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The Dissolution of the Town of Cedar Grove

City, County and Local Government

On October 3, 2008, the Bay County supervisor of elections certified the passage of a referendum to dissolve the town of Cedar Grove located in Bay County. Dissolving a municipality may seem straightforward; just close the doors of city hall and walk away. In reality it was not that simple. Municipal dissolution in Florida had never before happened by a vote of the local electors. There was no template to apply, no outline, no playbook. The unprecedented transfer of all assets and liabilities of the town to the county proved to be quite complicated. Over the next few years, Bay County’s experience with the dissolution of Cedar Grove involved the entire range of issues facing local governments, from policing to planning, finance to franchises, litigation to land use, employee relations, and even a homemade Star Wars car. A brief review of the dissolution of the town of Cedar Grove should provide guidance to counties and municipalities in Florida faced with a similar challenge.

A Grassroots Campaign
A thorough review of the historical background and politics surrounding the town’s citizen-based dissolution effort is beyond the scope of this article. Suffice it to say it started with a strong grassroots campaign. Two years later, the proponents helped elect two pro-dissolution commissioners who, upon taking office, obtained a majority on the commission and voted to adopt a dissolution ordinance and place a referendum on a special ballot.1 After the election, the citizens went home victorious. Their campaign lived on as it was shifted to the county to complete.

Statutory Basis
Municipalities are creatures of the state and, as such, are created and may be abolished by the legislature.2 Fla. Const. art. VIII, §2(a)provides that “municipalities may be established or abolished and their charters amended pursuant to general or special law; however, when a municipality is abolished, provision shall be made for the protection of its creditors.”3

F.S. Ch. 165 addresses the formation, merger, and dissolution of municipalities.4 With regard to dissolution, the statute provides that the “ charter of any existing municipality may be revoked and the municipal corporation dissolved ” by either a special act of the legislature, or by an “ordinance of the governing body of the municipality, approved by a vote of the qualified voters.”5 When the ordinance is adopted, the local government must set a date of the election for “the next regularly scheduled election or a special election.”6 The statute provides that if the local municipal body fails to act, the county “shall” schedule the election.7 In any case, the election cannot be scheduled until at least 30 days after the adoption of the dissolution ordinance. Notice has to be published “at least once each week for [two] consecutive weeks prior to the election.”8

There is surprisingly little guidance provided in the statute on the dissolution process. The law is more focused on how municipalities are created or merged. There is, however, mention of certain “standards” and “conditions” for dissolution.9 The statute requires that the municipality “must not be substantially surrounded by other municipalities.. . [t]he county or another municipality must be demonstrably able to provide necessary services to the municipal area proposed for dissolution” and “an equitable arrangement must be made in relation to bonded indebtedness and vested rights of employees of the municipality to be dissolved.”10

When a municipality is dissolved, the county gets assets and debts. At dissolution, “title to all property owned by the preexisting municipal government” is transferred to the county.11 Counties have some undefined flexibility regarding the assumption of debt. The law states counties “shall also assume all indebtedness of the preexisting municipality, unless otherwise provided in the dissolution plan.”12 There is no other discussion of a “dissolution plan” in the statute. Presumably, provisions could be included in the plan dealing with debt as long as the constitutional requirement to protect “creditors” was maintained.13

Finally, the statute anticipates the potential problem caused by a drop in gross tax revenues. Obviously, when a municipality is dissolved, its tax base disappears. This may leave the county with insufficient revenue to pay municipal debts. In such a situation, the successor county may levy and collect additional “ad valorem taxes. . . for repayment of any assumed indebtedness through a special district created for such purpose in accordance with chapter 189.”14

The Dissolution Ordinance
On August 28, 2008, by a 3-2 vote, the commission adopted an ordinance titled “Ordinance Dissolving the Town of Cedar Grove, Florida Municipal Corporation and Dissolving its Charter.”15 Pursuant to the statutory process for dissolution, this ordinance was subject to approval by the town’s electorate. The charter did not contain provisions for a citizen-initiated referendum for dissolution, which are included in some municipal charters. Initially proponents thought it was necessary to amend the charter to provide for dissolution. This obviously would have overly complicated, delayed, and perhaps even doomed the process. They later correctly concluded that the dissolution process was governed by Ch. 165, not the charter, through the statute’s express preemption of the procedures for formation and dissolution of municipalities.16

