A Joint MEETING OF THE BOARD
OF COUNTY COMMISSIONERS
with the Lake County School Board
September 16, 2013
The Lake County Board of County Commissioners met in in special session for a joint meeting with the Lake County School Board on Monday, September 16, 2013 at 2:00 p.m., in the Board of County Commissioners’ Meeting Room, Lake County Administration Building, Tavares, Florida. Commissioners present at the meeting were: Leslie Campione, Chairman; Jimmy Conner, Vice Chairman; Timothy I. Sullivan; Sean Parks; and Welton G. Cadwell. School Board Members present at the meeting were: Kyleen Fischer, Chairman; Debbie Stivender, Vice Chairman; Bill Mathias; and Tod Howard. Ms. Rosanne Brandeburg was not present. Others present were: David Heath, County Manager; Sanford A. “Sandy” Minkoff, County Attorney; Dr. Susan Moxley, Lake County Schools Superintendent; Wendy Taylor, Executive Office Manager, County Manager’s Office; Barbara F. Lehman, Chief Deputy Clerk, County Finance; and Susan Boyajan, Deputy Clerk.
Commr. Campione welcomed the members of the Lake County School Board as well as those in attendance in the audience to the meeting.
Commr. Campione stated that Tab 5 would be moved to between Tabs 7 and 9 because Mr. Bob Nabors was currently on his way from Tallahassee. She added that she had received a request to allow public comment, so public comment would be allowed before Tab 8.
Purpose of the meeting
Commr. Campione stated that capital funding was an important issue for the School Board, and she mentioned the BCC had received a letter indicating the desire of the School Board to have the BCC consider an assessment as opposed to a traditional impact fee. She added that there would also be some discussion on the possibility of duel districts. She noted that the BCC would be considering an ordinance next week to suspend School Impact Fees.
Ms. Fischer thanked the BCC on behalf of the School Board for the opportunity to meet.
school board overview of existing and needed funding
Mr. Harry Fix, Lake County Schools Director for Growth Planning, discussed the capital plan for Lake County Schools. He noted that the five-year revenue estimate for Fiscal Year (FY) 2007 – FY 2011 had been $700 million, while the current five-year estimate for FY 2014 – FY 2018 came just under $200,000, and he reported that the impact fee revenues would be $0 for 2013. He estimated that just under $24 million in revenue had been lost from the impact fee suspension as of July, 2013, comparable to the funding for one elementary school. He also reported that the State had lowered the millage rate from two mills to 1.5 mills, resulting in a loss of revenue for the School Board that he calculated at $40 million between FY 2009/10 and FY 2012/13. He stated that statewide Public Education Capital Outlay (PECO) funding had not contributed any money to public schools in FY 2011/12 and FY 2012/13, though the funding for charter schools had remained relatively constant over the last seven years. He reviewed a graph of capital revenue sources and reported that Lake County Schools were only receiving revenue from ad valorem and sales taxes and were no longer receiving funds from debt proceeds, interest, other state funds, PECO, or impact fees. He then discussed the 2014-2018 Capital Plan for Lake County Schools, displaying a revenue summary chart and explaining that the reason that there were PECO funds appearing in FY 2015/16 was because the state indicated those funds would be distributed; however, the funds were not a guarantee. He reviewed the expenditures for the next five years, reporting that the debt service payments over the five-year period totaled $164 million, and the areas that were no longer funded through capital outlay would instead be funded out of the operating budget. He remarked that the five-year work plan summary showed few funds available for proposed projects in the outer years, leaving the total unfunded capital needs for new construction at approximately $240.5 million. He stated that the total for the combined recommendations of the Long-Range Planning Committees from South Lake, North-West Lake, and North-East Lake County came to $260 million to address the needs of the oldest facilities in those regions. He summarized the other unfunded capital needs such as maintenance, white fleet, yellow fleet, and technology, relating that the total for the five-year plan was estimated at $58.5 million. He also summarized the long-range facilities plan for growth and new capacity for the next five years, stating that the 10-year plan projection was for almost $131.5 million and the 20-year plan would need an additional $241 million, for a total of almost $373 million. He reported that the sum of all of the unfunded capital needs totaled $932,094,178. He stated that 72 percent of the expenditures for the FY 2012/13 1/3-cent sales tax revenue went towards debt while the remaining 18 percent went towards new construction, and he reported that the sales tax collection had held relatively steady over the last ten years. He displayed a graph of the Lake County Schools debt service payments, which showed where the current sales tax would end, and he explained that the debt associated with the sales tax bonds would end once the current sales tax ended, and the amounts shown at the end of the graph were debt against ad valorem taxes. He discussed the allocation of capital outlay funds, stating that the majority went towards debt service payments, leaving little to go towards other capital projects. He reported that the total outstanding long-term debt for Lake County Schools was decreasing because of such factors as the debt being paid off and the interest rates becoming more stable.
Ms. Carol McLeod, Lake County Schools Chief Financial Officer, stated that the School Board has refunded bonds at every opportunity to take advantage of interest savings including three bonds last year with a projected savings estimated at over $4 million.
