Item T3
BOARD OF COUNTY COMMISSIONERS
AGENDA ITEM SUMMARY
Meeting Date: August 20. 2003
Division:
County Administrator
Bulk Item Yes No X Department: County Administrator
AGENDA ITEM WORDING:
Presentation of a Debt Capacity Report from Public Financial Management, the County's financial
advisor and action by the Board of County Connnissioners, as appropriate.
ITEM BACKGROUND:
At the meeting of the Board of County Connnissioners in July of 2003, in conjunction with the
discussion of the acquisition of environmental sensitive lands, the BOCC asked for a report concerning
the availability of funds for either direct purchase or bonding of the cost of the acquisition of such
environmentally sensitive lands. The Administrator and staff have worked with Public Financial
Management to review the options available. In addition, there is the possibility of utilizing, on a one
time basis, existing funds from the Land Authority. The reports will be completed and submitted to the
Commission prior to the August meeting.
PREVIOUS RELEVANT BOCC ACTION:
As above.
CONTRACT/AGREEMENT CHANGES:
N/A
STAFF RECOMMENDATIONS:
Discussion by the Board of County Commissioners and approval to proceed, as appropriate.
TOTAL COST:
Unknown
BUDGETED: Yes
No
COST TO COUNTY:
Unknown
SOURCE OF FUNDS:
REVENUE PRODUCING: Yes
No
AMOUNTPERMONTH_ Year
APPROVED BY: County Atty _ OMB/Purchasing ~ Risk Management _
DIVISION DIRECTOR APPROVAL:
-=---.;~~
James L. Roberts
DOCUMENTATION:
Included
To Follow X
Not Required_
DISPOSITION:
AGENDA ITEM #
T?
AGENDA ITEM WITH LATE DOCUMENTATION
DIVISION: County Administrator
DEPARTMENT: County Administrator
SUBJECT: Presentation of a Debt Capacity Report from Public
Financial Management. the County's financial advisor and action
by the BOCC as appropriate.
DATE ITEM WILL BE AVAILABLE: August 15. 2003
BOARD OF COUNTY COMMISSIONERS
AGENDA ITEM SUMMARY
Meeting Date: August 20, 2003
Divisiory.
County Administrator
Bulk Item Yes No X Department: County Administrator
AGENDA ITEM WORDING:
Presentation of a Debt Capacity Report from Public Financial Management, the County's fmancial
advisor and action by the Board of County Commissioners, as appropriate.
ITEM BACKGROUND:
At the meeting of the Board of County Commissioners in July of 2003, in conjunction with the
discussion of the acquisition of environmental sensitive lands, the BOCC asked for a report concerning
the availability of funds for either direct purchase or bonding of the cost of the acquisition of such
environmentally sensitive lands. The Administrator and staff have worked with Public Financial
Management to review the options available. In addition, there is the possibility of utilizing, on a one
time basis, existing funds from the Land Authority. The reports will be completed and submitted to the
Commission prior to the August meeting.
PREVIOUS RELEVANT BOCC ACTION:
As above.
CONTRACT/AGREEMENT CHANGES:
N/A
ST AFF RECOMMENDATIONS:
Discussion by the Board of County Commissioners and approval to proceed, as appropriate.
TOTAL COST:
Unknown
BUDGETED: Yes
No
COST TO COUNTY:
Unknown
SOURCE OF FUNDS:
REVENUE PRODUCING: Yes _ No _ AMOUNT PER MONTH_ Year
APPROVED BY: County Atty _ OMB/Purchasing ~ Risk Management_
DIVISION DIRECTOR APPROVAL:
---J_~
James L. Roberts
DOCUMENTATION:
Included -L
To Follow
Not Required_
DISPOSITION:
AGENDA ITEM #
--J
l--.J
DEBT CAPACITY REPORT
In conjunction with consideration . of the potential acquisition of
environmentally sensitive lands (ESL), the Board of County Commissioners
instructed the Administration to have a Debt Capacity Report prepared for the
August, 2003 BOCC Meeting. The purpose was to evaluate the potential funding
available, either for direct acquisitions or for debt financing for the purpose of
purchasing ESL.
Attached to this memorandum are two documents. The first is a
memorandum from the Executive Director of the Land Authority in reference to
the availability of Land Authority RaGO reserves. The second is the report as
prepared by Public Financial Management. In summary the conclusions reached
are as follows:
LAND AUTHORITY
The Executive Director has identified approximately $3.4 million in RaGa
reserves. This amount, or part of it, could be available to assist the County in its
ESL purchases. The funds are not suitable for debt financing. If the Board of
County Commissioners/Land Authority chooses to utilize these funds, it may be
necessary to have an amendment to the Comprehensive Plan. The Board should
also be aware that there are other potential uses for these funds whi~h may be
necessary due to requirements for administrative relief for ROGO applicants and
the resolution of litigation.
LOCAL GOVERNMENT INFRASTRUCTURE SALES SURTAX (FUND 304)
This one percent sales surtax is utilized to support the capital program for
the County. It is presently programmed through 2019. Use of these funds is
appropriate for the intended purpose; however, use of these funds for the
support of long range debt would require the elimination of anticipated and
programmed capital projects. PFM suggests that by utilizing approximately $5
million per year for fifteen years and wrapping the existing debt ($21,455,000)
into the total package, there could be approximately $56 million of new debt
available for ESL.
GUARANTEED ENTITLEMENT
These funds are sent to the County under the Florida Revenue Sharing Act
of 1972 through a formula. These funds support other general government
services. The County would see an addition of only about $360,000 per year
available for debt support; however, using these funds for that puroose would
require the raising of ad valorem taxes to replace them in the budget.
HALF CENT SALES TAX
Once again this is revenue-shared from the State by formula. The
approximate $5.3 million projected to be received would produce about $30
million in bond capacity; however, once again these funds are utilized to support
the County budget and dedicating them to debt support would require the raising
of ad valorem taxes.
TOURIST IMPACT TAXES
An approximate $1 million per year would not produce a significant level
of debt capacity even if it could be utilized. These funds are presently included
in the Land Authority budget.
FOUR CENT GAS TAX (NEW PROPOSAL)
One idea that has recently surfaced is the possibility of a legislative
change to allow the County to impose a four cent additional tax on each gallon
of gasoline sold. There would need to be a County-wide referendum in order for
this to occur or an Ordinance adopted by the Board of County Commissioners.
The theory is that the legislative change would allow this to occur only for areas
of Critical State Concern. Four cents would produce approximately $2.4 million
per year and support a $17 million/15 year debt capacity.
STATE PARK SURCHARGES
The surcharges charged by the Department of Environmental Protection
and parks in the County produces for the land Authority approximately $350,000
per year. This would produce only a $2.2 million debt capacity. Funds can be
used to acquire ESL or affordable housing property. These revenues are also
utilized to support the General Fund general government operations.
COVENANT TO BUDGET AND APPROPRIATE (CBA)
CSA basically means the utilization of the County's non ad valorem
revenues (where allowable) to support debt. An analysis indicates that there
may be approximately $40 million of those funds available after reduction of
certain government budgeted expenditures; however. that money is dedicated to
support various aspects of the County budget and would have to be replaced
(probably by ad valorem taxes) if utilized for ESL.
AD VALOREM REVENUES
The County is able to use ad valorem revenues to support debt. In
essence, general obligation bonds are issued and, if directly secured by ad
valorem millage, would require a voter-approved referendum. PFM has done an
analysis of one mill of increased ad valorem revenue and one quarter mill of
increased ad valorem revenue. Their numbers are conservative and suggest one
mill would produce $11 million per year based on Fiscal Year 2002 and one
quarter mill would produce nearly $3 million per year (the actual amounts would
be slightly higher based upon new property values). These would produce
substantial debt financing opportunities in the range of $60 million (one mill) or
approximately $47 million (one quarter mill). The issue here is the raising of
additional millage and the possible need to take the question to referendum.
..
