HomeMy WebLinkAboutM-83-0055A PROPOSED NOVSINR FINANCE PLAN
PRESENTED TO THE FLORIDA LEGISLATURE
♦ �_i �a.a aJ
Tne message is clear but
WHO WILL LISTEN?
A Proposed Housing Finance Plan
Presented to the Florida Legislature
MARTIN FINE
Miami, Florida
November 1982
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THE PROBLEM
The great questions that disturb the peace and
well-being or man are not about ends, but means. There is
little question that the providing of affordable housing for
families with Low and moderate incomes is an important and
noteworthy goal. However, there is far less agreement as to
means of achieving this goal. Because inflation has hit our
cities and counties just as it has our households, the methods
bwhich we can fund the real needs of our society in these
difficult economic times is a matter of mounting national
concern.
Notwithstanding federal and state legislation which
has provided substantial federal funding during the past
forty-five gears, cities and counties throughout Florida still
contain vast areas of slum housing and deteriorating
neijhhortioods. These are the "homes" of thousands of hopeless
and frustrated citizens as well as the breeding grounds of
crime an -_I delinquency.
111,f10 j r g e n t need to provide affordable housing for
families with low and moderate income in Dade County as well as
in many other counties in Florida cannot be achieved without a
plan for creative and fiscally sound financing on a continuing
hj.;is.
Pne message is clear, but who will listen?
THE HISTORY
In 1937 the t'onyress of tt]e Un, ited States passed
housing legislation to ass i7:,t low incc)m tarn ilies. Tap reaLter,
the State of Flor ida adopted imploiiientiny ie jislation to permit
the cities .ind :ounti(,s A F'lori<ia to p:,irticipato in "irious
public housing, tlrc)ran r(!nF�wa1 Ind cJmmunity dev?Lopment
progr:ams.
in IL 49 the <)n 1 r e.,:;, f). �1,12 �Init�"i :;t.at�:� it�c�tare(I
that th-� goal fc)r it.; i,,ousiny 1e'ji.;lation of that year was to
ir')vi'1(� "_i ;tncf,n` t?'iv, In , ;liit.t:AL 11!i;ly f�nlir;J:IMF?11t IOr.
!'Vtir: ' !if^,_ r l .in t i.I i 'f'h_1~ 3.IIT11 r•:it Le 1)1.lt ?1',1 4i,,,? yo31 has
n )t ".1 i(_,;jI 'd-3cj, '1 )r jO('�; ',:ti r(2 . Xi.;t any rPJ,-;0tl:A0L2
l iK•'11 lc` j tii.it 1t 4l11.1 i)(_' at`_31ne"i i.n t'ln e ) r f utur -.
in 1�i', (i )'` i , L11 l 'c)1.t(lt•i "IaIla,jer,
1:;S'1i fi d ch'i1I t_rl(L� :")in.`mintt1 3t t!liretln9 0t
n
1.`?1i.1 c)O,1C1, '''t'tf_1t._l.'2.a W t'�1L1 UiVw tiio
ialpv3t
A not 1 L t )r j t,)
31l"?w ] :;,J::`;tant1:II purtiun of ]to Citizt,n.3 Lo L1ve in slufu and
1)L1,Int-1olislnj. iG')!"tly tri rftaitf'rluunity-we
committOP waS formed under the aa:ipic�js of the Ur.)3ii CoaLitlon
to resE)ond to tii(,' cnaLLsn,jk?. It was .:cmj)c)3e,,i of influential
citizens, ouilder representatives of the Nanking industry and
oth(-,rs from a L L segments of t1e cotn:;lunity. 1n May, 1971, it
-2-
�-juc:ti -n in the
IOUtihat 3re
3"=e ;C t at
..TI 11'..
i, i,.tt.?i7t....
✓l.h
which to carry
out
their virious ho-isin,j ra,n:;.
