MINUTES OF THE MEETING

OF THE PORT OF THE ISLANDS

COMMUNITY IMPROVEMENT DISTRICT

The regular meeting of the Board of Supervisors of the Port of the Islands Community Improvement District was held Friday, November 19, 2004 at 10:00 a.m. at the Egret Room, 25000 Tamiami Trail, and Naples, Florida.

Present and constituting a quorum were:

Richard Gatti Chairman

Ted Bissell Vice Chairman

Dale Lambert Supervisor

Norine Dillon Supervisor Elect

Dick Ziko Supervisor Elect

Also present were:

Edward Goscicki Assistant Secretary & Manager

Dan Cox Attorney

Ron Benson Engineer

Numerous Residents

FIRST ORDER OF BUSINESS Roll Call

Mr. Gatti called the meeting to order and Mr. Goscicki called the roll.

Mr. Gatti stated Mr. Goscicki is Vice President of Severn Trent. He has taken the place of Mr. DeCocq and will be our regular representative at these meetings. We appreciate having a senior officer at these meetings. We feel he will be able to bring us the attention we need.

SECOND ORDER OF BUSINESS Organizational Matters

A. Appointment of Supervisors and Oath of Office

Mr. Gatti stated our second order of business is the appointment of officers and the Oath of Office.

Mr. Cox, being a Notary Public of the State of Florida, administered the Oath of Office to the newly appointed Supervisors; copies are attached hereto as a part of the record.

Mr. Cox stated you are now members of a Public Board and you are subject to all of the duties and responsibilities of such a member. You are subject to, most principally, the Sunshine Law, which requires that any business of this Board be conducted in a duly noticed public meeting. You cannot discuss any matter that, as reasonable foreseeable, may come before you to make a decision on this Board outside of such a noticed meeting with any other member of the Board. You can talk to your staff, but you cannot use staff to communicate your feelings or to try to ascertain the feelings of other Board members when it comes to a matter that you are going to be dealing with.

These are serious requirements. There have been fines for violations and there have been fines levied for violations and there is a County Commissioner who is right now appealing his conviction because they are going to send him to jail for violation of the Sunshine Law. It is an important thing for you to keep in mind. I urge you to be very conservative regarding your discussions outside of these meetings.

The other requirement is that you file your Form 1 with the Supervisor of Elections. Typically, those are provided to you by management. We will make sure you receive those. You file them with the Supervisor of Elections here in Collier County. They are self-explanatory. They have instructions that come with them, but if you have any questions, do not hesitate to call me or members of your staff. We will help you through them. If you have any questions, perhaps after the meeting we can talk more about the nature of this Board and its responsibilities.

Mr. Goscicki stated I would like to request that everyone identify themselves as they speak to facilitate transcription.

Mr. Gatti stated I will address that. I appreciate your point.

B. Election of Officers

Mr. Gatti stated next we must have the elections of new officers.

Mr. Bissell NOMINATED Mr. Gatti as Chairman seconded by Ms. Dillon and with all in favor Mr. Gatti was elected Chairman.

Mr. Ziko NOMINATED Mr. Lambert as Vice Chairman seconded by Ms. Dillon Mr. Bissell and with all in favor Mr. Lambert was elected Vice Chairman.

Mr. Gatti stated congratulations to our newly elected officials. I think it is great that individuals in the community take an interest in what is happening. Being on the Board sometimes is tough, but we thank you for taking the interest.

Mr. Cox stated I believe in the past Mr. Hans was the Treasurer and Secretary; is that correct?

Mr. Goscicki responded Mr. Hans has been the secretary and Ms. Powers haves been the Treasurer. I suggest to the Board that we need to make some changes in that regard also. We request 1)one, that I be appointed as Secretary for the Board with Rich Hans as the Assistant Secretary and we would also like to request 2)_that Karen Ellis, aAccounting mManager, be appointed as the Treasurer with Mr. Ward as the Assistant Treasurer.

Mr. Gatti asked in terms of the Treasurer, is it because of expediency that you have someone from your firm do that or could a Board member do that?

Mr. Goscicki responded we really need someone other thanfrom the Board to do that so that we have someone who can sign off on all the checks as the Treasurer. All that activity takes place in our Coral Springs office, so you need one of our fiscal managers who is responsible for putting together your budgets and overseeing the finances in that role.