Mr. Fix then summarized the unfunded maintenance needs for the next ten years, stating that they would need $1,262,000 for electrical, $3,979,362 for flooring, $10,706,100 for HVAC, $10,095,273 for painting, $15,455,610 for roofing, $8,526,700 for site work, and $5,280,500 for the boilers, chillers and cooling towers, totaling $55,305,545. He recapped that the five-year plan saw the unfunded capital needs for construction at approximately $240.5 million, replacements at $260 million, technology at $13.1 million, and other needs at approximately $45.5 million, as well as nearly $373 for the long-range plan, bringing the total unfunded capital needs to $932,094,178.
Commr. Campione asked if the $240 million for construction was for a five-year period of new construction projects.
Mr. Fix replied that that was correct.
Commr. Campione asked if the elementary school in the Sawgrass Bay area was included in that amount.
Mr. Fix replied that that had been included on the list of unfunded new construction during the presentation under project name “L” for Lost Lake/Sawgrass Bay relief. He also mentioned that the list presented had been alphabetical and not in order of priority.
Commr. Campione commented that meeting the school system’s needs would be difficult even with an extremely high impact fee and a growth rate similar to last year. She estimated that the revenue might be enough to address one school, but it would depend on the type of permits that were issued in the last year.
Mr. Fix opined that they could have done it with the impact fee revenue that had been forfeit from the suspension in addition to the $6 million they currently had.
Commr. Conner asked if the $24 million in lost impact fee revenue was estimated with the assumption that the growth level would have remained the same even with a full impact fee.
Mr. Fix replied that this was correct.
Commr. Conner commented that some of the growth might have been spurred by the fact that the impact fees had been waived during that time.
Commr. Campione stated that the real amount of lost revenue was somewhere between $0 and $24 million and opined that the estimated amount should be closer to $12 million because there was no way to know for sure how much revenue was lost. She then asked how much of the 1/3 penny sales tax was going towards debt service and if that would disappear once the sales tax was ended in 2017.
Ms. McLeod replied that 72 percent of the sales tax currently collected was going toward the existing debt service and that the bonds were for the length of the sales tax, so the debt would be paid once the tax was gone.
Commr. Conner asked if there was a list of the completed projects that had been funded by the debt service.
Ms. McLeod replied that a chart showing the schools that had been built with those funds had been provided in the backup documentation given to the commissioners, and she specified that the sales tax was used almost exclusively to renovate the County’s high schools.
Dr. Tod Howard, Lake County School Board Member, commented that PECO funds should not be considered a guarantee, because the State has bonded out those funds. He mentioned that the School Board had the ability to pay part of the sales tax off early for an interest savings of between $800,000 and $1.3 million, though that ability hinged on the decisions made at this meeting, because they would not be able to realize these savings if they were not able to plan for funding for new growth. He commented that they were trying to be fiscally conservative, but not funding those projects inhibited their ability to save the money on payoffs.
Commr. Sullivan asked if there were any charter schools in Lake County that were receiving capital outlay funds.
Ms. McLeod replied that Lake County had 10 charter schools, five of which were considered conversion schools which did not receive PECO funding, and four of which did receive PECO funding. She stated that there was $55 million statewide that went to the charter schools, and the Lake County charter schools that were non-conversion were eligible to apply for some of those funds.
Commr. Campione asked for more information concerning the legislative decisions causing the drop in funds on some of the charts and whether there was a chance for any legislative relief.
Ms. McLeod explained that the millage rate had been at two mills during the time of massive growth, and the School Board had been very conscious about keeping the debt at one mill and keeping the other mill available for all other needs such as maintenance, busses and technology. She remarked that when the legislature then reduced the millage to 1.75 mills, the School Board believed that there would be a solid funding source to pay those bonds, but there was a reduction in property value at the same time the millage was reduced, which affected the revenue stream. She noted that the legislature told the School Board that they could vote to levy the additional 0.25 mills themselves, but removed that ability the following year. She added that other State funding sources shown in the presentation were one-time payments meant for special projects.
Mr. Bill Mathias, Lake County School Board Member, asked Ms. McLeod to explain the amount of debt the School Board would have after 2017 and where the revenue would come from to pay that debt.
Ms. McLeod explained that there were currently three types of outstanding debt: Capital Outlay and Debt Service (CO&DS), sales tax bonds, and State-issued bonds. She stated that after 2017 there would only be CO&DS in the amount of about $200 million, which would be paid for by millage revenue.
Financial institution perspective
Commr. Campione stated that they were considering a special assessment type model, and they wanted to gain the perspective of the financial and building industries while also recognizing that there were several interests at play within the building industry, such as local versus national builders as well as the single person wishing to build a home on their property.
