Tavares, FL - Jan. 16, 2014
Most cities in Lake County have CRAs which set aside future property tax revenues to use to “redevelop” blighted downtown areas in specific “zones”. Projects might include repair of old sidewalks, painting and fixing exterior fronts of old retail buildings, and other projects to improve the attractiveness of the downtown area.
Note: The book cover at the left is NOT a real book, but who knows, someday.
The hitch is that part of the CRA revenues come out of County property taxes, not just city tax shares. For instance, if you look at the Lake County budget, you will find they pay out over a million dollars to CRAs in the County. That money comes right out of COUNTY property taxes but goes towards CITY CRA projects.
So the Sun-Sentinel in South Florida just reported that Broward County, FL Commissioners got fed up with those tax losses and will stop approving any extensions of expiring CRAs by cities that use County Tax funds. The Commissioners want to use the funds for their own projects. Broward County has much higher tax collections than Lake County, so the numbers are much larger.
Cities in Broward County can still set up CRAs, but not receive any County funds for them.
Other reasons cited by the County include high, duplicative administration costs, poor oversight and City projects that are questionable.
Read about it here:
http://www.sun-sentinel.com/news/broward/fl-broward-ends-cras-20140114,0,3452756.story
Comment:
Note: This blog contains a page on CRA issues HERE.
I have questioned the value of CRAs because rules are loose, and most are run by city councils or their delegates and may waste funds on projects not supported by the public if they knew about them. For instance, some cities might just give outright grants for $10,000 to retail store owners to renovate the front of buildings, but not require a repayment plan or a lien on the property to recapture and recyle the funds.
Additionally, city CRAs siphon off some of County taxes for the CRA projects, when the funds should be used for normal County or City services, thus it puts pressure on to raise existing taxes to compensate for the lost revenues. As property values grow, more and more property taxes within the CRA “zone” are diverted from normal uses like libraries to the CRA projects.
Additionally, there is hardly any oversight on CRAs. The state allows them to be created, but provides no oversight of them. There is ONE guy administering the records for some 1500 special districts, including CRAs in Florida. And most cities are not sophisticated enough, or independent enough to perform compliance reviews or ensure abuse does not occur. For instance, one CRA in North Florida was using funds to overpay a property owner for land and he was related to a person on the CRA committee. There was a big investigation and I think it is posted on FiscalRangers.com. In the past, eminent domain was used to steal some property from owners to build CRA projects that benefitted other parties (like car dealers but I think it is harder to use eminent domain in Florida now).
There is also a legal opinion from the FL State Attorney General saying CRAs cannot use funds for charity projects like parades, fund raisers, fairs, etc. Some CRAs were using funds to reimburse charities for projects, which was not considered a valid use. However, that is a legal opinion, and I think some cities ignore it, and only a lawsuit would raise the issue.
The big beneficiaries are the consultants who push CRA formation on government entities. And, if you look at the one created in Minneola to fund infrastructure for “blighted” residential areas near the new Florida Turnpike interchange that is mostly agricultural, those future revenues are pledged as the collateral to float bond issues, thus bond agents make a mint. I wrote at least one article on that on my FiscalRangers.com blog. http://webworks.typepad.com/lakecountyfiscalrangers/2013/03/are-the-minneola-fl-city-council-and-local-land-developers-trying-to-rip-off-local-taxpayers.html
The issue of CRAs is controversial and there were many abuses in California, while Florida does have some safeguards to minimize abuses. But not long ago, the California CRAs were even taking money from school taxes (not allowed in Florida) and built up huge balances due to property value increases. The result is that schools were losing millions in funds. Then the California governor saw how much the CRAs were collecting and declared the funds could be taken and used by the State, so the practice of CRAs in California has dropped considerably.
So, this move by Broward County is pretty smart, because they are getting out of the practice of letting cities siphon off some County taxes for their own projects.
I will report more later on this.
Vance Jochim
Lake County Fiscal Rangers
Chief Fiscal Watchdog