Mr. Gatti stated the reason I ask that is that Mr. Bissell watches all our dollars and he does a great job for the community. If it were possible, I would like to see him in that Treasurer's position. I do understand the circumstances.

Mr. Cox asked could we get a motion to that effect?

On MOTION by Mr. Bissell seconded by Ms. Dillon with all in favor Ms. Ellis was elected Treasurer, and Mr. Ward was elected Assistant Treasurer., Mr. Goscicki was elected Secretary & Mr. Hans was elected Assistant Secretary.

Mr. Gatti stated now that I have been elected, I have some issues that were suggested to me. A lot of communications that the legal staff and the engineering staff receive are not disseminated to the Board. It has been suggested that these communications get distributed to the entire Board. I receive things from the EPA and I depend on Mr. Benson and Mr. Stephens to handle these things. This information should come down to the entire Board.

You may catch something like timing or other issues. I will make sure to take care of my part of that. It is critical that we, the Board, be informed on anything of major significance that is going to affect the community. I understand that there are times of negotiation in the process of business when a decision has to be made. I understand that. Mr. Benson runs into this all the time. For instance, while digging a hole in the ground, we run into a valve in the ground and there is an extra cost that comes up on the contract.

You cannot shut down toand run to the Board to solicit approval to put on the valve and all that. In those cases we understand, but in normal activities that affect the Board I will ask the staff to make sure we receive that information. I was caught a bit off guard the other day. I found out one of our staff quit his job and found out the hard way. That type of thing disturbs me.

In terms of the general public, we welcome you to come to these meetings if you have an issue you want us to know about. This is where we accept public input and we will listen and try to react as best we can. The other thing you can do is write us a letter and tell us what is happening. Again, we will be glad to respond as best we can. I have covered the information.

Next, to keep the minutes reasonable accurate, I will acknowledge the Board members names when they speak or they can name themselves, or in the case of the public, when you speak please identify yourself. I do not know that the address is necessary, but we need you to identify yourself. I can understand that the transcriptionist needs to recognize our voices and it is difficult.

THIRD ORDER OF BUSINESS Approval of the Minutes of the September 24, 2004 & October 15, 2004 Meeting

Mr. Gatti stated that each Board member received a copy of the minutes from the September 24, 2004 meeting and the October 15, 2004 meeting and requested any additions, corrections and deletions are requested.

Ms. Dillon stated I have many comments. On the September minutes on Page 37, the fifth paragraph down, where it says Mr. Stephens, that was Mr. Robinson. That is related to the work with the AED.

On Page 38 it says I said a couple of things, but that was not I. Ms. Dillon responded 33 lots. I am not sure who that was as well as the fourth line down from that. Does anyone else remember?

Mr. Lambert responded that was Ms. Marchand.

Ms. Dillon stated on the October meeting, there are references to Mr. Wolsky on Page 1 at the bottom. That was Mr. Burgeson. On Page 5 at the bottom, regarding the EPA test, that was Mr. Burgeson. On Page 6, four paragraphs down, that was Mr. Burgeson. On Page 10 and 11 there are references to Mr. Wolsky making a motion.

Mr. Gatti stated I believe that was Mr. Burgeson.

Ms. Dillon stated he also statedsaid I cannot go anywhere on Monday, so that was Mr. Robinson. On Page 13, the bottom three paragraphs; that was not I. That was a resident and that also applies to the very last paragraph. On Page 14, there were a lot of statements attributed to me that were made by a resident. On Page 15 and 17, we have Mr. Wolsky making motions again. That is all I have.

Mr. Benson stated on Page 7 it mentions me and I was not at the meeting. I do not know who made that statement regarding October 2nd.

Mr. Lambert stated I believe Mr. Stephens Bissell said that. On the September minutes, Mr. Black was present by phone representing Goldstein, Zugman. On Page 9 there are two statements attributed to me and I do not believe I made those statements. I do not know who that was.

Mr. Gatti stated in that case, a resident would suffice.

Mr. Lambert stated on Page 14 about 3 paragraphs about three paragraphs from the bottom, Mr. Burgeson stated, that is Mr. Lambert. On the next set of minutes on Page 4 in the center of the page they are talking about three-inch pipe. I believe it was three-quarter-inch pipe. There are two or three places there.

On MOTION by Mr. Bissell seconded by Mr. Ziko with all in favor the minutes from the September 24, 2004 meeting and the October 15, 2004 meeting were approved as amended.