Mr. Gerry Suarez, Home Builders Association of Lake and Sumter Counties, stated that he had been asked to speak in regards to the collection of impact fees versus some other type of fee such as a special assessment and the impact on financial institutions, specifically mortgage lending. He remarked that just having this meeting had actually cost business to Lake County, because there were builders who were holding projects pending a final decision and who might possibly move into other areas depending on the outcome. He commented that South Lake County was seeing growth because of its proximity to Orlando, and anything that lessened affordability or raised the purchase price of homes would affect its competitiveness and impact the number of permits pulled, in turn affecting how much revenue from impact fees was collected. He commented that the biggest impact an impact fee would have for the financial community was that it was always paid by the buyer because builders would raise the price of a home to cover the fee. He gave an example of an appraisal in South Lake County for $195,000 on a home purchased for $194,980 which emphasized that there was no room for property price increases, because financing would not happen if the appraised values could not be supported. He commented that home prices and loan rates were increasing, and the Federal Reserve had announced that they were backing off of the bond purchases resulting in an increase of over a full percentage point in some mortgage rates. He reported that a $10,000 increase in the purchase price of a home reflected about a $70 per month increase, or approximately a 0.75 percent increase in interest rate, and that would keep a lot of people from buying because people would hesitate to buy a home with a mortgage interest rate that was 0.75 percent higher than market. He commented that the challenge was to find a way to raise the necessary funds without hurting the market or the buyer’s ability to buy. He commented on the proposed special assessment, asking if it would provide the funds for the capital expenditures within the period of time it was needed. He remarked that a special assessment could be touted as having less of an impact because it was financed, but it would not bring in a great deal of revenue at one time and would affect a buyer’s debt to income ratios, lowering a buyer’s purchasing power. He opined that the impact fee was the worst option, because it was forcing the market to artificially inflate its values. He noted that the value of resale homes was typically driven by new construction, and inflating those values would hamper growth.
Commr. Conner asked if an impact fee was financed as part of the mortgage over the life of the loan.
Mr. Suarez replied that it was, because it was added to the purchase price of the home and became part of what was being financed.
Commr. Conner asked how long a typical mortgage was financed for and how long a special assessment would last.
Mr. Suarez replied that a typical mortgage term was still 30 years and that the length of the special assessment was something that the two boards would determine.
Commr. Conner asked how much the payment would be on a 10-year special assessment for $10,000.
Mr. Suarez replied that it would be $83.33 a month, which was about $13 more than the $70 that would be added to the monthly mortgage payment on a $10,000 impact fee.
Commr. Conner asked how the special assessment was advantageous to the homebuyer.
Mr. Suarez opined that neither option was better, because both resulted in $10,000 being taken out of the pocket of the homebuyer.
Commr. Conner asked which option was better in terms of spurring economic growth.
Mr. Suarez explained that the special assessment would not increase the purchase price of a home.
Commr. Campione reiterated that that was the only advantage. She then posed the scenario that someone purchased a home with the special assessment and after two years decided to sell it. She commented that the special assessment in that scenario would then be like a lien or a mortgage on the home, and she asked if the new buyer would most likely roll that assessment into the purchase price of the home.
Mr. Suarez replied that the new buyer could either do that or continue paying the special assessment in monthly sums just as the previous owner did, though it depended on how the two boards wrote the legislation.
Commr. Conner asked if the assessment would inflate the market value of a home in the same way as an impact fee.
Mr. Suarez replied that it would affect the market value of a home during a resale. He stated that there was no way to implement a fee without having a negative impact on the buyer and the market. He added that if someone were to buy a home with an assessment and attempted to sell it after a few years, that home would be competing against other homes that did not have that assessment, and they would have to market their home for less to remain competitive. He stated that the impact fee being paid up front affected the purchase price of the home up front.
Commr. Cadwell asked if the logic of the assessment was to give the buyer more time to pay the fee instead of having to pay it up front.
Mr. Suarez replied that it would be part of the buyer’s taxes and it would be treated the same way as a community development district.
Ms. Debbie Stivender, Lake County School Board Member, commented that it would be handled the same way as road assessments.
Commr. Cadwell asked if the School Board would be able to bond that money so they could use it up front as if they had collected the full impact fee.
Mr. Suarez replied that they would be able to do that.
Commr. Conner asked if there would be a tax advantage on the assessment that was part of the tax bill.
Mr. Suarez replied that that question would need to be answered by a tax expert.
Commr. Campione surmised that the assessment, acting as an impact fee spread out over time, probably would not be tax deductible. She clarified that the impact fee would not be part of the ad valorem taxes and was an independent charge on the tax bill.
Dr. Howard stated that Lake County had to be competitive against Orange County’s current $6,000 school impact fee. He remarked that large builders would roll the impact fees into their construction and that landowners and developers would also feel an impact from the implementation of an impact fee. He commented that since there was no hard data showing the influence the impact fee suspension had on development, they could only theorize on what would happen once the fee was reinstated. He opined that there might need to be a difference in how the fee was structured between the builders in the south and north ends of the County, and there might not be a one-size-fits-all solution. He suggested that it might be better to have the cities provide their input when the County started looking at the assessments from a committee standpoint, and there would be a chance to talk with the developers building in those regions. He stressed that they did not want to hurt growth, but not having adequate schools would have just as significant an impact as not implementing the fee, because families looking to relocate would look at the quality of the schools.
Mr. Mathias commented that Mr. Suarez had stated the School Board would not qualify for a loan, and asked him what he would do in the position of the School Board.
Mr. Suarez replied that having too few people pay too many dollars would create a huge impact that the School Board would need to mitigate, because growth was needed to pay for the capital expenditures, and the best option was to spread it out through the tax base.