Please review the EXECUTIVE SUMMARY in the PFM Report. That page
summarizes PFM's findings and feelings overall in reference to the potential for
debt financing. The last bullet in the Summary suggests that, if the County is to
proceed with the issuance of debt for. ESL, that utilizing a millage approach
would seem to be the most prudent at this time.
MONROE COUNTY LAND AUTHORITY
12()() THUMM, AVENIH-. SI;11T 2117. Kr'r WI''; I, hllllllM 33040
I'HlWI (l05) 2Q.'i.'i I HO . FAX (:\()~;) 2')5-51H I
MEMORANDUM
TO:
James L. Roberts, County Administrator
Mark J. Rosch, Executive Director M ~
Monroe County Land Authority ~
FROM:
DATE: August 8,2003
SUBJECT: Land Authority ROGO Reserve
Pursuant to Policy 101.6.2 of the Monroe County Year 2010 Comprehensive Plan, the Monroe
County Land Authority has established a budgetary reserve for the purchase of property to
provide administrative relief to ROGO applicants. Since FY 93, the Land Authority has set aside
35% of its recurring land acquisition revenue into this reserve. To date there have been no
expenditures from this reserve and thus the balance has grown over the years to its current
level of $3.4 million. The ROGO reserve in the proposed FY 04 budget is $3.8 million.
The County's ROGO ordinance has been in effect for 11 years. To date the Land Authority has
purchased property from six ROGO administrative relief applicants at a total cost of
approximately $800,000. All but $12,000 of this total was paid for With State funds that are no
longer available (Preservation 2000 funds appropriated to the land Authority by the Florida
Legislature)
The ROGO ordinance creates a contingent liability that is difficult to forecast. The variables
include: 1) how many property owners will choose to enter the ROGO competition; 2) how many
ROGO allocations will be available for the County to issue; 3) which applicants will compete
unsuccessfully for four years and become eligible for administrative relief; 4) which of the
eligible applicants will choose to apply for administrative relief; 5) what form of administrative
relief the Board will choose to offer; 6) how many eligible applicants will be willing sellers; and 7)
the purchase price for a given property.
As of the most recent ROGO ranking approved by the County PlannIng Commission (April 14,
2003). there were 305 applications denied a ROGO allocation Of these 305. 48 have already
been In ROGO for 4 years and have either declined the land Authority's purchase offer or have
not applied for administrative relief Depending on the outcome of future rankings, a maximum
of 23 additional applications may have been in ROGO for 4 years by this time next year.
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What bUdgetary impact will this situation have? It is impossible to know for sure. After 11
years. the impact has only been $800,000. Assuming an average assessed value of $45.000
per parcel. the assessed value of the 48 "4-year aids" is approximately $2.1 million. By this time
next year if the 23 /o3-year aids" are still in ROGO, the estimated assessed value of potential
administrative relief properties will be $3.2 million. The estimated assessed value of all 305
applications is $13.7 million. These figures are only rough estimates, but they illustrate the
potential order of magnitude involved and the high degree of uncertainty.
The land Authority's ROGO reserve was established pursuant to Policy 101.6,2 of the
Comprehensive Plan. Should the Board wish to use a portion of the reserve for acquisitions
outside of the ROGO administrative relief process, the Board should proceed by directing staff
to initiate a plan amendment.
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7.
Potential DcYC.:lopmcllt Credits (PDC!l) . All llpplicalll may have the option of
receiving positivc points. called Potential Development Credits (POes). for
transferring I.lcveloplllent rights away from a ~cllder site for development
proposed Oil an eligible receiver site, liS spcdtied in Objective 101.\3 Ilnd related
policies,
(.
Policy 101.5.8
The Residential Permit Allocation Ordinance shall be ameOlJcd to award a graduated
scale of positive points to dwelling units which are proposed for lots within legally
platted. recorded subdivisions. which are served by existing infrastructure. including at a
minimum pot4blc water, electricity and pav~d rondways, Maximum points shall be
awarded for those projects proposed within planed subdivisions which are 67% to 100%
built out; fewer points will be awarded for projects proposed for subdivisions JJ% . 61%
built out; and minimum points shall be awardcd for projects proposed for subdivisions 0 -
33% built out. The percentage of build out shall be based upon updated. accurate data
from the County's Geographic Information Systelll (GIS). The Ordinance shall be
amenued when thc pertinent information is readily available Oil the County's GIS.
Policy 101.5.9
Monroe County :shall allow for th~ development of multiple-family units within the
Permit Allocation System" If" project ranks high enough in the Point System for a
portion of the development to receive an allocation award, but the project includes more
units th3n are available during, an allocation period, the entire project may receive
allocation awards if the excess allocation is reduced trom the next alloc4tion perioc.l(s).
Multi-family affordable hou$ing or elderly housing projects !lhall be given priority"
(;
Policy 101~.10
Monroe County may develop a program, called Transfer of RooO Exemption (mE),
that would allow tor the transfer off-site of dwelling units, hotel rooms, recreational
vehicle spaces and mobile homes to lUlother site in the same ROGO sub-area. provided
that they are lawfully existing and can be accounted for in the County's hurricane
evacuation model In addition, the new site would not be eligible for any negative
environmental points under ROGO with the exception of those properties designated
Residential High. When a multiple-family housing dcvelopment utilizes a TRE. any other
units in that same project that are pennitted through the ROGO process may be eligible
for minor po!litive points on a one for one basis,
Obiective 101.6
Monroe County shall expand the Monroe County Land Authority acquisition program to provide
for the purchase of land from property owners who have not been awarded building pennit
allocations in the Pcnnit Allocation System.
Policy 101.6.1
MOllme County shall, upon a property owner's request, purchase property for fair market
vahu.: or permit the mlllim\l/ll u:asonablc economic II~C or the property, if the properly
owner meets th~ following conditions:
I.
they hilV~ been d~l\icd an allocilllon award for li)ur successive years in tl~e Penn it
Allocation Syslcm; ,
IhClr propused ~h:ydoplllcnl ollll.:rwlsc IIIcets all applicable county, state, and
federal rcgulatiolls; ,
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2.
3.1.30
PollCV OOCOIT'''''' . Monroa Counry rellr 20tO Compr.h.~.I". Plan
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their allocation application hll~ nllt been wlthurawn;
4. Ihey have I;omplieu with all the re'I"Ifc:ment.. of the Permit AlloClltilln Syslem;
and
s. they follow the procedures (or aJlllllustrative relief contained in thc Dwelling
Unit Alloc,ltion Ordinance,
As used In this Policy, "minimum rCilsonable economic use" shall mean, as applied to
any rcsillcntially zoned lot of record which was buildable immediately prior to the
effective date of the Plan, no less than a singh,:-family residence. "Fair market value"
shall be an amount which is no less than ad valorelll valuation in the Monroe County
Real Property Tax Roll for the year 1992.
Policy 101.6.2
By fiscal year 1998, the Monroe County l.and Authority shall dedicate a minimum of JS
percent of its annual budget each year for ".Ie purpose of acquiring land from qualified
property owners as defined by Policy 101.6.1. Funds accumulated from this source shall
be reserved for the acquisition of land from clualificd property owners.
Policy 101.603
Dy January 4, 1998, Monroe County !>hall identify potential funding sources and seek
funding from Slate, federal, and/or private sources tu bc used for acquisition of land from
q\lalifil:d property owners as defined by Policy 101.6.1.
Policy 101.6.4
The County will coordinate with DCA to ensure that DCA continues to support enhanced
land acquisition cfforts in the Keys based on needs identified in this comprehensive plan.
This coordination shall ensure continued support of state acquisiticlrI efforts under CARL,
Preservation 2000 ;lnd the Florida Communities Trust programs. The County and the
Department will also support appropriate legislative change, which will have the effect
of enhancing the l.and Authority efforts throughout the County, and the South Florida
Water Managemcnt District's acquisitions on Big rine Key. Similarly, cooperation will
continue wilh private acquisition efforts, such as The Nature Conservancy and the
Florida Land and Sea Trust.