The dissolution ordinance contained findings that tracked the statutory conditions precedent for dissolution. These included an analysis that “58 [percent] of the [t]own’s border, more or less, does not adjoin another municipality.” Therefore, the commission concluded the town was not “substantially surrounded” by other municipalities.17 This finding of fact was key to the town’s success in defeating a lawsuit that had been brought by opponents seeking to block and set aside the election based in part on a claim that the town was “substantially surrounded” by other municipalities.18

Municipal dissolution can be devastating to employees who legitimately fear they will soon lose their jobs. Sensitivity to their personal concerns was important in the success of the dissolution effort. While the commission stated in the ordinance that no employee had “vested rights,” it nonetheless provided a “severance package” for the town’s 27 employees. This included severance pay, accumulated leave, retirement benefits provided by the Florida Retirement System, and health insurance for three months. The ordinance prohibited the mayor and town commissioners from receiving any severance package.

The commission also made a finding that the “Bay County Board of County Commissioners, the Bay County Sheriff’s Office and other county offices are demonstrably able to provide the necessary services to the [t]own, if its corporation is dissolved and its charter revoked.” Admittedly, this was technically an assumption on the town’s part, since there had been no formal statement of the Bay County Commission or sheriff to this effect. However, in actual fact, everyone knew Bay County was capable of absorbing Cedar Grove and providing these public services. Embedded in the ordinance was the ballot question. The town directed the supervisor of elections to hold a referendum election and conduct a special election on September 30, 2008, and place on the ballot this simple statement: “I want to dissolve the Town of Cedar Grove and revoke its charter.___Yes.___No.”

While it was theoretically possible to develop a dissolution plan for consideration prior to the election, this proved too difficult to accomplish. There simply was not enough time to draft a plan with sufficient specificity. Politics also played a role. The county commission was reluctant to formally engage in any aspect of the dissolution process for fear of being seen as supporting one side. It decided to remain neutral and let the voters first decide the issue. At the town level, the tension between those favoring dissolution and those who opposed it complicated thorough planning for dissolution before the vote was taken.19

The town required the creation of a dissolution plan if the ordinance was approved. The commission was directed to meet within 30 days to “begin winding up the affairs of the municipal corporation and develop a dissolution plan.” A 90-day deadline was set for the adoption of a dissolution plan.

The major components of the dissolution plan were spelled out in the ordinance. The dissolution plan was to include provisions dealing with the employees, bonded and other indebtedness, the town’s assets, and “other matters as the [t]own [c]ommission determines is in the best interest of the citizens.”20 The ordinance provided that the commission would “remain in office for the time necessary to administer the dissolution plan and doing every other act necessary to wind up the affairs of the [t]own, but shall have no other powers or duties.” The ordinance stated: “Upon the dissolution of the [t]own corporation and the revocation of the [t]own [c]harter the [t]own borders shall be dissolved and become part of unincorporated Bay County, Florida.” The election was held and the vote was to dissolve the town.

The Plan of Dissolution
The mention of a “dissolution plan” only appears in provisions of the statute discussing “financial allocations” related to a county’s assumption of the municipality’s debts and assets.21 The concept of a “dissolution plan” is logically related to the other vague references in the statute to a “plan for merger” or a “plan for incorporation.”22 Unfortunately, other than mentioning the obligations to “honor existing solid waste contracts” and “provide for an equitable arrangement in relation to bonded indebtedness and the status of pensions rights of employees,” the statute contains little direction on what needs to go in these plans.23 Given the complexity of issues that arise after municipal dissolution and the potential for special circumstances, perhaps it was not unintentional that the legislature was so imprecise about this important element of the process.

The creation and adoption of a thorough plan of dissolution was essential. Given the lack of detail in the statute, the town’s advisors looked to the process to dissolve a corporation and close an ongoing business.24 Corporate law provided a general template to guide the transition from the vote to dissolve to the final actions necessary to pay debts, transfer assets, close the doors, and turn the keys over the county.