IIow:2✓.r, iufFL.:ient Funds
received in a timely and contino)us
ha.,i:; have never reaLly been
avaiIaI)Ie to properLy deaL with
the pr,)i)tems c)i redeveloping
the slums and blighted aro'-)s of thi_,
or any other community in
our country. `1'he :urrent 3timiniStr
at- iOn in i,vashinyton is
committed to a drastic re-duction
in ttre level of funding to
loc'll .ommunities for housing sand
other i':)is (:nanye
in the role of tfte federal government will. --ompound the
,)rohlfi,m:3 .ilr-ady Cai-e�i uy--- itie!;
in•i :Ounr_ie.; ttlrou:3hout the
.oIint'r'y' in ttIe ar< a of: hoIiF,irig and
)if, muniLi' (4,eV('1.01)111Qnt.
11s tatF, i ��3r L. L,_,r, tn,�re
I,) ) isL)utt' ti13t th�' joaL
>f pr.oviditly decent ing
onl_, the i:,stie is, and
f'un.i.; roc_,cil iev my
such an end.
UlYI'. 1)IZUi'OSI-;L) :;U1AJT1oN
Unr, proposa i w,-1 ic!, t n i,3 wr i ter ii,A s acivanceu d- ur my the
[)a i-; Verl L� ,jV 1"iLat1_' :i+_' :;L:)tIJ i , I( I t)1)l t�n that W
; ".t111
permit COUntiQ'3 to 1t'v'; cif :,dditionaL excise tax on documents
rt_ Latin(3 to r-".3L-.it,it" "inks CF_taia tnL additionaL Lt1:1a5 in the
county in which it is coLlec:ted. At t;ie present time, the
State )f f'tori is Ievi'>s 3n c.-ticisr, tax un all real estate
transactions which is c.ollecteu uy the sixty-seven counties and
turned over tO the Stat-, a minor Lee for tnc! cost of
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collection. In the calendar year ending December 30, 1980,
Dade County collected $37,841,000 from this source.
The Bill, which is attached as Exhibit A, was last
introduced in the Legislative session of 1981, in a slightly
modified form. The House passed it and it was passed by two
committees of the Senate, but languished in that body and died
in the last remaining days of the session.
The present proposal calls for a one-time payment of
an additional excise tax on all real estate transactions,
excluding single family residences, condominiums and coopera-
tives. Tne bill would oe particularly effective in capturing
revenue from previously untapped sources since a great many of
the purchasers of land and improved real estate are "off -shore"
entities or persons, which pay no federal or state corporate
income tax.
The funds could be used to acquire land for
redevelopment purposes and for the construction of homes and/or
apartments in the slum and blighted areas of the community.
These funds could also be made available to families which
require assistance in acquiring new and/or existing single
family homes under existing programs presently being
implemented by the City of Miami and Dade County. Both of
these governmental agencies have successfully carried out
home -ownership assistance programs on a limited basis and have
"hands-on experience" in this area.
The enormity and importance of the redevelopment
process will require a great deal of effort and cooperation
between the public and private sectors. It would provide Miami
and other communities throughout the State with a unique
opportunity to establish various forms of creative partnerships
between public agencies and those in the private sector engaged
in the construction industry such as builders, savings and loan
associations, mortgage bankers, commercial banks, realtors and
others. ;Hiami has been fortunate in being able to establish
many such relationships between public and private sectors
during the past several years and, as a result, the City has a
base upon which to continue and broaden such relationships. An
important benefit of this cooperation would L)e the possibility
of "leveraging" public funds through participation in private
sector lending institutions resulting in a more effective use
of public funds. Indispensable partners in this venture are
the community based organizations and institutions which
already exist in the neighborhoods. Their participation could
guarantee that local residents will be involved in the
redevelopment process.
This proposal is not only simple and fair, out it is
also financially sound. It does not require a new or expanded
bureaucracy for its implementation. It recognizes that local
communities must develop new sources of funds for housing and
community development programs. Once passed by the
IM
Legislature, its implementation can be carried out by the
County Commission, without any approval from Washington. it
will, however, require political courage and leadership for the
Legislature to articulate the realities of the situation and
pass the attached Bill to initiate the program.
