Item I2 * 1:30 p.m. Closed Session
BOARD OF COUNTY COMMISSIONERS
AGENDA ITEM SUMMARY
Meeting Date: 12/10/14 —MAR Division: County Attorney
Bulk Item: Yes No XX Staff Contact: Bob Shillinger, 292-3400
AGENDA ITEM WORDING: An Attorney-Client Closed Session in the matter of Venture Out at
Cudjoe Cay, Inc. v. Florida Keys Aqueduct Authority and Monroe County, Case No. 2013-CA-204-K.
ITEM BACKGROUND:
Per F.S. 286.01 1(8), the subject matter of the meeting shall be confined to settlement negotiations or
strategy sessions related to litigation expenditures.
Present at the meeting will be the Commissioners, County Administrator Roman Gastesi, County
Attorney Bob Shillinger, Assistant County Attorney Cynthia Hall, special outside counsel Mike Burke
and a certified court reporter.
PREVIOUS RELEVANT BOCC ACTION:
11/18/14 BOCC approved closed session to be held at 1:30 p.m. on 12/10/14 in Marathon, FL or as
soon thereafter as may be heard.
CONTRACT/AGREEMENT CHANGES: N/A
STAFF RECOMMENDATIONS: N/A
TOTAL COST: Court Reporter costs INDIRECT COST: BUDGETED: Yes No
DIFFERENTIAL OF LOCAL PREFERENCE:
COST TO COUNTY: Court Reporter costs SOURCE OF FUNDS:
REVENUE PRODUCING: Yes No xx AMOUNT PER MONTH Year
APPROVED BY: County Atty X OMB/Purchasing Risk Management
DOCUMENTATION: Included Not Required X
DISPOSITION: AGENDA ITEM#
Revised 2/05
County of Monroe
The Florida Keys
Robert B. Shillinger, County Attorney"
Pedro J. Mercado, Assistant County Attorney **
Cynthia L. Hall, Assistant County Attorney **
Christine Li mbert- Barrows, Assistant County Attorney **
Derek V. Howard, Assistant County Attorney**
Steven T. Williams, Assistant County Attorney**
Peter H. Morris, Assistant County Attorney
Patricia Eables, Assistant County Attorney
Chris Ambrosio, Assistant County Attorney
** Board Certified in City, County & Local Govt. Law
June 6, 2017
Kevin Madok, Clerk of the Circuit Court
Sixteenth Judicial Circuit, State of Florida
Monroe County Courthouse
500 Whitehead Street
Key West, FL 33040
BOARD OF COUNTY
COMMISSIONERS
Mayor George Neugent, District 2
Mayor Pro Tern David Rice, District 4
Danny L. Kolhage, District I
Heather Carruthers, District 3
Sylvia J. Murphy, District 5
Office of the County Attorney
1111 12`h Street, Suite 408
Key West, FL 33040
(305) 292-3470 — Phone
(305) 292-3516 — Fax
In Re: Venture Out at Cudjoe Cay, Inc. v. Florida Keys Aqueduct Authority and Monroe
County, Case No.: CA-K-13-204
Dear Mr. Madok:
Please find enclosed herewith the transcript of the December 10, 2014 closed attorney/client
session of the Monroe County Board of County Commissioners regarding the above -
referenced matter. Under F.S. 286.011(8), the transcript may be part of the public record
because the litigation has concluded.
Thank you for your assistance with this matter. Please contact me should you have any
questions.
Sincerely,
eobert B. Shillinger
Monroe County Attorney
Enclosure
CONFIDENTIAL
IN
ORIGINAL
CLOSED SESSION
VENTURE OUT AT CUDJOE CAY, INC.
VS.
FLORIDA KEYS AQUEDUCT AUTHORITY
and MONROE COUNTY
Case No. 2013-CA-204-K
APPEARANCES:
Mayor Danny Kolhage
Commissioner Heather Carruthers
Commissioner Sylvia Murphy
Commissioner David Rice
Commissioner George Neugent
Roman Gastesi, County Administrator
Bob Shillinger, County Attorney
Cynthia Hall, Assistant County Attorney
Michael Burke, Special Counsel
Marathon Government Center
2798 Overseas Highway
Marathon, FL 33050
Wednesday, December 10, 2014
1:30 p.m. - 1:51 p.m.
