On April 30, 2008, Florida Power & Light Company (FPL) announced their proposal to modernize its power plant in Riviera Beach. The proposal was to convert the 280 megawatt coal-fired facility to a 1,250 megawatt combined natural gas facility with three units. The new proposed facility had an estimated construction cost of $1.3 billion. The FPL property on which the electricity generating facility sits is located within the Community Redevelopment District.
Based on the anticipated cost of construction for the new facility, the Community Redevelopment Agency (CRA) projected that the fiscal windfall to the CRA would be an increase in property tax revenue of approximately $10 million beginning in Fiscal Year 2016. Relying on their projections of future tax revenue from FPL, the CRA undertook an aggressive capital plan fueled by debt. In 2011 and again in 2013, the CRA issued stand-alone debt in a total of $29,235,000. This debt was in addition to previous debt commitments to the City for a 2006 Note and a 2009 Loan.
In May 2015, the City received preliminary taxable values from the Palm Beach County Property Appraiser. Preliminary assessments increased $1.1 billion over the prior year’s taxable values. Knowing that the FPL plant was coming onto the tax rolls for Fiscal Year 2016, the increase in overall values was much anticipated. What was not expected was that the CRA’s tax values would only increase $67 million and that the City’s values would increase over $1 billion. The fiscal impact of the FPL plant was an additional $6.8 million to the City.
The reason behind the shift in the anticipated values for the CRA to actual values for the City is the classification of FPL’s generating and transmission equipment. The equipment is classified by the Property Appraiser as “personal property”. Under Florida statutes, community redevelopment agencies only receive revenue for “real property”. “Real property” is generally defined as buildings and land. Therefore, the City, and not the CRA, was the beneficiary of the taxable values of the installed equipment.
The shifting of the taxable values from the CRA to the City has a significant impact on both parties. On June 3, 2015, the CRA Executive Director issued a memorandum advising the CRA Board of the budget implications on the CRA. The memorandum highlighted the inability of the CRA to fund future Marina upland improvements, Marina Upland operations, non-upland capital improvements and on-going programs.
On July 24, 2015 the CRA Executive Director submitted a memorandum dated July 8, 2015 to the City Manager requesting budgetary relief through the restructure of debt owed by the CRA to the City. During the budget process for both the City and the CRA, there were a number of public discussions and presentations regarding how best to allocate the increased FPL tax revenue between the City and the CRA. Considerable amount of discussion revolved around the structure of the ultimate assistance to be provided to the CRA by the City. After due consideration and deliberation, considering the financial needs of both parties and the impact certain decisions may have on the City’s bond rating and future borrowings, the decision was made to provide $3,917,028 to the CRA for Fiscal Year 2016.
1. $62,356 – Marina Operating Lease for the office space being provided for the Marina staff
2. $970,664 – Payment for common area charges on the Marina uplands
3. $1,466,980 – Funding for ongoing CRA programs such as small business loans, neighborhood services, ambassador program and special events
4. $500,000 – Reimbursement for ongoing and future capital project on the Marina Uplands
5. $917,028 – Capital for outdoor amenities, Avenue C reconstruction and Marina administrative office relocation
In addition to the cash funding, the Council authorized a restructuring of the Ocean Mall Loan providing for zero interest and an extended amortization/pay-off period.
As has been the standard operating procedure between the City and the CRA, all agreements between the parties are memorialized through interlocal agreement approved by both the City Council and the CRA Board.
If adopted, this Resolution authorizes execution of the Public Improvement Reimbursements Interlocal Agreement between the City and the CRA providing for an annual $500,000 reimbursement from the City to the CRA for ongoing and future capital projects at the Marina Uplands. The highlights of the Agreement are:
1. The $500,000 is a reimbursement to the CRA from the City for ongoing and future development of the Marina Uplands
2. The City will reimburse the CRA $500,000 in Fiscal 2016 on May 1, 2016.
3. Future reimbursements will be made on January 1 of each subsequent year.
4. The Agreement continues through January 1, 2034.
5. The CRA is prohibited from using the funds as security for bonding or otherwise financing capital projects.
The CRA Board previously approved a similar agreement on February 24, 2016. However, there are several differences between the two agreements. The CRA version:
1. Does not restrict the use of the funds to capital expenditures
2. Has the payment date as October 1st of each fiscal year
3. Does not contain the bonding/financing restriction.
The City’s Bond Counsel and Financial Advisor have provided input into the development of the Agreement as presented by the City to ensure that the City is not entering into an agreement that would cause a violation of bond covenants.
Entering into this Agreement will costs the City $9,500,000 over a 19-year period.