Bonds ruling worries groups

The state Supreme Court's opinion may jeopardize projects.

By ASSOCIATED PRESS
Published September 14, 2007

TALLAHASSEE - Organizations representing cities, counties and school districts said Thursday they want the Florida Supreme Court to rehear a bond case they fear could jeopardize billions of dollars worth of construction projects across the state.

The justices last week unanimously ruled voter approval must be obtained before selling tax increment financing bonds, which are backed by property taxes generated from redevelopment and improvement programs.

The decision came in an $350-million bond validation case for an Escambia County road-widening project near Pensacola. In the process the Supreme Court reversed a legal precedent it set 27 years ago by backing off prior rulings that referendums are not required for two types of borrowing: "tax increment financing" used by cities and counties, and "certificates of participation," a form of financing widely used by school districts and other local governments.

The opinion calls into question the validity of $12.9-billion in existing school certificates of participation, and could make it difficult, if not impossible, to offer $8.1-billion more that districts have planned for the next five years, said Wayne Blanton, executive director of the Florida School Boards Association.

Holding referendums is likely to delay projects and increase their cost even if voters approve them. Districts are building schools and expanding existing ones to comply with a state constitutional amendment that limits class sizes.

"School construction is going to come to a screeching halt," Blanton said. "It specifically jeopardizes class size."

Future and existing city and county building projects also may be affected.

Within days of the Sept. 6 ruling, two bond rating firms, Standard & Poors and Fitch Ratings, put $514-million in Florida tax-increment bonds on negative credit or ratings watches. Standard & Poors issued the same warning for certificates of participation.

A third firm, Moody's Investors Service, said Thursday that it is maintaining a stable outlook on both types of financing in Florida pending clarification by the Supreme Court.

The Florida School Boards Association, Florida Association of District School Superintendents, Florida Association of Counties and Florida League of Cities plan to submit rehearing requests by a Monday deadline.

A key question will be what the justices meant by writing the referendum requirement did not apply to borrowing that already has been "validated." Most of the outstanding bonds and certificates, though, have not gone through that process.

The Supreme Court could relieve much of the angst among local officials by saying the ruling does not apply to existing borrowing regardless of whether it has been validated.

[Last modified September 13, 2007, 22:26:49]