Don’t look now, folks, but the Florida Supreme Court has just fired a shot that may be heard around the redevelopment world. In Strand v. Escambia County, 2007 Fla. LEXIS 1598 the court held that while the use of TIF bonds pledging future tax revenues to repay them may continue to be used in the future, under the Florida Constitution the issuance of such bonds must be approved by the electorate. That means no more quiet, off-budget deals raising huge amounts of money for private redevelopers through upstart loans without the taxpayers’ say-so.
We don’t have the data for Florida, but out here in La-La Land outstanding bonded indebtedness for redevelopment has gone from $5 billion in 1985 to $61 billion in 2006, and counting. That is one hell of a lot of change to saddle local taxpayers with (without their knowledge or approval), particularly in a country that was founded on the idea that there should be no taxation without representation.
Will Strand stop redevelopment in Florida? Hardly. The process is too well entrenched and the beconing call of the “free lunch” of promised local prosperity too seductive to inspire the voters to shut off the money spigot altogether. But it sure will serve as a restraint on the more far-out redevelopment schemes proposed by wealthy, well-connected redevelopers who got to be the new Robber Barons. After all, redevelopment is nothing more than commercial development with the prefix “re” attached to it. It may be government-financed but it is a business activity that carries the usual market risks to those who would pursue it. Oh sure, those spiffy new malls look great, but some of them go under, leaving the local municipality and its bondholders holding the bag. As California Court of Appeal Justice Macklin Fleming put it in one of his opinions, redevelopers and their municipal allies promise a bigger economic pie with bigger shares for everyone. But, as Fleming also put it, the landscape is littered with failed projects whose promised bigger economic pie turned into pie in the sky.
So let’s stay tuned and see how the Strand court’s reasoning fares in Florida and how it influences the law in other states. One way or another, it should be interesting.
UPDATE: Responding to the panic stricken wails of Florida cities and counties, on September 28th the Florida Supreme Court issued a revised opinion clarifying that TIF bonds that had already been issued at the time of its original decision, are not subject to the new referendum requirement, but new ones will be. The revised opinion removes any issue with regard to bonds issued or validated prior to this opinion becoming final and they are unaffected. Additionally, the revised opinion removes any issue with regard to certificates or obligations issued in reliance upon State v. School Board of Sarasota County, 561 So. 2d 549 (Fla. 1990), and they are similarly unaffected. The court has scheduled rehearing oral arguments for October 9th. Stay tuned.