Estimated Development Liability for Sold Land

9 Months Ended

Sep. 30, 2011

Estimated Development Liability for Sold Land [Abstract]

Estimated Development Liability for Sold Land

Estimated Development Liability for Sold Land

The estimated development liability consists primarily of utilities improvements in Poinciana, FL and Rio Rico, AZ communities for more than 8,000 homesites previously sold and is summarized as follows:

	September 30,			December 31,
	2011			2010
Gross estimated unexpended costs	$	37,185		$	37,752
Less costs relating to unsold homesites		(2,993	)		(5,909	)
Estimated development liability for sold land	$	34,192		$	31,843

The estimated development liability for sold land is reduced by actual expenditures and is evaluated and adjusted, as appropriate, to reflect management's estimate of anticipated costs.  In addition, we periodically obtain third-party engineer evaluations and adjust this liability to reflect changes in the estimated costs. Management of the Company determined that such engineer estimates should be further evaluated by another independent engineer.  The new engineer's report reflects a much greater cost to complete the utility improvements at Rio Rico as a result of more accurate measurements of linear feet of utility lines required, unit costs increases, and advanced techniques in identifying the location and number of applicable lots requiring service.  The result is an overall increase to the estimated liability related to Rio Rico of $12,136 as of September 30, 2011.  The increase in liability can be attributed to (a) an increase in unit costs, (b) the correction of an error in the total water pipeline mileage required to be constructed, (c) the addition of costs to bring utility services from the street pipeline to the sold lots (previously estimates only included utility pipeline and other infrastructure), and (d) a reduction in water infrastructure costs.  The overall increase in liability related to correction of errors will result in a prior period adjustment of $12,930.  The offsetting decrease in liability related to a change in estimated costs results in a credit to current period expenses of $794.  For the nine and three months ended September 30, 2011 we had total charges associated with the estimated development obligations of $476.  For the nine and three months ended September 30, 2010 we recorded charges of $137 with these obligations.  Future increases or decreases of costs for construction, material and labor as well as other land development and utilities infrastructure costs may have a significant effect on the estimated development liability.

Additionally, we determined that we no longer have any liability relating to the land development at Poinciana as all development was completed several years ago, resulting in an overstatement of the estimated development liablility of $1,374 as of December 31, 2010.