Florida tax collectors’ losing fight puts bond validations and homeowners at risk

by | Apr 11, 2024

Dan Humphrey is an attorney at Quinn Emanuel Urquhart & Sullivan. He formerly served as a law clerk to a Florida Supreme Court Justice and a Federal Judge.

Florida voters should pay attention to who is running for tax collector this November because tax collectors around the State are losing an expensive litigation battle—footed by taxpayers—that threatens to send the Florida public bond market into turmoil.  In a saga that has unfolded over the past year and a half, a group of Florida tax collectors have refused to comply with two court orders instructing them to collect assessments as part of the State’s energy and disaster resiliency program, PACE (Property Assessed Clean Energy).

The PACE program helps homeowners finance important hurricane hardening improvements.  According to a recent study, PACE home improvements have provided Florida homeowners over $1 billion in insurance premium savings, yet, some of the state’s tax collectors are refusing to collect the assessments required to pay for these improvements. In a recent court order issued on March 19, 2024, a Tallahassee Judge found that, “the tax collectors are without discretion to collect the non-ad valorem assessments issued by the Agency.”  Nevertheless, because these county-elected tax collectors don’t want to be told what to do, their baseless legal fight continues at the taxpayers’ expense.

The heart of the dispute lies in Florida’s PACE statute, codified at Section 163.08, Florida Statutes. This statute was designed to empower local governments to finance crucial hurricane hardening and resiliency improvements for qualifying property owners, offering them lower interest rates than otherwise available by allowing payments to be collected through property tax bills. PACE presents a unique win-win situation: property owners benefit from affordable financing, while lenders enjoy the security of tax-based repayment.

The PACE program depends on the issuance of bonds, which are validated by state courts in Tallahassee. Once validated, investors can rely on the relative safety of their repayment because tax collectors have a ministerial duty to collect the repayments on each homeowner’s tax bill the following year. The tax collectors’ compliance with the PACE statute and bond validation is critical and their failure to comply is a dereliction of duty.

What happens when local officials stand in the way of repayment of court-validated bonds? In short, a costly legal battle that will not end well for the tax collectors, taxpayers, or the State. Multiple worst-case-scenarios for the tax collectors are likely to occur if they continue down their ill-advised path: First, they run the risk of causing Florida municipal bonds to be downgraded, making it harder for municipalities to fund important public works projects. Second, they may well wind up limiting the power of municipalities for good by getting a negative ruling in the Florida Supreme Court.  

In October 2022, the Circuit Court in Tallahassee validated certain bonds to be issued as part of the PACE program. In the court’s validation judgment, the court spelled out how the valid bonds would be issued and repaid, namely by assessments that had to be collected by the tax collectors, given that tax collectors do not have discretion whether to collect tax bills that comply with the law.  Although the tax collectors later claimed the validation judgment misinterpreted the law,  they did not challenge the judgment for a year.  During this time, hundreds of homeowners utilized PACE financing to hurricane harden their home and reduce their homeowners insurance premiums, and investors continued to rely on the court’s judgment that the bonds were valid and would be collected by the tax collectors.  

In October 2023, the tax collectors went to the Tallahassee Court to challenge the judgment validating the bonds. After months of expensive litigation, the court upheld its original judgment, ruling against the tax collectors, and affirming that the PACE assessments funded under the bond validation must be collected by the tax collectors.

Instead of promptly complying with the court order and collecting the 2023 assessments, the tax collectors have announced their intention to drag out the litigation and incur additional attorneys’ fees, by appealing directly to the Florida Supreme Court. However, because the tax collectors failed to directly appeal the bond validation judgment in the first instance, only intermediate appellate courts can hear an appeal. Appealing to the Florida Supreme Court will only prolong this unwinnable court battle and ring up additional legal fees for Florida taxpayers.  

Importantly, the tax collectors’ challenge of a validated bond judgment, though unsuccessful, calls into question the stability of the Florida bond market generally. If investors doubt the finality of a bond validation proceeding in our courts, they will no longer invest in Florida.

Moreover, the tax collectors’ actions continue to harm Florida homeowners—the exact population that the State sought to benefit through the PACE program.  Homeowners eligible for PACE financing that initiated hurricane-hardening home improvements may now be left with incomplete projects, the inability to afford crucial repairs to maintain property insurance while hurricane season nears, or construction liens on their homes. 

There is a solution: the tax collectors comply with bond validation judgments and stop the legal wrangling.  The agency that issued the PACE bonds and investors are willing to work with the tax collectors. Wasting time in legal battles is costly to everyone, and repeatedly losing legal battles erodes the public trust.  Tax collectors serve important public duties, but they serve at the will of the people and the Governor.  


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