State v. School Bd. of Sarasota County
561 So. 2d 549 (1990)
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Rule of Law:
A government financing agreement is not "payable from ad valorem taxation" requiring a voter referendum under Article VII, Section 12 of the Florida Constitution if bondholders have no legal right to compel the government entity to levy ad valorem taxes. The government's ability to terminate its payment obligations annually by not appropriating funds preserves its budgetary discretion and prevents the agreement from being classified as a long-term bond.
Facts:
- The School Boards of Sarasota, Collier, and Orange Counties entered into agreements to lease public land they owned to not-for-profit entities via ground leases.
- The agreements provided for the construction of public educational facilities on the leased lands, financed by the sale of bonds or certificates of participation issued by trustees.
- The School Boards would then lease the newly constructed facilities back from the entities through 'facilities leases', making annual rental payments.
- These annual lease payments were to be made from several sources, including a portion of the boards' receipts from ad valorem (property) tax levies.
- The agreements expressly stated that if a School Board failed to appropriate money for the lease payment in any given year, its obligations would terminate without penalty.
- Upon non-appropriation, a School Board would surrender possession of the facilities and land for the remainder of the ground-lease term, but could not be compelled to make payments.
Procedural Posture:
- The School Boards of Sarasota County, Collier County, and Orange County each filed a complaint in their respective circuit courts to validate their proposed financing obligations.
- The circuit courts entered final judgments validating the financing agreements.
- The State of Florida, as the appellant, directly appealed the final judgments of validation to the Supreme Court of Florida.
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Issue:
Does a school board's lease-purchase financing agreement, which is funded in part by ad valorem tax revenues but allows the board to terminate the agreement annually by not appropriating funds, constitute a bond "payable from ad valorem taxation" that requires voter referendum approval under Article VII, Section 12 of the Florida Constitution?
Opinions:
Majority - Per Curiam
No. The financing agreements are not "payable from ad valorem taxation" within the meaning of Article VII, Section 12 of the Florida Constitution and therefore do not require referendum approval. The court's precedent in State v. Miami Beach Redevelopment Agency established that the critical factor is whether a bondholder has the right to compel the levy of ad valorem taxation. Here, the agreements expressly prevent anyone from compelling the use of the ad valorem taxing power. Furthermore, as in State v. Brevard County, the non-appropriation clause gives the boards the freedom to decide anew each year whether to appropriate funds for the lease payments. This annual option preserves the boards' budgetary flexibility and prevents the lease from becoming a binding long-term debt that would trigger the constitutional referendum requirement. This arrangement is distinguishable from cases like County of Volusia v. State, where interrelated promises effectively guaranteed a tax levy, and Nohrr, which involved a mortgage with a right of foreclosure.
Dissenting - McDonald, J.
Yes. The financial schemes are the functional equivalent of issuing bonds that pledge ad valorem taxes and therefore require a voter referendum. The majority's decision elevates form over substance. In practical reality, no school board would ever choose to forfeit its school facilities by failing to make the annual lease payments. This practical compulsion ensures that the board will levy, collect, and pay ad valorem taxes each year to avoid this outcome. When this circumstance exists, the realities of the situation should supersede the technical inability of a bondholder to compel a tax levy. As this court held in County of Volusia v. State, such arrangements that create an inevitable need to tax should require the approval of the taxpayers.
Analysis:
This decision solidified the legality of lease-purchase agreements with non-appropriation clauses as a primary method for Florida local governments to finance major capital projects without voter approval. It created a clear legal distinction between a direct pledge of taxing power, which requires a referendum, and an arrangement where the use of tax revenue is subject to annual appropriation. This ruling significantly empowered local governments to fund essential infrastructure like schools by using creative financing structures that circumvent constitutional debt limitations. The impact has been a proliferation of such financing, increasing governmental flexibility but also reducing direct voter oversight on long-term capital spending commitments funded by tax dollars.
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