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Officials worry how tax changes will affect bonds
By JODIE TILLMAN
Published May 3, 2007
NEW PORT RICHEY - Ever since legislators started pushing plans for tax relief, City Manager Scott Miller has spent part of many City Council meetings predicting bad news for local coffers.
Tuesday night's gloomy summary prompted an interesting question from council member Ginny Miller: If we lose all this revenue, how will we pay off our bonds?
The answer, city officials say, is unclear. But under a worst-case scenario, they say, the city could default on those loans.
That's because the debt - two $9-million notes and one $9-million line of credit, all from Bank of America - was secured by the pool of future tax revenue that goes into the city's redevelopment trust fund. That revenue, however, would be "wiped out" under House Speaker Marco Rubio's plan, Scott Miller said.
"The House bill as it sits now would be devastating, " he said Tuesday night.
Legislators on Wednesday announced they would put off further negotiations on property tax relief until next month.
So why do city officials say the House proposal is particularly damaging? Remember that the City Council declared the entire city blighted in 2001, which allowed it to use a redevelopment tool called tax increment financing.
That tool works like this: The city and other government agencies collect the same amount of taxes in New Port Richey as they did in 2001.
But as property values rise, the tax revenue generated by that additional value goes into a special fund for redevelopment.
Rubio's plan could roll back local property tax bases to 2001 levels, which spells an end to the tax revenue generated by later values, city officials say. Miller puts the loss at $4.2-million a year.
Other proposals by Gov. Charlie Crist and the Senate would cost the city $3-million and $1-million, respectively.
When the city went after bonds to pay for redevelopment projects, it pledged future redevelopment funds to pay them off. The bonds, which most notably helped pay for the new $14.1-million recreation facility, have about 18 years left on them, said finance director Rick Snyder.
Each year, the city spends about $1.8-million from the redevelopment fund on debt service, he said.
Snyder said he hopes legislators find a way to take into account the bonds that already have been issued.
"I would think they have to come up with a new formula, " he said. To take away the ability to pay off debt, he said, "is unconscionable."
City Attorney Tom Morrison said the city would not be obligated to use money from its general fund to pay off the bonds, which are tied only to the redevelopment fund. So it's anybody's guess at this point how that debt would be paid.
"It's a very serious problem, " he said.
The Florida Redevelopment Association certainly thinks so. Executive director Carol Westmoreland said she worries about how bond companies and banks would view redevelopment projects if community redevelopment agencies are unable to pay their debts.
"Are we going to get loans in the future?" Westmoreland said. "If the rug gets pulled, it'll take years to build back up."