FOURTH ORDER OF BUSINESS Consideration of Invoice from Goldstein, Zugman, Weinstein & Poole, LLC for Audit of Financial Statements for Fiscal Year ended September 30, 2003 and for Additional Auditing Procedure

Mr. Gatti stated all of you were present when we discussed the invoice from Goldstein, Zugman, Weinstein & Poole, where they were asking for extra money for auditing services provided in the auditing process. Do you remember, it went from $11,000 to $14,000?

Mr. GoscickiStephens responded it was $500 for each component, for a total of $1,000 more.

Mr. Bissell stated I thought it was $2,000.

Mr. Gatti asked what is the Board's pleasure? In discussing this matter, the firm said they were doing our work almost pro bono and were hardly covering their costs in doing the work. I had a bit of a problem with that. Did they submit a proposal?

Mr. Goscicki responded they did not submit a proposal on this new one. They claimed they missed the advertisement.

Mr. Gatti stated who has submitted a proposal before these came in?

Mr. Goscicki responded we have four proposals.

Mr. Gatti asked did they submit one earlier on?.

Mr. Ziko Lambert stated Goldstein has one in one of the minutes, but I do not think I have it with me today. I think it was the same meeting where we talked about the bill.

Mr. Bissell stated they wanted $12,000 and it cost them $20,000.

Mr. Gatti asked what is the Board's pleasure? They are asking for $2,000 extra based on a lump sum bid that they provided on a contract that candidly, in an auditing contract, is a function of hours spent on it and they pretty well know up front what the costs will be. Had we asked them to perform additional work, then I can see that extra is appropriate.

Mr. Ziko stated I do not think that they performed to their contract, number one. They were late. They want more money and a contract is a contract.

Mr. Lambert stated I tend to agree. They did not do as well.

Ms. Dillon stated I would not give them any more money.

Mr. Bissell stated I would not give them any more money.

On MOTION by Mr. Lambert seconded by Ms. Dillon with all in favor the invoice from Goldstein, Zugman, Weinstein & Poole, LLC for Audit of Financial Statements for Fiscal Year ended September 30, 2003 was approved for the original amount and the $2,000 for Additional Auditing Procedures was denied.

FIFTH ORDER OF BUSINESS Ranking of Audit Firms

Mr. Gatti stated one new member of our Board has not had a chance to review the materials submitted. We are under no time crunch to get this done today. I suggest that the new members of the Board make copies. We need two copies. I have done my evaluations. Maybe I could give Mr. Ziko mine.

Ms. Dillon stated Mr. Bissell gave me his copy.

Mr. Gatti asked does that work?

Mr. Lambert Mr. Ziko responded yes.

Mr. Gatti stated there is a ranking scale in the packet that is very typical of how you deal with consulting firms. You assign a value for each criteria, qualifications of the firm, qualifications of staff, prior experience, prior District experience, current references, evidence of CPAE requirements, all the licenses and that sort of thing. Your total scoring;, we can throw that into the pot and see who wins or we can use those numbers to structure, in our minds, who we think it should be and where we think we want to go with it.

We need to make sure to use this form so we are all talking apples to apples. Does anybody have any problems with that?

Mr. Cox stated two of these are half the price of the others, if you took an average. I was wondering if it would be appropriate to verify with these guys if they are doing more than one fund accounting here. I would hate for them to be selected and then turn around and say, wait a minute; you guys have an enterprise fund accounting here.

Mr. Gatti stated I hear what you are saying. If somebody does not know what they are bidding on, we may not want them performing it anyway.

Mr. Lambert stated we supplied them with all the information they needed to make a decision, so they just did not read their material.

Mr. Gatti stated we will talk about this at the next meeting and we will all fill out the cards and go with whatever is appropriateaspect.

Mr. Lambert asked are we going to consider Goldstein, since they did include a proposal in one of our packets? Are they out because they did not bid?

Mr. Gatti stated we did advertise this.

Mr. Goscicki stated we advertised this with a closing date of November 3rd for them to submit. It was advertised as a sealed bid. I will defer to the attorney on this. This is a professional service. This is not a commodity. You are not selecting on price. This is really a request for price proposals. You are evaluating both on experience, qualifications and price.

Normally, these are done in a less structured fashion than a sealed bid-type process because price is only one of the considerations. In fact, we received this week another firm that submitted a proposal. I was going to bring that up, and whether if the Board wanted to consider that, if they could.

