MINUTES OF MEETING

NORTH SPRINGS IMPROVEMENT DISTRICT

The regular meeting of the Board of Supervisors of the North Springs Improvement District was held Thursday, September 5, 2002 at 4:10 P.M. in the District Office, 10300 N. W. 11 Manor, Coral Springs, Florida.

Present and constituting a quorum were:

Matt Lauritzen President

Salvatore J. Mendolia Secretary

Also present were:

Rhonda K. Archer Finance Director

Dennis Lyles Attorney

Donna Holiday Recording Secretary

Jane Early Gee & Jenson

Roger Moore Engineer

Scott Davidson WCI

Dave Rohal CCL

FIRST ORDER OF BUSINESS Roll Call

Mr. Lauritzen called the meeting to order at 4:10 p.m.

SECOND ORDER OF BUSINESS Approval of the Minutes of the Minutes of the August 1, 2002 Meeting

Mr. Lauritzen stated that each board member had received a copy of the minutes of the August 1, 2002 meeting and requested any additions, corrections or deletions,

There not being any,

On MOTION by Mr. Mendolia seconded by Mr. Lauritzen with all in favor the minutes of the August 1, 2002 meeting were approved as submitted.

THIRD ORDER OF BUSINESS Public Hearing to Consider the Adoption of the Water and Sewer Budget

Ms. Archer stated we adopted our general fund budget, debt service fund budgets, special operating budget for Heron Bay Commons and Parkland Isles and this is the last budget we need to adopt to start the fiscal year on October 1. This is the water and sewer enterprise fund budget and includes operations and debt service. We project our revenues next year will be $9,037,386 that is down from this year's budgeted $10,452,925 and we expect to see by the end of the fiscal year $7,968,431, The largest discrepancy in what we budget versus what we actually experience is in the development in the District, which is how many new units come on line, what we projected to come on line versus what actually came on line so far. It is not a problem because we are still covering our expenditures but our revenues are lower year to date than we expected. The debt service is shown on page two with a total of $2,409,734. On page three is the administrative budget and totals $468,410 and that is up slightly from the prior year of $431,466. The most significant increase is related to personnel costs and the rest of the fees are fairly level or have gone down slightly. The largest expenditure in personnel costs that we are experiencing is related to health insurance. We received a notice from our health insurance carrier that they projected our insurance was going to go up 40%. We are researching and will be in a position shortly to convert our health insurance to another company which is going to be similar to the plan that our employees already have but a little less expensive for the District and less expensive for the employees with dependent coverage which is a payroll deduction for them. We might be looking at a slightly higher deductible so that they can afford to cover their dependents on the policy. That is the case as well in plant operations. The personnel costs in plant operations have gone up related to the health insurance but also related to hiring additional personnel to operate the plant facility. As we continue to complete our plant expansion and hire more personnel to operate the different facilities in the different locations, we are adding more personnel to the budget. Also this year we added to the budget, our security line item. The total plant budget is $3,125,025 compared to the prior year of $2,376,329.

Mr. Lauritzen asked are we able to refinance any of our bonds?

Ms. Archer responded we are looking at that and it is something we are working on. We will bring a proposal to you at a future Board meeting.

The field operations relate to the water distribution and wastewater collection system that outside the gates of the plant facility. This includes the electricity for the lift stations, trucks and field crews that work on the water and sewer lines. The field operations budget is $1,122.480 as compared to this year's budget of $1,040,150. Total operating expenditures in all departments of $7,180,285 compared to the prior year of $6,285,524. Page 6 shows the projected surplus funds that we will generate this year, the debt coverage, the balance remaining and keep in mind this excess is supposed to go toward paying off a future bond issue that we should have been in a position of issuing about this time in anticipation of the plant expansion that hasn't started yet because the last plant expansion isn't finished. You can see we will not have a rate increase to cover that future bond issue because we are generating sufficient revenues with the user rate we have on our system. If we need any type of rate increase for that plant expansion and future bond issue, it should be slight considering we are generating surplus funds right now to pay for that bond issue.

Mr. Lauritzen opened the public hearing and there being no comments or questions from the public, the public hearing was closed.

On MOTION by Mr. Mendolia seconded by Mr. Lauritzen with all in favor the water and sewer budget for fiscal year 2003 was approved.

FOURTH ORDER OF BUSINESS Acceptance of the Audit for Fiscal Year 2001

Ms. Archer stated a copy of the audit was provided to you prior to the meeting and is for fiscal year ended September 30, 2001. This is a clean audit as you can see in the report of independent certified public accountants, the report on compliance and internal controls and financial reporting, the report on bond compliance and the management letter.

On MOTION by Mr. Mendolia seconded by Mr. Lauritzen with all in favor the audit for fiscal year 2001 was accepted.