Mr. Mathias asked if Mr. Suarez meant they should raise property taxes.
Mr. Suarez replied that it could be done through the millage rate, a transfer fee on real estate transfers, or anything that spread the fee out amongst a greater tax base in order to dilute the impact the fee would cause. He mentioned that when the many currently unoccupied homes went back on the market, they would either be purchased by investors as rentals or by owner/occupants, and the majority would end up as homes with children that would attend Lake County schools. He pointed out that no money would be collected from those homes towards the capital expenditures.
Ms. Stivender mentioned that the School Board had discussed the possibility of doc stamps to help spread around the costs.
Commr. Conner noted that he and County staff had met with Ms. Fischer and Dr. Moxley, and it was determined that it was a steep uphill climb for doc stamps, because the legislation would have to be statewide and not just for Lake County. He stated that the advice received from Tallahassee was that the only chance they had was to go through the Florida School Board Association (FSBA) and the Florida Association of Counties (FAC), and to find out if those associations would be willing to make the doc stamp issue part of their legislative package as well as making it a top priority. He opined that doc stamps were a real solution and the best answer to the problem, and they were going to attempt to get the support of the FSBA and FAC.
Commr. Parks stated that the legislators who came to the CFAC meeting had emphasized that it would be difficult to get the legislation for the doc stamps, because it was viewed as a tax increase. He remarked that he was in support of doc stamps and opined that it was the best option.
Commr. Conner stressed the importance of addressing the needs of the school system without hindering growth.
Ms. Fischer stated that the School Board was in agreement that they did not have time to wait for doc stamp legislation to be implemented. She remarked that every aspect of the Lake County School System had an impact on development.
Mr. Suarez opined that the School Board was not going to find one solution for the entire problem; it would take multiple options to solve the problem.
Homebuilding industry perspective
Commr. Campione introduced Mr. Jim Bible, Showcase Homes; and Mr. Mike Carter, Granger Construction and Development in Eustis. She specified that Mr. Bible would address the perspective of the bigger building companies while Mr. Carter would address the perspective of the smaller companies.
Mr. Bible stated that there were three types of builders in Lake County: the small builder who typically built on a single lot, the middle sized builders like himself, and the national builders. He mentioned that his work was similar to the national builders in that they bought rural land, developed it, and built all of the houses in the subdivisions, and that the construction was completely financed by the builder until the end when the buyer closed on the property. He noted that single-lot projects were typically financed completely by the homeowner. He explained that large builders financed the impact fee for the entire time of construction because it was paid at the time the building permit was pulled, but an assessment would be paid by the buyer and not the builder. He noted that the suspension of impact fees combined with the effects of concurrency meant that there were houses and lots in the county that either had their impact fees prepaid, had a portion of the fees prepaid, had no impact fees, or would have full impact fees if they were reinstated, and that this created a very complex situation. He remarked that the situation in South Lake was very different from North Lake, with North Lake showing steady growth compared to the explosion of growth in South Lake.
Mr. Carter stated that customers used criteria such as impact fees to weigh the decision of where they chose to build. He gave the example of a current client who was considering downsizing into a 900 square-foot home that would cost roughly $90,000 to $100,000. He remarked that a $10,000 impact fee would add about 10 percent to the cost of the home and would have a large impact on what the client was looking to spend and whether or not they would build. He stressed that impact fees directly affected the bottom line cost of a project.
Mr. Bible mentioned that the School Board would also have to consider the impact of interest rates on an assessment fee.
Mr. Carter added that there would also be complications when people researched surrounding property and saw that the property they were interested in had an assessment that the neighboring properties did not have, because buyers care about what the final cost of the purchase will be and how long it will take to pay it off.
Commr. Campione asked for an opinion on whether it would be better to pay an impact fee when the building permit was pulled or at the point of the issuance of the Certificate of Occupancy (CO).
Mr. Carter stated that it would be better for the small builders to pay at the CO because they typically received only five to 10 percent of the contract price up front.
Mr. Bible agreed that paying it at the end was better.
Commr. Conner asked if the property assessment process helped the large homebuilders more than the smaller builders.
Mr. Bible replied that an assessment was not included in the appraisal, giving the builder the chance to build the house for the amount of money comparable to the neighboring properties without the burden of that additional $10,000 increasing the appraisal price.
Commr. Conner asked how the assessment would help the small homebuilder.
Mr. Carter explained that it meant his client would have a $98,000 contract instead of a $109,000 contract, which meant less that the client would have to finance. He added that the client would still have to come up with the money for the assessment fee, but it made the initial cost easier to bear.
Commr. Conner commented that the assessment would increase the monthly cost more than the impact fee would.
Mr. Carter pointed out that the assessment cost was not a part of his costs for the construction of the house.
Commr. Conner remarked that he could see how the assessment fee would save a large homebuilder a lot of interest, but it would not help the building industry as a whole if it did not help the homebuyer. He stated that it would still raise a homebuyer’s monthly payment, whether it was through the tax bill or the mortgage, and that an assessment would increase the monthly payments more than the impact fee would. He remarked that he had not heard compelling evidence that the assessment provided a better alternative to the impact fee.