I will defer to the attorney here on the procurement practice, since I do not have a history with this Board. The cleanest way is to stay within the four corners of the advertisement that say we advertised, and we asked for sealed bids. If youthey did not meetsubmit it within that deadline, we will not consider themyou. I did not review the record on when the current firm submitted something. Was that done as a formal submittal to the Board?

Mr. Gatti stated I can tell you how other governments work. If you do not meet that time deadline, your bid is not even opened.

Mr. Goscicki stated that is what I would suggest on this firm that submitted late. We basically told them that we would bring it to the Board, but our recommendation would be that they you missedpassed the deadline.

Mr. Bissell stated Mr. Zugman, on the telephone, said they would appreciate our using their services next year and I believe it was $12,000, although it does cost them $20,000 to do it. That was not a formal proposal as far as I am concerned.

Mr. Lambert stated their formal proposal is in the September minutes package.

Mr. Bissell asked was that a formal proposal? They were telling us they wanted $2,000 more for something that they knew they had to do to start out with.

Mr. Cox responded I do not think it was responsive to the bid. It was just something that they were submitting to justifying an increase over last year's agreement that we had with them. I believe what we do typically with the auditors is enter into an agreement that you can extend year to year without a re-bid.

They were saying essentially that if you wish to extend our contract for another year, then we need this increase. It was at this meeting that we were directed, as staff, to advertise for bids instead of continuing that contract on another one-year basis. They did not respond to the bid. We have the four responsive bids.

Mr. Gatti stated the cleanest way to do this is to go with the four bids.

Mr. Goscicki stated I recommend you go with these four bids. If you decide you do not want to go with these vendors, you could go back to your current vendor and extend their contract. You have multiple options if you do not like what is in front of you.

Mr. Gatti asked what is the Board's pleasure?

Mr. Lambert stated I would like another month.

Mr. Gatti stated there is no question about that. We will not select a firm at this point. You folks have to review the stuffinformation. The question is do we want to include that firm, which came in late? Do we want to include our current firm, which sort of submitted a proposal through the back door or do we want to consider those two at all or do we want to throw them all out and re-bid the whole thing?

Mr. Ziko stated going through these four packets; it is very vague on what their fees are. It says estimated audit fees. One of them says maximum not-to-exceed and the others look like they could be billing us hourly.

Mr. Cox stated the Consultants Competitive Negotiations Act outlines the process for acquiring professional services. You look at the criteria listed on the chart and just look at their experience, staffing, and ability to meet your needs and rank the firms in order, one-two-three-four and take it back to your management staff to go to number one and say what are the financial terms of your agreement? Here are the types of accounts we have. Look at it in a little more detail and tell us what it is going to cost.

If that is within what we budgeted for the audits for the year and seems to be reasonable for management staff, since they have a broad range of experiences in acquiring these audit services, then you have basically authorized them to enter into the agreement with Number 1. If they were not happy with the financial terms of Number 1, they would go to Number 2 to try and get a better financial deal.

Mr. Ziko asked we will know what a not-to-exceed price is, right? We will not get monthly billing by saying there are five more hours here, unless we request it.

Mr. Cox responded once you rank these one-two-three-four, Mr. Goscicki will go down to Number 1 and get a contractual agreement as to a not-to-exceed price or how they are going to bill you and then we will bring that contract back for your final approval.

Mr. Gatti stated it really boils down to the two outside contracts, one that submitted late and one that submitted earlier.

Mr. Goscicki stated I would not go with the one that was late because they were late. I think we have included this one, because it was submitted in September.

Mr. Ziko stated I really do not think Mr. Zugmanhe will be interested since we turned down his request for $2,000.

Mr. Bissell asked what page was that on?

Mr. Cox stated I really do not think it was in the minutes where we discussed that.

Mt. Lambert responded it was section five in the September minutes.

Mr. Gatti stated we have gotten into a lot more discussion on this. I guess we have to deal with these things because there are a lot of questions.

Mr. Cox stated on Page 7 of the September minutes is where you said we were not going to give them the $2,000 and then we discussed a proposal to increase it on Pages 7 and 8 and we were instructed to take it out to bid. Here is where we were instructed to take it out to bid.

Mr. Bissell stated they did not bid.

