Concerns are raised about taxing units

Article Courtesy of The Ocala Star Banner
By Bill Thompson

Published December 19, 2011

Contrary to popular belief, some Marion County taxpayers actually want to cough up more money to the government.

Several of them appeared before the County Commission recently, asking the board to charge them for road improvements within their subdivisions.

Commissioners obliged, unanimously inducting those residents into the realm of special tax districts known as Municipal Services Taxing Units (MSTUs) or Municipal Services Benefit Units (MSBUs).

Despite names as dry as the dirt roads that get paved under them, the programs have proven popular over the past three decades.

With the commission's blessing, scores of Marion County communities have adopted these tax districts since the mid-1980s. Their requests have produced more than 600 miles of new roads and infused road builders with tens of millions of dollars through projects that likely would have been scuttled had the politicians not had this mechanism.

But there has been controversy about the programs.

Construction worker Jeremy Kendrick with Art Walker Construction marks the grade of a ditch 8 inches low while excavator operator Darryl Goodman loads a dump truck along Southwest 112th Lane in the Ocala Waterway Estates near Marion Oaks on Dec.

Sometimes the county has failed to follow its own rules. Simple tasks like vote counting and contract awarding have been muddled. Majestic Oaks homeowners actually posted election observers when their subdivision voted. A South Florida lawyer has successfully sued Marion County three times over these programs.

For all the appearance of direct democracy, the process of establishing these taxing districts has only one bedrock certainty: The County Commission can do whatever it wants. And that's what most bothers residents who object to — or are tossed into — this process.

And now the pool of affected residents might be getting bigger: County Administrator Lee Niblock has proposed expanding the program.

How it started

The benefits and shortcomings of the MSTU program were on display during four hours of public hearings the County Commission conducted on Dec. 7.

Proponents argued for implementing a tax district in their community, citing safety concerns and exasperation with pothole-stricken roads.

“It's time that we move forward,” said Leslie McCarson, who led the effort to pave streets in part of Kingsland Country Estates. “We can't expect taxes to do everything. Taxes have done all they can. Money is scarce in our pockets. Money is scarce for you guys to do all that we expect you to do. ... Money only goes so far.”

Commissioners complied, voting unanimously to charge McCarson and her neighbors $1,708 apiece to pave 2.5 miles of streets.

These special tax districts are deemed fair because only those people within the defined “unit,” and not taxpayers at large, pay for a government-provided benefit that only they enjoy.

In Florida, they evolved in response to cities that griped about paying property taxes to fund services rendered solely to residents in unincorporated portions of Florida counties.

Marion County was a pioneer in this approach for offering what are dubbed “municipal services.”

State records indicate that the Rainbow Lakes Estates Municipal Services District, which spans parts of Marion and Levy counties, is the second-oldest special district of its kind, created by the state Legislature in November 1969.

State lawmakers permitted counties themselves to set up the districts locally in 1974. While the law allows for a variety of government services, efforts in Marion County have primarily focused on paving streets.

The County Commission first adopted the program in October 1982. Commissioners approved 10 projects in 1984, the first year the program went online, and demand has been steady since then: Since 1984, 204 such districts have been proposed, with only a few either rejected or still pending.

Landowners in the ones that have been approved have spent $68.7 million to pave 621 miles of roads, county records show.

That is an expense, Assessments Department Director Myra Tedder pointed out, that general taxpayers in Marion County were spared.

Tough starts

But the forming of these districts has, at times, been prickly. Sometimes the county has departed from its own policies.

Although not specified in the 1982 ordinance, the Star-Banner reported at the program's inception that establishing these tax districts required the support of two-thirds of the landowners within the specified area.

The county would pay for up to 20 percent of the cost of the improvements, while property owners on each side of the street would each chip in 40 percent. The tax would be pro-rated by how many feet of road frontage each of them owned.

Then-Commissioner Roy Abshier, although a champion of the program, criticized the idea of taxing only people along the improved street. Abshier, the Star-Banner reported, felt that was unfair because other residents who had not paid for the new road would be able to use it.

