HomeMy WebLinkAboutR-84-09800 0
J-84-900
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RESOLUTION NO. 84
A RESOLUTION SETTING FORTH THE POSITION
OF THE CITY OF MIAMI THAT AUTHORITY FOR
THE ISSUANCE OF TAX-FREE INDUSTRIAL
DEVELOPMENT REVENUE BONDS BE ALLOCATED
USING A FORMULA OR METHOD SIMILAR TO THAT
PROPOSED BY THE FLORIDA LEAGUE OF CITIES,
INC. AND THE DADE COUNTY LEAGUE OF
CITIES, INC._-EXCEPT THAT THE CITY FAVORS
ADOPTION OF A DOLLAR LIMITATION UPON
CITIES BASED ON THE POPULATION FACTOR
(POPULATION X $150); FUIHER EXPRESSING
THE BELIEF THAT THE CITY OF MIAMI'S
ALLOCATION BE DIRECTLY UNDER CONTROL OF
THE CITY TO BE USED BY ITS DEPARTMENT OF
ECONOMIC DEVELOPMENT AS A SALES TOOL OR
LEVERAGE FOR GENERATING AND CREATING 3085
IN CERTAIN SEGMENTS OF THE CITY; FURTHER
DECLARING THAT IF THE POPULATION FACTOR
IS NOT ADOPTED AS THE METHOD OR FORMULA
FOR SAID ALLOCATION, THEN SUCH OTHER
METHOD OR FORUMULA BE ADOPTED AS WILL
RESULT IN AN EQUITABLE ALLOCATION FOR
LARGER CITIES IN THE STATE.
BE I T RESOLVED BY T HE COMMISSION OF I lit C I T Y Of MI AMI ,
F L 0 R I D A :
Section 1. It is the position of the City of Miami
that authority for the issuance of tax-free Industrial
Development Revenue Bonds be allocated using a formula or
method similar to that proposed by the Florida League of
Cities, Inc. and the Dade County League of Cities, Inc.
except that the City favors adoption of a dollar limitation
upon cities based on the population factor (population x
$150).
Section 2. It is the belief of the City Commission
that the City of Miami's allocation should be directly under
control of the City to be used by its Department of Economic
development as a sales tool or leverage for generating and
creating jobs in certain segments of the City.
Section 3. If the population factor is not adopted
as the method or formula for the allocation of authority to
issue Industrial Development Revenue Bonds, then such other
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Method or formula should be adopted as will result in an
equitable allocation of such authority for the larger cities
in the state.
day of SbpttR�y , 1984.
PASSED AND ADOPTED this 13th_ Y
M A Y O R
TEST: 4
1: GZ.P
1 Y CL K
PREPARED AND APPROVED BY:
7
DEPUTY CITY ATTORNEY
AP4AA
TO ORM AND CORRECTNESS:
L UGNERTY
CITY ATTORNEY
L
L
TO Howard Y.'Gary
City Manager
ark Me ill
CITY OF MIAM1. FLORIDA
INTlR-OFFICE 14tM0111ANDUM
FROM Assistant to the City Manager for
Intergovernmental Affairs/Cable
DST[ September 4, 1984 ,n,c
su*Jcc. Governor's Industrial
Development Bond Allo-
cation Hearing in
Tallahassee
R[r[R[Nces
ENCLOSURES
The United States Congress has passed legislation entitled the
"Tax Reform Act of 1984" that places certain limits on the amount
of funds that can be raised by the private and public sector
through tax free Industrial Revenue Bonds (IDB). One limit is
calculated by multiplying $150 times the population of the State
of Florida, which amounts to approximately $1.6 billion of Bond
Authority per year. For comparison, last year $1.1 billion of
IDB'a were authorized in the state.
On August 16, 1984, the Governor held a workshop as the result of
a provision in the federal legislation that authorized the
Governor to make a state-wide distribution of IDB issuing
Authority limitation among the local governments and state
agencies on an interim basis.
At the workshop, a large number of speakers and the Florida
League of Cities, recommended that 60% of the state's allocation
be assigned to local governments, 35% to state agencies (mostly
for big ticket items such as resource recovery projects), and 5%
for small users such as governments with less than 20,000
population whose economic development activities utilizing IDB's
would exceed the amount that the $150 per capita limit would
impose on small county allocations.