Mr. Goscicki stated my recommendation to the Board would be to consider the four that submitted on the bid. If you are not satisfied with them you still have the option to throw that out and go back to your existing firm. They are certainly not out of the process. They are just not in the first stage of the process.

Mr. Gatti asked is the Board okay with that?

Ms. Dillon responded yes.

Mr. Bissell responded yes.

Mr. Gatti stated good; we will proceed on that basis. Does the Board want to review the four that we received and apply them to the criteria that we have? Then at the next meeting, we will make a selection.

Before we go on to staff reports, a lot of people are here on this tax increase. With the Board's permission, I would like to make a comment to sort of address the issue.

People who attend our meetings on a regular basis and get our minutes, read them and see what is going on and sort of know already, what I am saying. I am seeing a lot of new faces here. I think it is appropriate for me to bring you up to date from square one to where we are now and why we took the action that we have to take took. I have received a number of phone calls, as I am sure the rest of the Board members have.

People have no problem with what we are doing, but they simply want an explanation of what and why, which is very reasonable. I will take a few minutes to attempt to answer your questions in advance. I have to go back to the beginning. When Port of the Islands was owned exclusive by Mr. Ray vis-à-vis California Bay Clubs, which he also owns and this is part of it, whenever there was a problem, Mr. Ray would right write a check and the problem would go away.

This place was a passion for him. He loved the Port and did everything necessary to make sure it would work right. Unfortunately, Mr. Ray passed away. He was a fine gentleman who loved the Port. The financial operation of the Port then went to Mr. Ray's wife and the finance people for the California Bay Club. They did not know where Port of the Islands was and the only thing they knew was this Community was costing the club a lot to run and the only thing they saw was a lot of red ink.

They developed a business plan that said sell the lots, get our money and go back to California. This did not happen, so then they revised that plan and said, sell the whole thing, get our money and go back to California. That did not happen. In this modus operandi to get rid of this thing, the directions here were do not spend any money. Do as little as you possibly can so we can get our money and get out of here. That took about five years. In the beginning, there were about five houses here and there was no money coming in to speak of. We had to ad these operations of our water treatment plant and sewer treatment plant.

Over those first five years, there were a couple of voices in the dark. This one man said we have to start putting some money aside for our infrastructure. The developer had no intention of putting a lot more money into this thing, so for five years nothing happened. Mr. Ray's brother, Chuck, fixed a few water lines and his son helped here and there. They helped with the minimum it took to keep this thing operating.

Every budget session we had I kept bringing up this fact. Mr. Bissell and Mr. Benson were also involved in bringing up the fact that we needed some money to do something. There was no money coming in and secondly, they were not going to create a vehicle where they, owning the land, would was going to have to cause them to put more money into this thing, so nothing happened. This went on for a while. They could not sell the property and then came the auction.

At the auction, some individuals bought properties. For the most part, the Hardy Group took over where the California Bay Club left off. We traded one developer for another. In During both of these periods, the Hardy Group and the California Bay Club totally controlled this Board. I think I was the only resident on the Board because of my engineering background and affiliations with the County and the City. They wanted me on the Board to see what good I could do.

At the auction we traded one developer for another. Since the days Mr. Ray passed away, there was no money coming in. There were years we did not know how we were going to pay our bills. Things were tough. Finally, after about ten years, in accordance with Florida Statutes, we had enough registered voters here where the power went from the developer to the homeowners. We are now in control of our own destiny. The bad news also is also that we are now in control of our own destiny. The operative word is O-U-R destiny. That wastewater treatment plant is our plant. Those roadway systems, lift stations and the well station are all ours. If something happens, we cannot go to Collier and say; we have a problem, fix it.

We cannot go to the State. That is our ball game. Getting back to the main point, there have been no upgrades in our infrastructure system for fifteen years. We have given Mr. Stephens authority to fix different things that were absolutely essential. Burnt out motors had to be replaced and what have you. In terms of upgrading the systems, we were not thinking about preventative maintenance. The point is we had to catch up. Mr. Benson has told us every year; this is what you have to do to maintain your systems.

Heretofore, we did not have any way to do it. That brought us to where we are now. We asked Mr. Benson to resubmit a five-year capital improvement plan, which he has done a number of times and the Board would consider it. He did that. He listed all the items that we need to address. He put prices on them, cost estimates, including items that we needed to address. He put prices on them, cost estimates, including engineering, contingency and some costs for excavations. We need about $1.7-1.8 million to bring this system to what it should be. Is that number about right?