The county legal staff believed that all residents could not be taxed unless the commission charged on a per-parcel — rather than per-foot — basis.

Facts

WHAT ARE THEY?

MSTUs: Generate revenue from property taxes and provide a general service that the taxpayers may or may not use.

For instance, all landowners in unincorporated Marion County now pay a property tax to fund the operations arm of the Sheriff's Office — that is, patrol deputies and detectives.

MSBUs: Funded by a fee — called an assessment — and are typically formed in subdivisions to address narrower needs solely within their boundaries. Examples: road paving, street lights, mowing.

ACTUALLY, WE ALL PAY
MSTUs and MSBUs localize the benefit and liability for a government-provided service. But even taxpayers outside the affected areas must help underwrite the efforts.

Engineers help design the project before it's approved so residents can be provided an estimate of their cost. On the rare occasions when the County Commission denies the project, the consultant's costs are paid from gas-tax revenues generated from all motorists.

Recently the commission discussed shifting those costs to the general fund, or revenues from all taxpayers.

Further, the county's Assessments Department conducts the elections by certified mail, with $25,000 set aside for those mailings. That money comes from all Marion County taxpayers.

WHO GETS IT RIGHT?
Coral Gables lawyer Richard Bennett, who has successfully challenged Marion County's procedures, cites Volusia County as an example of how special districts should be formed.

Volusia residents interested in a tax district, according to that county's website, must collect signatures from at least 51 percent of the property owners in the area involved, or from the owners of at least 51 percent of the total lands within the proposed district.

If the roads are private, 100 percent cooperation might be required, the website notes

So, in 1985, the County Commission asked the Legislature to enact two special laws to fix that. One applied to recorded subdivisions, the other to unrecorded ones. But both laws required that at least 51 percent of all the property owners inside the tax district support the improvements.

In 1996 the commission made another change: an internal policy that mandated tax districts would be established in recorded subdivisions if 50 percent plus 1 of those landowners who responded to the county's ballot were supportive.

An alternative threshold for approval was 40 percent of the respondents and two-thirds of the owners of improved parcels.

The process remained unchanged for unrecorded subdivisions.

In 2007, the process came under fire when a lawsuit was filed over vote tallying. Richard Bennett, a Coral Gables lawyer, is the only one to challenge how the MSTUs were created and funded, according to Tedder, a 33-year county veteran who has headed the Assessments Department for the past two decades.

At issue in Bennett's suit: the MSTU in the Rainbow Springs subdivision near Dunnellon.

The County Commission had ratified the tax district because 477 of 926 property owners who submitted ballots — or 51.5 percent — favored the road project.

While that complied with county policy, Bennett maintained the 1985 laws trumped that; as a result, he argued, the project should have been vetoed because the approval threshold was far from met.

In Rainbow Springs, 714 landowners — and not 477 — were needed to achieve the legally mandated 51 percent, he maintained. The county had proceeded with only 34 percent supporting the tax, charging landowners about $900 each.

Circuit Judge Jack Singbush ruled in December 2008 that the county had wrongfully taxed the landowners.

Bennett has subsequently prevailed in similar lawsuits on behalf of property owners in Lake Tropicana Ranchettes near Dunnellon in 2009 and Timberwood in the State Road 200 corridor in 2010.

While refunds were ordered, local judges have also ruled that the county, under a 2009 ordinance, may reassess the landowners in those communities. That issue is still being litigated in appellate court.

At the county's request, the Legislature repealed those 1985 laws in June 2010. Since then, the county has relied on the 50-percent-plus-1 standard.

Bennett's highlighting of the election process eventually led the county to submit the results to the court clerk's Internal Auditor for verification.

But, as was shown at the Dec. 7 hearings, Bennett possibly could have enlisted other potential clients.

For example, the County Commission unanimously approved a tax district for the Florida Orange Groves subdivision. Landowners will pay $6,353 each to pave a mile of streets.

The tax passed in the community 19-15. Yet the subdivision has 55 total landowners.

Under the 1985 laws, which were still in effect when the balloting occurred in October 2008, the project garnered only 35 percent support instead of the 56 percent the county went by.

