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Tax Increment Financing, Certificates of Participation and Lease Purchase Arrangements - Supreme Court Says Need Referendum Approval
Escambia County brought a bond validation proceeding to have the court validate its road construction bonds that were to be financed with tax increment revenues. The county prevailed at the trial court level. However, an intervener, Dr. Strand, appealed the ruling to the Supreme Court on the issue of whether a county has the home rule power to pledge tax increment against bonds to finance infrastructure outside the context of a community redevelopment authority. The Florida Association of Counties participated in the case as an amicus curiae on behalf of the county.
Much to the surprise of local governments throughout the state, on September 6, 2007, the Supreme Court reversed the trial court's validation order and receded from its prior opinions in State v. Miami Beach Redevelopment Agency, 392 So. 2d 875 (Fla. 1980) and State v. School Board of Sarasota County, 561 So. 2d 549 (Fla. 1990). Miami Beach upheld the use of tax increment financing for bonds in a CRA context without a referendum being required under Article VII, section 12, Florida Constitution and School Board of Sarasota County upheld the use of certificates of participation to finance infrastructure construction without a referendum. Furthermore, the Supreme Court ruled the Escambia County's financing plan that used tax increment required a referendum. The Court never addressed the direct home rule issue.
FAC, with the help of Greg Stewart at Nabors, Giblin & Nickerson filed a Motion for Rehearing and Clarification on September 17. Among others, the Florida League of Cities, the Florida Redevelopment Association, the Florida School Boards Association, and the Florida Association of District School Superintendents also sought rehearing and clarification. The Court accepted FAC's motion, accepted the appearance of these named associations and set oral argument for Tuesday, October 9, 2007.
If the Court does not reverse itself or significantly scale back its decision, the impact could be dramatic for cities, counties, school boards, and the state with respect to use ad valorem tax revenues, in any form, for bonds.