Policy IOt.6.5
Monroe County shall annually compile a list prioritizing the lands requested for County
acquisllion due to the Permit Allocation System. The lands of the property owners who
meet the criteria ill Policy 101.6.1 shall be ranked accun.lmg 10:
I. the environlllcntal sensitivity of the vegetative h"bilat, marine resources, and impacts
to the quality of near shore waters as specitied by the ranking in the Environment..1
Dcslgn Cratena section of the Land Development Regulations;
2 whelher the properly is in known, probable. and/or potential habit:\l for one or more
Ihrcal~lIcd and/or cllc.langerct.l species. as indicated on the most recent I)rntccted
Alumal M:\ps; and
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MONROE COUNTY, FLORIDA
Debt Capacity Report
August 20, 2003
Public Financial Management, Inc.
10100 Deer Run Farms Road
Suite 20 I
Fort Myers, FL 33912
Monroe County Debt Capacity Report
August 20, 2003
EXECUTIVE SUMMARY
· Public Financial Management, Inc. ("PFM") has examined Monroe County's eXIstmg
revenue sources and determined the estimated debt capacity of each to aid in the funding of
environmentally sensitive land ("ESL") purchases.
· The County has the option of pledging either non-ad valorem or ad valorem revenues.
· The County's Guaranteed Entitlement, Half-Cent Sales Tax, Infrastructure Sales Surtax
(Fund 304) and Covenant to Budget and Appropriate revenues have the capacity to secure
bonded debt on a stand-alone basis. However, these revenues are currently tied to long-term
capital projects and operational expenses. Over reliance on these revenues for bonded debt
service will result in an increase of ad valorem millage in order to balance the County's
budget. Use of Fund 304 to pay debt service will result in the elimination of anticipated
capital projects.
· Florida statutory limit for ad valorem millage is 1 0 mills. The County has proposed an ad
valorem millage of 4.4756 mills. A slight millage increase for operational expenses would
not require voter approval. However, the issuance of bonded debt secured by ad valorem tax
revenues would require a voter-approved referendum.
· The County's total assessed value has grown by an average of approximately 7.8 percent
over the past five fiscal years.
· 14 mill ad valorem tax revenues will generate an average of$5.4 million in revenues over the
next 15 years at an assumed 7.8 growth percentage. This is sufficient to support a $47
million ESL financing.
· PFM recommends that the County proceed with an issuance of Limited General Obligation
(14 mill ad valorem tax) Bonds, Series 2003, to support the acquisition of ESL.
Public Financial Management
Page I
Monroe County Debt Capacity Report
August 20, 2003
I. INTRODUCTION
Public Financial Management, Inc. ("PFM"), as Financial Advisor to Momoe County ("County"),
has examined the County's existing revenue sources and determined the estimated debt capacity of
each to aid in the funding of environmentally sensitive land ("ESL") purchases.
The premise underlying debt financing of ESL purchases is that the rate of price inflation on land in
the Florida Keys greatly exceeds the interest rate on municipal bonds under almost any imaginable
scenario. In addition, such unique lands may be spoiled beyond reasonable restoration by the time
pay-as-you-go ("P A YGO") financing becomes available to save a particular site. Thus, both cost
savings and urgency justify issuance of municipal bonds for ESL purchases.
This Debt Capacity Report summarizes the County's existing debt and available revenue streams
that could support debt service payments, identifies existing commitments of those revenues and
calculates the par amount of bonds that could be issued within the constraint of the annual average
debt service computed. A key element in that calculation is "coverage," the extent to which pledged
revenues must exceed related debt service. More volatile, less reliable revenue streams suggest
higher coverage ratios are needed to attain investment grade ratings and qualify for bond insurance.
PFM recognizes the County maintains a balanced budget; that is, every dollar of revenue is
committed to an appropriation for operations, capital expenditures or debt service. A new program,
such as ESL purchases, requires reallocation of existing revenues, increases in rates or appropriation
of revenue growth.
II. EXISTING BONDED DEBT: GENERAL FUND
The County may use its General Fund revenues to secure an ESL financing. As of August 2003, the
County has limited General Fund bonded debt outstanding. The following page includes a
breakdown of the County's General Fund bonded debt service, including securities, existing
covenants and other details.
Public Financial Management
Page ::
Monroe County Debt Capacity Report
I S,lIC
;\lnOlllll
D:lll'd
DcliwT,'
Insurance
Raling~
S"Curi1\
lhnhr
Cd] I' r<i\lsion s
i\BTT,',1
Rate Cu\'cIJ:lnt
Maturity
2003
2004
2005
2006
2007
2008
lssllc
.\moun1
Dated
Ddi\'l'fI
Insurance
R:lt1l1g'
Sccmil','
L' ndcfI\l'1tcr
Call Pro\'lsions
.\13'1' Tnl
Rate Covenant
Maturity
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
August 20, 2003
Guaranteed Entitlement Revenue Refunding Note, Series 2002
3,495,144
12/19/2002
12/19/2003
N/A
Guaranteed Entitlment
SunTrust
No Prepayment Penalty
L05X Pledged Revenues
N/A
Principal
541,359
556,045
571,254
590,663
609,146
626,677
Coupon
2.96%
2.96%
2.96%
2.96%
2.96%
2.96%
Interest
103,456
87,432
70,973
54,064
36,580
18,550
Debt Service
644,815
643,477
642,227
644,727
645,727
645,227
Infrastructrue Sales Surtax Revenue Bonds, Series 2003
21,455,000
3/4/2003
3/26/2003
MBIA
A3/A
One Cent Infrastructure Sales Surtax
William R. Hough & <::ompany
10 years @ par
1.30X Pledged Revenues
N/A
Principal
1,105,000
1,145,000
1,170,000
1,205,000
1,240,000
1,285,000
1,335,000
1,385,000
1,445,000
1,505,000
1,575,000
1,645,000
1,720,000
1,805,000
1,890,000
Coupon
2.00%
2.00%
2.00%
2.00%
2.40%
2.75%
3.00%
3.25%
3.40%
3.50%
3.60%
3.70%
3.75%
4.00%
4.00%
III. EXISTING REVENUES SOURCES
Interest
683,696
652,230
629,330
605,930
581,830
552,070
516,733
476,683
431,670
382,540
329,865
273,165
212,300
147,800
75,600
Debt Service
1,788,696
1,797,230
1,799,330
1,810,930
1,821,830
1,837,070
1,851,733
1,861,683
1,876,670
1,887,540
1,904,865
1,918,165
1,932,300
1,952,800
1,965,600
PFM has included the following section summarizing the existing County revenue sources that may
be used to secure a financing of ESL. The revenue amounts are based upon the County's FY2004
Proposed Budget and FY2002 CAFR. While the County's low level of indebtedness may indicate
Public Financial Management
Page 3
Monroe County Debt Capacity Report
August 20, 2003
that there is capacity to issue future debt on a senior lien basis (i.e. bondholders that have achieved
"senior-lien" status on a particular County revenue stream will have a prior claim to that revenue),
only a fraction of the County's annual revenues are actually available to support debt service as
these funds will be used for operational expenses, P A YGO capital expenditures and the possible
issuance of additional bonded debt down the road.
Local Government Infrastructure Sales Surtax (Fund 304)- The Local Government
Infrastructure Surtax is levied at one cent pursuant to an ordinance enacted by a majority vote of the
County's governing body and approved by vote in a countywide referendum. Generally, the
proceeds of this revenue must be expended to finance, plan, and construct infrastructure; to acquire
land for public recreation or conservation or protection of natural resources.
In 1998, the infrastructure surtax was voted in to secure the Infrastructure Sales Surtax Bonds.
Series 1998. In 2000, the County's share of this tax declined due to the incorporation of Marathon.
Currently, the County has voted in the infrastructure surtax to secure the Infrastructure Sales Surtax
Bonds, Series 2003 ($21,455,000). This tax expires in 2018.