Mr. Bissell stated I estimated $1,794,000.

Mr. Gatti stated well, the Board then said we have 1,032 ERU's, equivalent residential units. There is some variation to that because the apartments are eight-tenths of a residential unit and the RV Park is four-tenths of a resident unit, but we have in total, 832. When you take those residential units into consideration, you actually have a few more units than that. We took that and said with 832 units, in order for us to develop a sufficient fund to address these needed issues, we need to look at the different scenarios.

We looked at increasing the funds $300 a year, taking seven years to complete the program. We looked at increasing the funds $500 a year and taking five years to complete the program and we looked at $700 a year, taking two years to complete this program. This room was pretty full then and normally I do not allow a lot of discussion at these meetings, but at this meeting, because it was critical, we opened it up to the entire audience.

There were new Board members and a lot of people in the community present. Every person in that room said go for it. The Board was considering going for about $500. The audience said we need these facilities. It is important. Go for it. That, ladies and gentlemen is how we increased the taxes to $700 a year. I would like to tell you that at the end of two years, this $700 is going to go away. In a perfect world, it probably would, but there are some significant pieces of property here that have never shared the cost and will probably not pay for their share of the cost in the future.

One of those properties is the development across the street, Orchid Cove. Several people asked me, if we could we stop that development? The answer is no. Do we really want to stop that development? There are two pieces to that. One is we have a lot of extra people here and we are not necessarily crazy about that. The other end is though is; they now come on the payroll on this. They now have to share these costs, so that those costs are distributed over a greater denominator. There are more of us to pay for that cost.

That is a two-sided sword. I will leave you with this thought. From a quality of life standpoint, these facilities are tremendously important to our community. How are we going to do without sewer and water? The proof of that is, every time there is a slight change in the quality or pressure of the water,. Every time there is a slight change in the pressure of the water, every time a sewer main breaks or lightning hits our wastewater treatment lift stations, our phones go off the hook. People need that service all the time. We should have it.

The other part of it is, those of us who have lived here over six months have seen our property appreciate in value. One of our real estate brokers said State property is going up. It is going up month to month. We have all recognized an increase in the values of our property values. Think about what the value of any of our properties would be if we did not have reliable sewer and water.

Now, should we take questions now or wait until the end where it says Supervisor and audience comments?

Mr. Lambert Ziko responded I suggest we go with the staff reports now.

Mr. Gatti stated we will go through the staff reports now and then open it up for questions.

SIXTH ORDER OF BUSINESS Staff Reports

A. Attorney

Mr. Cox stated I have received a series of letters over the last two weeks. If you remember, several months ago, Orchid Cove, the new development on the north side, essentially we had filed foreclosure against the property that we call Northport Development for failure to pay their debt services assessments. There were also several outstanding tax certificates that had been stricken off to the County and tax certificates that had been sold to third parties.

A gentleman by the name of Mr. Hicks negotiated with all of the outstanding tax certificate holders and Allstate is the holder of the bonds that were issued by the C.DI.D. to pay 28 cents on the dollar, essentially and cleared that property of all of the outstanding debt. All of the assessments, going forward, those people will pay. The settlement took it out of the foreclosure proceedings and liquidated that debt.

Mr. Hicks is now looking at the RV Park parcel, which is the entire RV Park parcel, which also would include all of the land north of the hotel that is within the boundaries of the C.I.D. The letter of the 27th, which is the top one on your packet proposes once you get through the first couple of paragraphs that they pay for thirty cents on the dollar for all of the outstanding tax certificates that are stricken from the County in the future and the current due debt on the property.

The second letter, which is dated November 12th, came about because when you look at the October 27th letter, it does not talk about the outstanding tax certificates, which is the money that would be coming to the C.I.D out of those settlements, so I wanted you to get to this letter. Halfway through the second paragraph, the County held tax certificates are worth approximately $1,164,478. The C.I.D.'s payoff on that would be $349,343.37.

Mr. Gatti asked does everybody understand what the discussion is?

Mr. Cox responded it does give you the gist of what is going on. You have got $925,443.79 in outstanding tax certificates that were sold to third parties. You have $545,000, roughly, of household debt service assessments. You have $688,000 in future bond debt.