If authorizations are in fact determined on a county -wide basis,
it is estimated that under a 60-35-5 formula Dade County would
qualify for about $160 million in IDB's. For comparison, that
exceeds the $40 million in IDB's issued through Dade County lost
year. The preponderance of recommendations was to allocate the
Bond Authority to the County, to be issued locally on a first
care, first serve basis.
The City of Miami representitives present at this workshop were
Clark Merrill, assistant to the City Manager, Charlotte
Gallogly,Direotor of Eccononic Development and Miriam
Maer,Assistant City Attorney. The City of Miami placed into the
record, a statement of the City's position and a copy of a letter
from the Mayor to Representative Barry Kutun regarding I081s,
both of which are attached.
To: Howard V. Gary
il
September 4, 1984
From: Clark Merrill Subject: IDB•a
The City of Miami has not issued any IDB's to private applicants,
although it is granted the authority to do so under the State
Statutes.
Please keep in mind that the City's authority to issue Tax Free
Municipal Revenue Bonds is not impaired by the federal
legislation so long as private developers, other than investors,
do not receive tax free benefits as a result of using IDB's.
The federal law specifically exempts housing projects from the
state-wide cap on IDB's. This was done at the City's urging when
the Bill was drafted in order to protect future housing unit
development in the City that would utilize tax free financing.
This is will encourage capital investment, particularly in the
inner city areas of Miami.
At the present time IDB financing is being considered for the
Bayside Garage and possibly for several other garages being
planned by the City's Off -Street Parking Department.
The State Statute provides for the creation of Industrial
Development Authorities as well as establishing certain
requirements that apply to issuing IDB's in Florida.
Industrial Development Authorities are created only by counties.
They are autonomous, and serve the entire county. By law, each
Authority has a five member Board of Direotors and are funded at
least partially through charges made to the bond applicants.
The Dade County Industrial Development Authority issued approxi-
mately $40 million in bonds during the past year.
Since 1978 there were 8 projects in the City of Miami. valued at
approximately $12.7 million when the last project is completed.
The Authority has a staff of nine, many of whom are economic
specialists and provide services beyond the issuance of IDB's.
The County Industrial Development Authority holds several public
h9arings on every project before it is approved. It would be
difficult and expensive for the City to duplicate this process in
light of -the limited number of IDS's issued in Miami.
The best approach in securing the Miami interests in the IDS
issuing process would be to establish a member from the City of
Miami on their Hoard. Realistically, the Authorities Board
Memberships should be expandec. to include a broader
representative base, i.e., members from the largest cities plus
2
F
To: Howard V. Gary
From: Clark.Merrill
September 4, 1964
Subject: IDB's
one or two •embers selected by the Dade League of Cities to
represent the smaller cities which would be in addition to
representitives of other related interests. (This some process
now provides for the Mayors representation on the South Florida
Regional Planning Council).
To accomplish this expansion would require a change in the state
law. Such a propsal could be included in the City's legislative
proposals for the 1985 legislature.This proposal would also
require the County Industrial Development Authority to notify the
City of all proposed industrial development projects that are
seeking federal tax exempt financing within the City.
It should be noted that the federal cap on IDB's is aimed at
reducing tax exempt financing on certain private and some public
projects in order to reduce the impact that this tax exemption
has on the federal budget. Florida, unlike some other states,
has not made excessive use of this method of tax exempt
financing.
This process created by the new legislation, has directed
significant attention to the IDS method of financing, and may
create an increased number of applications for IDB's in the near
future. It is reasonable to assume that additional restrictions
would be made if Congress determines that the tax loss exceeds
the economic general benefit provided by IDH's.
The Governor will make his decision on the allocation of IDS
funding authority by proclamation. This decision will be
effective until the Legislature meets, but not longer than
December 31, 1985. The 1984 Legislature was considering IDS
Legislation (H9.1281), during the 1984 session, that did not
pass. This allocation process will be a legislative concern in
the 1985 legislative session.
Also attached is the Florida League of Cities recommendations,
the Governors meeting notice and a summary of the IDS legislation
published by the Government Finance Officers Association.
CM/maua
gncls.