Summary of Revenue
. FY2004 Proposed Revenues: $10,500,000
· Bonded Debt Pledged to Revenue: Infrastructure Sales Surtax Bonds. Series 2003
· Average Annual Debt Pledged to Revenue: $1.8 million/year
· Use of Additional (Unused) Revenues: Funding of the Monroe County Board Capital
Plan, including dedicated amounts for wastewater, solid waste and land acquisition
· Use of these funds for support of debt would require the elimination of anticipated
capital projects
Guaranteed Entitlement-The Florida Revenue Sharing Act of 1972 was a major attempt by the
Legislature to ensure a minimum (guaranteed) level of revenue parity across units of local
government. Provisions in the enacting legislation created the Revenue Sharing Trust Fund for
Municipalities. Currently, the trust fund receives 2.9 percent of the net cigarette tax collections and
2.25 percent of sales and use tax collections. An allocation formula serves as the basis for the
distribution of these "guaranteed entitlement" revenues to each County that meets the strict
eligibility. There are no use restrictions on these revenues; however, there are some statutory
limitations regarding funds that can be used as a pledge of indebtedness. Currently. the only bonded
debt secured by the County's Guaranteed Entitlement is the Revenue Refunding Note, Series 2003
($3.495,144).
Summary of Revenue
· FY2004 Proposed Revenues: $1,000,000
· Bonded Debt Pledged to Revenue: Revenue Refunding Note, Series 2003
· A verage Annual Debt Pledged to Revenue: $640,000/year
· Use of Additional (Unused) Revenues: Funneled into General Fund to support general
government operations
· Use of these funds for support of debt would require raising ad valorem taxes
Public Financial Management
Page -I
Monroe County Debt Capacity Report
August 20, 2003
Half-Cent Sales Tax-Created in 1982, the Half-Cent Sales Tax Program generates the largest
amount of revenue for local governments among the state-shared revenue sources curr~ntly
authorized by the Legislature. It distributes net sales tax revenue to counties and municipalities that
meet strict eligibility requirements. Allocation formulas serve as the basis for this distribution to
each County and its respective municipalities. The program's primary purpose is to provide relief
from ad valorem and utility taxes in addition to providing counties and municipalities with revenues
for local programs. Currently, the County allocates Half-Cent sales tax revenues between its General
Fund (45 percent) and its Planning, Building and Zoning Fund (55 percent). Currently, the County
has no bonded debt secured by this revenue stream.
Summary of Revenue
. FY2004 Proposed Revenues: $5,300,000
· Bonded Debt Pledged to Revenue: None
· Average Annual Debt Pledged to Revenue: None
· Use of Additional (Unused) Revenues: Funneled into the General Fund to support
general government operations and the Planning, Building and Zoning Fund to
support the operations of the Growth Management Division.
· Use of these funds for support of debt would require raising ad valorem taxes
Tourist Impact Taxes-The tourist impact tax is levied at the rate of 1 cent on most rents, leases or
lets, living accommodations in hotels, motels, apartment houses, rooming houses, mobile home
parks, and the like. The taxes are collected and ;;t.dministered by the Florida Department of Revenue.
Counties may use this revenue source to acquire ESL. Currently, the County receives approximately
$1 million in tourist impact tax revenues each year.
Summary of Revenue
. Estimated Annual Revenues: $1,000,000
· Bonded Debt Pledged to Revenue: None
· Average Annual Debt Pledged to Revenue: None
· Use of Additional (Unused) Revenues: Funneled into the General Fund to support
general government operations.
4 Cent Gas Tax-Local governments are authorized to levy a tax up to 6 cents on every net gallon
of motor fuel sold in the County. The tax may be authorized by an ordinance adopted by a majority
vote of the Board of County Commissioners or voter approval in a countywide referendum.
Generally counties are authorized to utilize the tax only for transportation such as street lighting,
bridge maintenance public transportation operations and maintenance and roadway drainage to
name a few. In addition, small counties that have a total population of 50,000 or less on April 1,
1992 are authorized to use the proceeds to fund infrastructure projects. Depending on the use of the
land to be purchased. the County may not be able to use this revenue as a funding without a special
exemption from the State. Legal Counsel should be consulted prior to finalizing the financing plan.
Public Financial Management
Page 5
Monroe County Debt Capacity Report
August 20, 2003
Summary of Revenue
. Estimated Annual Revenues: $2,400,000
. Bonded Debt Pledged to Revenue: None
. Average Annual Debt Pledged to Revenue: None
State Park Surchare:es-Currently, the Department of Environmental Protection ("DEP") imposes
and collects a surcharge of 50 cents per person per day on admission to all state parks in areas of
critical state concern located in a county, and a surcharge of $2.50 per night per campsite, cabin, or
other overnight recreational occupancy unit in state parks. The proceeds from these surcharges, less
a collection fee that is to be kept by DEP for the actual cost of collection, is transmitted to the
Monroe County Land Authority. Such funds shall be used to purchase ESL or affordable housing.
The state park surcharges will remain imposed as long as the Monroe County Land Authority is in
existence.
Summary of Revenue
. Estimated Annual Revenues: $350,000
. Bonded Debt Pledged to Revenue: None
· Average Annual Debt Pledged to Revenue: None
Covenant to Bude:et and Appropriate-The County's Covenant to Budget and Appropriate
("CBA") revenues represent all legally available non-ad valorem revenues (i.e., the surplus of Total
Governmental Funds Revenues over Public' Safety, General Government and Debt Service
expenses). The County uses its CBA revenues to fund necessary County projects and services on a
P A YGO basis. The following is the calculation of the County's CBA revenues, based on numbers
found in the County's FY2002 CAFR:
Revenues
Total Governmental Funds I
2
Less: Ad Valorem Revenues
Total Revenues
$160,412,640
(54,584,047)
$105,828,593
Expenditures
Essential and Mandated Expenditures:
Public Safetyl
I
General Government
Debt Service)
Total Essential & Mandated Expenditures
Ad Valorem Support of Expenditures2
Net Expenditures
Legally Available Non-Ad Valorem Revenues
82,854,954
31,214,821
6,049,706
120,119,481
(54,584,047)
65,535.434
$40,293,159
I Monroe County FY2002 CAFR, pg. E-5
2 Monroe County FY2002 CAFR, pg. H-l
Public Financial Management
Page 6
Monroe County Debt Capacity Report
August 20, 2003
Summary of Revenue
· FY2004 Proposed Revenues: $40,293,159
· Bonded Debt Pledged to Revenue: None
· Average Annual Bonded Debt Pledged to Revenue: None
· Use of Additional (Unused) Revenues: Funneled into the General Fund to support
general government operations and Special Revenue Fund to support various
earmarked services.
· Use of these funds for support of debt would require raising ad valorem taxes
Ad Valorem Revenues- Ad valorem taxes may be used for any general gove~ent purpose up to
the Florida 10-mill statutory limit. A levy of millage above this 10-mill limit would entail voter
approval of a referendum seeking the additional taxing authority. Currently, the County has
proposed an ad valorem tax millage of 4.4756, and would not require a referendum to raise this
millage up to 10 mills to cover operational expenses. However, an issuance of General Obligation
bonds secured by the County's ad valorem millage would require a voter-approved referendum.
Local governments may levy ad valorem taxes subject to the following limitations:
1) Ten mills for county purposes
2) Ten mills for municipal purposes
3) Ten mills for school purposes
4) A millage fixed by law j;>y a county furnishing municipal services
5) A millage authorized by law and approved by voters for special districts.
The State Constitution provides two exceptions to the 10-mill cap. The exceptions include a voted
millage not to exceed a period of two years. Additionally, no property may be subject to more than
20 mills of ad valorem tax for municipal and county purposes without elector approval, regardless
of the property's location, under the State Constitution. For example, Duval County/City of
Jacksonville is a consolidated government; therefore, it has a 20-mill cap since it operates as both a
county and municipal government. Currently, the County has no debt secured by its ad valorem
revenues.
