Opinion ID: 1813487
Heading Depth: 2
Heading Rank: 2

Heading: Constitutionality of Tax Increment Financing

Text: Lastly, Bay County argues that the proposed tax-increment-financed bonds violate the referendum requirement of article VII, section 12 of the Florida Constitution. The determination of a statute's constitutionality and the interpretation of a constitutional provision are both questions of law reviewed de novo by this Court. Fla. Dep't of Rev. v. City of Gainesville, 918 So.2d 250, 256 (Fla.2005). As explained below, we conclude that the proposed bonds do not violate article VII, section 12. In State v. Miami Beach Redevelopment Agency, 392 So.2d 875 (Fla.1980), this Court held that it was permissible for a local government to use the tax increment as one of the sources of debt service on outstanding bonds where the taxing power had been disclaimed and no lien could attach until the funds were deposited into the trust account. In other words, we held that tax increment financing does not run afoul of the referendum requirement of article VII, section 12 so long as ad valorem taxing power is not pledged. In so holding, this Court stated the following: [T]here is nothing in the constitution to prevent a county or city from using ad valorem tax revenues where they are required to compute and set aside a prescribed amount, when available, for a discreet [sic] purpose. The purpose of the constitutional limitation is unaffected by the legal commitment; the taxing power of the governmental units is unimpaired. What is critical to the constitutionality of the bonds is that, after the sale of bonds, a bondholder would have no right, if the redevelopment trust fund were insufficient to meet the bond obligations and the available resources of the county or city were insufficient to allow for the promised contributions, to compel by judicial action the levy of ad valorem taxation. Under the statute authorizing this bond financing the governing bodies are not obliged nor can they be compelled to levy any ad valorem taxes in any year. The only obligation is to appropriate a sum equal to any tax increment generated in a particular year from the ordinary, general levy of ad valorem taxes otherwise made in the city and county that year. Issuance of these bonds without approval of the voters of Dade County and the City of Miami Beach, consequently, does not transgress article VII, section 12. Id. at 898-99. In State v. School Board of Sarasota County, 561 So.2d 549 (Fla.1990), this Court reiterated the holding in Miami Beach as follows: In State v. Miami Beach Redevelopment Agency, 392 So.2d 875 (Fla.1980), we interpreted the words payable from ad valorem taxation in article VII, section 12 and held that a referendum is not required when there is no direct pledge of the ad valorem taxing power. We noted that although contributions may come from ad valorem tax revenues: What is critical to the constitutionality of the bonds is that, after the sale of the bonds, a bondholder would have no right, if [funds] were insufficient to meet the bond obligations ... to compel by judicial action the levy of ad valorem taxation.... [T]he governing bodies are not obliged nor can they be compelled to levy any ad valorem taxes in any year. Id. at 898-99. The agreements here, as in Miami Beach, although supported in part by ad valorem revenues, expressly provide that neither the bondholders nor anyone else can compel use of the ad valorem taxing power to service the bonds. Id. at 552 (alterations in original); see also Strand v. Escambia County, No. SC06-1894. 992 So.2d 150, 2008 WL 4240151 (Fla. Sept. 18, 2008) (expressly declining to recede from Miami Beach ). In the present case, the proposed bonds conform to the tax increment financing mechanism we approved in Miami Beach. Cedar Grove's bond resolutions provide that no bondholder shall ever have the right to compel the exercise of the ad valorem taxing power of the State, Bay County, or any other governmental entity. Resolution 07-007, art. IV, § 4.01; Resolution 07-011, art. IV, § 4.01. The bond resolutions also explain that the bonds are payable solely from and secured by a lien upon and pledge of the Pledged Funds. Id. Thus, Cedar Grove's proposed bonds do not pledge the taxing power of any government entity. The bondholders would have no right, if the trust funds were insufficient to meet the bond obligations, to compel the levy of ad valorem taxation. Consequently, the proposed tax-increment-financed bonds are constitutional without a referendum.