3
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OFFICE OF THE GOVERNOR
TM Co". TN1dSON, "wide U301
Tsl"Ow m: SM/481-1234
MEMORANDUM
'c]
ATTACHMENT 1
To: ALL INTERESTED PARTIES
FM°: Howard E. "Gene" Adams, Director, Legislative Affairs
Vim: MORxSHOP - Industrial Development Bond Allocations
Osa. July 18, 1984
The Executive Office of the Governor intends to conduct a
public s otinq and workshop on August 16, 1984 in the Cabinet
Meeting Roos, Lower Level, the Capitol, Tallahassee, Florida,
ccm ncing at 8:30 a.m., Eastern Daylight Savings Time, for
the purpose of discussion and taking testimony from interested
parties relating to the allocation procedures for tax exempt
private activity bonds (industrial development bonds).
A copy of the notice, as it appears in the Florida Administrative
Weekly, is attached for your information. The Office of the
Governor, pursuant to authority granted by House Joint
Resolution 4170, proposes to issue an Executive Order if
warranted, providing for allocation procedures different from
those specified in the federal act.
The allocation of industrial development bonds has serious
ecbnomic consequences for our state and the Office of the Governor
is interested in receiving as such input as possible prior to
issuance of this Executive Order. Any comments, written responses,
sugqested allocation formulas or other information, will be
welcomed. The workshop and meeting is open for all persons
to attend and it is hoped that a broad range of input and ideas
can be shared at this meeting in order to develop allocation
procedures for the State of Florida. As stated in the notice,
written testimony or written comments should be forwarded to
thr Office of the Governor, Gene Adams, Director of Legislative
Affairs, Roos 210, The Capitol, Tallahassee, Florida, 32301.
The office slay be reached by telephone at (904) 489-5152.
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ATTACRMENT l
POSITION PAPER
POSITION Of- THE CITY OF MIAMI, REGARDING INDUSTRIAL
DEVELOPMENT BOND ALLOCATIONS UNDER THE DEFICIT
REDUCTION ACT OF 1984 (H.R. 4170, as modified by
H.Con'. Res. 328)
This Position Paper is being submitted in connection
with a workshop on Industrial Development Bond Allocations to be
held on August 16, 1984 by the Executive Office of the Governor
of the State of Florida.
The City of Miami, Florida has the same economic
development goals as Dade County, Florida. These goals are the
creation of jobs, an increased tax base, the stimulation of
economic growth and tourism, and downtown revitalization. Such
revitalization is increasingly important in light of the high
rate of vacancy in the major downtown office buildings and
hotel§.
Although the City has not
development revehue bonds ("IDRB")
consideration the following joint
revitalize the downtown area: The
proposed tourism related facility
Theater in the Coconut Grove area,
Island, the Dinner Key development
plan for said area including a par
marina, the Florida East Coast Rai
a performing arts complex to be to
financing may be required in order
economically viable.
heretofore issued industrial
the City has under
private -public ventures to
Rouse Bayside project, a
adjacent to the Players State
a cultural facility on Watson
in accordance with the master
king garage and full service
lroad property development and
sated within the City. IDRB
to make the above projects
Additionally, the City has had concern for some time
about present policies which allow the Dade County Industrial
Development Authority to finance the construction of facilities
which remove businesses from the area within the City and
relocate them to areas in unincorporated Dade County or to other
municipalities within Dade County. This is particularly
troublesome to the City in the light of the need to -revitalize
the downtown area and eliminate the vacancy rates in office
facilities and hotels. In order to accomplish its goals in
revitalizing the downtown area the City must be in a position to
attract businesses and facilities which make it attractive for
companies utilizing office space to locate in -the downtown
area. Further, the City has for some time expended resources to
develop the downtown area, including the Gusman Cultural Center,
the restaurant arcades along Flagler Street, the Mnuchi-Hayfront
Park area, the World Trade Center and parking garage, and the
City of Miami/James L. Knight Convention Center. This public
0
investment was made to increase utilization of the downtown area
particularly in the evenings and on weekends, and among other
things was intended to bring people back into the City and to
reduce the crime rate within the City. The City risks losing its
public investment in these projects unless it is in a position to
allocate IDRB bonding authority to projects which the City
considers to be of the highest priority in its overall economic
development.
The Deficit Reduction Act of 1984 provides for the
smallest -unit of overlapping geographic areas to receive the
first part of the allocation to local government units, such
allocation to be in proportion to its population. The City
believes that the Congressional intent was to'give local
governments the opportunity for self-determination as to the
priorities of projects in their areas and to allow the elected
Officials of such local goverments to fulfill their fiduciary
responsibilities to the citizenry. The City, therefore, urges
the State to allocate bonding authority for IDRB in such a way
that effectuates this Congressional inten .
