County Commissioners are looking at alternative sources of funding in order to move forward on major projects since a one-half sales tax was defeated by voters in 2022.
Consideration about where and how to find these resources came before the BOCC at the April 25 board meeting at the request of County Administrator Jeff Rogers. He was aided by Matt Sansbury, financial advisor of RBC Capital Markets, and Steve Miller, a bond counselor with Nabors, Giblin, and Nickerson.
As most projects are of a public safety nature, these can be funded through a General Obligation (GO) bond. There are two types of GO bonds: Unlimited Tax GO, which has no limit on millage increases, and the Limited Tax GO, which imposes a limit on millage rate increases.
Sansbury added that the Limited Tax Go option is seldom chosen in Florida.
Meanwhile, gas tax revenues to fund capital transportation projects are currently stagnant or declining and are no longer widely used.
A third funding mechanism presented was the Covenant to Budget and Appropriate (CB and A). This approach uses all non-ad valorem revenues minus essential services.
An aspect of this source is that the CB and A method is given its own credit rating — currently the same as the county’s credit rating. Hernando County is rated AA-2 by Moody’s and -$300AA- by Standard & Poor (S&P), the third and fourth highest on the rating scale, respectively.
In the long-term, the CB and A is cheaper overall.
DIFFERENCES IN OPTIONS
As earlier stated, there are two types of GO bonds: Unlimited and Limited. With an Unlimited Tax GO, there is no limit on millage increases.
Hypothetically, a $100-$300 million GO bond would require a millage rate of 0.5000 in the second year of debt service, declining each year. The final year of repayment would result in a millage requirement of 0.212. This projection assumes property values remain unchanged over the course of the bond.
However, if property values increase, the millage rate decreases. While a Limited Tax GO may seem preferable, there is a caveat.
“If property values decline, you have a little bit of an issue,” said Sansbury. “If property values decline quickly and early into the term of the loan, the county could have bigger issues.”
The GO bond needs approval by voters, which neither the gas tax revenues nor CB and A require.
Commissioner Steve Champion stated he was in favor of the GO bonds. He considered anything else to be a circumvention of the voters’ wishes. He was supported by Commissioners Brian Hawkins and Jerry Campbell. Hawkins also recommended prioritizing projects, as well as choosing the Limited Tax GO bond.
WHY THE NEED
County growth has necessitated the need for several projects. Of those Budget Director Toni Brady presented to commissioners, several already have funding mechanisms in place.
• Jail Complex: $173 million (to come from the Sheriff’s budget and General Fund)
• Sheriff’s Training Center; Fire Training Building; new Emergency Operations Center: $50,000,000 (estimated) (to come from the General Fund, unspecified grants, plus the Hernando County Fire Rescue Municipal Services Benefit Unit [HCFR MSBU], and Emergency Medical Services Municipal Services Taxing Unit [EMS MSTU], and an allocation of $500,000 from seized funds)
Also requiring work are:
• Rebuilding the Waterways building to a corrected elevation (from the General Fund and a Resiliency Grant)
• Four additional fire stations (at a projected cost of $32 million, to come from HCFR MSBU, and EMS MSTU). Of the fire stations, No. 15 is currently in the design phase, while No. 16 is in the land acquisition phase. Once designs are complete, these can be replicated for subsequent station construction.
• A warehouse for station logistics and supplies (at a projected cost of $5 million)
• Mosquito control that has outgrown its current facility (price yet to be determined)
No decision nor vote was made. The matter is expected to come back to the BOCC over which projects will require alternative funding. The language that should be included in a referendum will also be discussed.