enough to see that they compounding the problem by fighting the suit. This happens over and over with the City Attorney. I don’t think Fernandina Beach is well served by Ms. Bach.
The real winners here were the attorneys.
The city attorney does the bidding of the city commission. Blaming the attorney ignores the failures of Mayor Gerrity and the city commissioners. They over paid, failed to do due diligence on the deal and accepted poor work from their consultants.
The official record of the 3/18/2003 City Commission meeting shows the following Commissioners approved the purchase with prior approvals of bond counsel: Mayor Joe Gerrity, VM Ron Sapp, Greg Roland, Mike Lamb and Beano Roberts. City Attorney was Debra Braga, City Manager was Bob Mearns and City Clerk was the late Cassandra Mitchell. Outside bond counsel Dan Livermore of Livermore, Freeman & McMillian had previously been retained by the City to advise them on the bond structure. That seemed to be the first point of failure unless the documentation shows they advised against the structure that was carried out. But the lack of documentation by Hartmann clearly weakened the City’s arguments. Thanks Adam for your effort in keeping us informed in a way that us non-legal people can understand.
Thank you to The Fernandina Observer for your close coverage. And, Adam, you’re an exceptional communicator, it’s been a pleasure to read your work here on this case.
Judge Davis’ ruling is a great victory for the citizens of Fernandina Beach and should be a wakeup call for the commissioners. The illegal implementation of impact fees was brought to the City on numerous occasions by me and other concerned citizens, only to be repeatedly ignored. The imposition of all impact fees should be examined by the commission with an open mind now even if staff and legal counsel tells them otherwise. The fact is that impact fees are a quid pro quo and must have a direct relationship between collection and use. Fernandina Beach has ignored the dual rational nexus rule since day one and simply used impact fees as a slush fund to cover anything it chose to. Just last week the commissioners broke the law by using in excess of $44,000 of impact fees to pay for a lightning warning system. As if thunder wasn’t already doing the job. Funds can only be used for capital improvement directly related to new growth. In a city of 11,000 residents with minimal growth is there any rationale for imposing impact fees at all? Replacing an existing buildings with impact fees is not allowed, the school population has steadily declined and with miles of beach and hundreds of acres of park do we really need to buy more land? If the commissioners do not take control and quit letting the tail wag the dog the citizens can expect the next challenge to come soon. Hurray for judge Davis recognizing and calling the city attorneys for their underhanded tactics in defending and indefensible policy.
What Phil fails to recognize is that the City has made the greatest discovery to understanding lightening since Ben Franklin invented the lightening rod. That is, that development causes lightening. How else could you justify spending impact fees on a lightening detection system? Truth is, you can’t. This expenditure is as illegal as the use of water impact fees to pay off the debt incurred to purchase the water facility. It’s even a more flagrant violation of law because after two plus years of litigation no one can honestly claim they don’t understand the dual rational nexus rule. The law is something others must comply with but certainly not Fernandina.