FIFTH ORDER OF BUSINESS Consideration of Plats

A. Mary Help of Christian Plat

Mr. Rohal pointed out on the map the location of the Mary Help of Christian plat and stated they are going to expand the facilities for a school. The bottom one third of the property was platted as Parkland Heights, the center was platted and the remaining third of the property is unplatted. We are combining all three pieces of property into one plat. We are going through a rezoning and small land use change at the city and county level so that we can take some of the vested uses that we have and distribute them across all the property. The church will remain in its existing location in the southern portion of the property and a school with grades K-8 will be constructed, a rectory and some day care facilities.

Ms. Archer stated our consulting engineer did review the plat and provided a letter that was included in your agenda package recommending approval and acceptance of drainage from the land within the plat.

On MOTION by Mr. Mendolia seconded by Mr. Lauritzen with all in favor the Mary Help of Christian Plat was approved.

B Parkland Western Community Park Plat

Ms. Early stated they have already commenced the work on Parkland Western Community Park and even though it is over 40 acres they can go right to South Florida for a permit but North Springs still needs to look at their plans if they are outfalling through a North Springs right of way. We also want to make sure they have 11.4% surface water area. I did notify the city engineer that they in fact did not have a permit from North Springs. I'm working with him and that is why we stipulated that last paragraph. The plat is fine we want them to be aware that we need to see those final plans.

On MOTION by Mr. Mendolia seconded by Mr. Lauritzen with all in favor the Parkland Western Community Park Plat was approved subject to the conditions listed in the engineer's review letter.

SIXTH ORDER OF BUSINESS Consideration of Permit Request for Parkland Country Club Maintenance Area

Ms. Early pointed out the Parkland Country Club maintenance area on the map and stated this is a typical surface water permit and we recommend approval.

On MOTION by Mr. Mendolia seconded by Mr. Lauritzen with all in favor the permit request for Parkland Country Club Maintenance Area was approved subject to the conditions outlined in the letter from the engineer.

SEVENTH ORDER OF BUSINESS Consideration of Work Authorization 94 for Parkland Country Club and Engineering Design Agreement with WCI

Ms. Early stated this work authorization is for the entire development and is for the water and sewer design and the funding agreement is with WCI.

Ms. Archer stated this is the usual two step process that we go through with a new subdivision.

On MOTION by Mr. Mendolia seconded by Mr. Lauritzen with all in favor Work Authorization 94 and the funding agreement with WCI was approved.

EIGHTH ORDER OF BUSINESS Staff Reports

A. Attorney

Mr. Lyles stated we are back at the point in the year when we are up against local hearings on new bills for the Legislative Delegation to take up and as you know our codification bill which we are required to prepare and file did not get accepted last year and therefore, was not acted on. I reported to you then that we will be required to do it again this year and that is coming up in October and we will dutifully submit our proposed codification bill of all our special acts and amendments to the Legislative Delegation and hope for the best from our local elected officials.

The issue that has caused a great deal of staff effort to be undertaken both before the last meeting and before this one is the continuing problem we have with our water plant expansion and our contractor, Felix Equities which has been purchased by and is a subsidiary of a national firm called Linknet. As we reported to you last month, Linknet is in bankruptcy proceedings as of July and we are continuing to have a severe problem with the contractor progressing with the work and the subs and suppliers doing any work they contracted to do with Felix Equities. They are essentially not working or not working very much on the plant expansion. The basic issue is we are not getting the plant completed in a timely fashion. We have subs and suppliers unpaid who refuse to work or deliver equipment. Normally when you have that situation it is a default under the contract and it would be except for the fact that we have a bankruptcy proceeding. That stops us from being able to demand that the surety come in and take over. All of us have been in communication verbally and in writing with our opposite numbers at both the surety and the contractor regarding the bankruptcy proceeding. The surety has initially reviewed this claim they know is coming and they have classified it as one where they do owe coverage to us and they have targeted it as one they intend to come in and take over once the proper steps can be taken. There are other jobs that Linknet or Felix Equities is in the middle of that they are not going to accept coverage on, there are defects in the notice or coverage or something but we are not going to suffer that fate. We are lined up and properly ready for the surety to take the job over and hire another contractor or renegotiate something with Felix Equities to get the job from here to the end. They can't do that because of the bankruptcy proceeding. The bankruptcy stops everything and it stops us as an owner of a project even though we are a public entity from declaring the job in default which is the step you have to take before you can bring in the surety. My last conversation with the bankruptcy attorneys for Felix Equities was this morning and this afternoon, and it appears that they are going to be able to get everyone involved from the surety side as well as the contractor side to file with the bankruptcy court a motion to reject our contract, meaning Felix will say formally they don't want to perform the rest of the contract and that in effect sort of waives the bankruptcy protections that they have and allows us to do what we need to do with the surety but we have to involve the surety in every step of all of this, otherwise, we run the risk of waiving the benefit of the surety. They have projected this job internally we believe and their attorneys believe as a negative cash flow job. In other words if they had to complete the rest of the contract, their position is that they will lose even more money. They will ask to be let out of the contract, bring in the surety to do what they need to do and that way they will lose less than they otherwise might. From our point of view they are not going to perform this contract, we are all satisfied they are not able to perform and get the subs and suppliers back on track with the right kind of payments and as of today we still have not gotten the authority to issue two party checks made payable to Felix and the subcontractor. They have to agree on how the proceeds of that check will get divided before it actually gets negotiated. It is a very complex situation and we have all independently found out that nobody has run into exactly this situation before. This is a unique situation so we have a bit of a problem but we believe we have in place a plan to get us from here to there. We are hoping to get the final authority to file this motion and again it will have to be Felix to file it. We are not a party to the bankruptcy proceeding because we are not a creditor or debtor at this point but we are an owner of a project and have a contract in play here. With our urging and cooperation they are going to court and file this motion to reject the contract. I would like you as a Board to pass a motion indicating your approval of the filing of the motion to reject the contract on behalf of Felix in the U.S. Bankruptcy Court.