In an era of unprecedented interest rates, the
opportunity to obtain funds at no interest cost on a continuing
basis is one that should not be lost. In Dade County alone it
is estimated that the doubling of the present excise tax,
exclusive of single family housing, would produce approximately
$25,000,000 a year.
Tne Florida Legislature must recognize that a means of
financing Local housing programs other than by obtaining funds
from Washington and/or borrowing at high rates of interest must
be found. Since this proposal would permit each Florida county
the option of determining if it wants to participate in the
proposed program, local implementation and control would be
paramount.
It is this :author's hope that the attached proposal
will be a significant means with which our community and others
throughout the State, who wish to do so, can set out again to
achieve the goal of decent housing for all citizens. All I ask
is that people take the time to listen to it and consider its
potential.
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t
SUMMARY OF PROPOSAL
ONE-TIME ADDITIONAL EXCISE TAX ON REAL ESTATE
TRANSACTIONS OTHER THAN SINGLE FAMILY HOUSING WHICH I5
TO BE RETAINED BY THE COLLECTING COUNTY
LOCAL OPTION - EACH OF FLORIDA'S 67 COUNTIES CAN
DETERMINE IF IT WANTS TO IMPLEMENT THE PROGRAM
FISCAL SOUNDNESS -THE PROGRAM PROVIDES A CONTINUOUS
SOURCE OF INTEREST -FREE FUNDS
NO EXTRA COST - NO NEW ADMINISTRATIVE AGENCY OR EXTRA
PERSONNEL ARE REQUIRED TO CARRY OUT THE COLLECTION OF
THE FUNDS. EXISTING HOUSING AND COMMUNITY DEVELOPMENT
AGENCIES CAN IMPLEMENT THE PROGRAM
PUBLIC & PRIVATE SECTOR COOPERATION - LOCAL GOVERNMENT
AGENCIES CAN WORK WITH THE PRIVATE SECTOR, BOTH IN THE
CONSTRUCTION AND FINANCING OF i'riE MUCH NEEDED HOUSING
RESPONSIVE TO PRESENT REAGAN'S REQUEST THAT STATE AND
LOCAL COMMUNITIES ASSUME A GREATER SHARE OF PHEIR
LOCAL HOUSING AND COMMUNITY DEVELOPMENT NEEDS
PROPOSED BILL
A bill to be entitled
An act relating to excise tax on documents;
creating s. L15.0167, Florida Statutes;
"Athor i z i.nq each county to Levy a
discretionary surtax for home ownership and
rent3L nssistance purpows; providing
limitstions and procedures; creating S.
20I . u K , Fier fi i Ktat_wta3; providing for the
levy Qf Che Surtax; providing for. the
..,,.imini3tration, woUpction, and distribution
nf- t�Q prooeWs OL the surtax for home
ownyt: NIP Ur r-ntal assistance programs;
r�-�gniring an annual report. to the Department
hanwinj .,n.i Finance; providing an
Wff.OctiVY dato.
i3 it- i.., .. i n ; i LaLor" of tin State of. Florida:
_�t i 4)n L . ��: ct ion 125. 0167, Florida Statutes, is
r a t i t, r a :_i :
nn.ul"7 Discretionary surtax on excise tax on
documents; adoption; application of revenue.--
(►.XHIBI P "A")
0
approre•i on f inal vote by a majority of the total membership of
thF governing authority.
