Special Assessment OverviewPresented to:

New Clerk AcademyMay 14, 2013

ORLANDO MIAMI300 S. Orange Avenue 255 Alhambra Circle Suite 1170 Suite 404Orlando, FL 32801 Coral Gables, FL 33134407-648-2208305-448-6992407-648-1323 fax 305-448-7131 fax5/14/2013

2

Presentation Outline

I. General Description of Special Assessments

II. Legal Considerations – Nabors, Giblin & Nickerson

III. Financing Considerations

IV. Property Assessed Clean Energy

I. General Description of Special Assessments

44

General Description

Local governments have many service and capital funding needs, from building or staffing new fire stations to construction of stormwater or road improvements, but they often don't have the funding to provide these services for their citizens. Florida's home rule authority allows local governments to collect charges from property owners for certain services and facilities through special assessments, which are a form of non-ad valorem fees.

Special assessments are charges assessed against the property of some particular locality because that property derives some special benefit from the expenditure of the money.

Special assessments fall under two categories: (i) service assessments and (ii) capital assessment.

Service assessments are items such as fire, garbage/solid waste and stormwater services that provide revenue for operating costs.Capital assessments are for construction of roads, stormwater facilities, fire stations, street lighting, beach re-nourishment and other capital projects. They are fixed according to the debt service schedule at assessment initiation, and end when the affected property owners pay off the borrowed amount.

5

Tax vs. Assessment

Is an assessment a tax? No.

SimilaritiesBoth generate revenue to pay for services and facilitiesBoth are mandatory and can be collected on the tax bill

6

Tax vs. Assessment

DifferencesTaxes AssessmentsNeed not benefit property Must specifically benefit

propertyAuthorization by general law Authorization by home rule

powersLegislature must prescribe a tax base

Local Governments may develop the rate of assessment and method of apportioning costs

7

Examples of Special Benefit

Fire Protection Road Improvements (Paving and O&M)BeautificationSidewalksStreet lightingParking FacilitiesDowntown RedevelopmentSolid WasteWater and Sewer ImprovementsStormwaterBeach Re-nourishment

8

Methods of Apportionment

A logical and factually driven method must be developed to spread the costs among the benefited properties. Methods of apportionment include:

Per Parcel or UnitLinear Front FootPhysical Use of PropertyRelative Proximity to FacilityAmount of Service/Facility RequiredSquare Footage of ImprovementsRelative Value of PropertyTrip GenerationCombination of Factors

9

Collection Methods

The method with which assessments are collected can have a significant impact on their ability to be bonded.

Uniform Collection Method (Tax Bill - Section 197.3632, Florida Statute).Separate BillUtility BillCombination of Methods

10

Collection Methods ― Pros and Cons

Tax Bill Separate Bill Utility Bill

Pro’s • Highest collection rate(95 – 98%)

• One bill with all charges• Use tax roll data from

Property Appraiser

• Deadlines set by local government

• Time frame set by local government

• Use tax roll from Property Appraiser Can use for government property

Deadlines set by local government• Time frame set by local

government Easier to charge exempt propertyCan use for government

Con’s • Strict deadlines• Strict time frame• Exempt property

information missing• Cannot use for

government property

Lowest collection rate (70 – 90%) More expensive to implement No full picture of charges Exempt property information

missing

Collection issues regardingnon-payment

Utility bill gets crowded Difficult to correlate utility accounts

to property uses (methodology issues)

May miss vacant property or thosewithout an utility account.

11

Procedures for Implementation

Notice of IntentDefine benefit or service areaDevelop apportionment methodologyCalculate initial/not to exceed ratesAdopt procedural ordinanceAdopt initial resolutionProvide for public noticePublic Hearing/Adopt final ratesCollect assessment

II. Legal Considerations – Nabors, Giblin & Nickerson (Refer to Separate White Paper)

III. Financing Considerations

1414

Bonding Special Assessments

Special Assessment Bonds can be issued to fund capital projects such as road improvements, water and sewer improvements, stormwater improvements, street lighting, and beach re-nourishment to name a few.The bonds are secured by and paid from special assessments collected from each affected property.Typically property owners are provided the opportunity to prepay (pay upfront) their fair share of the capital costs instead of being levied an annual assessment. Additionally prepayments of assessment are accepted during the term of the financing. As a result, optional prepayment flexibility on the bond is desired.

1515

Bonding Special Assessments – Credit Concerns

The expected annual assessment collections are equal to or slightly greater than the annual debt service payment due (minimal debt service coverage) which creates potential credit concerns for lenders.In order to mitigate these concerns the following should be considered when analyzing a potential financing:

Make-up of assessment base – developed vs. undeveloped propertyCollection method – uniform collection method (via property tax bill) creates strong incentive to payLien position – a lien on parity with ad valorem taxes is preferredTreatment of property upon sale – assessments typically stay in place upon transfer of property Debt service reserve fund – can provide liquidity in the event assessment are delinquent

1616

Bonding Special Assessments – Other Considerations

Due to the recent economic climate and real estate market crash, it has been increasingly difficult for local governments to find lenders willing to lend funds solely secured by special assessment even if all of the credit concerns on the prior page are addressed.For smaller projects ($10 MM or less) with shorter repayment terms (10 years or less), the most likely financing vehicle would be via a privately placed bank loan. Some financial institutions will require a back up pledge in order to provide the loan. This can be in the form of covenant to budget and appropriate from legally available non ad valorem revenues.

This creates a policy decision for elected officials as to whether the countywide general fund should be used for credit support on a financing that might not have countywide benefit.

IV. Property Assessed Clean Energy

1818

Property Assessed Clean Energy (PACE)

Local government makes funding available to commercial and residential property owners to finance the installation of qualifying improvements.Repayment is through a special assessment on the property tax bill; subject to same rights and requirements for the payment of taxes.Qualifying improvements include renewable energy, energy efficiency and wind resistance measures.

1919

Property Assessed Clean Energy (PACE)

Energy Efficiency: Improvements that reduce consumption through the efficient use of electricity, natural gas, propane, or other forms of energy include, for example: – Air and duct sealing and Insulation, windows; – HVAC systems and cooling energy recovery; – Daylight harvesting, lighting and lighting controls;– Electric vehicle charging equipment.

Renewable Energy: Any system in which the electrical, mechanical, or thermal energy is produced through hydrogen, Solar PV or thermal, geothermal, Biomass, biogas, ocean or wind.Wind Resistance Improvements: – Improving the strength of the roof deck attachment;– Creating a secondary water barrier to prevent water intrusion;– Installing wind-resistant shingles or storm shutters;– Installing gable-end bracing;– Reinforcing roof-to-wall connections.