Thursday, September 06, 2007

Fla Supremes Make REALLY Sure We'll Have Lots of Special Assessments - No Bonds for TIFs w/out Referendum

In my "local government law" class in law school - and in studying for the bar - I learned that you can't pledge ad valorem tax revenues for bonds without a referendum. I also learned the exception - you could pledge TIF revenues or combinations of revenues, so long as the core "ad valorem" taxing power was not implicated in the pledge.

Not any more. In Strand v. Escambia County, the Florida Supreme Court drove a stake into the heart of the Miami Beach case that established the "TIF exception" and loosed an arrow (not yet struck) into the "combination of revenues" exception established in the Sarasota County School Board case.

Not surprisingly, a local government had taken the TIF exception (carved out for CRA type improvements) to an extreme, funding a major road improvement ($135M) for Perdido Key solely from TIF-backed bonds. The TIF "area" is the "Southwest Escambia County Improvement District"-- which does NOT appear anywhere in the opinion as an MSTU/MSBU; instead it appears that the County tried to use its home rule powers to simply create a TIF-type area from whole cloth to segregate general-fund ad valorem tax dollars into the bond payments. [I'm sure I'll here from the principles if I've got this wrong or if the Court missed it.] The Court invalidated the bonds as being in violation of Article VII, s. 12.

The Court did a very scholarly job of reviewing the bad history of ad valorem-backed bonds in Florida and the two main "exception" cases. It also discussed (cogently) the Volusia County case that held that the County couldn't pledge a hodge podge of non-ad volorem revenues to back a bond if it appeared that the county might have to raise ad valorem taxes to replace the pledged revenues. The Court concluded that the Miami Beach and Sarasota School Board cases went too far and reeled them back in.

So, in the span of two weeks we find out that local governments get huge discretion to issue bonds backed by special assessments and have little or no discretion to issue bonds backed by ANY kind of ad valorem revenues. Two results are pretty much automatic:

1) HEELLLOOOO MSTUs and Special Districts with special assessments. I'm guessing we'll see lots and lots of these because its the only way left to raise funds to pay for infrastructure.

[Well, maybe we won't see so many in the short run. After over 25 years of Republican preaching about "no new taxes" and government waste, the citizenry thinks that it can get better roads and other infrastructure for free. It's all new development's fault, just use impact fees to do it, and if they don't work, screw around with concurrency to create moratoria and then make them pay for everything just to be able to do anything. In that climate, we probably won't see cities and counties establishing responsible ways to pay for infrastructure until they lose a few major cases.]

2) Bye, bye CRAs!!! No bonding for TIF revenues from CRAs, so why bother - straight into special assessment districts. First they lose the power to condemn for redevelopment, and now they lose the ability to bond TIF dollars - the two useful functions of CRAs are now pretty much toast.


  1. Anonymous4:16 PM

    Agreed that Citys/CRAs may have to rely more heavily on other avenues for financing infrastructure (e.g., MSTU, special assessments, impact fees, etc.), however, technically the decision didn't do away with tax increment financing--just that bonds need to go to referendum--which, given the political climate, realistically may have killed it--but note that it doesn't say anything about the CRA receiving the tax increment revenue--that is, unless I read it wrong, the CRA can continue to receive tax increment revenue on a yearly basis and spend that money on projects, it just can't plan on building a project now and finance it with future tax increment revenues--essentially, they (i.e., CRAs) are now on a pay as you go basis unless there is a referrendum.

    Also, speaking of referendums, who will be the voters?--an argument can be made that its just the "electors who are owners of freeholds" within the CRA as the "ad valorem taxation" (and use of thereof) only directly affects them--in which case it may not be such a politically charged item--that is, wouldn't the residents of the CRA be the operative voting block? Why wouldn't they want to use the tax increment revenues to renovate the CRA as opposed to sharing it with the rest of the City? Thoughts?

  2. Yes, CRA's may still get and spend the increment. But that just ends up an accounting procedure in many cases. If the CRA can't bond the revenue, the money will end up going to beautification and other minor projects rather than major capital improvements.

    And particularly in CRA cases, it's not clear who the relevant voters are -- all the voters in the CRA, all the voters in the "host" local government, or all the voters in the County hosting the local government (if the county has surrendered part of its increment).

  3. Do "Charter counties" have anything to do with who the "voters" are? It seems this TIF/CRA situation has become a mess, especially for the Florida Marlins being hung up in this similar situation...thoughts?