It would have been virtually impossible to dissolve immediately after the election. The town needed to continue to provide essential daily operations at least until the dissolution plan could be developed and implemented. Even after adopting the dissolution ordinance, the town continued to pay employees, operate its utilities, and collect utility payments, fees, and state and local taxes during the implementation of the plan.

County staff coordinated with the town’s staff to develop the “Town of Cedar Grove, Florida Plan of Dissolution,” which was adopted by resolution on October 21, 2008.25 At the same time, the commission voted to formally delegate to the mayor the power to take all actions necessary to implement the plan and “wind down” the corporate activities of the town.26 The dissolution plan covered the basic elements outlined in the ordinance — employees, debts, and assets — but with more detail. Generally, the town was directed to compile inventories, execute documents necessary to transfer title, make public records available to the county, continue to maintain the status quo, and avoid waste and further liability.

The first section of the plan dealt with the employees. Here, their severance package was spelled out. As a testament to the critical part they play in the dissolution process, provisions in the plan dealing with employees were given “priority over all other provisions.” The plan required that “[b]onded indebtedness” and “other indebtedness” was to be “assumed” by Bay County. A schedule of assets was attached to the plan, which were likewise “assumed and transferred to” the county.27

The town’s financial accounts were transferred to the county along with copies of all audits and the current budget. The town resolved to “execute documents, assignments, and other written instrument requested by the [c]ounty [m]anager to effectively transfer all financial assets and obligations to the [c]ounty.” Control over cash, bank accounts, grants, taxes, and all other fees, receipts, and financial assets were given over to the county. The town was directed to avoid any further liens or major expenditures. A final financial audit was promised at the completion of the dissolution process.

The plan set a date of October 22, 2008, when “financial decisions of the [t]own. . . shall be made by the county manager with input from the [t]own [c]lerk and the [m]ayor.” All real and personal property, including all the town’s buildings, lands, leases, easements, roads, rights of way, and all infrastructure, including the water and wastewater distribution lines, stormwater, and drainage systems were conveyed to the county.28

Implementation of the Plan
The complete implementation of the plan took some time. Bay County held a “closing” on December 1, 2008, to formally transfer all debts and assets, and staff tried to address every possible matter. Still, unusual issues arose long after dissolution. In July of the following year, the county had to make arrangements to accept restitution payments from a parolee in Tennessee who had damaged a former Cedar Grove police vehicle. A former retired employee came forward claiming the town commission had promised it would make her Medicare supplement payments for an undetermined period of time. Bay County settled the claim with a lump sum payment. It took more than a year for the county to assume the USDA loans.

The town’s financial records were not in the best shape. This complicated the preparation of the town’s final audit. A drawer in city hall contained hundreds of checks that had not been reconciled. Fortunately, there was sufficient cash in the bank, and on balance, aside from utility debt, the liquid assets were sufficient to pay the town’s obligations. In the end, the county actually booked revenues.

While the transfer of the legal title to the town’s assets and property was fairly easy to accomplish, it was difficult to find all the assets.29 Titles had to be located before vehicles could be auctioned. Water and sewer lines had to be found. This was a challenge, especially in the older parts of the town where maps and other location records had been lost. Fortunately, the county’s utility director was able to spend a day with the town’s utility staff driving around the town locating pipes and lift stations from memory. Utility issues continue.

Because the retail water and wastewater system were subject to federal USDA rural development loans and other bonded indebtedness, the county created a new retail water and wastewater utility service area for Cedar Grove’s customers. Bay County adopted separate water and sewer rates, which were lower than the town’s, but somewhat higher than those charged other retail customers.

Overall, the financial impact of dissolution on residents and taxpayers was positive. Street lights, however, posed an unexpected challenge. For years, the town supplied a street light for any resident wanting one and then paid the electric bill. This element of government largess had grown to over $80,000 per year. Bay County did not intend to carry on with this obligation. After a year of operation, the county offered the property owner the opportunity to take over payment for the light, or simply turn it off.

The town’s records were “public records” subject to the Public Records Act, F.S. Ch. 119. These included important original real estate documents, but also records that had been kept by the town for years and not destroyed. Bay County still has numerous file drawers filled with antiquated documents from the town. All of the town’s information technology and geographic information system assets, including hardware and software, are now stored with the county’s other digital records.

