Piecing Together the Governing Puzzle: An Exploration of Florida's Special Districts Robert J. Eger III and Joseph Vonasek September 12, 2012 LeRoy Collins Institute ~ Carol Weissert, Ph. D., Director FSU Campus ~ 506 W Pensacola Street Tallahassee FL ~ fax

Governance in Florida is granted by the state to local and special district governments. Although imparted with governance authority, special districts remain largely invisible to citizens who use and pay for their services ▫Contemporary evidence in Florida is observed in newspapers and surveys This provides an opportunity to analyze the role and fiscal behavior special districts Focus of Today’s Presentation

Transmission of governance powers to special districts governments ▫Usually for a single function Powers include ▫Revenue authority ▫Expenditure authority ▫Debt authority Overview of Governance Powers

1.How are special districts in Florida conveyed?  Focus is on the legislative (legal) definition of special districts and the process of creation, operation, and dissolution  Analysis creates a document for citizens and legislators who would like specifics associated with the creation of special districts Research Question #1

Operate under a confusing and often contradictory set of laws with different levels of government approving the creation of the district ▫State executive branch and the local government executive branch can create  Given the different levels of government for creating, a question is raised as to how districts avoid fragmentation in the provision of services The use of the term “creation” and “establishment” are unclear in statute ▫Are powers associated with both terms equal for local governments? Findings – Conveyance of Special Districts

Lack of consistent uniformity in the composition of governing boards ▫Methods of appointment ▫Number of seats Dissolution guidelines are divergent Recent efforts to reassess continued existence, accountability, and effectiveness failed in the House In 2012 special district convertibility into municipal governments was signed into law ▫We estimate that 53 CDDs may be eligible for conversion Findings – Conveyance of Special Districts (cont.)

What does Analysis Suggest Under law, task is to serve “a public purpose with accountability to the public and general- purpose local governments” ▫This directly conflicts with the often confusing set of laws ▫The number of creating documents available ▫The ability to reassess the accountability, effectiveness, and existence 7

2.What has been the fiscal performance of special districts in Florida?  Focus is on exploring the financial aspects of Florida’s special districts including revenues, expenditures, debt, assets, and liabilities  Analysis provides citizens and legislators the opportunity to directly examine the recent fiscal behavior of special districts Research Question #2

Fiscal Performance- Methodology We stratify the special districts based on statutory creation ▫F.S. 189 (Independent districts) ▫F.S. 190 (Community Development Districts) ▫F.S. 191 (Fire Districts) Within each stratum ▫Simple random sample based on our desired error rate of ± 4% Sample only the 992 districts that are active as of June 12, 2012 Of our 96 sampled districts, 74 have complete information We further subdivide our districts based on board structure ▫Dominated by an elected board structure (Chapters 190 and 191)  Community development districts (CDD)  Fire control and rescue districts ▫Not dominated by elected board structure (Chapter 189)  Elected board  Gubernatorial appointed  Mixed board (boards that have both elected and appointed members)  Appointed board structures. 9

Findings- Fiscal Performance CDDs ▫End-of-year cash on hand has been declining  Indicating that cash to pay for annual financial liabilities are eroding ▫25% of CDDs had less than 35 days of cash on hand in 2010 ▫At least 50% of CDDs are in balance sheet insolvency ▫CDDs have high liabilities compared to unrestricted net assets and high debt to asset ratios over the entire time period  Indicates that debt has the potential to place the average CDD into a financially distressed position which may require an inflow of outside revenues to reduce the default risk of these districts

Findings- Fiscal Performance (cont.) Non-CDDs ▫Elected board districts have seen a decline in their average liquidity position over time ▫Fire districts, mix board districts, and appointed board districts  May have a difficult time responding to temporary cash shortages, emergencies or deficits do to low unrestricted net assets ▫Elected board and governor appointed board districts have about 2 times their annual expenses available in spendable unrestricted net assets in 2010

Findings- Fiscal Performance (cont.) Non-CDDs ▫For each year analyzed  Average fire district had actual revenues below budgeted revenues  Average elected and governor appointed board districts had actual revenues that exceeded budgeted revenues  Both of these outcomes indicate consistent inaccuracy in projecting revenues ▫For all years (exception is average fire district in 2009)  Actual average expenditures are lower than budgeted expenditures for all the special district types ▫Consistent across the time period for every year evaluated  Independent special districts with gubernatorial appoint boards or elected boards always understate their actual revenues and overstate their actual expenses

What does Fiscal Analysis Suggest Fiscal performance for all districts ▫Generally appear to have writhed during this economic slump ▫Fiscal health appears to be marginal to poor ▫Districts have seen a decline in liquidity, but appear to be slowly improving over the time period ▫Find a limited ability to respond to temporary cash shortages, emergencies or deficits ▫The trend was for districts to overstate expenditures on average ▫Consistently inaccurate in projecting both revenues and expenditures 13