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COMMITTEE WEEK UPDATE
JANUARY 20 — 23, 2015
As we close out the second committee week in January, the schedule and pace have intensified
and gained speed. Several big issues are on the horizon that pertain to local governments, for
example: pension reform, enterprise zone programs, local government financial oversight, sober
homes, vacation rentals, and cuts to the communication services tax. We expect another hectic
session and will continue to keep you updated on issues as they move through the process. As
bills continue to be filed and heard throughout the upcoming committee weeks, we will add to
our weekly reports. Should you have any questions regarding legislation or legislative action,
please do not hesitate to call or email us.
Water project funding alert
We continue to work with your staff on water project funding
request. This deadline for the online form submission to the House
Agriculture and Natural Resources Appropriations Subcommittee, is
February 7H
Pension Reform: The outlook for municipal pension reform seems to be more of the same, with
both the House and Senate acknowledging that legislation negotiated with cities, police and fire
entities at the end of last session, deserves another review. FRS reform will be considered as
well, but the potential is high for all of the pension reform issues to bog down in the politics of
session. We expect pension reform to be at the forefront of the legislative agenda this session and
will continue to update you as we move through the legislative season.
Local Government Pension Reform: This week, the Senate committee on Governmental
Oversight and Accountability heard one bill, SB 172 by Senators Bradley and Ring, regarding
local government pension reform.
In his presentation of the bill, Senator Ring made the point several times that this bill is the exact
same bill passed out of the Senate, 40 — 0 during the 2014 Session, which was agreed to by all
entities affected. However, after the Senator's presentation, the League of Cities did speak before
the committee, opposing this bill. The League's stated opposition this session, is based on further
research into the effects of the bill, since last session.
Harbour Centre 118851 N.E. 29th Ave., Ste. 1010 1 Aventura, FL 33180
Phone: 305.935.1866 1 Fax: 305.935.9737
104 West Jefferson Street I Tallahassee, FL 32301
Phone: 850.224.3427 1 Fax 850.224.3361
Based on the League of Cities member vote over the summer, the League supports two pension
reform measures: first, the elimination of the 1999 "extra benefits" law, and second, that the
legislature adopt the Department of Management Services (DMS), "Naples letter" interpretation,
in statute. More specifically, the League's directive is to oppose anything that undermines the
Naples interpretation. Additionally, the two areas of concern for the League are as follows: the
increase in the minimum benefit level, and that current interpretation dictates that if there is no
mutual consent reached, the employer would have the authority to impose a contract, to continue
city business. Under the bill, that provision is removed, even in the event of an impasse.
Bill Summary: The bill addresses two areas of reform: the minimum benefit accrual rate and the
insurance premium tax revenues.
• Minimum Benefit Accrual Rate
The bill changes the minimum benefit accrual rate from 2.0 percent to 2.75 percent annual
accrual. However if a plan is below 2.75% accrual rate on July 1, 2014, the city must maintain
the rate as of July 1, 2014. If the plan is currently above or goes above the 2.75% accrual rate in
the future, you must remain at 2.75% or greater.
• Insurance Premium Tax Revenues
Senator Ring explained that this section of the bill is bifurcated into two tracts. First, it addresses
pre-1997 insurance premium taxes, where those revenues are used to meet plan minimums. Over
the 2013 level, of the additional premium taxes, 50% go to fund minimums and 50% go into a
defined contribution plan.
And secondly, post-1997 to 2012, insurance premium taxes are used to pay for benefits above
the minimum. If the insurance premium tax revenue funds full cost of the benefits over
minimum, any excess revenue is to be used for 50% defined contribution plan and 50% plan
minimums. In addition, any new plans created after July 1 2014, must meet new plan
minimums, and 50% of taxes would be used for defined benefits and 50% to be used for defined
contribution.
By mutual consent of the negotiating entities — the members' collective bargaining representative
or, if there is none, by majority consent of the members' of the fund, and the consent of the
municipality (or special fire control district) — plans may deviate from the above use of premium
taxes, as long as minimums are met. If a plan is below minimums on October 1, 2012, it may
continue under mutual consent. Without mutual consent, all accumulated dollars from 1997 to
2013, for plans under 100% funded, are split 50% to the plans' participants and 50% to the UAL.
Without mutual consent, all accumulated dollars from 1997 to 2013, for plans at 100% funded,
are going 100% to special benefits.
Senator Ring explained, that this bill is meant to push the cities and unions to negotiate in good
faith toward mutual consent. If there is none, both the cities and unions will be subject to a more
strict interpretation. In other words, this bill removes the idea of `impasse' and forces the cities
and unions to work toward mutual consent.
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The bill will next be heard in Senate Community Affairs committee and finally in the Senate
Fiscal Policy Committee.
