Ballot Question 1 - What is the ballot language?
Proposed Charter Amendment of Treasure Island, Florida Allowing Municipal Borrowing Through Resolution Instead of Ordinance
Shall Sections 3.09 and 3.10 of the City of Treasure Island, Florida’s Charter be amended to allow for municipal borrowing by the adoption of a resolution instead of requiring the adoption by ordinance, as set out and proposed by the City of Treasure Island in Ordinance No. 2022-20?
Yes (For the Amendment)
No (Against the Amendment)
What does that mean?
The recommended change is to revise the Charter to allow for municipal borrowing to be conducted by resolution instead of ordinance. The Charter Review Committee recommended this change due to the trend of banks holding interest rates for shorter time periods. A resolution takes less time to pass due to requiring one public meeting versus two public meetings.
Ordinance – Is a rule, law, or statute adopted by a municipal legislative body (City Commission).
- Requires two Commission Meetings
- Takes four weeks or more to pass an ordinance.
Resolution - A formal expression of the opinion or will of an official municipal legislative body (City Commission) adopted by a vote.
- Requires one Commission Meeting
- Takes three weeks or less to pass a resolution.
Why now?
When the City wants to amend its Charter, the City’s citizens must vote on any proposed amendments before such amendments might take effect.
The City hired independent financial advisors and bond counsel to assist the City with its municipal borrowing when it purchased the Allied Building (to eventually become the new City Center). These professionals and City staff testified before both the City’s Charter Review Committee and the City Commission regarding several challenges that they experienced in trying to obtain competitive borrowing terms while operating within the existing charter language.
You can listen to this testimony at the following City meetings (click on the link):
Based on the testimony of these professionals, City staff, and with the recommendation of the Charter Review Committee, the City Commission voted to put this proposed charter amendment to a referendum to address these municipal borrowing concerns.
For more information on this proposed amendment, please see Ordinance 2022-20.
What will change if passed?
The City has been advised by independent financial advisors and bond counsel that lenders are less willing to hold interest rates for long periods of time, much like a mortgage “rate lock” when shopping for a house. Allowing municipal borrowing through a resolution will result in less time that a lender is required to hold an interest rate, thereby allowing the City to approve borrowing quicker and possibly obtain more competitive interest rates/terms.
What happens if it does not pass?
The City's Charter will remain without the proposed amendment. This will impact the City's ability to obtain competitive loan terms.
Examples
For the City to accept a loan proposal by ordinance, this will require a bank to hold loan terms for up to 5 weeks because there are two commission meetings a month and sometimes there are 5 weeks in a month. The City’s independent finance advisors have informed the City that banks are less willing to hold interest rates for this time period and if banks are required to do so, then the banks may not offer the most competitive proposal.
Ballot Question 2 - What is the ballot language?
Proposed Charter Amendment of Treasure Island, Florida Revising Outdated Budget Language and Municipal Borrowing Restrictions.
Shall Section 4.10 of the City of Treasure Island, Florida’s Charter be amended to update requirements regarding the City’s budget to reflect current accounting standards and revise the provisions regarding municipal borrowing (to delete restrictions on borrowing by the City while retaining those restrictions required by the Florida Constitution), as set out and proposed by the City of Treasure Island in Ordinance 2022-21?
Yes (For the Amendment)
No (Against the Amendment)
What does that mean?
The first part of the change is to remove antiquated language in the City’s Charter and provide for the current method of generating an annual budget, detailing the income and expenditures of City owned and operated utilities. The current language in the Charter is outdated and does not represent current or best practices.
The second part of the change is to remove the current language restricting one aspect of municipal borrowing. The City’s independent financial advisors have explained that the current Charter restrictions are antiquated and place the City in a disadvantaged position when borrowing. The state Constitution and state statutes have restrictions already in place that restrict municipal borrowing and will remain regardless of any changes to the City Charter. Florida’s Constitution requires a majority vote of the citizens in a referendum to pledge any ad valorem (property tax) revenue for debt maturing more than 12 months after issuance.
This amendment to the City Charter would:
- Update the Charter to reflect current best practices for the City’s Budget.
- Remove borrowing restrictions that are antiquated.
Why now?
When the City wants to amend its Charter, the City’s citizens must vote on any proposed amendments before such amendments might take effect.
As the City’s financial advisors explained, the current Charter requires that the Commission approve the loan proposal with the lowest Net Income Cost (NIC), which is an antiquated method when evaluating different loan proposals. The NIC methodology was included in the adoption of the charter in 1978 and mandates that this criterion must be used as the sole factor when evaluating loan proposals. The NIC methodology pre-dates computers and existed at a time when different loan scenarios were difficult to calculate and evaluate. Today, loan proposals can offer several different terms such as variable and/or fixed interest rates, early payoff options, principal and interest payments that vary throughout the term of the loan, and different bond covenants. These items are examples of different loan attributes that can be used when evaluating the most appropriate loan option for the project being considered.