Commr. Cadwell specified that the only benefit the assessment gave to the homebuilder was that they could market a lower-priced house.
Mr. Carter clarified that the assessment was not taken into account on the appraisal, but the fee still had to be paid.
Commr. Cadwell commented that they could end up in a situation where they had multiple levels of houses in a subdivision: someone who paid the original impact fee when they built the house, someone who built when there was no impact fee, and someone who built while there was an assessment. He remarked that he did not know what impact that would have on the appraisals of property within a subdivision. He commented that he had thought the assessment option was to make it easier for the homebuyer, not for the homebuilder.
Commr. Parks asked if it was standard for an assessed fee to be included in a mortgage.
Mr. Bible replied that he had never seen anyone do that, but that people would probably want to spread the payment out even though it would mean more paid in interest.
Mr. Mathias commented that the purpose behind the assessment fee discussion was to find a way to collect the amount that was needed for the schools without breaking the backs of the contractors. He opined that families would want to move to areas with great schools, and Lake County would have great schools through adequate funding.
Dr. Howard asked if there would be an effect on the resale market if impact fees caused more people to purchase resale homes instead of new homes and whether that would be a benefit to the contractors.
Mr. Bible stated that there would be a significant negative impact, because it would take ten remodels to bring in the revenue of one house.
Dr. Howard specified that his question was in regards to home values and not the direct impact to the contractors.
Mr. Bible replied that the contractors were struggling and until the market stabilized, they would not see a significant increase in value.
Mr. Carter added that replacement costs were higher than buying what was already there.
Commr. Campione expressed concern that some houses would have an ongoing monthly or annual fee and that this would make the real estate market unpredictable. She added that it would seem very unfair to some people who would not be able to sell their house because they had the assessment tacked on while the house next door did not, and she opined that this would be tinkering with the market, which they needed to be very careful about. She then mentioned that the assessment would benefit the big builder as opposed to the small builder, because the big builder would not have to carry the cost of the assessment, since it would be passed on to the buyer. She opined that it was the bigger projects that were bringing in the new residents with the new students going into the schools.
Commr. Sullivan noted that the County waived school impact fees in retiree communities, and he asked if this could also happen on an individual basis.
Commr. Campione stated that that could not be done legally.
Recess and reassembly
The Chairman announced at 3:30 p.m. that there would be a ten-minute recess.
Presentation by Nabors, Giblin and Nickerson
Mr. Bob Nabors of Nabors, Giblin and Nickerson stated that one of the things he wished to address was the danger and the ability of using assessments to fund school growth. He remarked that it was difficult instituting an impact fee, since everyone is entitled to free public education, and unlike other fees such as a special assessment for solid waste, not every home charged would receive a direct benefit from the fee because not every home would have children. He commented that because of this, the Board should not opt to impose the fee on particular subdivisions, because they ran the risk of creating a user fee which could be seen as infringing on the right to free public education. He suggested that the Board could instead opt to impose an impact fee and have it due earlier in the land approval process, such as during the site plan, and offer builders the option of either paying the fee early or breaking it apart over several years as an assessment fee. He remarked that this would ensure that everyone was treated the same, though it could pose some administrative difficulties regarding recordkeeping of payments made and balances remaining.
Commr. Campione asked if this plan was only for larger projects.
Mr. Nabors replied that it would apply to all new projects, explaining that the fee could continue to be collected at the time of the building permit or the CO for smaller developers who were pulling a single building permit, but the County could offer the developer the option of paying the fee at the time of platting or incrementally as an assessment over 10 to 15 years. He added that the Board would have to then make a policy decision as to when the remaining balance would come due and recommended that the better option was for it to be due at either the pulling of the building permit or the issuance of the CO.
Commr. Campione asked if they could require larger subdivisions to pay a larger amount up front. She explained that currently 50 percent of the fee was due at platting and the other half due with the building permit and was applicable to any size plat.
Mr. Nabors replied that there were no constitutional restrictions on that. He noted that there would still be the administrative complications of keeping track of how many properties had prepaid and what properties had remaining balances. He mentioned that there were also other types of properties that would pay impact fees such as multi-family homes.
Commr. Cadwell commented that he did not know how many houses a subdivision would have to have in order for the higher payment to benefit the school system.
Commr. Campione replied that the larger projects would create a larger influx of students at one time, so getting the money upfront allowed capital improvements to move forward. She remarked that the impact fee would have to be uniform whether it was a single family house in Tavares or a 1,000 unit development in Clermont.
Mr. Nabors stated that generally most did not impose an impact fee lower than what the study suggested. He remarked that if they wanted to do something different than the uniform fee, then they would need to conduct a more detailed analysis than what had already been done. He clarified that the assessment concept he proposed was a mechanism to allow for earlier collection of the fee and commented that early payment was important because the schools would already be overcrowded if they waited to collect at the time of the building permit or CO. He stated that they needed to be careful because they did not want to do anything to jeopardize the structure of the school impact fee.
Ms. Stivender asked Mr. Fix what number of homes being built would indicate a school was needed.