Specifically, the City recorr„nen s� that it receive an
allocation of IDRB bonding authority proportion to its
population. The "first come, first serve" basis which has been
recommended by the County is inadequate to provide for the making
of choices between projects which serve private entities solely
and projects which, in addition to creating jobs and stimulating
economic development and tourism, would also permit the City to
target this resource to the areas where it will provide the
greatest economic impact. The City would further recommend that
the provision for allocations be drafted in such a way that to
the extent a governmental entity does not use any of the
allocation allotted to it, it would be able to turn that
allocation back to the County or to the State for worthy
projects.
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M,96klR ICC h r t c A[
"I'Lt
C, 1111 lot -limillorII)a
,August 35, 1984
}ion. Bard- Nutun, Chairran
Go:crnor's .Advisory Ccnmittee on
Industrial Dc%,elo; :dent Bonds
The Capitol
204 House Office Building
Tallahassee, Fla. 32301
%ar ChsiT7.an Yuttm and Ccr%nittee ','Pc;nhers:
ATTACNXUT 3
R E C Fco e
It is nm understtieidins you are , al;ing both verbal and %critten testimony
on the polity• under the federal guidclines for InduLtrial Development
Bands. The City ofposition i,ill he presented by AIs. alarlotte
Gallogly, the Caty's Director of Economic DAN•elorMent, Ms. Miriam "aer
from our City Attorney's office amid Mr. Clark'�errill, Special Assis-
tant to our Cite `•tanager.
Briefly, it is our interpretation that it is the intent of Congress
that the lowest governmental entity be the recipient of the allocation
of the IIffi's.
It is m' position that use cannot accept the current proposal by Metro-
politan Dade County to allocate these IDB's on a first -cane basis.
The fact that Miami has not issued IDB's in the pa.;t should not be a
factor. We are in desperate need of industrial development bonds in
our fashion district and in Decorators Rcr: , currently beset by canpe-
tition outside Dade County. It is our intention to pursue aggressively
the issuance of IM's for the economic development and redevelopment
of Miami.
Recently, Metropolitan Made County approved an US wherein Coopers &
Lybrand is using tax-free bonds to lower its office rental by moving
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Hzn. r,,r»• Y%itim, Cl,ai -;;an
Covc rnor's . %dwi sort' Co er6 t i c-c an
Industrial T%:,v0q; vnt rends
Augwrt 15, 19S4
rage Two
from the City of Miami to the iuiincwj-,or;i1ed area. It is precisely this
misuse of IDB's that has so �wgered Cong)-cssn;an Pickle and has moved
Congress to add restrictions and to provide p6 del ines for the use of
IDB's. By the admission of Mr. Robert MIN -son, the Mmiaging Partner of
Coopers 5 Lybrand, not one single i-icw job ti, 17 have lheen created by
Coopers & Lybrand's move fro-, the city to the iwii,coilioraied area.
As you loio►t, sane states prohibit the use of IDB's for the transfers of
busine-sea from one part of the state to mother. 111e would strongly
urge that this panel incorporate this 1>>o1-)ihition into the guidelines
in its deliberations.
This blatant abuse of 1DB's by Metropolitan Pade Colony in the Coopers
case leaves me little cmffidence in its objectivity or its ability to
dedicate itself to the economic, and to the proper industrial, develop-
ment of Pade Count,. I1;iring this same period ►ben tax-free monies are
used to e-Ipty office space from doi-mtovn Dade Coinity to the imincor-
poi-ated area, Racal.-Milgo Corp. moved from Miami to Broward County, and
the Cordi s Corp. has x-maiwced its preference of an e_-,ja;3nsi-on of its
facilities in Frazee over e>l,anding its plant in Dade County.
In vies: of these East acticrs, I refzpectfully i•,ould submit to the Com-
mittee, and through you to the (;rnevnor, and eventually to the Legisla-
ture, that you permit r. u;icipa]ities, like Miami, to act in their best
interests.
So as not to let IDB's get lost through inaction of municipalities, I
would, however, recomiend you set a deadline by N.fiich that allocation,
either directly or through 1,1etro on a population basis, be utilized;
otherwise, that allocation vould go into a general pool, then to be
sought on a first -cane, first -serve basis.
Si cerely,
/I/ ( a
Maurice A. Ferre
RAF:pas MSVOr of Miami
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LORIDA LEAGUE OF CITIES, wc.