You have roughly $3.7 million worth of debt on a piece of property that, by conservative estimates, is worth $1.4-1.5 million.

Mr. Gatti asked who are the three parties and how much do they pay?

Mr. Cox responded there are a lot more than three, but we filed foreclosure of the debt to try and get this property cleaned up. It is in proceedings right now. We have a couple of people left to serve. There are roughly 12 people who hold tax certificates that were sold and the County holds seven tax certificates that nobody would buy because of the high debt on them. Alls State owes a bunch of outstanding bond money.

Mr. Gatti asked what do they owe us?

Mr. Cox responded approximately $1,165,000.

Mr. Gatti asked that is stand-by fees and what else?

Mr. Cox responded that is the amounts that were assessed against the property on the tax roll for stand-by fees and O & M that were never sold. The tax certificates were never sold, so we never got our money.

Mr. Gatti stated a minute ago, we were talking about why the $700 a year would not go away for a while and this is part of the reason.

Mr. Cox stated for several years we have had properties that have not paid and we have had properties that have paid to get caught up as they were developed, but with these on the north side of the road, it had just gotten out of hand.

Mr. Gatti asked what is that property across the way again?

Mr. Cox responded they are current from what I understand.

Mr. Gatti asked they are they paying?

Mr. Cox responded yes.

Mr. Ziko asked if this goes through and we accept the thirty cents on the dollar, does this take if off the rolls of what we owe All Sstate?

Mr. Cox responded yes, this includes a complete payoff for that property on All Sstate and all of the past obligations are gone, but our current years and future assessments for O & M for stand-by would be collected through the tax collectors process, just like we do on all these others. What is significant is when you have a piece of property that has 183 ERC's and you multiply that by $700 a year, you are looking at $160,000 that you are asking this property owner to come up with to contribute.

When they developed this property into the 175-200 units that they can put on this property and you are back down to each of those paying $700 a year, then it is manageable and you generally have better collection success. The end user of the property who buys the condo or the home is much more likely to pay their tax on time than the developer who is holding it for future development or speculation.

Mr. Gatti stated the answer to your question is yes.

Mr. Ziko stated I understand you saying yes on that. The Orchid Cove property, which has 28 cents on the dollar, supposedly took this off the Alls State rolls as what we owe on the bond.

Mr. Cox stated that is correct.

Ms. Ziko stated I have never seen any document, seeing showing what we owe on the bond and seeing that money coming off on it.

Mr. Cox stated what we are doing right now, oin the background, is, I am putting everything together on the Northport property to get it over to Severn Trent's financial folks for them to do their analysis.

Mr. Ziko asked is that last one documented so that we can actually see it?

Mr. Cox responded it is fully documented.

Mr. Ziko asked could we get a copy of it?

Mr. Cox responded they should be on the record for the District, but I will try to remember to get you one down here. Essentially, it is the same process here. What is going to end up happening, because these properties are developed over here at M1 and M2, the other properties we were having some difficulty with, were pretty much going to have this bond then in a fully-performing status. We are now in a state of financial emergency because we are not able to make principal and interest payments.

We get this all taken care of and that in and of itself is not going to affect anybody's assessments. Those who are already paying their assessments, it is not going to go up and not going to go down, but it makes this bond itself more attractive for potential renegotiation of interest rates or refinance. The problem we have to think about there is these bonds were issued in 1990. They have a twenty-year maturity. In 2010, when they mature, and you go out and try to renegotiate for those last five years and your recap yourping interest.

The way negative amortization works, you are paying all your interest up front and you basically are now down to principal payments.

Mr. Ziko stated that is ninety percent.

Mr. Cox stated that is something to look at in the future. The last letter in the bunch shows there has been some resistance from the tax certificate holders that has come about because they have given unrealistic expectation on these tax certificates. When we were in the bankruptcy process there was an advocacy on the part of the tax collectors to make sure that these non-institutional tax certificate holders got a hundred percent of their original principal investment back. The deal that was structured in the bankruptcy proceedings still allowed the settlement to happen, but was never funded, would have done that.

This is not going to end. I think they may be a little resistant here. We basically have two options. We can either accept the thirty- percent proposal or reject it. If we reject, we have current filed foreclosure. I think we have everybody served now. In about twenty days, we are going to be able to begin filing for Motion for Summary Judgment. It has been indicated that the tax collector, who I suspect does not understand what we are trying to do, and has indicated that they are going to contest this foreclosure. I do not know why.

