The Supreme Court of Florida released three important opinions in 2008, upholding the principles established in a landmark 1980 case. These decisions are crucial for local governments in Florida to access funding for important projects like schools and fire stations. The court ruled that local governments can issue tax-increment financing bonds without a referendum, as long as they donât directly obligate the government to use its taxing powers. This clear principle has been relied on by local governments for 75 years. In 1933, the court decided that if bonds or debt obligations are not paid from property taxes, they don’t count as a debt for the local government. In 1949, the court said that bonds paid from a special fund with operating revenues and property taxes didn’t violate the law because bondholders couldn’t force the government to collect property taxes. Then in 1964, the court confirmed that property taxes could be used as long as the government didn’t promise to use the power to tax. In 1968, the Florida Constitution was changed a lot. It made it so that local government could only borrow money for certain projects and had to get approval from the public first. Even after the change, the court continued to follow the same rule that they had been using since 1933, which says that if a transaction requires the government to use taxes to pay off debt, then there must be a public vote on it.
In 2007, the court made a surprising decision in a case called Strand, which caused a lot of confusion for local governments and schools. But after a year, they changed their minds and went back to following the old rule about when a public vote is needed for borrowing money. After the first decision in the Strand case, the court got a lot of pushback from schools, cities, and counties. They allowed some groups to speak up in support of a rehearing and even granted a second oral argument. Eventually, the court changed its decision, which made the schools and financial markets feel better. The only thing left to talk about was the future of tax-increment financing. The court heard arguments about three cases involving tax-increment financing for community redevelopment projects. They ultimately upheld the use of tax-increment financing without a voter referendum, based on the precedent set in the Miami Beach case. This means that local governments can issue bonds for redevelopment projects without needing to get approval from voters. The court in the Strand case said that they are sticking to the legal principle of stare decisis, which means they follow previous court decisions. They decided that the Miami Beach case still works and is relied on by many local governments. They also said that the County of Volusia case is different from the Strand case because it involved different legal issues. In the end, they decided that Escambia County can issue tax-increment financing bonds under its own powers and doesn’t have to follow the Community Redevelopment Act. The court in Parker and Cedar Grove approved tax-increment financing bonds to pay for redevelopment projects. The bonds were not payable from property taxes, so they didn’t need a voter referendum. The decisions supported a rule that distinguishes between using taxes and pledging taxes, and were narrowly approved by the court. Some justices disagreed and wanted a referendum for issuing these bonds, but they couldn’t get enough support. After the court cases of Strand, Parker, and Cedar Grove, local governments can now use tax-increment financing to fund community redevelopment projects without needing voter approval. This means they can issue bonds to raise money for redevelopment, as long as they follow the rules of the Community Redevelopment Act. However, the rules for using tax-increment financing outside of the Community Redevelopment Act are less clear, as shown in the case of Strand. Overall, these court decisions allow counties and municipalities to continue their redevelopment projects and issue new debt using tax-increment financing. In the future, local governments need to be careful when using home rule powers with tax-increment financing without following the Community Redevelopment Act. This act has strong protections for using tax-increment financing with voter approval. Without these protections, local governments should not try to do indirectly what they can’t do directly. The court has found that some local governments have exceeded their powers in the past. It’s important for local governments to be cautious and make sure they don’t accidentally pledge their taxing powers. The decisions in cases like Strand, Parker, and Cedar Grove show that local governments can use tax-increment financing, but they need to be careful to follow the rules. If most of the court agrees with the dissenting opinions, then any debt that could be paid with tax money would need a referendum. This could make it harder for local governments to get money for infrastructure. The court has rejected this idea before, but if local governments aren’t careful with how they use tax-increment financing, it could cause problems in the future. There are a lot of court cases in Florida that deal with how local governments can use taxes to fund redevelopment projects. Most of the cases support the use of tax-increment financing, which is when taxes from a certain area are used to pay for improvements in that area. Some cases also deal with whether bonds issued by the government are legal. In the end, many of the court decisions have been in favor of using taxes and issuing bonds for redevelopment projects. The Community Redevelopment Act has an important protection that requires the local government to create a separate entity to control tax-increment funds. This entity does not have the power to levy property taxes, which means bondholders cannot force the entity to raise taxes.
Cases like County of Volusia v. State and Frankenmuth Mut. Ins. Co. v. Magaha have dealt with similar legal issues in Florida.
Robert C. Reid and Jason M. Breth, who work at a law firm, wrote this column on behalf of the City, County and Local Government Section. They are experts in public finance and state and local government law.
Source: https://www.floridabar.org/the-florida-bar-journal/miami-beach-receded-revised-and-reaffirmed/
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