Summary of Revenue
· County's FY2002 Total Ad Valorem Assessed Value: $11.3 billion (1 mill of this
amount equals $11.3 million; 'l4 mill of this amount equals $2.8 million); County's
proposed FY2005 Total Ad Valorem Assessed Value $14.8 billion ($14.8 million)
· Bonded Debt Pledged to Revenue: None
· Average Annual Bonded Debt Pledged to Revenue: None
· Use of Additional (Unused) Revenues: Used to balance budget in light of capital
expenditures and services funded by non-ad valorem revenues
· Use of these ad valorem tax revenues for support of debt would require raising
millage
Public Financial Management
Page 7
Monroe County Debt Capacity Report
August 20, 2003
IV. PROPOSED REVENUE COVERAGE FACTORS
Typically with the issuance of debt, there are limitations related to certain coverage requirements
and additional bonds tests. Each revenue pledge is evaluated by financial institutions and bond
insurers based upon certain credit criteria to determine the necessary coverage requirements (i.e. the
ratio of total revenues to total debt service). For stronger credits such as ad valorem taxes, the ratio
of revenues to debt service required by credit rating agencies is closer to 1 to 1, or 1.00 times
coverage. For weaker credits such as sales tax, the ratio is much greater than 1 to 1 (i.e., a much
higher coverage requirement). Higher coverage requirements will result in greater restriction of a
County revenue stream for anticipated capital projects or services. The tables below include the
actual coverage requirements for the County's General Fund revenues currently pledged to bonded
debt and estimated coverage requirements for the County's General Fund revenues not pledged to
bonded debt.
Pledged Revenues Coverage
One-Cent Infrastructure Surtax
Guaranteed Entitlement
1.30
1.05
Revenues not Pledged Estimated
Coverage
Half-Cent Sales Tax 1.30
Covenant to Budget & Appropriate 1.00
State Park Surcharge 1.30
Tourist Impact Tax 1.30
Ad Valorem Tax Revenue 1.00
Limited (~ mill) Ad Valorem Tax 1.10
Revenue 3
4 Cent Gas Tax 1.50
v. CURRENT INTEREST RATE MARKET
Interest rates have a significant impact on the debt capacity of any given revenue. As interest rates
rise debt capacity will decrease and vice versa. Therefore, any estimated debt capacity may change
on a daily basis as the market fluctuates. Today's interest rates are at five-year low levels and
therefore increase the County's debt capacity. The chart on the following page illustrates the 10-
Year Treasury, 20-Year General Obligation Bond and 25-Revenue Bond rates over the past five
years:
4 Limited ad valorem debt could result in a higher required coverage level than ad valorem debt because the issuer
cannot raise the millage above '.I.. to pay debt service. In an ad valorem issue, the issuer receives voter approval to
adjust the millage as necessary to pay debt service.
Public Financial Management
Page 8
Monroe County Debt Capacity Report
August 20, 2003
Interest Rates
Last Five Years
7.0
6.5
6.0
5.5
=
"
u 5.0
....
"
~
4.5
4.0
3.5
3.0
12/04/97 12/03/98 12/03/99
12/01/00
11/30/01
11/29/02
,"-IO-Year TSY -20 GO Bond -25 Re,o Bond I
I I
VI. AD VALOREM DEBT CAPACITY SCENARIOS
PFM has provided scenarios to analyze the available debt capacity for the County's ad valorem and
limited ad valorem (Y-t mill) tax revenues. The County has expressed an interest in using ad valorem
tax revenues to fund the acquisition of ESL. PFM has recently advised Sarasota and Alachua
Counties on issuing limited ad valorem tax bonds to fund the acquisition of ESL. Along with the Y-t
mill ad valorem tax, we have also explored the viability of using ad valorem tax revenues (1 mill) as
a source of ESL funding.
The FY2002 tax base to which our assumed millage applies is currently $11.3 billion, yielding
$11.3 million in I-mill ad valorem tax revenues and $2.8 million in Y-t mill ad valorem tax revenues.
Additionally due to the timing, the County would not be able to levy additional millage until FY
2005. If this took place the County could receive $14.8 million in 1 mill ad Valorem tax revenues.
Since the County's ad valorem assessed value grew by an average of approximately 7.8 percent over
the past five fiscal years, we have assumed this growth percentage in our scenario. The following
are other major assumptions in each scenario:
· Bonds are amortized for a term of 15 years
· Debt service in each scenario is calculated using current market rates for a Florida ad
valorem credit
· Cost of Issuance is estimated at $200,000; Underwriter's Discount is estimated at $6.00 per
bond; and Bond Insurance is estimated at 35 basis points of total debt service
· Par Amount of 114 mill ad valorem ($47.1 million) and I-mill ad valorem ($60 million)
scenarios are conservative to account for any shortfalls in the assumed ad valorem tax
Public Financial Management
Page 9
Monroe County Debt Capacity Report
August 20, 2003
growth rate of 7.8 percent and the County's ongoing need to fund operational expenses with
ad valorem tax revenues
Scenario 1: Level Debt Service Scenario: Ad Valorem Revenues Increasine: at 7.8 PercentlYr.
50
Level Debt Service Scenario
One Mill Ad Valorem Revenues Increasing at 7.8% Per Year
5
2005 21116 2007 2008 20CS 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
45
40
35
30
..
c:
co
S25
:E
...
20
15
10
o
I-oebt SelV1ce -+-Revenues I
In Fiscal Year 2005, the County could receive approximately $15 million in I-mill ad valorem tax
revenues available to secure General Obligation bonded debt. General Obligation debt, backed by
the full faith and credit of the County, is subject to only 1.00x coverage restriction. The above chart
demonstrates that the County has significant capacity for General Obligation debt at I-mill
assuming that the FY2002 ad valorem assessed value continues to grow by 7.8 percent each year in
line with five-year historical trends. Given the low coverage levels required by General Obligation
debt and the County"s low General Obligation debt burden, it has the capacity to issue nearly $305
million in I-mill ad valorem debt over the next 15 years at the 7.8 percent growth rate. However,
given the County's reliance on ad valorem taxes for operational expenses, PFM suggests that the
County issue $60 million in bonds for 15 years secured by this revenue stream. This results in
approximately $5.5 million in debt service each year and approximately $136 million in additional
revenues over this period to fund operational expenses or additional bonded debt.
Public Financial Management
Page 10
Monroe County Debt Capacity Report
August 20, 2003
Scenario 2: Level Debt Service Scenario: Limited Ad Valorem Revenues Increasin2 at 7.8
Percent/Y r.
10
9
8
7
6
'"
c
o
== 5
:IE
...
4
3
2
o
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
1- Debt S~lVjce ..... Revenues i
In 2003, the County will receive approximately $2.8 million in Y4 mill ad valorem tax revenues
available to secure Limited General Obligation bonded debt. Limited General Obligation debt,
backed by the County's Y4 mill ad valorem tax revenues, is usually subject to only I.OOx coverage
restriction. The above chart demonstrates that the County has significant capacity for Limited
General Obligation debt assuming that the FY2002 ad valorem assessed value grows by 7.8 percent
in line with historical trends. Given the low coverage levels required by Limited General Obligation
debt and the County's low Limited General Obligation debt burden, it has the capacity to issue
approximately $81.6 million in Y4 mill ad valorem tax debt over the next IS years assuming a 7.8
percent assumed growth rate. However, given the County's reliance on ad valorem taxes for
operational expenses, we have provided the County with a IS-year, $47.1 million bond issuance
scenario that guarantees the County at least 1. lOx coverage from 2004 through 2007 and 1.30x in
the out years. This results in approximately $4.4 million in debt service each year and approximately
$16.9 million in unused quarter mill revenues to fund operational expenses or additional bonded
debt.
VII. NON-AD VALOREM FINANCING SCENARIOS
While ad valorem tax revenues are likely the best source to secure an ESL financing, PFM has also
calculated scenarios for the County's General Fund non-ad valorem revenues. Currently, General
Fund revenues are tied to long-term capital projects and services. Over reliance on these revenues
for bonded debt service will result in an increase of ad valorem millage to fund operational
expenditures. To ensure that the County still has considerable funding capacity following a 2003
Public Financial Management
Page II
Monroe County Debt Capacity Report
August 20, 2003
bond issue for ESL, we have assumed that the County issues bonds secured by each revenue stream
at a par amount well below maximum debt capacity.