,hW Pok„veswe
t a.oe Mes 1757 — "V222-9i84
W.ersM Piadlia 30U -
:MORANDUM
TO: The Honorable Bob Graham
Governor, State of Florida
FRM: Harry Morrison, Jr.
Assistant General Counsel
Florida League of Cities
RE: Tax Reform Act of 1984
Private Activity Bonds - Florida Allocations
DATE: August 10, 1984
In the latter part of June, Congress passed ER 4170, the Tax Reform Act of
1984. Part of this legislation placed significant restrictions on the use of
industrial development bonds (IDB's). 0enerally, the legislation imposes a
$150 per capita state -by -state limitation on the issuance of IDR's. Basically,
the legislation reserves 50% of the state per capita allovance to the State
and the remaining 50% to local goverment. The legislation further provides,
bovever, that the Governor may provide an alternative allocation method.
The Itecutive Office of the Governor has announced your intent to provide
an alternative allocation procedure for IM's in Florida. It is my understanding
that your office intends to use HB 1281, proposed during the 1984 Legislature,
as the basis from vhlch to detirsine Florida's allocation procedure.
The Federal legislation provides that each State'$ ceiling is allocated equally
NFWO n (1) the State and its sgemies, and (2) the local units. ?bee
coe-halt allocated to localities is divided smong them in proportion to their pop-
ulativos. iken the jurisacticos of tva local gvvsrnmental emits averlap (se.
oomty/city), the emit Vith jurisdiction over the smallest geogrrp64cal area (eg.
city) receives Its !!m larger jnrisdiot� (�g�oouatl►tf ;�iyoef the eves localities, 3Q% of 1�brs osil,lag.
rtUnate she" based an
the msber of residents other then the residents of�the amanw I
Vbw tea govetmsntsl emits have jurisdictim over the sae g+og:aphioal area (eg.
city/oaw►itf redevelopment agency), only the jurisdiction Frith the broacher sov-
ereiga pacers receivN the ceiling allocation (eg. city).
G04ERNOA'S ALLOCATION POWUS
The Federal allocations may be changed by state lax or by action of a
state's Governor. The Governor's allocation will be effective until such time
as the State Legislature makes a different allocation by law or until commence-
ment of the year after the first regular session of more than 60 days of the
State Legislature following the enactment of the Federal legislation. Thus,
if the 1985 State Legislature passes a state lax providing for an allocation,
the Governor's allocation will expire. Otherwise, the Governor's allocation will
expire at -the and of 1985 and will be replaced by the allocation provided in the
Federal legislation.
LBAME RECOMMENDATIONS
Based on the foregoing, the League recommends that the following propositions
be incorporated into any allocation procedure provided by the Governor:
1. The Governor should provide for a 60/35/5% allocation 60% going to
local governments, 35% going to the State and 5% being reserved to local
governmental units in counties with populations of 20,000 or less. The State
has not in the recent past issued IDB's and the only State bond issues that
would be subjected to the capp in the forseeable future would be State bonds
issued pursuant to Sec. 240.E+39-240.463, Fla. Stat., to finance student
loans and, in some cases, State bonds issued pursuant to Sec. 403.1834,
Fla. Stat., to finance the construction of various water supply and distri-
bution facilities, air and water pollution control and abatement facilities,
and solid waste disposal facilities. Accordingly, it would appear that the
State is therefore not in need of its entire 50% allocation. 0n the other
hand, local governments have historically been the issuer of IDB's and would
appear to be the governmental emits that will issue IDB's in the forseeable
future.
a. The 5$ allocation reserved for local goveissntal units in small
counties attempts to address the problem governmental units in
small counties have incurred as a result of an allocation cap based
an population. This problem my best be illustrated by the following
S=mple. If the allocation cap was in existence during 1983, local
gove3�tal units to Citrus County would have been allocated approx-
imately $6,000,000 on a 60/35/5% allocation. ?et, in 1983, IDd's
in the amount of $96,500,000 were issued in Citrus County, $87,000,000
of the IM's were issued for the construction of a pollution control
facility (is. a ooe-ayot big ticket item . Mftr1T, relativ917
spealdag, the cost of construction of the pollution control facility
would have been so sore had it been oomstrvcted in Ds& County;
horever, the imipect on the allocation cap would mot have bees as
dresti c on local governmental units in Dade t=ty as it would Save
bean on gov r=Mtal =Its in Citrus County. Bsnoe the & M►ll oouaty
allocation pool will have the effect of somewhat offsrttiag the
moomecionabU result the allocation asp will have am gorew utal
gaits in small co mties when they attempt to Isaac =Is for big
ticket items.