Mr. Fix replied that the current multiplier to estimate the number of students that a development would bring with it was about 0.4, with about half those students going into the elementary schools. He stated that for a 1,000 unit development this meant that there would be an additional 200 students entering elementary school. He remarked that he did not know what the specific tipping point would be, but it would be prudent to keep the multiplier in mind. He estimated that a 500 unit development would bring in about 100 new elementary school students, equal to about five classrooms, which would be a substantial addition to a school.
Ms. Fischer commented that the School Board had looked at that tipping point before, and she opined that Mr. Fix had provided a good estimate.
Mr. Mathias stated that he was confused as to why the School Board could not put the Municipal Services Taxing Unit (MSTU) in place countywide.
Mr. Nabors replied that it was impractical to impose the fee countywide because they would not know which properties would receive a direct benefit from the fee. He explained that they would need the permission of the cities to institute the countywide MSTU, and then they would need to create the benefit units for the MSTU, which would be difficult because of all of the different development classifications. He added that the problem with assessments was that the improvement needed to be provided within a reasonable amount of time of the assessment being paid. He explained that large subdivisions usually gave a contribution to the school to receive a credit against the impact fee.
Mr. Mathias mentioned that different impact fee amounts had been approved over the years, and he asked if there had ever been a discussion as to whether the people who paid the fees would be concerned about their fee compared to the fee others had paid.
Commr. Campione stated that she had heard complaints from citizens concerned about how much they had to pay versus how much others had to pay.
Ms. Fischer added that the School Board looked at single-family homes versus multi-family homes and had instituted different fees. She noted that the fees had always been separate with the single-family versus the multi-family.
Commr. Conner commented that he remembered that they had allowed the impact fee to be transferred from one property to another.
Commr. Campione replied that that had applied to the prepayment of impact fees.
Mr. Nabors stated that an assessment would have to be implemented by the BCC, and if the Board approved the assessment option for developers, they would pay whatever remaining fee was due when the building permit was pulled and receive a credit for the payments made up to that point. He commented that impact fees tended to change over time, but that would not change the analysis because it was done uniformly, just at a different rate.
Mr. Sandy Minkoff, County Attorney, clarified that the BCC had allowed impact fee credits to be given in the past, particularly for transportation impact fees, and allowed them to be transferred. He added that he thought after the suspension they also had allowed for school impact fees to be moved into a bank, so if someone had prepaid but built the home when the fees were suspended, they could use the money at a later time should the fees be reinstated. He also mentioned that courts had struck down assessments for things like police services and general transportation because they related the fees to either user fees or taxes, and therefore they were not authorized by law. He specified that they needed to have a specific tie between an assessment and a particular piece of property in order for the assessment to be upheld. He commented that for general education, they could not tie the fee to every lot if they imposed the fee countywide.
Commr. Campione clarified that when they had mentioned spreading the payments out over time, they had really meant that they would impose an impact fee and allow the payment of that fee to be spread over time, because they did not have the legal authority to impose a tax.
Mr. Nabors stated that a tax had to be authorized by general law.
Commr. Campione recapped Mr. Nabors’ recommendation that in regards to using a fee on a per subdivision basis, they would require that the fee be paid at an earlier point in the development process, and the developer at that point could then ask to spread the payment out by putting the assessment in place just on those lots, and then the final payment would be due when the CO was issued on an individual house.
Mr. Nabors explained that this would not equate to a user fee because it was an accommodation and method of payment as opposed to assessing an individual subdivision.
Mr. Mathias stated that he had received a message earlier today from another firm stating that they had a different opinion than that of Mr. Nabors, and he asked if this was something that the Attorney General could offer an opinion on so that they had the State’s opinion on the legality of the countywide assessment.
Commr. Campione stated that they could request that opinion.
Mr. Minkoff commented that the problem was that the Attorney General’s opinion did not provide any weight in court and did not guarantee that a judge would agree with that opinion, so it posed a large risk.
Mr. Mathias mentioned that while Mr. Nabors gave the opinion that they could not do the countywide assessment, he had the opinion of another firm that said they could, and he opined that it would be good to weigh the risk and make an educated decision. He stated that they were trying to create a mechanism for future growth that paid for itself and did not hurt the local construction industry.
next steps – Joint Discussion by BCC and School Board
Commr. Campione mentioned that the BCC had some experience with special assessments and that they could have a significant legal impact, so she opined that it was prudent to have several opinions on that particular mechanism before making a final decision. She asked if they could discuss the Attorney General’s opinion regarding dual impact fee districts.
Commr. Conner asked whether they should discuss that issue before knowing if the School Board had a recommendation on the issue.
Dr. Howard stated that there was consensus from the School Board to see how dual impact fee districts would work.
Ms. Fischer stated that she would like to hear what Mr. Nabors had to say regarding the issue of dual impact fee districts, but the School Board could not make a definitive decision at this meeting because it was a workshop and not a special meeting.
Mr. Nabors mentioned that the original impact fee ordinance in St. Johns County only applied to the unincorporated areas which the courts said was not valid because it failed the second prong of the dual Rational Nexus Test. He specified that the first prong was that the impact fee could not be greater than the need created by the development, and the second prong was that the fee had to be used for the purpose for which it was imposed. He stated that the impact fee was now considered invalid unless it was instituted countywide because of the risk of the fee resembling a user fee. He mentioned that the courts had upheld the exemption of deed restricted subdivisions because they would not contribute to the school system. He stressed that doing anything less than countywide ran the risk of having people paying the fee while others used the schools the fee paid for, which violated the first prong of Rational Nexus Test. He mentioned that they could potentially limit the fee based on concurrency service areas, but it would be difficult to do that while not violating the second prong of the test.