PFM has summarized the results of the debt capacities completed for each of the County's General
Fund non-ad valorem credits. For revenue streams that are likely to generate at least $15 million
over the next IS-years, PFM assumed that the County issues bonds with those revenues. However,
for those revenue streams that are likely to generate less than $15 million over a IS-year period,
PFM assumed that the County issues a IO-year private placement note with those revenues. The
estimated interest rates are based upon market rates for August 2003.
Public Financial Management
Page /2
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MONROE. COUNTY, FLORIDA
Debt Capacity Report
August 20, 2003
Public Financial Management, Inc.
10100 Deer Run Farms Road
Suite 201
Fort Myers, FL 33912
Monroe County Debt Capacity Report
August 20, 2003
EXECUTIVE SUMMARY
· Public Financial Management, Inc. ("PFM") has examined Monroe County's eXIstmg
revenue sources and determined the estimated debt capacity of each to aid in the funding of
environmentally sensitive land ("ESL") purchases.
· The County has the option of pledging either non-ad valorem or ad valorem revenues.
· The County's Guaranteed Entitlement, Half-Cent Sales Tax, Infrastructure Sales Surtax
(Fund 304) and Covenant to Budget and Appropriate revenues have the capacity to secure
bonded debt on a stand-alone basis. However, these revenues are currently tied to long-term
capital projects and operational expenses. Over reliance on these revenues for bonded debt
service will result in an increase of ad valorem millage in order to balance the County's
budget. Use of Fund 304 to pay debt service will result in the elimination of anticipated
capital projects.
· Florida statutory limit for ad valorem millage is 10 mills. The County has proposed an ad
valorem millage of 4.4756 mills. A slight millage increase for operational expenses would
not require voter approval. However, the issuance of bonded debt secured by ad valorem tax
revenues would require a voter-approved referendum.
· The County's total assessed value has grown by an average of approximately 7.8 percent
over the past five fiscal years.
· 1;4 mill ad valorem tax revenues will generate an average of $5.4 million in revenues over the
next 15 years at an assumed 7.8 growth percentage. This is sufficient to support a $47
million ESL financing.
· PFM recommends that the County proceed with an issuance of Limited General Obligation
(1;4 mill ad valorem tax) Bonds, Series 2003, to support the acquisition ofESL.
Public Financial Management
Page 1
Monroe County Debt Capacity Report
August 20, 2003
I. INTRODUCTION
Public Financial Management, Inc. ("PFM"), as Financial Advisor to Monroe County ("County"),
has examined the County's existing revenue sources and determined the estimated debt capacity of
each to aid in the funding of environmentally sensitive land ("ESL") purchases.
The premise underlying debt financing of ESL purchases is that the rate of price inflation on land in
the Florida Keys greatly exceeds the interest rate on municipal bonds under almost any imaginable
scenario. In addition, such unique lands may be spoiled beyond reasonable restoration by the time
pay-as-you-go ("P A YGO") financing becomes available to save a particular site. Thus, both cost
savings and urgency justify issuance of municipal bonds for ESL purchases.
This Debt Capacity Report summarizes the County's existing debt and available revenue streams
that could support debt service payments, identifies existing commitments of those revenues and
calculates the par amount of bonds that could be issued within the constraint of the annual average
debt service computed. A key element in that calculation is "coverage," the extent to which pledged
revenues must exceed related debt service. More volatile, less reliable revenue streams suggest
higher coverage ratios are needed to attain investment grade ratings and qualify for bond insurance.
PFM recognizes the County maintains a balanced budget; that is, every dollar of revenue is
committed to an appropriation for operations, capital expenditures or debt service. A new program,
such as ESL purchases, requires reallocation of existing revenues, increases in rates or appropriation
of revenue growth.
II. EXISTING BONDED DEBT: GENERAL FUND
The County may use its General Fund revenues to secure an ESL financing. As of August 2003, the
County has limited General Fund bonded debt outstanding. The following page includes a
breakdown of the County's General Fund bonded debt service, including securities, existing
covenants and other details.
Public Financial Management
Page 2
Monroe County Debt Capacity Report
Maturity
2003
2004
2005
2006
2007
2008
Maturity
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
August 20, 2003
Guaranteed Entitlement Revenue Refunding Note, Series 2002
3,495,144
12/19/2002
12/19/2003
N/A
Guaranteed Entitlment
SunTrust
No Prepayment Penalty
1.05X Pledged Revenues
N/A
Principal
541,359
556,045
571,254
590,663
609,146
626,677
Coupon
2.96%
2.96%
2.96%
2.96%
2.96%
2.96%
Interest
103,456
87,432
70,973
54,064
36,580
18,550
Debt Service
644,815
643,477
642,227
644,727
645,727
645,227
Infrastructrue Sales Surtax Revenue Bonds, Series 2003
21,455,000
3/4/2003
3/26/2003
MBIA
A3/A
One Cent Infrastructure Sales Surtax
William R. Hough & Company
10 years @ par
1.30X Pledged Revenues
N/A
Principal
1,105,000
1,145,000
1,170,000
1,205,000
1,240,000
1,285,000
1,335,000
1,385,000
1,445,000
1,505,000
1,575,000
1,645,000
1,720,000
1,805,000
1,890,000
Coupon
2.00%
2.00%
2.00%
2.00%
2.40%
2.75%
3.00%
3.25%
3.40%
3.50%
3.60%
3.70%
3.75%
4.00%
4.00%
III. EXISTING REVENUES SOURCES
Interest
683,696
652,230
629,330
605,930
581,830
552,070
516,733
476,683
431,670
382,540
329,865
273,165
212,300
147,800
75,600
Debt Service
1,788,696
1,797,230
1,799,330
1,810,930
1,821,830
1,837,070
1,851,733
1,861,683
1,876,670
1,887,540
1,904,865
1,918,165
1,932,300
1,952,800
1,965,600
PFM has included the following section summarizing the existing County revenue sources that may
be used to secure a financing of ESL. The revenue amounts are based upon the County's FY2004
Proposed Budget and FY2002 CAFR. While the County's low level of indebtedness may indicate
that there is capacity to issue future debt on a senior lien basis (i.e. bondholders that have achieved
Public Financial Management
Page 3
Monroe County Debt Capacity Report
August 20, 2003
"senior-lien" status on a particular County revenue stream will have a prior claim to that revenue),
only a fraction ofthe County's annual revenues are actually available to support debt service as these
funds will be used for operational expenses, P A YGO capital expenditures and the possible issuance
of additional bonded debt down the road.
Local Government Infrastructure Sales Surtax (Fund 304)- The Local Government
Infrastructure Surtax is levied at one cent pursuant to an ordinance enacted by a majority vote of the
County's governing body and approved by vote in a countywide referendum. Generally, the
proceeds of this revenue must be expended to finance, plan, and construct infrastructure; to acquire
land for public recreation or conservation or protection of natural resources.
In 1998, the infrastructure surtax was voted in to secure the Infrastructure Sales Surtax Bonds,
Series 1998. In 2000, the County's share of this tax declined due to the incorporation of Marathon.
Currently, the County has voted in the infrastructure surtax to secure the Infrastructure Sales Surtax
Bonds, Series 2003 ($21,455,000). This tax expires in 2018.
Summary of Revenue
. FY2004 Proposed Revenues: $10,500,000
· Bonded Debt Pledged to Revenue: Infrastructure Sales Surtax Bonds, Series 2003
· Average Annual Debt Pledged to Revenue: $1.8 million/year
· Use of Additional (Unused) Revenues: Funding of the Monroe County Board Capital
Plan, including dedicated amounts for wastewater, solid waste and land acquisition
· Use of these funds for support of debt would require the elimination of anticipated
capital projects
Guaranteed Entitlement-The Florida Revenue Sharing Act of 1972 was a major attempt by the
Legislature to ensure a minimum (guaranteed) level of revenue parity across units of local
government. Provisions in the enacting legislation created the Revenue Sharing Trust Fund for
Municipalities. Currently, the trust fund receives 2.9 percent of the net cigarette tax collections and
2.25 percent of sales and use tax collections. An allocation formula serves as the basis for the
distribution of these "guaranteed entitlement" revenues to each County that meets the strict
eligibility. There are no use restrictions on these revenues; however, there are some statutory
limitations regarding funds that can be used as a pledge of indebtedness. Currently, the only bonded
debt secured by the County's Guaranteed Entitlement is the Revenue Refunding Note, Series 2003
($3,495,144).
