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Business Observer Friday, Sep. 19, 2003 15 years ago

Help Wanted from Tallahasee

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A new law implementing court-funding reform has Hillsborough County scrambling for a remedy before next summer.
by: Janelle Makowski Staff Writer

Help Wanted from Tallahasee

A new law implementing court-funding reform has Hillsborough County scrambling for a remedy before next summer.

By Francis X. Gilpin

Associate Editor

Florida counties expected a lot of good things to come from the 1998 voter passage of a constitutional amendment designed to relieve them of funding local court systems.

What Hillsborough and Miami-Dade counties didn't count on was losing the use of court fees to secure bond financing for new court facilities. But that is what county officials say the Florida Legislature did to them this year as it enacted a comprehensive bill to carry out the 5-year-old wishes of state voters.

In requiring the state to take over responsibility for finding the money to operate county and circuit courts, House Bill 113A also stripped the counties of their ability to keep various court filing fees and surcharges.

In Tampa and Miami, that has complicated courthouse expansions. County governments in the two cities are repaying bondholders who financed courthouse projects with the filing fees. If those revenue streams dry up for the counties, there could be trouble for all concerned.

The 1998 constitutional amendment, known as Revision 7, goes into effect next July 1. Hillsborough and Miami-Dade officials hope to persuade their legislative delegations to tweak HB 113A before then.

Gov. Jeb Bush has shown little empathy for the plight of the counties. A Bush spokeswoman told The Bond Buyer newspaper last month that the governor believes that counties should only be pledging revenues that they can reasonably expect to control over the life of a debt financing.

County officials reacted with a mixture of anger and disbelief at Bush's pronouncement. They are getting more support from legislators, particularly those from Miami-Dade.

The process of fixing HB 113A has begun in anticipation of the 2004 legislative session.

Lobbyists for Hillsborough government have been instructed to find sponsors for an amendment to HB 113A. They are looking at getting passed a grandfather provision that would let counties keep the fees that have been pledged for bonds outstanding as of July 1 of this year until those issues have been retired.

The bonds in question for Hillsborough are from a $46.4 million issue in 1999 that isn't scheduled to mature until 2018. The proceeds financed the new George E. Edgecomb Courthouse in downtown Tampa, among other court building improvements. The $40 million courthouse is scheduled to open this month.

Michael S. Merrill, the county's debt management director, says Hillsborough is in better shape than Miami-Dade. Hillsborough pledged court fees, which raised $3.6 million in fiscal 2002, as the primary revenue source for repayment of the bonds.

As a backup, the county pledged receipts from the so-called Community Investment Tax, a sales tax increase passed by county voters in 1996.

If the Legislature fails to act, Merrill says the county can still tap some of the CIT money, which brought in nearly $80 million last year. But that would not be its preference. The county obtained a fixed interest rate at the time the 1999 bonds were issued.

In contrast, according to Merrill, Miami-Dade's 1998 bonds are secured by court fees only and the interest rate floats. If HB 113A isn't altered, Miami-Dade's interest expense could jump because the uncertainty almost surely would push the adjustable rate upward, he says.

Fitch Ratings Ltd. has placed the Miami-Dade bonds on a watch list for possible downgrade, according to Miami's Daily Business Review newspaper.

An Aug. 11 analysis of Hillsborough's situation by Henry M. Morgan Jr., a lawyer in Holland & Knight LLP's Lakeland office, concluded that HB 113A does indeed force the county to surrender the court revenues pledged to secure the 1999 bonds, except an assessment of up to $150 on those convicted of a crime.

But Morgan raises the possibility that the portion of HB 113A dealing with court fees could be unconstitutional. Governments effectively enter into contracts with bondholders. Under the contracts clauses of both the U.S. and Florida constitutions, Morgan says, the contractual rights of bondholders cannot be impaired by subsequent legislation.

The Legislature typically substitutes another funding source when shifting fiscal responsibility for a branch of government like the courts, says Morgan. But no provision was made this year when lawmakers decided in HB 113A to hand court revenues over to the state along with the burden of funding court operations.

Morgan says in his analysis that "at least some of the legislators were not aware" that counties had pledged future fee collections to pay off construction bonds for their new courthouses.

Hillsborough officials intend to inform bondholders of the legislative glitch, even though they don't believe they are legally required. The disclosure will emphasize that the situation isn't as dire as Miami-Dade's predicament.

J. Alex Villalobos, R-Miami, who chairs the Senate Judiciary Committee, has gone on record in favor of the change requested by his home county and Hillsborough. County officials say they won't hesitate to go to court if the Legislature does nothing.

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