(3) Pevenues from the discretionary surtax shall be
deposited in thF, Home Ownership and Renters' Assistance Loan
Tri.r ;t i',lnd of ttv_ runty ind used (.)nly for the purposes of
carrying oat the program of the county, as set forth in its
Low .ind moderate income families
to finr_inct-, do pur,_:frasF or rentaL of homes and apartments.
ti. on 201..031, Florida Statutes, is
.)Le,i tc:, r,:,J.1:
'Ji .031. �,�.: ;.rctLrnary surtax; administration and
11etion and RF?nters' Assistance Loan Trust
F,�:;i; rr ;;;>� r. i•,: rr:.1 : r rr:r;r<>:lt::. --
c:l _,),I Ity rn�I_, Ievy, suc)lect to the provisions
tion-iry surtax on those documents taxed
_i W: t r:ri: cn:rE:tf_r, up to an amount equal to
cri,_ipter, except tnat there shall
s. 201..02 When the
r ,:r co:iv yance involves only a
1•. ,:,'r , r=:1,:'C S+�C:I in, -family residence
i unit ri- 1d through stock ownership or
prOpr ietary interest in a corporation
..'ni 1e jsF hold initially in excess of ninety-eight
or r dot.ic!i• -i iwelt iny.
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P.
(2) The De par tmen t o f Revenil e -,ha L L p,ay a L 1 taxes
collected under this section to the governing authority of the
county which levies the Surtax for deposit into the Homy
Ownership and Renters' Assistance Loan Prust Fend of the
county. The funds may be ised for :any purposefor which fends
deposited in the trust funds of the county may be used as
provided in s. L25.0L67(3), and also may cue used to pay the
cost of collecting and enforcing the tax Levied under this
section.
(3) Each county Levying the surtax shall slihmit, in
its financial report to the Department of Banking and Finance
as required under s. 218.32, information :snowing ttne revenues
and the expenses of the fund.
Section 3. This act shall tare effect JuLy 1, L983.
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CITY OF MIAMI. FLCR:CA
IN'T F2.OFFICE MEMORANDUM
Howard V. Gary,
City Manager
Randolph B. Rosencrantz,
Assistant City Manager
November 3, 1982
DATEFILE
Pooled Cash for Capital Projects
RErEPENCES
ENCLOSURES
Capital projects included in the Capital Improvement Program Budget
may be funded from a variety of sources. Some projects are funded
entirely by General Obligation Bonds; others are funded by FP&L
Franchise Revenues; others by federal or state grants; additionally,
some projects may be funded by a combination of the above sources.
The purpose of this memorandum is to discuss utilizing the concept
of "pooled cash" as an accounting technique relating to the actual
expenditure of dollars for a capital project.
Capital projects not funded by General Obligation Bonds or Revenue
Bonds are considered viable projects when the City Commission has
made an appropriation based on available funding. Capital projects
which are funded in whole or part by General Obligation Bonds require
three specific events to occur before they can be considered as a
viable project.
a. Authority to incur General Obligation Debt must be approved
by the voters (referendum).
b. The referendum must be validated through the court system.
c. The City Commission must, by appropriation ordinance, appropriate
funds for the project.
The concept of pooling cash is a generally accepted accounting practice.
This concept provides essentially that all funds for the Capital Im-
provement Program (except Revenue Bonds) is placed in a "pool of
funds" available to fund those projects which meet existing legal
criteria as a capital project. This pooling of cash permits local
jurisdictions greater flexibility in determining the timing for
entering the bond market and generally reduces interest cost since
under the "pooled cash" concept, Bond Funds (borrowed funds) are the
last to be spent on the project. Additionally, the pooling of cash
permits the opportunity to increase interest earnings. The identity
of all revenue coming into this pool and expenditures going out of the
pool are clearly maintained. However, since there are a variety of
revenue sources coming into the pool, the specific identity of any
given dollar is not maintained. Expenditures from the pool are'made
only for projects properly and legally appropriated by the City Com-
mission and in accordance with any other appropriate requirements.
Ski 55
ft
To: Howard V. Gary,
City Manager
Page 2 of 2 Date; November 3, 1982
It is prudent to always maintain a certain level of cash in the
pool. When it appears that the revenues coming into the pool
from non -bond sources is insufficient to maintain the desired level,
then it is appropriate to sell General Obligation Bonds and place
that money into the pool. Since we must pay interest on bond dollars,
it is generally an accepted practice to not place those funds in the
pool until all other sources have been utilized. Attachment #1
illustrates the concept of pooled cash.