Summary of Revenue
· FY2004 Proposed Revenues: $1,000,000
· Bonded Debt Pledged to Revenue: Revenue Refunding Note, Series 2003
· Average Annual Debt Pledged to Revenue: $640,000/year
· Use of Additional (Unused) Revenues: Funneled into General Fund to support general
government operations
· Use of these funds for support of debt would require raising ad valorem taxes
Public Financial Management
Page 4
Monroe County Debt Capacity Report
August 20, 2003
Half-Cent Sales Tax--created in 1982, the Half-Cent Sales Tax Program generates the largest
amount of revenue for local governments among the state-shared revenue sources currently
authorized by the Legislature. It distributes net sales tax revenue to counties and municipalities that
meet strict eligibility requirements. Allocation formulas serve as the basis for this distribution to
each County and its respective municipalities. The program's primary purpose is to provide relief
from ad valorem and utility taxes in addition to providing counties and municipalities with revenues
for local programs. Currently, the County allocates Half-Cent sales tax revenues between its General
Fund (45 percent) and its Planning, Building and Zoning Fund (55 percent). Currently, the County
has no bonded debt secured by this revenue stream.
Summary of Revenue
· FY2004 Proposed Revenues: $5,300,000
· Bonded Debt Pledged to Revenue: None
· Average Annual Debt Pledged to Revenue: None
· Use of Additional (Unused) Revenues: Funneled into the General Fund to support
general government operations and the Planning, Building and Zoning Fund to
support the operations of the Growth Management Division.
· Use of these funds for support of debt would require raising ad valorem taxes
Tourist Impact Taxes-The tourist impact tax is levied at the rate of 1 cent on most rents, leases or
lets, living accommodations in hotels, motels, apartment houses, rooming houses, mobile home
parks, and the like. The taxes are collected and administered by the Florida Department of Revenue.
Counties may use this revenue source to acquire ESL. Currently, the County receives approximately
$1 million in tourist impact tax revenues each year.
Summary of Revenue
· Estimated Annual Revenues: $1,000,000
· Bonded Debt Pledged to Revenue: None
· Average Annual Debt Pledged to Revenue: None
· Use of Additional (Unused) Revenues: Funneled into the General Fund to support
general government operations.
4 Cent Gas Tax-Local governments are authorized to levy a tax up to 6 cents on every net gallon
of motor fuel sold in the County. The tax may be authorized by an ordinance adopted by a majority
vote of the Board of County Commissioners or voter approval in a countywide referendum.
Generally counties are authorized to utilize the tax only for transportation such as street lighting,
bridge maintenance public transportation operations and maintenance and roadway drainage to
name a few. In addition, small counties that have a total population of 50,000 or less on April 1,
1992 are authorized to use the proceeds to fund infrastructure projects. Depending on the use of the
land to be purchased, the County may not be able to use this revenue as a funding without a special
exemption from the State. Legal Counsel should be consulted prior to finalizing the financing plan.
Summary of Revenue
· Estimated Annual Revenues: $2,400,000
Public Financial Management
Page 5
Monroe County Debt Capacity Report
August 20, 2003
· Bonded Debt Pledged to Revenue: None
· Average Annual Debt Pledged to Revenue: None
State Park Surchar2es--currently, the Department of Environmental Protection ("DEP") imposes
and collects a surcharge of 50 cents per person per day on admission to all state parks in areas of
critical state concern located in a county, and a surcharge of $2.50 per night per campsite, cabin, or
other overnight recreational occupancy unit in state parks. The proceeds from these surcharges, less
a collection fee that is to be kept by DEP for the actual cost of collection, is transmitted to the
Monroe County Land Authority. Such funds shall be used to purchase ESL or affordable housing.
The state park surcharges will remain imposed as long as the Monroe County Land Authority is in
existence.
Summary of Revenue
· Estimated Annual Revenues: $350,000
· Bonded Debt Pledged to Revenue: None
· Average Annual Debt Pledged to Revenue: None
Covenant to Bud2et and Appropriate-- The County's Covenant to Budget and Appropriate
("CBA") revenues represent all legally available non-ad valorem revenues (i.e., the surplus of Total
Governmental Funds Revenues over Public Safety, General Government and Debt Service
expenses). The County uses its CBA revenues to fund necessary County projects and services on a
PA YGO basis. The following is the calculation of the County's CBA revenues, based on numbers
found in the County's FY2002 CAFR:
Revenues
Total Governmental Funds!
Less: Ad Valorem Revenues2
Total Revenues
$160,412,640
(54.584.047)
$105,828,593
Expenditures
Essential and Mandated Expenditures:
Public Safety!
General Government!
Debt Service!
Total Essential & Mandated Expenditures
Ad Valorem Support of Expenditures2
Net Expenditures
Legally Available Non-Ad Valorem Revenues
82,854,954
31,214,821
6.049.706
120,119,481
(54.584.047)
65.535.434
$40,293,159
I Monroe County FY2002 CAFR, pg. E-5
2 Monroe County FY2002 CAFR, pg. H-l
Public Financial Management
Page 6
Monroe County Debt Capacity Report
August 20, 2003
Summary of Revenue
· FY2004 Proposed Revenues: $40,293,159
· Bonded Debt Pledged to Revenue: None
· Average Annual Bonded Debt Pledged to Revenue: None
· Use of Additional (Unused) Revenues: Funneled into the General Fund to support
general government operations and Special Revenue Fund to support various
earmarked services.
· Use of these funds for support of debt would require raising ad valorem taxes
Ad Valorem Revenues- Ad valorem taxes may be used for any general government purpose up to
the Florida 10-mill statutory limit. A levy of millage above this 10-mill limit would entail voter
approval of a referendum seeking the additional taxing authority. Currently, the County has
proposed an ad valorem tax millage of 4.4756, and would not require a referendum to raise this
millage up to 10 mills to cover operational expenses. However, an issuance of General Obligation
bonds secured by the County's ad valorem millage would require a voter-approved referendum.
Local governments may levy ad valorem taxes subject to the following limitations:
1) Ten mills for county purposes
2) Ten mills for municipal purposes
3) Ten mills for school purposes
4) A millage fixed by law by a county furnishing municipal services
5) A millage authorized by law and approved by voters for special districts.
The State Constitution provides two exceptions to the 10-mill cap. The exceptions include a voted
millage not to exceed a period of two years. Additionally, no property may be subject to more than
20 mills of ad valorem tax for municipal and county purposes without elector approval, regardless of
the property's location, under the State Constitution. For example, Duval County/City of
Jacksonville is a consolidated government; therefore, it has a 20-mill cap since it operates as both a
county and municipal government. Currently, the County has no debt secured by its ad valorem
revenues.
Summary of Revenue
· County's FY2002 Total Ad Valorem Assessed Value: $11.3 billion (1 mill of this
amount equals $11.3 million; l!4 mill of this amount equals $2.8 million); County's
proposed FY2005 Total Ad Valorem Assessed Value $14.8 billion ($14.8 million)
· Bonded Debt Pledged to Revenue: None
· Average Annual Bonded Debt Pledged to Revenue: None
· Use of Additional (Unused) Revenues: Used to balance budget in light of capital
expenditures and services funded by non-ad valorem revenues
· Use of these ad valorem tax revenues for support of debt would require raising
millage
Public Financial Management
Page 7
Monroe County Debt Capacity Report
August 20, 2003
IV. PROPOSED REVENUE COVERAGE FACTORS
Typically with the issuance of debt, there are limitations related to certain coverage requirements
and additional bonds tests. Each revenue pledge is evaluated by financial institutions and bond
insurers based upon certain credit criteria to determine the necessary coverage requirements (i.e. the
ratio of total revenues to total debt service). For stronger credits such as ad valorem taxes, the ratio
of revenues to debt service required by credit rating agencies is closer to 1 to 1, or 1.00 times
coverage. For weaker credits such as sales tax, the ratio is much greater than 1 to 1 (i.e., a much
higher coverage requirement). Higher coverage requirements will result in greater restriction of a
County revenue stream for anticipated capital projects or services. The tables below include the
actual coverage requirements for the County's General Fund revenues currently pledged to bonded
debt and estimated coverage requirements for the County's General Fund revenues not pledged to
bonded debt.