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b. With retard to the local allocation, it has been suggested that
the Governor do away with the IDB allocation specifically reserved to
cities in the Federal legislation. This suggestion has been made
Primarily because the federal local allocation, when applied to Florida's
smaller cities, does not provide smaller cities with enough of an IDS
allocation to issue .an IDS as a practical matter. For example, over half
the cities in the State of Florida have populations of 5,000 or less.
Generally a city With a population of 5,000 under the Federal local
allocation will receive an annual IDB allocation of only $375,000.- A
review of the 233 IDB issues in Florida in 1983 shows that only 7 were
in an amount for less than $1,000,000 and that there were no IDS's issued
during 1983 in an amount of $375,000. In sum, it is suggested that the
federal local IDB allocation, when applied to Florida's cities, is imprac-
tical. WMl• the League does not necessarily recommend that the federal
allocation reservation to cities be preserved, the League does believe
that it is incumbent upon the Governor to understand that the above
mentioned problem could be som what alleviated by using the 3-year
carry forward provision of the federal legislation to accvaulate an
amount sufficient to issue an IDB. Alternatively, various local issuers
could enter Into inter -local agreements to jointly utilise their IDB
allocations.
If it is nonethless the Governor's intent to do away with the
specific reservation of IDB allocations to cities, the League recommends
that the local allocation available to the local governmental units in
each county be based on the population within the geographical boundaries
of each county and that the local allocation be consumed on a first come -
first serve basis. The League is opposed to any allocation process that
would require a county government's approval of a city's issuance of an
nO or an allocation system that mould be based on a governmental entity's
previous use, of ID8's.
C. Nith regard to the State allocation, the Dengue would recommsnd that
a priority be given to "private activity bonds" issued bZthe State.
This would include State bonds issued pursuant to Sec. 2 .439-240.463,
Fla. Btat., for student loans and possibly State bonds issued pursuant
to Sea. 403.1834, Fla. 8tat., to flaaaoe the construction of various
water supply and distribution facilities, sir and water pollution control
sad abatement facilities, and solid waste disposal facilities. AllooN
tiOms rwalaw in the state allocation pool after the Leman" of smy of
** abm mentioned state bonds should be utilised for 10's of local
GwOOrMENO&I units f CR oo►onties that have reached their amemal cap bn a
first come -first serve basis.
if the Goveroor decides that certain local ID® projects should be
given a priority in the State allocatioo pool, than the Longue reoomrmsm+ds
that a priority be given to M's issued to finance the oaostroaWma of
projects, as defined in Sec. 159.25(5), Fla. Stet., in enterprise scow,
as defined in Sec. 290.004(1)(a), Fla. Stet., in oomWmity redmlopmsmt
areas, as defined in Sec. 163.340(10), Fla. Stat., and in other community
redevelopment areas created pursuant to constitutional, general or special
law. There is a strong state policy to provide incentives to invest in
and to locate in these redevelopment areas. Distressed areas are considered
by the State to constitute a serious menace that is injurous to the public
health, safety and welfare because the existence of such areas contributes
substantially to the spread of disease and crime, constitutes an economic
and social liability imposing onerous burdens which decrease the tax base
and reduce tax revenues, substantially impairs sound growth, retards the
provision of housing accomodations, aggravates traffic problems, and sub-
stantially hampers the elimination of traffic hazards and the improvement
of traffic facilities, and otherwise consumes an excessive proportion
of governmental revenues because of extra services required for police,
fire, hospitalization, and other forms of public protection, services, and
facilities. Additionally, each of the projects authorized to be constructed
with revenues derived from the issuance of IDB's could be located in redev-
elopment areas and the location thereof would substantially address the
problems and evils that are uniquely a product of distressed areas. Thus,
a priority of this nature would give all projects authorited to be con-
structed from revenues derived from the issuance of IDB's a shot at the
State allocation. Finally, priority given to these redevelopment
areas would further the Legislature's and the Governor's aclmovledged
objective of promoting and accomodating sound growth management policies
in that it would have a substantial effect in discouraging urban sprawl.