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(Beginning of closed session)
MAYOR KOLHAGE: Okay. We will now open the
closed session.
MR. SHILLINGER: Thank you. So the closed
session is called to order.
For the record, this meeting is being held upon
the request of myself, Bob Shillinger, County Attorney, to
announce that at a prior BOCC meeting held on November
18th, 2014, that I needed your advice in a matter of
Venture Out at Cudjoe Cay, Inc. versus Florida Keys
Aqueduct Authority and Monroe County, Case Number
2013-CA-204-K.
At the meeting the Board approved holding
today's closed session. Public notice was given through
the announcement on the 18th of November, the publication
of today's agenda on the County's website.
For the record and the benefit of the court
reporter, each of us will state our name and position,
start withing the Commissioners.
COMMISSIONER CARRUTHERS: Heather Carruthers,
Commissioner, District 3.
COMMISSIONER MURPHY: Sylvia Murphy,
Commissioner, District 5.
COMMISSIONER RICE: Dave Rice, Commissioner,
District 4.
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COMMISSIONER NEUGENT: George Neugent, County
Commissioner, District 2.
MAYOR KOLHAGE: Danny Kolhage, County
Commissioner, District 1.
MR. GASTESI: Roman Gastesi, County
Administrator.
MR. SHILLINGER: Bob Shillinger, County
Attorney.
MS. HALL: Cynthia Hall, Assistant County
Attorney.
MR. BURKE: Michael Burke, Special Counsel.
MR. SHILLINGER: Thank you.
Just as a reminder, we will only be discussing
settlement negotiations and strategy related to litigation
expenditures. We cannot take any decisive action.
We can't take any decisive actions at this
meeting. You can only provide information and direction
to the attorneys. Any decisions that this Board makes
concerning this case must be done at a meeting open to the
public.
To start it off, this is the case where Venture
Out has sued the County and the Aqueduct potentially for a
takings as well as for some other issues. It involves the
pending hookup to Venture Out to the Cudjoe Regional
Wastewater System and the consequences of that action with
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respect to Venture Out's sewage treatment plant.
They originally were being represented by
Mr. Horan. They've recently changed lawyers to Bart
Smith, who submitted a settlement proposal to the County.
We're ethically obligated to convey it to you. So we're
going to talk about it today.
Mr. Burke is here. He is representing the
County in the course of litigation through our insurance
contract with the Florida League of Cities. He will give
you some evaluation to the claim and then we'll make a
recommendation.
And our recommendation is, just so you know
where we're headed, is that we think we have valid and
adequate defenses towards the takings claim, so that the
settlement offer is something that you are not under an
obligation to follow through with. You wouldn't want to
follow through with this unless you desire just to buy
peace in the matter and be done with it.
So having said that, I'll turn it over to
Mr. Burke so he can explain the case a little better and
give you some idea why we're taking that position.
Mike?
MR. BURKE: Thanks.
Good afternoon. Nice to see you all again.
As you may know, the central wastewater system
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is reaching the point of completion whereby, as I
understand it, in the February -March time frame --
MR. SHILLINGER: Would you be able to hear him
better if he were at the podium? As long as you hear him
and the court reporter hears him we're fine.
MR. BURKE: This is not being blasted out there.
MR. SHILLINGER: No.
COMMISSIONER CARRUTHERS: Just out there. Just
kidding.
MR. BURKE: As I was saying, as you may know,
the central wastewater system is reaching a point where,
if I understand it correctly from the engineers, in the
February -March, maybe a little bit later time frame this
property, the Venture Out property, they're on Cudjoe Key,
is going to be ready to connect to the central system.
Venture Out has a, as you know, a number of
folks that live there and they have their own system.
They've been operating their own water system and their
own wastewater system and they have a package plant to
treat the wastewater. They have a collection system that
brings it to the package plant and it's treated there.
And it is licensed through 2015 through the Florida
Department of Environmental Protection.
The County, as you know, has an ordinance which
requires within 30 days of it becoming available, both
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persons who have on -site systems and people who treat
through package plants, to connect to the central system.