Pkdgt.'d I{t.', t.'II ill'S ('0\ t.'ragt.'
One-Cent Infrastructure Surtax
Guaranteed Entitlement
1.30
1.05
I~t.', t.'IIUt.'S not Pkdgt.'d Estimatt.'d
('0' t.'ragt.'
Half-Cent Sales Tax 1.30
Covenant to Budget & Appropriate 1.00
State Park Surcharge 1.30
Tourist Impact Tax 1.30
Ad Valorem Tax Revenue 1.00
Limited (~ mill) Ad Valorem Tax 1.10
Revenue 3
4 Cent Gas Tax 1.50
V. CURRENT INTEREST RATE MARKET
Interest rates have a significant impact on the debt capacity of any given revenue. As interest rates
rise debt capacity will decrease and vice versa. Therefore, any estimated debt capacity may change
on a daily basis as the market fluctuates. Today's interest rates are at five-year low levels and
therefore increase the County's debt capacity. The chart on the following page illustrates the 10-
Year Treasury, 20- Year General Obligation Bond and 25-Revenue Bond rates over the past five
years:
4 Limited ad valorem debt could result in a higher required coverage level than ad valorem debt because the issuer
cannot raise the millage above Y4 to pay debt service. In an ad valorem issue, the issuer receives voter approval to
adjust the millage as necessary to pay debt service.
Public Financial Management
Page 8
Monroe County Debt Capacity Report
August 20, 2003
Interest Rates
Last Five Years
7.0
6.5
6.0
5.5
<=
"
u 5.0
...
"
...
4.5
4.0
3.5
3.0
12/04/97 12/03/98 12/03/99
12/01/00
11/30/01
11/29/02
l-lO-Year TSY - 20 GO Bond - 25 Rev Bond I
VI. AD VALOREM DEBT CAPACITY SCENARIOS
PFM has provided scenarios to analyze the available debt capacity for the County's ad valorem and
limited ad valorem ('i4 mill) tax revenues. The County has expressed an interest in using ad valorem
tax revenues to fund the acquisition of ESL. PFM has recently advised Sarasota and Alachua
Counties on issuing limited ad valorem tax bonds to fund the acquisition of ESL. Along with the 'i4
mill ad valorem tax, we have also explored the viability of using ad valorem tax revenues (1 mill) as
a source of ESL funding.
The FY2002 tax base to which our assumed millage applies is currently $11.3 billion, yielding $11.3
million in I-mill ad valorem tax revenues and $2.8 million in 'i4 mill ad valorem tax revenues.
Additionally due to the timing, the County would not be able to levy additional millage until FY
2005. If this took place the County could receive $14.8 million in 1 mill ad Valorem tax revenues.
Since the County's ad valorem assessed value grew by an average of approximately 7.8 percent over
the past five fiscal years, we have assumed this growth percentage in our scenario. The following are
other major assumptions in each scenario:
· Bonds are amortized for a term of 15 years
· Debt service in each scenario is calculated using current market rates for a Florida ad
valorem credit
· Cost of Issuance is estimated at $200,000; Underwriter's Discount is estimated at $6.00 per
bond; and Bond Insurance is estimated at 35 basis points of total debt service
· Par Amount of 'i4 mill ad valorem ($47.1 million) and I-mill ad valorem ($60 million)
scenarios are conservative to account for any shortfalls in the assumed ad valorem tax
Public Financial Management
Page 9
Monroe County Debt Capacity Report
August 20, 2003
growth rate of 7.8 percent and the County's ongoing need to fund operational expenses with
ad valorem tax revenues
Scenario 1: Level Debt Service Scenario: Ad Valorem Revenues Increasin!!: at 7.8 PercentlYr.
50
Level Debt Service Scenario
One Mill Ad Valorem Revenues Increasing at 7.8% Per Year
5
45
40
35
30
..
=
..
=25
i
20
15
10
o
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
1_ Debt SelVice -+- Revenues I
In Fiscal Year 2005, the County could receive approximately $15 million in I-mill ad valorem tax
revenues available to secure General Obligation bonded debt. General Obligation debt, backed by
the full faith and credit of the County, is subject to only 1.00x coverage restriction. The above chart
demonstrates that the County has significant capacity for General Obligation debt at I-mill assuming
that the FY2002 ad valorem assessed value continues to grow by 7.8 percent each year in line with
five-year historical trends. Given the low coverage levels required by General Obligation debt and
the County's low General Obligation debt burden, it has the capacity to issue nearly $305 million in
I-mill ad valorem debt over the next 15 years at the 7.8 percent growth rate. However, given the
County's reliance on ad valorem taxes for operational expenses, PFM suggests that the County issue
$60 million in bonds for 15 years secured by this revenue stream. This results in approximately $5.5
million in debt service each year and approximately $136 million in additional revenues over this
period to fund operational expenses or additional bonded debt.
Public Financial Management
Page 10
Monroe County Debt Capacity Report
August 20, 2003
Scenario 2: Level Debt Service Scenario: Limited Ad Valorem Revenues Increasin!!: at 7.8
PercentlYr.
10
9
8
7
6
..
=
o
== 5
i
...
4
3
2
o
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
1_ Debt Service ~ Revenues I
In 2003, the County will receive approximately $2.8 million in If4 mill ad valorem tax revenues
available to secure Limited General Obligation bonded debt. Limited General Obligation debt,
backed by the County's If4 mill ad valorem tax revenues, is usually subject to only 1.00x coverage
restriction. The above chart demonstrates that the County has significant capacity for Limited
General Obligation debt assuming that the FY2002 ad valorem assessed value grows by 7.8 percent
in line with historical trends. Given the low coverage levels required by Limited General Obligation
debt and the County's low Limited General Obligation debt burden, it has the capacity to issue
approximately $81.6 million in If4 mill ad valorem tax debt over the next 15 years assuming a 7.8
percent assumed growth rate. However, given the County's reliance on ad valorem taxes for
operational expenses, we have provided the County with a IS-year, $47.1 million bond issuance
scenario that guarantees the County at least 1. lOx coverage from 2004 through 2007 and 1.30x in
the out years. This results in approximately $4.4 million in debt service each year and approximately
$16.9 million in unused quarter mill revenues to fund operational expenses or additional bonded
debt.
VII. NON-AD VALOREM FINANCING SCENARIOS
While ad valorem tax revenues are likely the best source to secure an ESL financing, PFM has also
calculated scenarios for the County's General Fund non-ad valorem revenues. Currently, General
Fund revenues are tied to long-term capital projects and services. Over reliance on these revenues
for bonded debt service will result in an increase of ad valorem millage to fund operational
expenditures. To ensure that the County still has considerable funding capacity following a 2003
Public Financial Management
Page 11
Monroe County Debt Capacity Report
August 20, 2003
bond issue for ESL, we have assumed that the County issues bonds secured by each revenue stream
at a par amount well below maximum debt capacity.
PFM has summarized the results of the debt capacities completed for each of the County's General
Fund non-ad valorem credits. For revenue streams that are likely to generate at least $15 million
over the next IS-years, PFM assumed that the County issues bonds with those revenues. However,
for those revenue streams that are likely to generate less than $15 million over a IS-year period,
PFM assumed that the County issues a 10-year private placement note with those revenues. The
estimated interest rates are based upon market rates for August 2003.
Public Financial Management
Page 12
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