Commr. Campione asked if they could potentially impose an impact fee just in South Lake if the deficiencies were all in South Lake.
Mr. Nabors replied that the BCC would need to conduct a study to show that the need was greater in that part of the county, but he opined that it would still be better to impose the uniform countywide fee. He remarked that most impact fee studies looked at a per student station cost, and he commented that the children were considered fluid among the uniform system.
Ms. Stivender mentioned that she had made a motion at the School Board meeting where this was discussed for 50 percent of the current impact fee study amount and that she had commented at the time that there were other things the School Board needed to look at. She stated that Dr. Howard had made a motion for a 50 percent impact fee for only the South Lake region, and at the time she had questioned the legality of doing that, but she had wanted to hear what Mr. Nabors had to say on the issue. She commented that while there was growth in South Lake, there were some inequities in some of the schools. She opined that there should be one uniform fee for the entire county.
Commr. Conner commented that 67 percent of the capital funds were going towards South Lake at one point. He then asked Ms. McCloud if she knew the percentage of school impact fees collected and spent in that one area of the County before they had been waived.
Ms. McCloud stated that that information was included with the debt service information that had been provided and that the schools recently receiving the most money were in South Lake. She mentioned that there were other schools such as Sorrento Elementary that were also receiving funds, even though the growth was at the south end of the county.
Commr. Conner opined that there could be unintended consequences if they only imposed an impact fee for one portion of the county.
Commr. Campione remarked that they would not be able to generate enough money to build schools in South Lake if they did not collect the fee countywide.
Commr. Conner mentioned that the BCC had received criticism from people in South Lake stating that they were not spending enough money there while at the same time being criticized by people in the northern part of the county for spending too much in South Lake. He opined that there were needs for the schools in the northern parts of the county, even though the growth was mainly in South Lake and that they could lose some flexibility if they only imposed the fee in one area of the county.
Ms. Fischer remarked that she did not want to do anything that was detrimental to any particular area, but they had dedicated funds to South Lake during a time of phenomenal growth. She stated that although Dr. Howard indicated that there was growth in South Lake again, it was possible that that growth would happen all over the county once the economy became strong again because of all the subdivisions that had been platted. She opined that currently the economy was not strong in Lake County.
Dr. Howard stated that the impact fee study showed where their areas of greatest need were, and that they were fortunate that the geography of the county allowed them to follow the existing boundary for South Lake High School and Lake Minneola High School to show the end of where the need was. He opined that students would move more between other South Lake Schools and that students would not necessarily ebb and flow across that boundary. He suggested that another option would be to impose a countywide impact fee and then institute an additional fee for South Lake. He stressed that in three years the School Board would have no money in the capital fund, and that the loss of funding was going to have a detrimental impact on the school system. He opined that the only answer was to have the dual impact fee districts, and he stressed that the need was crucial because there was no extra capacity for additional students currently in South Lake County.
Commr. Parks asked if the greatest area of need for schools in the Four Corners area was for grades K-8.
Dr. Howard stated that Lost Lake Elementary School, Windy Hill Middle School, Sawgrass Bay Elementary School, and Lake Minneola High School were all full, and that East Ridge Middle School and East Ridge High School had a little bit of capacity. He noted that there were more than 1,000 seats in just portables at East Ridge High. He stressed that they were using every available resource they had, and there was no capacity at those schools to absorb the impact of additional students.
Commr. Campione stated that the BCC was looking for direction from the School Board.
Ms. Fischer stated that the School Board needed to meet in a special emergency session regarding this issue, but that she was still unsure whether the School Board had everything it needed to make a decision. She suggested that the School Board could have their emergency special session on Monday and that she would want Ms. Brandeburg present at the meeting.
Commr. Campione stated that the BCC would be voting on an ordinance to suspend school impact fees for one year, and she specified that if the BCC was to go in a different direction then they would need to cancel the public hearing and re-advertise. She remarked that they still had the 90-day requirement, so they could implement whatever decision was made if it was something that could be done in short order. She mentioned that some of the things that were discussed today were things that might take quite a while, such as the idea of the countywide base fee with the additional fee for South Lake because it would require a study be conducted to justify the additional fee. She opined that the BCC would still be concerned about the possibility of a challenge if that option was pursued, and they would be looking for some indemnification or an escrowing of the funds for a particular period of time for that district.
Commr. Cadwell added that even if multiple studies were brought showing that it could be done, they would still want some sort of indemnification.
Commr. Campione remarked that at least they would still be collecting the base fee, even if they were not using it right away, so it might work hand in hand with what the needs actually are so that that portion could be set aside and have access to the base funds right away.
Ms. Stivender stated that she knew the transportation impact fee for South Lake had been set by the BCC at 70 percent, and she asked what the countywide fee was.
