BRADENTON, Fla. - Two cases coming before the Florida Supreme Court today focusing on separate community redevelopment agencies in the same county may ultimately decide the fate of future tax increment financings in the state.
Attorneys for Bay County in the Florida Panhandle said in court briefs that TIF bonds proposed by two municipalities in the county for their CRAs are unconstitutional without first getting voter approval through a referendum.
"What's at stake really is the constitutionality of the tax increment financing structure in Florida," said Randy Hanna, managing shareholder at Bryant Miller OliveLLP, who is arguing on behalf of the two CRAs today. "That's the question left open from Strand."
Supreme Court justices have yet to issue a final ruling in a prior case known as Strand v. Escambia County, which shook the bond market because of an opinion issued Sept. 6 that called into question the legality of both TIF bonds and certificates of participation issued in Florida.
Because of the resulting upheaval, the court on Sept. 28 revised its opinion to say that outstanding TIF bonds were validly issued. It also said that TIF bonds not issued, but validated by a court, could legally be sold. The opinion also removed all references to COPs, assuring their legality as well.
However, the revised opinion left open the justices' interpretation of Florida's constitution, which requires voter approval to issue bonds backed by ad valorem taxes and the full faith and credit of the issuer, and whether TIF bonds fall into that category. The court heard oral arguments in the Strand case on Oct. 9 and has yet to issue a final opinion.
Discussion about TIF debt issued by community redevelopment agencies has been heightened by recent property tax reform in Florida. Several reform measures already implemented lower property assessments on which taxing authorities, including CRAs, rely for a major portion of their budgets.
Those budget concerns and the proliferation of CRAs in fast-growing small towns and cities in Bay County helped elevate the two cases being argued today before the high court.
In the first case, the city of Parkeris appealing a lower court ruling that refused to validate $41 million of TIF bonds because the city does not levy ad valorem taxes. Bay County has intervened, raising several issues in opposition to the validation, including the constitutionality of TIF bonds without a referendum.
In the second case being argued today, Bay County is asking Supreme Court justices to overturn a trial court's validation of $23.7 million of TIF debt sought by the town of Cedar Grove, also on grounds that the TIF issuance would be unconstitutional.
Bay County's attorney, Terrell Arline, could not be reached for comment.
Although there are complex and statutory issues that differentiate the two CRA cases from Strand, the issue that defines all three cases is whether governmental entities wanting to issue TIF bonds in the future must first get voter approval.
Since Strand, sales of TIF bonds not previously validated by a court in Florida have been virtually nonexistent, Hanna said.
A great deal is a stake for community redevelopment agencies across Florida pending the outcome of these cases, according to Kim Briesemeister, president of the Florida Redevelopment Association and CRA director for West Palm Beach.
e_SDLqThis is causing quite some difficulties in addressing redevelopment," she said. "All eyes are on the Supreme Court."
CRAs are allowed by state law to address blighted conditions and to sell TIF bonds to finance improvements, Briesemeister said.
"Prudent spending of government funds is important," she said. "But removing the tool to address blighted conditions may have broader and far-reaching effects than many realize."
Briesemeister said CRAs likely face an uphill battle getting voters to approve TIF bonds and that turning instead to pay-as-you-go funding for major projects may stall redevelopment efforts.
As an example, she noted that West Palm Beach is planning a large transit-oriented development for a local CRA that includes new workforce housing. "While we don't have any plan to issue debt to finance the infrastructure, clearly it's on our radar screen in the near future," Briesemeister said.
Florida has 154 active community redeveloment agencies with bonding powers, as well as authority to finance projects with other long-term obligations such as letters of credit, according to state records.
Florida Redevelopment Association executive director Carol Westmorelandsaid major CRA projects in Tampa and Fort Lauderdale were set to follow through with finance plans when the Strand case was handed down. Both now have been delayed.
"I'm very hopeful that the court sees the wisdom in protecting tax increment financing that's been in effect for 28 years and not pull the rug out from under us in the progress that we've made," Westmoreland said.
Briesemeister noted that Florida law requires a lengthy public process to be followed when CRAs are formed. The agencies must create a plan of action that includes financing mechanisms, which requires multiple public meetings and hearings. If bond financing is not included in the original CRA plan and contemplated at a later date, the plan must be amended in additional public meetings.
In the Strand case, Escambia County did not create a CRA. The county was attempting to issue TIF bonds under its home rule power - something that had not been done in Florida. However, the case raised questions about TIF bonds because they are usually secured by incremental increases in property taxes created by rising values sparked by redevelopment efforts.
The Strand case initiated the Supreme Court's review of case law established in 1980 in State v. Miami Beach Redevelopment Agency, which essentially categorized TIF bonds as revenue bonds that do not require a referendum.
Briesemeister said some preliminary discussions have taken place about whether the state Legislature could intervene, but nothing would be decided until the high court acts on the cases under review.
If the court rules that referendums are required to issue TIF bonds, Hanna said the Legislature could schedule a statewide referendum and ask Florida voters to exempt TIF bonds from the constitutional requirement. q