Link to full committee staff analysis:
http://www.flsenate. gov/Committees/Show/GO/Meeting%20Packet/2771
Link to bill: http://www.flsenate.gov/Session/Bill/2015/0172BillText/cl/PDF
The House companion bill, HB 341 sponsored by Representative Cummings, was filed on
January 19th.
Enterprise Zone Program Sunset: The Florida Enterprise Zone program set forth in statute,
sunsets, or expires, in 2015. Senator Detert, Chairman of the Commerce and Tourism committee,
has made it known that she would like a full revision of the program, if the program sunset
extension were to be extended. She has stated in past years and again recently, that she feels the
program needs to expire or needs an extensive overhaul.
Enterprise Zones (EZs) and their effectiveness around the state vary. For example, Tampa and
Jacksonville have productive and impactful EZs. Senator Bean from Jacksonville and Senator
Latvala from the Pinellas/Clearwater region, who have strong EZs in their areas, have stated that
many areas of the state have been significantly helped through EZs. Senator Latvala recommends
a careful review of the entire program, so that elements of the EZ Program that are working, can
continue through a reauthorized EZ program.
This week, the Florida League of Cities and several in the lobby corps who represent those
supporting the renewal of the Enterprise Zone program, met and agreed to put together a list of
success stories of the EZ program to use to develop an alternative to allowing the program to
end.
SB 392 sponsored by Senator Clemens substantially revises the policies and the purpose of the
Florida Enterprise Zone Act; it revises the conditions under which a county and/or municipality
may apply for the designation of an area as an enterprise zone; provides that the municipality or
county that applies for designation of an enterprise zone has jurisdiction over the enterprise
zone's administration and does extend the expiration date of the Florida Enterprise Zone Act.
Regional Planning Councils: SB 484 filed this week by Senator Simpson, would eliminate the
11 Regional Planning Councils across the state, by eliminating duties and shifting
responsibilities to local government entities. This bill would also authorize local governments to
enter into agreements to create regional planning entities if they so choose.
House Finance and Tax Committee Workshop - Local Government Uncollected Capital
Recovery Collections: In his overview of goals for the upcoming session and his committee's
work, Chairman Gaetz discussed his research in local government uncollected capital recovery
collections. In the interim, the Chairman Gaetz wrote letters requesting information from some
of the largest counties around Florida, asking to what extent those entities have fully optimized
their own capital recovery collections processes.
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Of the information gathered, the Chairman briefly outlined the responses: Of five (5) of the
major urban counties of Florida, accounts receivables total uncollected sums of over $400
million. For example, Polk County has an outstanding collections total in the range of $25
million, Lee County, over $5 million.
Chairman Gaetz then asked the committee members to look further into a review of local
governments, as part of the committees work, to determine if they have developed any programs
on collections, utilizing best practices of collections, and of those that have had successes, bring
these best practices forward to use as possible legislation to assist local governments in capital
recovery collections.
House Finance and Tax Committee Workshop - Local Governmental Entity Financial
Oversight: Also in the committee action packet as part of the committee's work during the
upcoming session, was a proposal draft of concepts to improve financial oversight of local
governments. This draft would revise reporting and transparency requirements, and auditing of
local governments. No votes were taken.
As they began the review, Representative Gaetz noted that many of the concepts in this bill were
recommendations in the 2014 Auditor General's Annual Report. We have done a section by
section preliminary summary for your review. A link to the bill draft is included at the end of this
summary.
Section 1 addresses if a local government fails to comply with recommendations from the
Auditor General's office. Currently, only the Auditor General, the Department of Financial
Services or the Division of Bond Finance, at the SBA, can refer the non compliant local
government entity to the Joint Legislative Auditing Committee (JLAC). The draft makes the
recommendation to add the Governor and the Commissioner of Education to the group of those
who can refer to the JLAC. This was explained as a technical correction — within the Financial
Emergencies Act they are currently included and this conforms the JLAC statute to mirror the
same.
This section also includes a provision to address any local entity that will not comply, by
withholding compensation of the entity's governing body and chief financial officer.
Section 2 Currently the Auditor General must send a list of local entities, (school districts,
charter schools, charter technical career centers, Florida College System institutions, state
universities), which are in non compliance, to the Senate President, The House Speaker and the
Department of Financial Services. This section does two things, it adds local governmental
entities to that list, and adds that notification also be given to the local legislative delegation
membership within the geographic bounds of the local government entity in non compliance.
Section 3 creates a quarterly reporting process with similar notification requirements for Clerks
of Courts.
Section 4 addresses County budget preparation and availability to the public. Currently, County
proposed budgets must be posted on that County's website at least 2 days before the public
hearing. The bill would then require that this proposed budget remain on the website for at least
30 days. Additionally, current law requires that a County's final budget must be posted on the
website within 30 days after adoption. This bill would require that the final budget remain on the
website for at least 5 years.