The Governor may want to further consider providing a priority to
TDB'* issued to finance the construction of resource recovery facilities,
sewage and solid waste facilities, pollution control facilities and hasard-
ous waste disposal facilities. These are big -ticket items that have the
potential of exhausting a couaty's allocation with one issue. Additionally,
these facilities address certain substantial environmental concerns of the
State and the" facilities constitute the essential--rnmental infrastruc-
ture that is required in order to accomodate the other IDB uses.
2. The Iaagoe reaomsinds that the Governor's allocation procedure provide a
eechaniss whereby a county's remaining allocation will be retrieved and placed
into the State allocation for we by other local goveraaental units in oouati"
that have reached their caps dwring a particular year if the local govetal
units in a particular county do not utilise the W=ty's nB allocation within
a t1w oertain darins each calendar year. For emaple, in 1985, it is antici-
pated that the Sayel mental units within Broward County, on a 60/55/58 allocation,
will receive over "7.000,000. If by October 1, 1985, for as0ple, the units
of loaa1 pveramsat with the geographical bo Maries of Brorard County have not
utilised its allocatiai, the Conty's remaining allocation sboald be shifted to
the State al%oatioa pool for use by units of local govermrant In counties that
have alroody reached their sap for 1985. The 5% "snail county issuers" allooatiAm
should be treated in a lire manner.
"�rWashington Updateu
ATTACRNENT 5
C`1��EG
1994 AUG _e 8 4 4
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SUMMARY OF MAJOR PROVISIONS IN THE DEFICIT REDUCTION ACT OF
1984 (H.R. 4170) AFFECTING STATE AND LOCAL GOVERNMENTS
Industrial Develo went Bonds (IDBs) -- Imposes a $150
per capita or 0 million annua vo ume cap on industrial
development bonds and student loan bonds beginning in 1964.
The per capita limit falls to $100 in 1987 when most small -
issue IDBs sunset. Exempted from the cap are bonds used to
finance multifamily residential rental property, certain
refunding bonds, and IDBs used to finance convention or
trade show facilities, airports, docks, wharves, certain
parking facilities, and mass transit facilities that are
publicly owned.for tax purposes and where rents charged to
users are not front -loaded.
A statutory formula provides 50 percent of the state
cap allocation to state agencies and 50 percent to local
issuers. If local issuers overlap, the cap is allocated to
the one with the smallest geographic area. If the geographic
area is identical, the governmental unit having broader
sovereign powers obtains the allocation. Governors are given
interim authority to reallocate the cap. This power termi-
nates within a certain period of time after the state legis-
lature meets in regular session.
A three-year carry -forward of a state's volume cap for
certain projects (six years for pollution control bonds) is
permitted. The carry -forward is not applicable to small -
issue IDBs. A two-year phase -in is allowed in states whose
1983 volume exceeded the state-wide limit. A transitional
rule exempts bonds having an inducement resolution adopted
before June 19, 1984 from the cap if the bonds are sold be -
fort January 1, 1985. Allocation priority must be given to
bonds with an inducement resolution before October 19, 1993
in the year in which the bonds are sold if construction had
begun or a binding contract existed by the sacs date.
Public officials responsible, for bond allocations under
the cap must certify that no consideration for allocation
was received. Criminal penalties will apply where it can be
shown that any bribe, gift, gratuity, or direct or indirect
contribution to any political campaign is made.
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New restrictions on cost recovery requiring straight-
line depreciation over ACRE periods apply to UDAG projects,
sewage and solid waste disposal facilities and certain pol-
lution control facilities. These rules apply to property
placed in service after December 31; 1983 which is financed
by an obligation issued after October 18, 1983.
More restrictive IDS arbitrage rules will apply to
obligations acquired for investment (nonpurpose obligations)
effective January 1, 1985 except for those IDS* used to fi-
nance multifamily residential rental housing. The change
reduces the temporary period for investing bonds proceeds
from 3 years to 6 months and requires a rebate to the U.S.
Treasury of earnings on invested bond proceeds in excess of
bond yield.
The use of IDSs to acquire land and existing facilities
is limited for bonds issued after December 31, 1983 with an
exemption for bonds issued before January 1, 1985, pursuant
to an inducement resolution adopted before June 19, 1984. No
more than 25 percent of the bond proceeds may be used to
purchase nonagricultural land. The limit increases to 50
percent for industrial parks, and some land required for
airports and 'docks is exempted. The purchase of existing
facilities is generally prohibited unless a certain amount
of rehabilitation is undertaken. Special rules apply to
first-time farmers.