Commr. Campione stated that the countywide transportation impact fee had been set at 13 percent.
Commr. Sullivan stated that it equated to approximately $2,600 for a three to four bedroom single-family home. He remarked that it would create complications to try to establish a different fee in different parts of the county, and that they were facing a difficult situation in trying to balance taking care of the needs of the County without hurting the local economy. He explained that this was why he had recommended instituting the transportation impact fee at a percentage of what the full fee would be. He commented that he was worried about special assessments because of the administrative requirements such a program would require. He opined that setting the fee at a percentage of the recommended school impact fee instead of the full amount would be a good option to help the county move forward, because the situation with the schools was not going to get any better. He stated that the BCC needed guidance from the School Board on what that percentage might be.
Commr. Parks mentioned that the transportation impact fee for South Lake had been tied to specific projects, and he noted that the study to justify the separate fee had taken a couple of months to complete.
Commr. Cadwell asked what would happen if the Board took no action on Tuesday regarding the ordinance to suspend School Impact Fees.
Commr. Campione replied that in January the impact fee would go back to $9,000 for a single family home, and they only had a small window of opportunity to make any changes. She stressed the importance of keeping the cities involved with concurrency, and she suggested amending the concurrency agreements to help promote development. She remarked that South Lake should consider restructuring the concurrency service areas to help bring developers to the table sooner.
Ms. Stivender commented that she had previously suggested the School Impact Fee be set at 50 percent of the recommended amount, but that she would be willing to go down to 25 percent in order to get things moving countywide.
The Chairman opened the floor for public comment.
Ms. Sherry Wilkins, a resident of Lake County, expressed a concern that the County would lose money if it instituted an assessment because of such issues as foreclosures if the fees were not paid up front and that the burden of this loss would be passed to the taxpayers. She emphasized that growth was happening in South Lake and would continue with the construction of the Turnpike extension. She remarked that bringing in more manufacturing companies instead of homes would better help to ease the burden in the county, because they could not continue to depend on homebuilders to supply the growth. She stated that the reason South Lake was seeing the most growth was because of its proximity to Walt Disney World and Orlando. She stressed that this burden should not be passed to the taxpayers, and she mentioned that the largest increase in her mortgage had been between taxes and runaway homeowners insurance.
Mr. Vance Jochim, a resident of Tavares and writer of a blog called fiscalrangers.com, addressed the Board stating that he believed that the people who had existing properties in the County should not have to suffer a hike in property taxes when they were not the ones causing the increased need for infrastructure. He opined that the impact fees were justified because new construction was responsible for creating the need for the increased infrastructure. He commented on the Community Facilities Act, commonly referred to as the Mello-Roos Act, in California that had been established in 1982 as a way to get around the cap on their taxes. He remarked that the homes that had this fee on them did not sell when there was a dip in the economy and that many people in homes with these fees were going bankrupt because they could not sell them. He explained that this was an example of why the boards should reconsider any sort of assessment that tacked additional taxes onto a property after it was built. He mentioned that the School Board had not discussed in specific detail how they had reached the amount of $980 million. He then suggested that the BCC seek the help of the homebuilders in lobbying for some of the changes at the state level that were discussed earlier.
Mr. Michael Rich, President and Developer of Harbor Hills Country Club, displayed a graph showing the number of building permits pulled between 1980 and 2012 according to County records, and he stated that 942 permits had been pulled in 2012. He commented that things had not been that bad since 1982. He then displayed a chart showing the number of permits pulled over the last 18 months and stated that economists were predicting a 13 percent drop for the second half of 2013. He stated that they had only had seven sales this year and not had a sale since interest rates went up in June. He opined that pre-owned homes were the key solution to the problem, because there had been 4,600 pre-owned homes sold in Lake County this year and over 1,000 pre-owned homes pending, and some sort of a capital contribution program would help bring in additional funds. He stated that the unemployment rate for Lake County was at 7.6 percent, which was higher than other Central Florida counties as well as higher than the state and national levels, and he stressed that building houses created jobs. He requested that the boards consider the option of a capital contribution on pre-owned homes because there was a huge shadow industry of companies buying up foreclosures and then renting them out, and these companies should be contributing towards this process.
Commr. Campione suggested that Mr. Rich could help bring the realtors and the homebuilders together to help push for the state-level changes such as doc stamps to take care of the capital needs.
Ms. Fischer thanked the two boards for their comments and thanked those present in the audience for their attendance. She stated that this was a very personal issue which affected the present as well as the future.
Dr. Howard reported that staff recorded 826 homes built in the first six months of this year in Lake County, which equated to approximately 250 students or about one-third the population of a school. He remarked that he would be willing to agree to an impact fee set at 25 percent of the recommended rate, but he would ask that there be an automatic increase established unless another method is found to offset the funds needed. He commented that postponing the impact fees for another year might be convenient but that it would not fix the issue.
Mr. Mathias thanked everyone for attending the meeting and remarked that this was the first step towards government working properly to get the job done. He stated that the School Board would get back to the BCC on Monday after their emergency special session.
There being no further business to be brought to the attention of the Board, the meeting was adjourned at 5:05 p.m.
leslie campione, chairman
NEIL KELLY, CLERK