So come in the not too distant future Venture Out and the
people that live in that community will be provided the
opportunity to connect to the central system. And they
have their own collection system which the Florida Keys
Aqueduct Authority does not own, of course the County does
not own, which will bring the wastewater to a lateral line
or stub line, which will then connect to the central
system, or it's available to connect.
Venture Out maintains that its package plant was
renovated and rejuvenated over the last several years and
that it has a value now in excess of $2 million. And they
assert that if they're required to connect to the -- if
their property owners and residents are required to
connect to the central system, the package plant will
become obsolete and worthless.
And the essence of their lawsuit here is they're
asking the, or demanding that the Court order the County
to purchase, and the Aqueduct Authority, to purchase or
acquire this package plant which they contend will be
rendered obsolete by the regulations which require their
connection.
This case has been on hold for a long period of
time because there was a bond validation proceeding which
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the County prevailed on, Florida Keys Aqueduct Authority
prevailed on. And now it has come back and the new
attorney, Bart Smith, has submitted a settlement proposal
which provides, states, it proposes that Monroe County
purchase the existing Venture Out wastewater system which
connects and utilizes it -- which they've been utilizing.
That would include, as I understand it, the purchase of
both the package plant and their collection system within
the community. That's the proposal.
Venture Out agrees to use the funds from the
purchase to install a new water system. Apparently their
on -site water system that they have is not --
MR. SHILLINGER: Watertight.
MR. BURKE: Yeah, it's not watertight. And
including individual meters to each unit owner property.
Venture Out's unit owners sign up for individual service
for wastewater and water service. Currently now, since
the wastewater connects to the package plant and the way
the design is set up currently, the Florida Keys Aqueduct
Authority will connect to a one line and will bill
according to that one -line standard as opposed to what you
often times see at many communities where the property
owner, itself, would have a meter and the potable water
and wastewater will be billed according to that meter at
each property owner's address.
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This system of course will be done differently
because there is a -- they have their own collection
system. They collect it and bring it to now the package
plant, but would be later then a stub line that would
connect to the central system. And so there's a different
billing system set up for that.
So the essence of what he's saying here is that
Florida Keys Aqueduct Authority would generate more money
in the future through property owners having their own
meters and paying that bill rather than this single system
that exists here. And then goes on to say that all
persons would release their claims.
The question really is, and there is not a
Florida case directly on point with this, although there
are some cases that speak to many of the issues in this
case, that the issue that's framed is when a local
government provides a central wastewater system and
requires the persons or property owners within that
community to connect to that system, which is commonplace
and routinely done, if a person has, if a property owner
has an on -site system or in this case a package plant for
a number of unit property owners which is functioning and
otherwise meets environmental standards, is there any
requirement for the government that is requiring the
connection and now in effect rendering the on -site or
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package plant systems obsolete, is there any requirement
that those folks, the property owners, be compensated for
the value, residual value of the systems that they're
required to in effect dismantle and abandon.
There is no case directly on point in Florida,
which kind of surprises me, but there are a number of
cases from outside of Florida and compensation has
routinely been denied by the courts, routinely been denied
for several reasons. And I think probably the simplest
and easiest one to understand is that when a property
owner installs an on -site septic system, or package plant
as this case may be, it is by definition a temporary
measure which provides for the wastewater services
necessary to use the land until urbanization takes place
and a central system is created, which then requires
everybody to connect. You can't have a leap -frog, or as
they call it a tic-tac-toe kind of system.
Yes, sir?
COMMISSIONER NEUGENT: Michael, and also Bob, I
know that the Aqueduct Authority has bought treatment
plants here in Monroe County, and my concern is
inconsistency -- not really concern. I'm just asking you
a question, maybe make me feel more comfortable here.
MR. BURKE: Have they bought them and used them?
COMMISSIONER NEUGENT: Yes.
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MR. BURKE: Sure, that would be required. That
often times happens. A government, a local government
will acquire a private utility's assets and mold -- and
bring them into their systems for use in the future and
they would certainly be required to pay compensation.
They would be required to buy it at fair market value.
In this case, as I understand it, the Florida
Keys Aqueduct Authority does not seek to purchase this
package plant. It doesn't seek to purchase the collection
system. Instead what's at issue is that there's a central
system that will be available to receive the wastewater,
which the community will then provide.