As the City’s financial advisors explained, the current Charter requires that the Commission approve the loan proposal with the lowest Net Income Cost (NIC), which is an antiquated method when evaluating different loan proposals. The NIC included the adoption of the charter in 1978 and was used as the sole factor in determining whether to accept a loan at a time that pre-dates computers and where different loan scenarios were difficult to calculate and evaluate. Today, loan proposals can offer several different terms such as variable and fixed interest rates, early payoff options, principal and interest payments that vary throughout the term of the loan, and bond covenants. These items are examples of different loan attributes that can all be used in evaluating the most competitive loan option.
Additionally, the single project limit in the current Charter language would limit the ability of the City to take on any projects that exceed that limit, even if the City is not borrowing for the entire cost of the project. Currently, the projected single project limit as of FY 2022 (pending the completion of the FY2022 audit) is $12.8 million. This restriction means that the City could not pursue a project that is more than $12.8 million, even if the City is not borrowing the entire project amount. Further, this current language would prevent the City from doing a combination of cash and debt funding for a project; so, if any portion of a project is debt funded, the total project would need to be under the threshold.
You can listen to this testimony at the following City meetings (click on the link):
Based on the testimony of these professionals, City staff, and the Charter Review Committee, the City Commission voted to amend the City’s Charter to address these municipal borrowing concerns.
For more information on this proposed amendment, please see Ordinance 2022-21.
What will change if passed?
If passed, the City staff will bring to the Commission a debt policy that the City will use to set the terms of what the City can borrow for, how much it can borrow, and other recommendations or restrictions. This will allow the Commission to more easily adjust the debt policy based on the economy and best practices that allow the City to conduct municipal borrowing in a more competitive manner. A Debt Management policy is common among local governments and is reflective of Government Finance Officer Association (GFOA) best practices.
Also, if passed the City could evaluate loan proposals that focus on all attributes of a loan, not solely the Net Interest Cost (NIC) so that the most appropriate loan for the project can be considered. Lastly, the single project limit would be eliminated, enabling the City to pursue projects that may exceed $12.8 million in cost, but may not necessarily mean financing more than $12.8 million in cost. This may allow the City to better leverage funding via grants or private contributions such as a public-private partnership.
What happens if it does not pass?
The City's Charter will remain unchanged without the proposed amendment. This will limit the City's ability to negotiate for more competitive municipal borrowing and limit the ability of the City to pursue opportunities where the funding may come from a number of different sources such as grants and/or private sector sources.
Additionally, keeping the language would prevent the city from potentially pursuing a project greater than the current limit when the amount financed is less than the current single project limit due to other funding sources being available. When such an opportunity becomes available, the time required to hold a referendum may make it infeasible when there are time constraints presented with grants and/or private sector funding.
Examples
Example 1:
A neighborhood wants the City to pursue undergrounding utilities. Usually, the City will finance this project through borrowing with the residents paying back the City through property assessments over a period of time that the residents agree to. If the cost of the undergrounding exceeds the single project limit, the project could not be pursued even though the City residents requested the project and would be funding the project.
Example 2:
After a hurricane, the City could have to pursue a line of credit to maintain continuous operations because property taxes and other revenues could be significantly impacted. After Hurricane Ian, the City of Sanibel Island approved a $20 million line of credit to ensure the continuity of services. The City of Sanibel has a similar population to Treasure Island and is also a barrier island. The City would be limited to the single project limit of $12.8 million in obtaining a line credit to maintain operations.
Example 3:
A City Project costing $14 million, of which the City has obtained grant funding ($6 million) and would borrow for the remainder of the project ($8 million). This project would exceed the single project limit (currently $12.8 million), so it could not be pursued.
OR
A City Project has been planned for several years with an estimated cost of $10 million, when it comes time to fund the project, it is now estimated to cost $14 million. While the City has saved cash funding of $10 million, the City could not finance the remainder ($4 million) as the project would exceed the single project limit. As a result, the project will be delayed in order to allow more time to save cash, however, the project cost may keep increasing.
Example 4:
The current location of the City’s Emergency Operations Center (EOC), which is shared with the City of Treasure Island, the City of St. Pete Beach, and South Pasadena, is only rated for up to a Category 3 Storm. The City is considering looking at other more resilient options for an Emergency Operations Center. If the three cities were to locate a property out of the flood zone to purchase, construct or remodel a structure to be suitable to serve as an Emergency Operations Center, then the total cost of the Emergency Operations Center would need to be less than the single project limit of $12.8 million, for the City to be able to borrow any portion of the total project costs. The City of Treasure Island would be restricted by the single project limit, even though the three cities would pursue and share in the funding of the total project costs.
Example 5:
A final example would be the City could not enter into a public-private agreement on a $15 million development, where the City was only financing $5 million and the remaining $10 million in cost was being provided by a private company and grants. In this example, the project cost exceeds the single project limit even though the City would not be financing the entire project.