We are going to try to have a meeting with the tax collector's attorney before I leave town next week to better understand our position and maybe clarify our position to him. What we are ultimately going to accomplish through the foreclosure and all this mix of people, that cumulatively holds about $3.5 million, is that we are all equal in dignity as far as whatever this property sells for, and we are going to receive our pro rata share.

The District's pro rata share of any foreclosure is probably going to be about 20-25twenty to twenty five percent. There is no guessing what that property is going to sell for. We are not going to be able to pool together like we would have maybe in the foreclosure of Northport. This is going to be auctioned off. If somebody buys it for a quarter of a million dollars are we are going to walk away with $75,000. It is a big question. We have no way of knowing with any certainty how much money the District will recover if we have to take it all the way through to foreclosure.

If the tax collector is going to contest, as they are indicating, it is going to cost us a lot of money. We may end up losing money to foreclose on that property. We have a certain amount here that you, as the Board, on behalf of this District, can consider that would bring in $350,000, plus or minus, of cash to the District Board by the end of December. This letter is committing to funding that settlement within thirty days. They gave us a November 30th deadline and they have committed to funding within thirty days of that deadline.

Mr. Gatti asked when do you need a statement from us?

Mr. Cox responded November 30th.

Mr. Ziko stated we must be one of many people. What happens if the other people do not agree?

Mr. Cox responded the bill requires a hundred percent agreement. I think there are about a dozen players involved.

Mr. Ziko asked how many are amenable to this right now?

Mr. Cox responded I do not know.

Mr. Ziko asked so we would not know at all until November 30th when everybody puts their cards in the pot?

Ms. Dillon stated from what I can read in this letter, this gentleman wants to put in another pipe.

Mr. Cox stated it would be an extension of the project they are proposing for Northport. It would just continue on around the canal. We were given some flexibility on having some more amenities and getting full use of the units. The property that is Northport can stand more units than they have ERC's. They could put a few more Condos on there. If they can put those two together, they can spread the ERC's over the two properties.

Mr. Ziko asked are you talking about the gun range and spreading it out to the trailer park?

Mr. Cox responded that whole north would be one unified development. How it would be spread out, I am not sure.

Ms. Dillon asked how is that going to affect the North Hotel?

Mr. Cox responded not at all.

Ms. Dillon asked that is still separate?

Mr. Cox responded we lit a fire under some people this week and hopefully will see some movement in that as well.

Mr. Gatti asked does that include all the property of the gun range?

Mr. Cox responded that includes the gun range, the RV Park and what we call the conservation area or surplus properties.

Mr. Gatti stated the one area that I am concerned with, and we are going to be finished with this some time in the near future, is the lead field out there.

Mr. Cox stated there was a statute recently passed that was an attempt by the legislature to shield gun ranges and so forth from liability for that. Whether we have to deal with that or not, I do not know.

Mr. Gatti stated if we or the owner of the property does, that could involve a large sum of money.

Mr. Cox stated we can fight that and say it is not our job.

Ms. Dillon asked is there anyone else currently working to buy this property besides us?

Mr. Cox responded I have had two or three people call me for details. I have tried to provide as much information as I can. This is the only offer I have to present to you right now.

Ms. Dillon stated I heard there was a gentleman wanting to buy a gun range and keep it operating.

Mr. Cox stated I do not know right now with the way everything is in the process that you could segregate out just the gun range. Unfortunately, the gun range as a whole requires portions of both parcels that are involved in the foreclosure.

Mr. Lambert asked is it too late to try to work something in to get a piece of this property to be set aside for a fire station?

Mr. Cox responded the Northport property has committed this property across the street, to provide us with an acre of land, wherever we can get the County to agree that should go.

Mr. Gatti stated I will share my conversation with Mr. Bernard, who the Board asked me to talk to at the last meeting and possibly have him here. As Mr. Cox said, they would be willing to commit to provide us with an acre of land for a fire station. A fire station is just as important to them as it is to us and he would be willing to do that. He thought that it was just a little premature. I can understand his position. He wants to get all his ducks in a row in Orchid Cove. When that is done, he will provide us with that acre of land.

When I say, get all his ducks in a row; I interpret that to mean, if for some reason, he has to negotiate with us or with somebody else, he will use that for leverage. He is committed to providing us an acre of land at the appropriate time. That is coming together.