On June 7, 1982 the Law Office, in response to our ingiury, indicated
that they could find no "pertinent charter and code sections and
statutory provision, ..." to prohibit utilizing this concept. They
further indicate this concept was discussed with Bond Counsel, Brown,
Wood, Ivey, Mitchell & Petty, and they concur with the conclusions of
the Law Office. A copy of that decision is attached.
Additionally, we asked the independent auditors, Coopers & Lybrand,
to comment on this concept and they concur in its implementation making
several suggestions to improve the appropriate monitoring. A copy of
their letter dated October 14, 1982 is attached.
RBR: to
Att: (1) Diagram
(2) Memo from Law Office of 6/7/82
(3) Coopers & Lybrand letter of 10/14/82
Rr3�.s`J
CITY OF MIAMI. FLORIDA
INTER -OFFICE MEMORANDUM
?O Randolph B. Rosencrantz
Assistant City Manager
FROM
JGe a F. Knox, Jr.
Cit Attorney
DATE FILE82-40
June 71, 1982 A-1854
SUBJECT Request for Legal Opinion
REFERENCES
Pooled Cash Concept on use
of Bond Funds
ENCLOSURES
This is in response to your recent request for a legal opinion
on essentially the following question:
"WHETHER THE USE OF POOLED CASH FOR PRO-
JECTS FOR WHICH THE CITY HAS A SPECIFIC
LEGAL OBLIGATION TO BE FUNDED IN WHOLE
OR IN PART BY BOND DOLLARS, BUT FOR WHICH
BONDS HAVE NOT YET BEEN SOLD, MAY BE USED
TO FUND THOSE PROJECTS UNTIL SUCH TIME AS
THE BONDS ARE SOLD?"
The answer is in the affirmative.
Pertinent Facts:
The City's Capital Projects are funded in whole or part by
General Obligation Bonds. Projects funded in this fashion
must first be approved by referendum, appropriated by the
City Commission and the referendum must be validated through
the court system. After these processes have occurred expen-
ditures for that specific project may be incurred. It is not
necessary for the actual bonds to be sold before incurring
expenditures since the City operates on a pooled cash basis.
The concept of pooled cash is used universally throughout the
nation and permits a jurisdiction to maximize its investment
opportunities through the concentration of cash in one major
account. The identity of all revenue coming into this pool
and expenditures going out of the pool are clearly maintained.
However, since there are a variety of revenue sources coming
into the pool, the specific identity of any given dollar is
not maintained. Expenditures from the pool are made only for
projects properly and legally appropriated by the City Commis-
sion and in accordance with any other appropriate require-
ments. In the case of Capital Program, the pool is funded by
801 JJ
4
Coopers
&Lybrand
October 14, 1982
certified public accountants
Randolph B. Rosencrantz
Assistant City Manager
City of Miami
3500 Pan American Drive
Miami, Florida 33133
Dear Randy:
1 S. E 3rd Avenue
(AmeriFirst Building)
Suite 2900
Miami, Florida 33131
telephone (305) 358-6363
C V*
in principal areas of the world
RE: Capital Projects Funding
As you requested and as we previously discussed, I have reviewed
the contents of Howard Gary's May 5, 1982 memo to George Knox,
City Attorney, and his subsequent legal opinion related thereto
dated June 7, 1982, regarding capital projects funding (copies
attached).
From an accounting standpoint, I see no problem with using the
pooled cash concept on the use of bond funds and other revenues
with respect to capital projects financing, as described in
your memo. The advantages are to minimize interest costs to the
City and to be able to penetrate the bond market at an optimum
time. The concept is used by other governmental entities.
The concept does have to be applied with close monitoring, and
the following points should be considered:
• Adequate and timely individual capital project fund records
must be maintained to insure that the financial status of
each project is clearly available on a current basis.