COMMISSIONER NEUGENT: Let me go back and
rephrase that as best I understand it. The
Aqueduct Authority -- are we named in this lawsuit?
MR. SHILLINGER: Yes.
COMMISSIONER NEUGENT: And if so, why? Isn't
this an Aqueduct Authority --
MR. SHILLINGER: Well, it's the County's
ordinance that requires the hookup.
COMMISSIONER CARRUTHERS: But is it our
ordinance or is it a state regulation?
MR. SHILLINGER: It is our ordinance that
requires the hookup. It is based upon some state
regulation.
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COMMISSIONER NEUGENT: The Aqueduct Authority
had bought an existing system. I think the plans are to
Key Haven and tie it into Big Coppitt. So it's a
temporary use of that particular plant. So I'm just
saying we're not treating anybody differently than by
choice.
MR. SHILLINGER: And that's the way Bart is
trying to position this, is you're taking over our --
you're trying to couch it as if we're taking their utility
and making it our own, but as we pointed out that's not
what we're doing.
COMMISSIONER CARRUTHERS: We don't even want it,
do we?
COMMISSIONER NEUGENT: I don't think we wanted
Key Haven, either.
MS. HALL: FKAA was actually approached about
this and affirmatively said that they would not want to
purchase the package plant because it was actually
renovated, the substantial renovation was in 2003. By
their own admission, by their own testimony of their
general manager, in the bond validation case it is not
working well.
The impression FKAA has is that it's possible
that the collection system is working a little bit better.
We're not too sure about that. But everybody agrees the
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package plant is not in good shape, contrary to Bart's
representations, and FKAA specifically said they didn't
want it.
COMMISSIONER NEUGENT: But what you just
described, that's not our issue, is it?
MAYOR KOLHAGE: Yeah.
COMMISSIONER RICE: Yeah.
MR. BURKE: Well, we don't buy -- as I
understand it, the FKAA is the one that makes the
operational decisions with respect to how the wastewater
will be collected and treated. The only involvement that
the County has, as Bob said, is that we have an ordinance
to which we are authorized by State law to adopt, which
requires property owners upon certain notice to connect to
a central system regardless of who owns it, whether it's
the FKAA or some other system, some other entity.
So the question that we're faced in the lawsuit
is whether that regulation, which as you say emanates from
State law, although State law generally provides that it
does not require the purchase -- it does not require the
package plants be taken off line. It's usually set up
just for on -site systems. The state statute does not --
in the case of the Florida Keys, because it's an area of
critical state concern, the State of Florida adopted a law
which authorizes local governments in the Keys to require
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not only on -site systems cease to function and that there
be a connection, but that package plants as well.
So that's Bart's argument, or Bart Smith's
argument is going to be that this is something we did not
have to do by State law, but did as part of ensuring that
all of the properties eventually will have advanced
wastewater treatment for their effluent and will provide
overall assistance to the water quality of the Florida
Keys.
COMMISSIONER CARRUTHERS: That was going to be
my question. The existing package plant does not meet AWT
standards?
MR. BURKE: It will not meet it, as I understand
it.
COMMISSIONER NEUGENT: But it was brought up to
AWT standards.
MR. SHILLINGER: That's debatable.
COMMISSIONER NEUGENT: Well, BAT.
MR. BURKE: Right, it meets BAT standards
apparently, or did when it was licensed.
COMMISSIONER NEUGENT: Right. I don't know
where the dividing line is between -- because it's my
understanding and I thought we had paid in participating
with Key West Resort Utilities, and the requirement was
that they came up to AWT standards, but I find out now
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that they only went to best available technology
standards.
MR. SHILLINGER: We have to confine our
discussion to this one in the closed session. Keep it in
that context.
COMMISSIONER NEUGENT: It is to some degree,
because who decides whether it can be brought up to BAT as
opposed to AWT, and that's okay. I still don't know why
we're discussing operational stuff, which the Aqueduct
Authority ought to be defending, because I also understand
that the infrastructure on the properties for wastewater
is in good shape.
MR. SHILLINGER: It's compliant.
COMMISSIONER NEUGENT: Well, okay.
MR. SHILLINGER: If it's in good shape, the
plant is the concern.
