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Apr 23

Florida Locals Alarmed at Bill to Give State Conduit Assessment Power

by Shelly Sigo

APR 22, 2015 1:13pm ET

BRADENTON, Fla. – A bill making its way through the final days of the Florida legislative session would vastly expand the financing power of the Florida Development Finance Corp.

House Bill 7067, a major economic development bill, was amended in recent weeks to give FDFC the ability to issue bonds statewide without local government approval.

City and county officials worry that local powers would be usurped by an agency that would have unilateral authority to issue industrial development bonds statewide without their permission.

HB 7067 would also give the FDFC the authority to place assessments on property bills across the state to finance energy saving improvements for property assessed clean energy, known as PACE, projects.

The bill would abolish a requirement that has been in FDFC’s enabling legislation for nearly two decades obligating the agency to obtain written agreements with local governments in order to issue bonds for projects in those communities.

The expanded authority is being sought as FDFC attempts to validate $2 billion in bonds that it plans to issue as a conduit to finance projects for energy-related and wind-hardening improvements under Florida’s property assessed clean energy law.

Two appeals of the validation are pending before the Florida Supreme Court. One challenger alleges that the bonds cannot be validated because the FDFC does not have the authority to levy assessments that would secure the debt.

The FDFC has partnered with California-based Renovate America Inc., to administer its Home Energy Renovation Opportunity financing program and solicit investors to purchase the PACE bonds.

On Monday, after learning about recent amendments to HB 7067 pertaining to the FDFC, Flagler County commissioners adopted a resolution opposing the bill. The resolution, which is being sent to lawmakers and other counties, said the bill would create a “state-run monopoly.”

The proposed law would give a non-local government authority the ability to levy special assessments, and allow a California company to sidestep laws that others have followed for years, said Flagler County Administrator Craig Coffey.

“The precedent this sets for the future for private companies to use a governmental special assessment process unchecked is equally alarming,” Coffey said.

Flagler County, on the state’s northeast coast, is a founding member of the Florida PACE Funding Agency, an independent unit of local government authorized to operate across the state to finance PACE projects. The agency has already validated $2 billion in bonds for its program.

The Florida League of Cities, which represents more than 400 cities, towns, and villages, also opposes HB 7067.

“The League has concerns with FDFC having authority to levy the special assessment without any oversight, accountability or an interlocal agreement with the local government,” said Amber Hughes, a legislative advocate for the FLC.

Even though PACE-related assessments would be voluntary for property owners, allowing a non-elected entity to operate apart from local government is a concern, she said.

Hughes said the bill’s details relating to FDFC surfaced gradually over the past few weeks, catching elected officials off guard.

The Florida Development Finance Corp. would not respond to questions from The Bond Buyer asking how the legislation came about or if it was approved by the corporation’s board.

“The FDFC is monitoring this legislation as it makes its way through the process,” said Beth Frady, public relations director for the state’s public-private economic development agency Enterprise Florida Inc., which provides administrative services to the FDFC.

Rep. Mike La Rosa, R-St. Cloud, sponsors HB 7067.

The bill “makes administrative changes to the operations of the Florida Development Finance Corp. [and] ultimately repeals ineffective programs,” La Rosa told the House Transportation & Economic Development Appropriations Subcommittee on March 31.

In addition to giving FDFC autonomous authority to levy PACE assessments statewide, HB 7067 would also ratify decisions that have been made by the FDFC’s board since Jan. 1, 2008.

A legal analysis prepared for the bill does not explain why it is necessary to confirm actions of the board.

However, the agency was unable to meet for a long period beginning late last year because some board members voted on bond issues for several years without being properly appointed. Remaining board members resigned or their terms ended.

The governor, who appoints all five members of the board subject to confirmation by the Senate, appointed three new board members on March 27. They held their first meeting on April 7 and they didn’t discuss HB 7076 publicly.

HB 7067 would appear to ratify the votes of the FDFC board out of concern that the pending PACE validation could be challenged further, said a Florida attorney who asked not to be identified.

The bill would vastly expand the powers of FDFC to become a statewide issuer of bonds, the attorney said, adding, “This seems inconsistent with FDFC’s original purpose of being an issuer for small conduit bond issues that were too small to do alone, but to aggregate them into a pool.”

An act of the Legislature created the Florida Development Finance Corp. in 1993 to be a special development finance authority primarily to issue industrial development revenue bonds for small manufacturers, as well as brownfield and economic development projects.

Over time, FDFC has also served as the conduit issuer for nonprofit health care facilities and charter schools.

In 2010, the Legislature expanded the corporation’s responsibilities to allow it to participate in the federal Department of Energy’s guaranteed loan program for renewable energy infrastructure projects, and projects authorized by Florida’s PACE law.

Since 1997, the FDFC has served as the conduit on 65 bond issues totaling more than $940 million, according to the analysis for HB 7067.

In its fiscal 2014 audit, FDFC reported serving as the conduit issuer on four transactions totaling $229.9 million for which it received application and issuance fees of $303,963.

In January 2014, the FDFC board adopted a resolution authorizing the issuance of up to $2 billion in PACE bonds after entering the agreement with Renovate America.

During the district court validation proceeding for the bonds last year, former state Rep. Robert Reynolds intervened. He contended that the bonds could not be validated because FDFC does not have the authority to impose assessments. In the PACE program, assessments on tax bills provide security for the debt.

The district court validated the bonds, and Reynolds appealed to the Florida Supreme Court.

The Florida Bankers Association has also filed an appeal of the validation.

The FBA is challenging the legality of the PACE law adopted by the Legislature in early 2010, and signed into law by then-Gov. Charlie Crist.

While the Florida Supreme Court has scheduled oral arguments in both cases for May 7, a ruling is likely to take months.

The Florida Legislature’s session ends May 1.

Scott, who has been reluctant to authorize new debt in the past, has not said if he would sign the bill expanding FDFC’s power if it should pass.

“Governor Scott will review any legislation that makes it to his desk,” the governor’s press secretary Jeri Bustamante said Tuesday.

While HB 7067 has a companion bill in the Senate, Senate Bill 1214 currently does not contain language about the FDFC.

Both bills have cleared their respective committees, and could go to the floor for a vote this week. If they pass, the House and Senate would have to reconcile the differences.

In addition to the PACE bonds, the FDFC plans to be the conduit issuer for $1.75 billion in federal private activity bonds for the All Aboard Florida private passenger train project.

St. Lucie County, along the east coast, has filed a lawsuit challenging the PAB allocation by the U.S. Department of Transportation because a portion of the project has not received federal environmental clearance.