The Loxahatchee Groves Town Council considered several funding options for road improvements on Tuesday, June 2.
Attorney Steve Sanford with the law firm Greenberg Traurig, which has been retained by the town to provide financial services, reviewed the financing options.
Sanford explained that in 2017, the town held a successful bond referendum wherein Loxahatchee Groves was authorized to issue revenue bonds not to exceed $6 million to finance roadway projects. The bonds would be secured by both the five-cent and one-cent local option gas tax.
“Those bonds can be issued in more than one series, and any series of bonds would have a term not exceeding 30 years,” Sanford said.
In addition, in 2019, the town held another successful bond referendum, which authorized the town to issue up to $4 million in special assessment bonds in one or more series to finance roadway improvements specifically on North B Road, Los Angeles Drive, San Diego Drive, 22nd Road North off C Road, Flamingo Drive and Raymond Drive.
The proceeds of these special assessment bonds would require a 50 percent contribution from the property owners benefiting from the roadway improvements. The source of repayment would be special assessments that can only be levied against land that receives special benefit from the roadway improvements financed by those bonds. The town would be responsible for the other 50 percent of the cost, with a portion of the proceeds to come theoretically from the sale of the gas tax revenue bonds. The maximum term of each series of special assessment bonds cannot exceed 11 years measured from the time of each issue.
“My interpretation of that referendum… would be the special assessment proceeds could only be used for those road projects,” he said. “The third option, which is something the town can do, they’re not obligated to issue the gas tax bonds or the special assessment bonds. They could hold another referendum and ask the voters to approve a general obligation bond.”
Sanford said the benefit of a general obligation bond is that it is not limited to property owners that may benefit from the project.
“If you pass the referendum, everybody would be paying their fair share pursuant to the town’s ad valorem tax levy,” he said. “I understand you may not want to put the burden on the taxpayers to pay for a general obligation bond completely.”
Sanford noted that the proceeds of a general obligation bond could also provide the 50 percent town obligation with respect to the special assessment projects approved by the 2019 referendum. He added that the town could use gas tax revenues or other legally available non-ad valorem funds to pay the debt service on the bonds. Any other source of repayment would result in a decrease in the amount of ad valorem taxes necessary to pay debt service.
Sanford said a general obligation bond could be sold through a general offering, which is expensive, and he did not recommend it. The town could issue bonds using a private placement through a bank, which would not commit to a term of more than 10 years.
A third option would be for the town to borrow through various bond programs established by the state, such as the Florida League of Cities.
Utilizing that program shifts all of the administrative responsibilities to that entity to include finding a willing financial institution through an RFP process, he said, adding that since the town does not have an established debt issuance history, that method to achieve its financing needs might be the best option.
The council members decided by consensus to discuss its options in more detail at an upcoming workshop session.