With respect to small -issue IDB9, a $40 million limit
on the outstanding amount of all tax-exempt IDBs for the
same company is imposed on bonds issued after December 31,
1983 except for where transitional rules apply. The small -
issue sunset was extended through 1988 for manufacturing
facilities. All others are scheduled to expire at the end of
1996. Avoidance of limitations on small -issue IDSs through
division of ownership is prohibited. The bill eliminates ID8
financing for the following prohibited facilities generally
beginning in 1984: airplanes, luxury boxes, gambling facili-
ties, alcoholic beverage stores, and health clubs.
The tax code provisions permitting advance refundings
for certain convention and trade show facilities, airports,
docks, wharves, mass commuting and parking facilities are
repealed.
The public approval requirement passed in 1992 is
modified for public airports where the government unit is-
suing the bonds is the owner or the operator of the airport.
Only the issuing governmental unit, rather than all units in
which the airport is located, will be required to approve
the IDRs issued to finance airport facilities.
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Governmental Leasing -- In general, the bill denies
accelerated cost recovery for property leased to or used by
taxexempt entities. Equipment must be depreciated over an
extended period equal to the greater of the mid -point life
under the ADR system (useful economic life) or 125 percent
of the lease term. Short-term equipment leases and certain
high technology equipment are exempted from the provisions.
Real property must be depreciated on a straight-line
basis for the greater of 40 years or 125 percent of the
lease term if 35 percent of the property is used by tax-
exempt entities and at least one of the following circum-
stances exist: 1) all or a part of the property is tax-
exempt financed by a related party; 2) the use involves a
lease with a fixed price option; 3) the use occurs after a
sale, lease, or other transfer of the property by the city
or tax-exempt entity, except for property leased within
three months after being placed in service by the tax-exempt
entity; or 4) the use is pursuant to a lease term exceeding
20 years.
The investment tax credit and the rehabilitation credit
is denied for all tax-exempt property meeting the above re-
quirements. Leases for 3 years or less are exempted.
The legislation establishes guidelines to determine
when a service contract is more properly characterized as a
lease. The circumstances taken into account are whether the
* service recipient is in physical possession of the
property;
* service recipient controls the property;
* service recipient has significant economic or
possessory interest in the property;
* service provider bears significant risk of non-
performance under the contract,
* there is concurrent use by service provider to
provide significant services to entities unrelated
to the service recipient, and
* contract price substantially exceeds rental value
of the property.
Service contracts for certain solid waste, energy and
water treatment facilities are not treated as a lease except
where the service recipient under contract with a solid
waste facility operates the facility, bears significant fi-
nancial burden if there is nonperformance, receives signifi-
cant financial benefit if operating costs are less than
standard performance or has a fixed and determinable price
purchase option or may be required to purchase the facility.
In general, the effective date of the legislation ap-
plies to property placed in service after May 23, 1983. Ex-
tensive and detailed transition rules also apply.
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Mortgage Revenue Bond Program -- The Act extends the
mortgage revenue bond program for four years through 1987.
An optional program allowing issuers to exchange their bond
authority to issue mortgage credit certificates has been
created.
$octal SecuritX -- Tax bill conferees
the Senate provision that would exclude
interest income from the income base of
recipients.
did not accept
municipal bond
social security
Corporate Minimum Tax -- The deduction taken by finan-
cial institutions for costs incurred for buying or carrying
tax-exempt bonds will be reduced from 85 to 80 percent.
For More Information -- A copy of the Deficit Reduction
Act (N.R. 4170) and the Conference Report to accompany it
may be obtained from the U..S. Government Printing Office,
Washington, DC 20402. $20.00. (202) 275-2091.
The Congressional Record dated June 22, 1984 (No. 87 --
Part II) contains statutory and conference report language
for H.R. 4170.
A Summary of Tax and SRendinq Reduction Provisions of
H.R. 4170 as Passed b the House and the Senate Sas been
prepared by the stafft of the Joint Committee on Taxation,
Committee on ways and Means, and Committee on Finance. Also
available from the U.S. Government printing Office.
Cathy Spain and Cathie Eitelberg of GFOA's Federal
Liaison Center will be happy to answer any questions you may
have. Please call (202) 466-2014.
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