Upon the vote approving dissolution, all of the town’s ordinances became null and void. This left a gaping, 6,300-acre hole in the middle of Bay County’s comprehensive plan and zoning maps. Technically, no lands within the town were covered by a future land use map or zoning map. Bay County planning staff worked diligently to prepare a huge land use and zoning amendment, trying to mirror the land uses established by the town. The Department of Community Affairs accepted the plan amendment as an emergency action with absolutely no data and analysis. Amazingly, not one person spoke at the public hearing.30

The town had issued numerous development orders and approved various plats and subdivisions, which all came with their own challenges. Generally, the county resolved such issues on a case-by-case basis by employing a liberal view of vested rights. One community development district subsequently went defunct, which continues to pose challenges for the county. The town had formed two community redevelopment areas (CRA). While it had obtained a bond validation judgment, no debt had been issued for either CRA. These were not carried forward in the county’s comprehensive plan.31

Litigation against the town did not go away with dissolution. The county attorney entered an appearance for the town. Personal injury cases continued, as did a civil rights suit filed against the police department. One could imagine how dissolution might have complicated ongoing litigation because one of the parties had lost its legal status. Fortunately, this thorny legal issue never became a problem.

Provision was made for transfer of environmental and other regulatory permits without a hitch. One hazardous waste issue remained unresolved. A lease on a copier turned into a multi-year dispute after the county simply returned the equipment.

The most contentious and politically heated issue involved the local police force. A specific provision in the plan provided: “The Town Police Department shall be disbanded as of 8:00 A.M. on Wednesday, October 22, 2008 when law enforcement services of the [t]own shall be transferred to the Sheriff of Bay County.” Dissolution became an immediate problem for the local police officers when the town fell under the jurisdiction of the Bay County sheriff. Firing an entire police department is not something for which a county manager trains. The sheriff had to hire four new deputies. This turned out to be one of the largest budgetary implications for Bay County.

Cedar Grove is still listed on various maps. The Department of Transportation includes the former town on its street signs. People know where Cedar Grove is located. Whether it legally exists, Cedar Grove continues to have lifelong residents. Towns are not just legal and governmental entities. They are places; they exist in people’s minds and hearts.

That being said, behind the locale is a local government, which must raise and spend revenues, employ workers, and exercise police powers to protect the public interest. In Florida, the residents of these communities possess a strong tool to ensure their municipal government ultimately serves their needs. While the use of this tool to dissolve the town of Cedar Grove extinguished the municipal form of government, it did not really do away with the government. The powers and obligations were simply and properly transferred to Bay County.

1 Roughly 33 percent of the town’s 3,610 registered voters went to the polls. Seven hundred twenty-three, or 60.71 percent of those voting decided to dissolve the town.

2 Over the years, the legislature has adopted hundreds of special acts rescinding the charters of various municipalities. Dissolutions essentially ceased with the adoption of the municipal home rule in the 1968 Constitution and Fla. Stat. Ch. 166.

3 This provision was carried forward from the 1885 Florida Constitution, which essentially codified the common law prohibition on the dissolution of municipal corporations without protection of creditors. See State ex rel. J.B. Johnson v. Goodgame, et al., 108 So. 836 (Fla. 1926); State ex rel Landis v. Peacock, 151 So. 4 (Fla. 1933).

4 In Sullivan v. Volusia County, 679 So. 2d 1206 (Fla. 5th DCA 1996), the court used the term “dissolution” interchangeably when referring to the term “abolished” in Fla. Const. art. VIII, §2.

5 Fla. Stat. §165.051 (emphasis added).

6 Id.

7 Id.

8 Id.

9 Fla. Stat. §165.061(3).

10 Id.

11 Fla. Stat. §165.071.

12 Id.

13 Id.

14 Id.

15 Cedar Grove Ordinance No. 446.

16 Fla. Stat. §165.022 states in part, “The provisions of this act shall be the exclusive procedure pursuant to general law for forming or dissolving municipalities in this state, except in those counties operating under a home rule charter which provides for an exclusive method as specifically authorized by s. 6(e), Art. VIII of the State Constitution.” See Correspondence from the Attorney General to Janet Beier, Town of Cedar Grove Commissioner (August 3, 2007). The attorney general has concluded that municipal charters may not provide for amendments that are inconsistent with Fla. Stat. Ch. 166. The attorney general has stated that “the charter amendment provisions in section 166.031, Florida Statutes, prevail over conflicting provisions in a municipal charter.” See 88-30 Op. Att’y Gen. (1988); 2003-36 Op. Att’y Gen (2003). In Treadwell v. Town of Oak Hill, 175 So. 2d 777 (Fla. 1965), the court wrote, “a citizen of Florida does not have the right to have a municipal government established, continued or abolished. Such ‘rights’.. . are within the exclusive province of the legislature.”