Section 5 adds the same requirements of County budget amendments as addressed in section 4,
for posting on the County website for 30 days and 5 years respectively.
Section 6 addresses Redevelopment Trust Funds, and strengthen Community Redevelopment
Agencies (CRA) audit requirements as they are outlined in s. 218.39 F.S., so that rather than
simply stating the CRA must do an annual audit of the redevelopment trust funds, the bill would
require an annual audit of its accounts and records completed within nine months after the end of
its fiscal year, by an independent certified public accountant retained by it and paid from its
public funds.
Section 7 amends statute to apply to cities in regard to proposed and final budgets. (same as
Section 4).
Section 8 amends statute to apply to cities in regard to budget amendments (same as Section 5)
Section 9 currently, state agencies and the judicial branch are required to have management
systems and internal controls to prevent fraud and safeguard assets. The Auditor General
recommends language that more clearly defines provisions that prevent fraud, waste, and abuse,
to comply with all applicable law. It also requires that state agency heads testify to these
provisions under oath. The draft states that each agency head and the State Courts Administrator
shall file a certificate with the Auditor General attesting under oath, in writing, to the existence
and efficacy of the management systems and internal controls.
Section 10 current law provides that each local government that is required to provide an audit,
must submit a copy of the audit report and annual financial report to the department within 45
days after the completion of the audit report but no later than nine months after the end of the
fiscal year. This bill would require that certified public accountants conducting audits of local
governmental entities shall report, as part of the audit, whether or not the annual financial report
is in agreement with the audit report, and, if not in agreement, shall provide an explanation as to
the significant differences. This section also provides for notification of the local legislative
delegation.
Section 11 requires of local governments the attestation requirements and fraud prevention
requirements as in section 9 of this draft. This section provides that each local governmental
entity shall establish and maintain internal controls designed to prevent and detect fraud, waste,
and abuse, and to promote and encourage compliance with applicable laws, rules, contracts,
grant agreements, and best practices; economic, efficient, and effective operations; reliability of
financial records and reports; and safeguarding of assets. Each member of the local government
entity' s governing board and the entity' s chief financial officer, or person charged with similar
duties, shall file a certificate with the Auditor General attesting under oath, in writing, to the
existence and efficacy of the internal controls.
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Section 12 strengthens the makeup and responsibilities of audit committees for local
governments which currently exist in statute. In current statute there is no requirement that there
is auditor review or rotation, this section works to provide a method of review, and a more strict
method of complying with a selection process for auditor. This would require a more frequent
review of the auditor selection process. In this section, the committee debated whether to remain
with an RFP process, how to address whether or not the same auditor is chosen time after time,
or require that new auditors are chosen. For example, should an auditor know that they will be
rotated off every five years, more scrutiny in auditing may be achieved.
Section 13 is a conforming technical change.
Section 14 addresses local government inventorying of tangible personal property. Currently, in
Ch. 274, counties and special taxing districts are required to inventory their tangible personal
property, this bill would expand this requirements to all local governments. The law also requires
the CFO to adopt rules of recording property and details of that property, and puts forth a
uniform recording of an annual physical inventory. This would be extended to apply to all local
and municipal governments.
Section 15 as in section 4, this section addresses Water Management Districts' budget
preparation and transparency. Currently, Water Management Districts' (WMD) proposed
budgets must be posted on the WMD website at least 2 days before the public hearing. The bill
would then require that this proposed budget remain on the website for at least 30 days.
Additionally, current law requires that a WMD's final budget must be posted on the website
within 30 days after adoption. This bill would require that the final budget remain on the website
for at least 5 years.
Link to the House Finance and Tax committee packet, bill draft begins on page 12:
http.//myfloridahouse gov/Sections/Documents/loaddoc asnx?PublicationTyne=Committees&Co
mmitteeld=2856&Session=2015&DocumentTyne=Action%20Packets&FileName=ftc%201-22-
15%20REVISED.ndf
Communication Services Tax (CST): Governor Scott has proposed a significant cut in CST,
which is the tax on cell phone and cable service, by $470 million or approximately 3.6%. His
proposal would cut more than a third of the money paid to the state in communication services
taxes, which are split between local and state governments. However, the Governor has indicated
that in his proposal, his plan is for the state to cover the local governments' revenue reductions,
and has said, "we are going to hold [local governments] harmless."
SB 110 has been filed by Senator Hukill which cuts the CST paid by customers, and reduces the
percentage of allocation of CST to the state from 63% to 54.5%, which in theory maintains the
current percentage allocated to local governments. However, as the overall intake is reduced, so
then is the portion that is allocated to local governments. This act would apply to taxable
transactions which are dated on or after January 1, 2016. This issue is a key part of the
Governor's overall tax cut package.