In the Rolling Hills area, where residents have lobbied the commission for an MSTU for years, four streets were approved for paving. That community voted in September 2009, also before the laws were repealed.

The Rolling Hills project, for which property owners will each pay $6,243 for 3.2 miles of new roads, was adopted with just 38 of 148 total landowners favoring the tax.

Opponents of a tax district for the Twin Lakes Ranchettes subdivision succeeded in lobbying the County Commission to vote down that proposal. It was the only one defeated on Dec. 7.

Foes of that project, which also was voted on in September 2009, showed that six votes from supporters were counted even though they came in after the county's deadline or were not postmarked to indicate they had arrived in time.

Tossing those out would have not achieved a majority under either standard, according to county documents.

The launching

The concept of voting on a special tax district exemplifies how direct democracy might work in the contemporary world. Yet, in reality, casting ballots has proven problematic for county officials and residents alike.

For one thing, the county's policy says a request for an MSTU must come from a legitimate homeowners association or 10 percent of the property owners within the proposed district.

The Rolling Hills project adopted on Dec. 7 did not meet that threshold — but went forward anyway because the County Commission waived the 10 percent requirement.

Tedder, at a Dec. 8 workshop, noted that the commission had done so a handful of times in the past — even though there is no provision in the policy saying the board could or would waive that mandate.

If the process moves ahead, the next issue is getting people to vote.

At the Dec. 7 hearings, for example, only 52 percent of the 421 total landowners who were issued ballots for the four subdivisions actually returned them — a “turnout” rate that is fairly typical, officials say.

The response ranged from a low of 45 percent to a high of 66 percent in those cases.

Although the County Commission has maintained for a long time that the vote is only used as a barometer of community sentiment, the laws and county documents outlining the program has used terms like “must” and “required.”

That, as officials acknowledged recently, has created an expectation among the public that the vote is final and binding. It isn't.

County records show that eight times since 1998 the County Commission has denied projects that had majority approval from property owners. One of those — Golden Meadow Farms in 1998 — was backed by 74 percent of the community.

But the near-perfect approval rate from the board means commissioners have sometimes not heeded the principle that people choose to live where they want to.

On Dec. 7, for example, two residents who opposed the MSTU for the Florida Orange Groves subdivision — Nicholas Newcombe and Tracy Addison — told commissioners they wanted to live along a dirt road. Newcombe said he saw it as a crime deterrent.

MSTU opponents over the years have offered other arguments that have gone for naught.

They have suggested that people who advocate for an MSTU knew they were moving to a community with dirt or poor roads when they moved in, and thus should accept the consequence.

Others argue that, since only about one in five of the proposed MSTUs since 1984 have covered private roads, that the roads in question are public and, as such, should be paved or taken care of by the county.

Critics have also pointed out the process is unfair to owners of multiple lots within the proposed district. They get one vote like everyone else, but must pay the lion's share of a project because the county assesses the district per each lot.

Who decides?

The drive to create special tax districts has created angst in other ways.

When voting on their own MSBU earlier this year, homeowners in the Majestic Oaks subdivision in the State Road 200 corridor took the unusual step of posting election observers from the community when the votes were counted.

The suspicions of opponents in that area were heightened when, after the proposed district was defeated, Tedder, the assessments director, resurrected it.

She just lopped off the section of the community that had spearheaded opposition to the project.

That move, made at the request of just 30 paving proponents, or just 8 percent of the entire voting pool, gave MSBU supporters in Majestic Oaks enough votes to prevail.

A similar situation arose in one of the lawsuits brought by Bennett, and in the Rolling Hills project, which was originally proposed for 11 streets but only featured four because the others lost.

Yet the staff in the past has sent projects to the commission without having a second vote by landowners in the smaller, redefined district.

Tedder has defended the practice, saying it is her job to help people who want the roads paved.

Lance Counts was a participant on the other side of the issue.

Counts, a road builder looking to get work from the tax districts, was recently the low bidder on a small job in the Doublegate subdivision budgeted for $105,000.

Counts made the best offer, about $300 better than the runner-up, but he still overshot the project's budget by $7,365.