17 This statutory condition precedent appears to reflect the legislature’s antagonism to the creation of enclaves. See generally the annexation statute Fla. Stat. Ch. 171 and specifically Fla. Stat. §171.044(5).

18 See court records of Citizens Coalition to Preserve Cedar Grove v. Town of Cedar Grove, Case No. 2008-3805-CA. The petition for writ of certiorari was dismissed on October 24, 2008. The geography of Cedar Grove presented a real challenge. The town had an older core area, which was probably substantially surrounded. Saving the dissolution initiative was the existence of a large area of recently annexed lands running north and away from the core area, like a finger through unincorporated lands. When the border of the annexed area was added to the border of the core area, the proponents of dissolution were able to rationally argue that the total border of the town was not substantially surrounded by other municipal lands. The petitioners alleged that the town of Cedar Grove was substantially surrounded by other municipalities. Opponents cited a California case holding that a municipality that was surrounded 16 percent by other municipalities was substantially surrounded.

19 In hindsight, a pre-election dissolution plan could have actually impacted the results. Had the plan fully explained in intricate detail all the issues associated with municipal dissolution, the voters would have been more informed at the outsight. This might have tipped the scales one way or another. History will never know the implications of prior planning because Cedar Grove did not adopt the dissolution plan until after the election.

20 The town had approximately $3.6 million in outstanding revenue bonds.

21 Prior to 2004, the statute included a section authorizing the state to dissolve “inactive” municipal corporations. Fla. Stat. §165.052. This was repealed in 2004 at the request of the Department of Community Affairs due to budgetary concerns. 2004-305 Laws of Fla.

22 Fla. Stat. §165.061.

23 Id. Prior to its repeal in 2004, Fla. Stat. §165.052(3) provided that if the legislature dissolved an “inactive” municipality, its property or assets “shall be subject to legal process for payment of such debt.” Afterwards “the remainder of its property or assets shall escheat to the county wherein located.” This section went to mirror Fla. Stat. §165.061 authorizing the county to impose taxes on the area pursuant to Ch. 189.

24 Fla. Stat. §607.1402.

25 Town of Cedar Grove Resolution No. 08-12.

26 The Bay County Attorney’s Office worked closely with counsel for the town to develop a workable draft dissolution ordinance. Such offline coordination proved essential to the success of the dissolution effort.

27 The employees were not dismissed all at one time. Many stayed on to assist with the transition. All were let go by November 30. They were each given six weeks of severance pay. The town paid half of their health insurance premium after they left employment for three months.

28 Bay County engineering staff is still working to complete stormwater projects initiated by the town.

29 A creative traffic device used by the town was to place a blow up doll, dressed in a police uniform, in a parked police car on a busy highway. After dissolution, the county was unable to find the doll. A Star Wars car fashioned for a local parade and left in the town’s garage also disappeared.

30 Email from author to Mr. Eubanks (January 9, 2013). Ray Eubanks of the Department of Economic Opportunity, who has been tracking plan amendments for years confirmed that this was one of the largest future land use map amendments in the state’s history.

31 Bay County previously opposed the Cedar Grove CRAs. See Bay County v. Cedar Grove, 992 So. 2d 164 (Fla. 2008).

Terrell K. Arline graduated from the University of Florida in 1980 with joint degrees in law and urban and regional planning. In 1992, ending a career in private practice in West Palm Beach, he moved to Tallahassee to work for the Department of Community Affairs. He was general counsel for 1,000 Friends of Florida from 1996 to 2000, when he returned to private practice. In 2006, he was selected to be the Bay County attorney.

This column is submitted on behalf of the City, County and Local Government Section, Jewel White, chair, and David Miller, editor.

City, County and Local Government