On MOTION by Mr. Mendolia seconded by Mr. Lauritzen with all in favor the Board approved the filing of the motion to reject the contract by Felix Equities in U.S. Bankruptcy Court.

Mr. Lauritzen stated assuming that happens are you ready to jump in with some bids?

Mr. Lyles stated it will be the surety to get the bids and negotiate directly. The surety will take the job over which is part of the coverage that was paid for when the performance bond which is part of our contractual requirement was put in place. They have to perform under our specs. They can't provide us with something different than what we contracted for. Our obligation is going to be to take the remaining funds that we have in the construction account and pay it to the surety.

Mr. Moore stated the surety has issued one or two checks to Felix Equity. Since the permits are all in Felix Equities name, I believe the surety will come in with a new contractor and have a learning curve and expense to take over the project but they will probably negotiate with some of the present employees. They talked to some of those people over a month ago. That will minimize their loss. There is enough money left in the pot that they will come out losing a minimal amount of money on this job. On some of the other jobs the money is gone, our money is still there. I believe it will be a win/win situation if we can get over this one hump.

Mr. Lauritzen stated I feel we are in a spot depending on them to do a good job.

Mr. Moore stated so far the quality of the work is okay and we are 85% complete. We have 15% of the funds left.

Mr. Lyles stated we don't have that in hand yet but believe we will be there. In case it doesn't work out, one thing that may occur is we may have to file on our own behalf in the bankruptcy court a petition to release the stay and allow us to declare the job in default and go through the technical steps that we hope to avoid by doing it the way I described where they reject the contract and get permission for the court and it goes right to the surety. If that doesn't happen we have to get a 15 day notice of our intention to declare default and a 20 day notice that it is in default and a time to cure and those are all conditions in the surety instrument itself that we are going to be facing and we hope not to face. To get to that point we may have to go into bankruptcy court and file a petition. There is a third possibility which would be a negotiated situation where we would put our money into the court registry and allow the court to get involved in the completion of the project and worry later on about who gets what money as long as it is all deposited. I request at this time to give staff authority if necessary bring in a bankruptcy specialist who does this kind of work along with surety law work to represent our interests. It would be a quick and relatively inexpensive because we are not going to do a whole bankruptcy proceeding. Everybody I have talked to about this, all recommend that if we are going to go forward beyond the point we are at we need to bring in a bankruptcy specialist to protect our interests. I would like to be able to bring in someone quickly and timely so we don't wait another month if necessary.

On MOTION by Mr. Mendolia seconded by Mr. Lauritzen with all in favor staff was authorized to retain a bankruptcy specialist as outlined above if necessary, to report and ratify the fee arrangement at the next meeting.

B. Engineer

There not being any, the next item followed.

C. Superintendent

Ms. Archer stated the county contacted me and asked me to respond to an inquiry they had as to whether or not we were implementing some type of review procedure for the water management permits that we issue such as the five year renewal program we talked about a few months ago. We will identify the magnitude of the project and we will have that information for you at the next meeting and how we will do a five review and renewal of those permits. The county is going to present to the legislature again this year a bill requiring Districts to adopt a five year renewal program or they will step in and do it themselves. We will have that on your next agenda for consideration.

NINTH ORDER OF BUSINESS Supervisor's Requests and Audience Comments

There not being any, the next item followed.

TENTH ORDER OF BUSINESS Approval of Requisitions and Invoices

On MOTION by Mr. Mendolia seconded by Mr. Lauritzen with all in favor the requisitions and invoices were approved as submitted.

On MOTION by Mr. Mendolia seconded by Mr. Lauritzen with all in favor the meeting adjourned at 5:05 p.m.

Salvatore J. Mendolia Matt Lauritzen

Secretary President