COMMISSIONER NEUGENT: In discussions that I've
sat in prior to any litigation between Venture Out and the
Aqueduct Authority and sitting there as an observer, I was
under the impression that the infrastructure in place had
been replaced in the not -- you know, somewhat recently.
I can't quote the dates. But it was the, that the
infrastructure for sewer.
What they were after was trying to cut a deal on
potable water and seeing if we could come to some kind of
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an agreement and everybody would agree and they'd be
willing to do that. And at one point in time I thought we
were close to some kind of agreement. Then they hired an
attorney and everything went to hell in a handbasket.
MR. BURKE: I mean the litigation issue from our
perspective is, it was said, is we're being sued for our
regulation that we had to require as a connection. That
regulation requires that package plants as well as on -site
systems connect. It's authorized by Florida law. It's
been challenged before the Florida Supreme Court and was
found to be valid.
It basically comes down to this: If you take it
out of the Keys for a minute, if somebody is living in an
area that doesn't have a central system and their septic
tank goes out and they go out and they expend the funds
that's required to put in a new system and then within a
couple, three years the government comes along and does
have the central system available and are required to
connect, they have a financial loss of some sort because
they've just bought something that is now no longer
usable.
And what I'm saying is that when that issue has
presented itself the courts have not required
compensation. You know, and for the reason that, the
basic reason is that these kinds of central systems
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function because everybody provides the effluent to them
and you couldn't go house to house to house because people
have different circumstances about when they bought their
on -site systems. So --
MAYOR KOLHAGE: This is not the only one in the
Keys, either, by the way. Anyway.
MR. BURKE: It's not the only package plant in
the Keys.
MAYOR KOLHAGE: Right.
COMMISSIONER CARRUTHERS: I guess my other
question is, I mean, if suddenly we have to compensate
them for this, what about all those people who say that I
put in my own on -site -- I can think of a couple on Big
Pine right now who would be chomping at the bit. I mean,
I think this -- you know what I'm talking about?
COMMISSIONER NEUGENT: Well, we have subsidized
a lot of those in the past.
MAYOR KOLHAGE: Bob, what do you need from the
Commission?
MR. SHILLINGER: Well, our recommendation is
that we defend the suit. If the Board is comfortable with
that I just need a head nod to do that. If you want to
see us --
MAYOR KOLHAGE: I'm comfortable.
MR. SHILLINGER: Okay.
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MAYOR KOLHAGE: Anybody else?
COMMISSIONER MURPHY: Yeah.
COMMISSIONER CARRUTHERS: Yeah.
COMMISSIONER NEUGENT: I don't think we have any
choice, do we?
MR. SHILLINGER: You can always buy peace in the
matter through a settlement, but then you're setting
yourself up for doing it --
COMMISSIONER CARRUTHERS: We don't want to do
that.
COMMISSIONER MURPHY: No, no, no.
MR. SHILLINGER: You have a theoretical choice,
but not a practical choice.
COMMISSIONER NEUGENT: They had the option to
work this out with the Aqueduct Authority, and based on my
observation they're the ones that created the impasse.
MR. SHILLINGER: Yes, that's my observation as
well.
All right. We have the direction.
MAYOR KOLHAGE: Okay. We're done with that
item.
MR. BURKE: Thank you.
MR. SHILLINGER: Closed session is now
terminated.
(Closed session concluded at 1:51 p.m.)
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CERTIFICATE
STATE OF FLORIDA )
COUNTY OF MONROE )
I, Jennifer D. Belz, CM, RPR, CRR, FPR, do
hereby certify that I was authorized and did
stenographically report the foregoing proceedings
and that this transcript is a true record of the
proceedings before the Court.
I further certify that I am not a relative,
employee, attorney, or counsel for any of the
parties, nor am I a relative or employee of any of
the parties, attorney or counsel connected with the
action, nor am I financially interested in the
action.
IN WITNESS WHEREOF, I have hereunto set my hand
this 22nd day baL-December 2014.
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abandon 9:4
able 5:3
acquire6:21 10:3
action 3: 15, 25
18:16,17
actions 3:16
address 7:25
adequate4:14
Administratorl:18
3:6
admission11:20
adopt12:13
adopted12:24
advanced 13:6
advice2:9
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