The state high court rules that voters -- not just governing bodies -- must approve financing plans.

The state high court rules that voters -- not just governing bodies -- must approve financing plans.
Mark Schlueb, David Damron and Aaron Deslatte

Sentinel Staff Writers

September 7, 2007

A surprise Florida Supreme Court ruling could imperil funding for Orlando's downtown sports and arts venues, and potentially jeopardize billions of dollars in public-school funding across the state.

Attorneys and financial experts were scrambling to figure out how the court's ruling Thursday in an Escambia County case might affect the $1.1 billion plan for a new performing-arts center, Orlando Magic arena and upgraded Citrus Bowl. The plan, long sought by Orlando Mayor Buddy Dyer and Orange County Mayor Rich Crotty, was just approved in July.

In a unanimous ruling, the high court said Thursday that any plan to use so-called "tax-increment financing" to pay for development projects would have to be approved by voters, instead of just a local governing board. The ruling stems from a fight in Escambia County, where the county wanted to use the financing option to widen a road along Perdido Key.

Such financing works by committing a portion of future property taxes to pay off bonds issued to widen roads, build sidewalks or make other public improvements. Two of the three downtown Orlando venues -- the performing-arts center and the Florida Citrus Bowl -- rely on about $150 million in tax-increment bonds backed by downtown property taxes.

"It could have some impact on how we finance the various venues," Deputy City Attorney Jody Litchford said. "We're going to look at the financing on [the performing-arts center] and the Citrus Bowl and see what this means."

'The next lightning storm'

The decision could also deliver a severe blow to school districts across Florida, officials said.

The Orange County school system, for instance, has about $1 billion of the type of debt addressed by the court and this year expects to borrow $131 million more. Many other growing districts use the same method.

"That's the next lightning storm on the horizon. It could significantly affect the way we build schools," Orange Schools Superintendent Ron Blocker said.

The Orange district uses the money primarily to build new schools, but the ruling could also affect a significant number of renovated schools that rely on property taxes, according to Rick Collins, the district's chief financial officer. Collins said it was too early to tell what the impact could be.

"But we're watching pretty closely what is going on there," he said.

The court's ruling, which overrides previous decisions, finds that "the Constitution requires that the people who are to pay the bill should be given an opportunity to approve the debt before it is incurred."

The court also makes clear it isn't invalidating the use of tax-increment financing or previous projects approved without public votes. It just means future tax-increment projects must be voted on first.

Still, "that's a bombshell," said veteran development lobbyist Wade Hopping, a former Supreme Court justice. "That will certainly cause some consternation."

Are venues affected?

While Orlando and Orange County leaders have approved the venues, they have not yet issued the bonds to pay for them, making it unclear whether the ruling would apply.

At the time of approval, commissioners rejected calls for a referendum. Three weeks ago, hotelier Harris Rosen launched a petition drive to try to get a venues question on a future ballot, with the hope that voters will overturn the politicians' decision.

Rosen's attorney, Ted Edwards, said the ruling signals the state's highest court looks favorably on referendums, though he would not say what impact it might have on his client's campaign.

Orange County Commissioner Fred Brummer -- one of two commissioners to vote against the venues -- supports Rosen's petition drive. The court's position could put pressure on city leaders to allow city residents to have a say on the venue plan, he said.

"I would be very pleased to see it on the ballot," Brummer said.

But Orlando officials say that isn't likely.

The city could change its financing plan so that the $150 million in bonds would be backed by a different source of revenue, they said, though it's not clear what source that would be. The venues plan first draws on other funding sources, including sales tax and tourist tax. City officials said there's plenty of time to come up with a solution and no reason not to proceed.

Counties seek clarification

In the meantime, Escambia County and the Florida Association of Counties are expected to ask the Supreme Court for a rehearing to clarify the court's intent and to get answers to questions raised by the ruling. Given the number of public projects across the state that might be affected, the court could act swiftly to bring that clarity.

But until that happens, the court's ruling -- coupled with the Legislature's recent overhaul of the state's property-tax system -- will make financing for many community facilities more difficult, Orange Commissioner Teresa Jacobs said.

"The bond market," she said, "is going to be looking more skeptically at Florida."

Erika Hobbs of the Sentinel staff contributed to this report.Mark Schlueb can be reached atmschlueb@orlandosentinel.comor 407-420-5417.David Damron can be reached atddamron@orlandosentinel.com or407-420-5311.Aaron Deslatte can be reached atadeslatte@orlandosentinel.comor 850-222-5564.

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