Sober Homes: SB 326 sponsored by Senator Clemens and HB 21 by Representative Hagar,
would create a voluntary certification program for recovery residences or "sober homes" that
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function as halfway treatment houses. The bill requires the Department of Children and Families
to create a voluntary certification program for sober of "halfway" houses, administer a
certification program, and to publish a list of credentialed facilities to the public. Lastly the bill
would require background screening of recovery residence employees. This is the same bill as
filed last session.
Gaming: As we reported last committee week, portions of the Seminole Indian Gaming
Compact expire in 2015. Senate President Gardiner has made it clear it is not mandatory that the
legislature address or accept a renewal of the Compact. If these portions were not to be renewed,
this would mean that Florida would no longer recognize the Tribe's right to have card games at
their casinos and that Florida would forfeit the revenue stream dedicated to the state coffers as a
condition of the compact. Should the State choose to move toward a renewal of the expiring
portions of the compact, Florida gaming entities are positioning themselves to be part of the
discussion and of the outcome. Issues that would be in the discussion regarding Florida gaming
entities are parity in tax rate, parity in gaming product, decoupling of races, and slots availability
to areas outside of Miami -Dade and Broward County. This by no means is a simple issue, and
will likely be front and center through to the end of the legislative session.
Vacation Rentals / Public Lodging Establishments: HB 4009 by Representative Eagle would
delete the term and definition of vacation rentals and transient apartments, from classification
and regulation as public lodging establishments. At this time there is no Senate companion. In
2014, the legislature passed a law that addressed vacation rentals, in that it prohibited local
governments from regulating vacation rentals or the frequency of rentals or to set minimum stay
requirements of greater than seven days. It also removed the exemption in the bill for any local
law, ordinance, or regulation adopted on or before June 1, 2011.
Entertainment Industry Tax Credit Program: HB 451 by Representative Miller revises tax
credit applications process by providing procedures for queuing applications; providing
procedures for certifying tax credits; requires provision of workforce data; requiring certified
production companies to contribute a portion of tax credit award to other entities; requiring
production companies to provide internship opportunities; requiring certified production
companies to promote Florida, and revising provisions related to distributions and certifications
of tax credits.
Red Light Cameras: At this time, no bill has been filed to specifically prohibit red light
cameras, though committee meetings have only just begun, and we expect that an attempt to
preempt the regulation of red light cameras to the state will come about again this session. Of
note however, the following bill has been filed this week.
Traffic Enforcement Agencies and Traffic Citations: SB 264 by Senators Bradley and
Brandes and HB 421 by Representative Rodrigues designates counties and municipalities as
traffic enforcement agencies, to prohibit them from establishing traffic citation quotas. This bill
would require a county or municipality to submit a report of its traffic citation revenue and its
expenses for operating a law enforcement agency annually to the State Legislative Auditing
Committee.
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Taxi, Chauffeured Limousines and Uber Preemption of Local Governments: Last session,
we fought to prevent preemption of ride sharing entities, such as Uber and Lyft, from being
allowed to operate without complying with local government regulation of taxis and limousines.
Our firm expects this issue to heat up again this session. We will continue to keep you updated as
committees and session develops.
Amendment 1 Implementation: One of the most anticipated issues for the upcoming session is
how the legislature will interpret Amendment 1, which deals with funding for Florida water and
land conservation. This constitutional amendment that passed by approximately 75% in
November's election. Amendment 1 dedicates funding for water and land conservation,
management, and restoration by setting aside one third (33 %) of Florida's existing documentary
stamp tax ("doc stamp") revenues collected when real estate is sold. Amendment i is slated to
take effect July 1, 2015 and is expected to raise approximately $640 million in its first year from
doc stamp taxes on real estate sales. Over the next 20 years, it is estimated to raise an estimated
$15 to $20 billion.
Senate President Gardiner has cautioned that the required redirection of funds to go toward the
Amendment 1 will certainly reduce funds from areas also funded through real estate taxes, such
as transportation, affordable housing and economic development programs. Speaker Crisafilli,
has made it clear that water quality is his first priority, and has stated that all potential water
issues fit into the purview of the intent of Amendment 1.
Leadership is developing legislation that would set into statute just how these funds will be
allocated. We expect a draft to be put forth in the next few weeks, and we expect that in some
form, this legislation will address land management, conservation, water, beach renourishment,
storm water and flood control, and other issues surrounding the environment. Amendment 1 and
its interpretation, will fundamentally reshape the state's budget. We will continue to update you
on all developments throughout Session.
SCHEDULE: The committee week and Session dates are below for your review
Interim Committee Meeting Schedule
• February 2nd — 6th, 2015
• February 9th — 13th, 2015
• February 16th — 20th, 2015
2015 Regular Legislative Session Dates
• March 3, 2015 — Day 1 of the regular session (Article III, section 3(b), Constitution)
• May 1, 2015 — 60°i and last day of the regular session (Article III, section 3(d),
Constitution)