Tedder recommended to the County Commission at its Nov. 1 meeting that all bids be rejected.

The staff, she told the board, had decided to lump the project in with another one nearby — and bid the larger project as one job in order to get a better price.

Counts maintained that his company was too small to get the appropriate insurance bonding for the bigger project. The commission subsequently opted to overrule Tedder's suggestion and awarded Counts the job.

“The consensus of landowners I talk to believe that owners of a majority of parcels to be assessed should decide the issue,” Bennett said. “They have the opinion that the county is financially interested in shifting the cost of road maintenance to landowners and that the nonbonding petition system is not fair since the board can do what it wants to, notwithstanding the outcome of the voting.”

Ignoring votes

The authority of county commissions to ignore the MSTU referenda goes back at least a generation.

In December 1989, then-state Attorney General Bob Butterworth noted in an opinion in an MSTU case from Osceola County that state law “authorizes counties to establish municipal service taxing units ... and to levy, without voter approval, additional taxes within the limits fixed for municipal purposes.”

Locally, the County Commission's absolute authority has been reiterated several times at recent meetings.

“The petition process has absolutely nothing to do with our ability to tax our own citizens. Nothing,” Commissioner Stan McClain said at the board's annual strategic meeting on Nov. 10.

“We could tax them without any petitions. We could say we're going to start paving every road in Marion County and everybody in Marion County is going to start paying for them. ... The petition process doesn't even really matter.”

Improving the system

Despite that assertion, the board in recent weeks has begun to recognize that problems exist.

Commission Chairman Charlie Stone suggested not long ago that resolving those problems has much to do with shielding Tedder and the board from criticism that it is trying to manipulate the results to impose the taxes.

Commissioners are still working to finalize a revised MSTU policy, but one of their first steps was to announce they no longer want the staff to carve out sub-areas in districts initially rejected by the voters, unless there is a second vote.

Moreover, they have said they will halt waivers for the 10 percent requirement to start the petition process.

And going forward, the Internal Auditor will tabulate the results instead of Tedder's staff.

But any problems have not tempered the commission's enthusiasm for the program — primarily because the main alternative would be raising other taxes.

“It's worked for 25 years and at the end of the day a lot of people end up being happy,” McClain said at the Nov. 10 meeting.

“We're in an enviable position in that we haven't had to raise taxes on our entire community to do some of this. ... It's a great process to be used. I think it's been a real benefit to all our citizens.”

McClain added that when he meets elected officials from other counties, he is always surprised they don't pursue the system with the same gusto exhibited by Marion County.

“I tell them, ‘You guys should do an MSTU,' ” he said.

At the Nov. 10 meeting, Niblock, the county administrator, told the board the MSTU program had “potential” for wider use.

A county report on the possible expansion noted that county crews maintain about 400 miles of unpaved roads and that another 95 miles of unimproved roads are not maintained by anyone. Those roads, the report said, create a dust problem in dry times and are candidates for washouts or potholes in the rainy season.

A more “aggressive” utilization of the MSBU program to address those areas would “have a positive impact on the quality of life in Marion County, and it will enhance property values, safety, emergency response and welfare of the impacted population,” the report added.

The options for paying for that included a “public funding contribution” or a “mandatory assessment.”

Niblock, in an email response to questions about the proposed expansion, observed that the county has approximately 1,800 miles of subdivision roads and alleyways that are aging and in need of maintenance — which is funded entirely by gas-tax proceeds.

“Gas tax collections have decreased, and there is not adequate revenue to handle even the major road system (approximately 1,233 miles),” he said.

“The potential with expanding would be making the program available for maintenance projects to offer residents more affordable options.”

Added Niblock, “Roads need to be maintained and improved by either a localized assessment or a countywide tax. The board favors localized assessment so the people who benefit most from the project are the ones responsible for financing it.”

But, he concluded, “our road development or paving process is generated by the citizens. However, it will only expand if additional citizens are interested in it.”

THE TRICKS OF COUNTY GOVERNMENT

MSBU -- THE NEWEST TRICK TO FLEECE HOMEOWNERS