• The appropriate "replenish level" and "stop commitment
level' must be established and monitored so that indivi-
dual projects do not force the City into the market place
at an inappropriate time due to an overall shortage of
funds - or to have to resort to short term financing
alternatives.
• If capital projects are to be financed by federal or state
grant funds, the City must be able to prove that such
grant revenues were only utilized on projects for which they
are intended. This is no problem if the City is on a
grant vouching (reimbursement) method of payment with the
to'
Randolph B. Rosencrantz
Assistant City Manager
City of Miami
October 14, 1982
Page 2
grantor agency, since funds will not be received until
expended. However, if the City is on a letter of credit
drawdown basis, the City must be able to demonstrate that
grant funds were appropriately expended on authorized
projects within a specified period of time after drawdown.
• The existence of authorized but unexercised bonding
capacity should be disclosed in the notes to the financial
statements, as well as the City's policy for recognizing
interest income/expense on capital projects funds.
• All future bond agreements and grant contracts should be
reviewed to be certain that they contain no language
that would otherwise prohibit the use of the procedures
employed under the pooled cash concept.
A key point in the City Attorney's memo of June 7, 1982 that
should be emphasized is "... we can find no prohibition to
this pooled concept so long as, it is understood that once the
funds are "borrowed" from the pool, the City obliges itself to
subsequently sell the bonds already authorized to replenish a
like amount to the pool".
As the City's accounting reporting system continues to improve,
you will have additional flexibility to adopt these more inno-
vative concepts.
The issue of the accounting for interest earnings on capital
projects funds, which Carlos Garcia raised in his letter of
September 30, 1982, can be dealt with separately from this
issue of the pooled cash concept when our fieldwork begins.
If you have any questions, or wish to discuss this further,
please give me a call.
Sincerely,
Sharon C. Brown
Enclosure - As stated
CC: Fernando D. Fernandez, Sanson, Kline, Jacomino & Co.
W. B. Koon, CPA
N3-5 3
4h
Ln
Randolph B. Rosencrantz
Assistant City Manager -2- June 7, 1982
Federal Grants, State Grants, Franchise Tax revenue, miscel-
laneous revenue as well as proceeds from the sale of General
Obligation Bonds. It is prudent to always maintain a certain
level of cash in the pool. When it appears that the revenues
coming into the pool from non -bond sources is insufficient to
maintain the desired level then it is appropriate to sell
General Obligation Bonds and place that money into the pool.
Since we must pay interest on bond dollars, it is generally
an accepted practice to not place those funds in the pool
until all other sources have been utilized.
A review of the foregoing pertinent facts revealed that all
of the legal prerequisites have been met, short of the actual
sale of the bonds, which are largely dependent upon market
conditions as to when is advantageous for the City to sell.
Upon further review of the pertinent Charter and Code sections
and Statutory provisions, we can find no prohibition to this
pooled cash concept so long as, it is understood that once the
funds are "borrowed" from the pool, the City obliges itself to
subsequently sell the bonds already authorized to replenish a
like amount to the pool. This concept has been discussed with
our bond counsel, Brown, Wood, Ivey, Mitchell and Petty and
they are in concurrence with our analysis and conclusions as
to the permissibility of this pooled cash concept.
PREPARED AND APPROVED BY:
TERRY V. PE CY
Deputy City Attorney
GFK/TVP/wpc/0
SOURCES
OF DOLLARS
FEDERAL GRANTS
STATE GRANTS
FP L FRANCHISE
INTEREST
REVENUE SALE OF LAND
OTHER
G.O. BONDS
Cf•�P1T�•�L PRU.J=T aUNC}
FEWI RIER CLASH CONC�FPT"
REPLENISH LEVEL
STOP COMMITMENT LEVEL _._..
USES
ENGINEERING SERVICES
INDIRECT CHARGES
CONSTRUCTION CONTRACTS
LAND ACQUISITION
OTHER
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