BRADENTON, Fla. - Two Florida state legislators want to require municipalities to get voter approval for bond offerings that exceed $50 million.
The bill is a red flag for the Florida League of Cities.
The proposal to make it more difficult to issue debt comes though the amount of bonds sold by Florida cities and towns dropped by 61.5% to $1.17 billion in 2013 from 2012, according to Thomson Reuters.
Rep. Carlos Trujillo, R-Miami, and Sen. Rene Garcia, R- Hialeah, filed House Bill 435 and SB 1168, which would both put the bond referendum requirement into law.
Their bills are among several measures dealing with municipal bonds expected to be considered during the legislative session that started Tuesday and runs through May 2.
Florida's constitution already requires all issuers that want to sell general obligation bonds backed by property taxes to get an OK from voters, regardless of the offering's size. The rule largely affects cities, counties, and school districts.
Voters in the Sunshine state are often reluctant to approve GO debt, so many issuers rely on other structures, such as revenue bonds, special obligation assessment bonds, and certificates of participation.
The League of Cities, the umbrella organization for Florida's 410 municipalities, opposes the referendum mandate, and it is a priority issue being watched during the 60-day session.
Requiring electorate approval of debt, such as revenue bonds, could put cities needing to finance big-ticket projects required because of state or federal mandates "between a rock and a hard place" if voters disapprove, said Amber Hughes, a member of FLC's legislative team.
Hughes said it is unclear why the measures apply to offerings over $50 million, and why the legislation only targets municipalities and not other issuers.
"It's a huge concern to our members," she said. "The ability to issue debt is one of the tools we have, especially when dealing with federal or state mandates."
Cindy Lerner, president of the Miami-Dade County League of Cities, said she's not heard anything from the region's municipalities about the bills.
The measures have been referred to three committees each, though no hearings have been scheduled. Both bill sponsors are from south Florida, and neither responded to several requests for comment.
Other legislation related to municipal bonds have been filed for consideration this session.
The only thing lawmakers are required to accomplish during their annual meeting is adopt a budget, and there likely will be debates over how to spend a surplus that revenue forecasters estimate at $845.7 million due to the rapidly thawing economy.
Gov. Rick Scott, who is up for election this year along with the Cabinet, state representatives, and half of the state Senate, trekked across the state in the months before session began telling constituents he wants to spend at least $500 million of the surplus reducing taxes. Lawmakers haven't disputed Scott's plan, but they could alter it.
The current budget is $74.2 billion, and Scott is recommending the same amount for fiscal 2015 along with $2.7 billion in bonds. Some $2.4 billion of the debt is for the Florida Department of Transportation's massive Interstate 4 expansion and renovation project. FDOT is using a public-private partnership and has asked the Florida Municipal Loan Council to be the conduit for issuing the bonds.
Scott, a Republican, and much of the GOP-led Legislature have been very conservative when authorizing new bonds and new bond programs.
This year lawmakers will be asked to approve a new utility cost containment bond program at the request of the Florida Governmental Utility Authority. FGUA is a public intergovernmental agency that operates water and sewer systems in Citrus, DeSoto, Hendry, Lee, Marion, Pasco, and Polk counties.
The Utility Cost Containment Bond Act would allow intergovernmental utilities to issue bonds for water, wastewater, electric, or stormwater services secured by a separate, dedicated charge on customers' bills. The legislation has been filed by Sen. John Legg, R-Port Richey, and Rep. John Wood, R-Winter Haven, as SB 910 and HB 1107.
The act is modeled after a securitization concept for water and sewer capital improvements in Los Angeles, according to documents prepared by FGUA, which describes the program as an "arms-length source of financing."
In a November memo to FGUA's board, the agency's system manager Robert Sheets said that "having an income stream that is dedicated exclusively for debt repayment is looked upon more favorably by creditors and bond rating agencies than basic revenue bond structures.
"If structured properly these types of transactions can receive triple-A bond ratings and often result in lower interest rates compared to traditional revenue bonds," the memo said.
Other advantages of using cost containment bonds include lower rate increases for customers, strengthening a utility's balance sheet because the bonds would not be treated as debt of the utility, and lower required coverage levels than traditional revenue bonds, Sheets wrote.
"Florida municipal issuers can realize significant annual cash-flow savings by issuing debt as a securitization," according to a document prepared for FGUA by Morgan Stanley & Co. "By decreasing the coverage ratio and acquiring an AAA rating issuers can lock in a lower cost of capital that can be passed on to customers through rate reductions."
FGUA has hired the law firm of Pennington PA to pursue the legislation in Tallahassee, and Nabors Giblin & Nickerson to address questions regarding bond finance, according to authority documents.
The League of Cities supports the cost containment act. The Florida Association of Counties is currently vetting the bill and has not take a position on it, according to senior legislative advocate Davin Suggs.
In other legislation, four bills have been filed that would place the Florida Municipal Power Agency, along with municipal water and sewer utilities providing service to customers in unincorporated areas, under the purview of the Florida Public Service Commission for the first time.
The Florida League of Cities opposes the bills because regulatory oversight from the PSC can increase costs to municipal utilities and customers, according to Ryan Matthews, a member of the League's legislative team.
Matthews also said there is fear that credit ratings could drop because of "the increased level of governmental bureaucracy over operations of a utility."
HB 861 and SB 1294 would place entities such as the Florida Municipal Power Agency under PSC oversight, while HB 813 and SB 1248 would require PSC oversight of water and wastewater rates assessed by a municipality providing services to unincorporated areas.
Other bills of interest this year include HB 541 and SB 900, which authorizes state universities to use public-private partnerships for the construction and improvement of university facilities.
The Florida Legislature, which has attempted to change the structure of the high-profile Orlando-Orange County Expressway Authority in previous years, is now poised to remake it as a regional entity.
SB 230 and HB 311 would replace the OOCEA with the Central Florida Expressway Authority and expand its membership to include Seminole, Lake, Osceola, and Orange counties. All assets, employees, and debt of OOCEA would be transferred to the new authority.
The Orlando-Orange County Expressway Authority has $2.6 billion of outstanding of bonds rated A by Fitch Ratings and Standard & Poor's, and A2 by Moody's Investors Service.
Legislators will also consider a number of bills that would make major changes to the Florida Retirement System as well as municipal police and fire pension plans. Expansion of gambling in the state is also under consideration.
