Florida bond fight continues three years after debt was validated
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A Florida agency that offers PACE financing to property owners is at the center of a legal dispute that it says could catastrophically undermine the finality of all Florida bond validations.
The Florida PACE Funding Agency and its financing partner FortiFi Financial, Inc., which offer
The Florida Supreme Court heard oral arguments in the case Nov. 7, and its decision is pending.
Arrayed against Florida PACE and its financer are many Florida county governments, tax collectors, state attorneys and the state attorney general.
Florida PACE issued $150 million of bonds in 2023 after the circuit court for Leon County in 2022 validated the agency’s plan to issue up to $5 billion total.
Circumstances around the issuance of the $150 million led the government parties to file suits against the bond validation judgments in 2023.
PACE programs offer loans to property owners for clean energy and, in the case of Florida PACE, hurricane-resistant home improvements that are secured by property tax assessments.
Several “local tax collectors refused to place the FPFA’s submitted non-ad valorem assessments on the property tax rolls,” according to
Florida PACE’s opponents sought relief in the Second Judicial Circuit of Florida (Leon County), which sided with Florida PACE and FortiFi in a decision released earlier this year.
The government parties appealed the case to the state Supreme Court.
The practical result of a Supreme Court ruling against the bond validation “would be to deprive FortiFi, an investor who relied on that same bond validation to lend $150 million for [Florida PACE]’s public purposes, of repayment of that debt; that same ability to challenge bond validations after finality would undermine, potentially catastrophically, the finality of all bond validations statewide,” Florida PACE said
Overturning an established bond validation “would portend grave consequences for Florida bond investors, who depend vitally on the certainty provided by validation judgments,” FortiFi’s attorneys wrote in its brief. “Without such certainty, bond ratings will decline as the risk to bond investors increases, the cost of capital for homeowners and municipal projects will increase, and institutional investors will look elsewhere.”
The Alachua County and other county tax collectors
Ben Watkins, Florida director of bond finance, said he thought the government parties’ appeal was unlikely to succeed, though he cautioned that he had not read their court filings.
The purpose of the bond validation law is to provide market participants with certainty on constitutional and statutory issues related to the debt, Watkins said. Appeals are allowed based on clerical errors and factual mistakes.
The objecting parties should have shown up at the bond validation hearings in 2022, Watkins said.
The parties appealing the validation say they are attacking aspects of the bond validation judgment “collateral” to the bonds themselves, which they say should never have been added to the validation judgment.
Several tax collectors specifically object to being required to collect taxes for an agency, Florida PACE, that has no agreement with their county government.
“Matters adjudicated in the Bond Validation Judgment abrogating their home rule authority were introduced into the proceedings through FPFA’s misrepresentations to the court, and the Counties’ rights to due process were ‘directly and injuriously affected’ as a result,”
The government parties say the validation judgment extended Florida PACE’s independent authority to operate statewide or the tax collectors’ duty to collect Florida PACE’s assessments using a uniform method.
The lower court’s “findings will serve to unlawfully preempt the authority of counties to regulate or deny the operation of the PACE program in their jurisdictions,” the Florida Association of Counties wrote
Florida PACE and FortiFi “committed a fraud upon the court” by influencing the trial court to adjudicate collateral matters beyond the proper scope of a bond validation proceeding, several state attorneys said
Palm Beach, Polk, and Lee County governments and tax collectors
The three counties’ parties said these issues were not properly argued in writing or orally before the decision, were decided in a proceeding where most of the counties and tax collectors weren’t participants, and were decided in hearings that lacked legally required advanced notification of the proceedings to affected parties.
The lower court was wrong in saying the government parties’ challenge to the bond validation were filed too late because relief from judgments that should be found void can be made at any time, the three counties said.
Also, the counties’ filing should be seen as reasonable since they were delayed by their effort to first communicate with Florida PACE outside of the court context, the counties said.
“It is plain that by opining on the authority of counties across Florida to regulate [Florida PACE], the circuit court ‘inject[ed] collateral matters’ which have ‘no place’ in a bond validation proceeding,” the state attorney general said in its brief.
The county tax collectors’ brief said the lower court erred when it determined Florida PACE as a “special district” could lawfully operate on a statewide jurisdiction because state law says special districts have jurisdiction to operate only with a limited boundary.
The state attorneys said no authority granted the Second Judicial Circuit state attorney, who attended the bond validation hearing, power over statewide issues that were addressed there.
Florida PACE argued state law precludes using a rule of state civil procedure to “mount a post-finality attack on a ‘forever conclusive’ bond validation judgment that ‘shall never be called in question in any court by any person or party.'”.
From when the lower court approved the bond validation on Oct. 6, 2022, state law says parties have 30 days to appeal it, Florida PACE said, and no parties filed an appeal in that time frame. Some parties filed suit against Florida PACE from operating in their jurisdictions in April 2023 but suits against the bond validation were only filed in October 2023.
Florida PACE quoted the Second Judicial Circuit court as rejecting the governments’ arguments because the governments cannot use a Florida civil procedure rule to circumvent the “forever conclusive” law, the governments’ motions came too late, the court was within its jurisdiction to determine the powers of Florida PACE and collections mechanism for the revenue bonds, and the government parties had not been deprived of due process in the proceedings.
Florida PACE asked the Supreme Court to dismiss the appeal or, alternatively, affirm the lower court’s decision against the government parties.
Florida state government in July passed a law to prospectively require, among other things, separate legal entities to obtain from every affected local government, authorization to operate a program for financing qualifying improvements within each local government’s territorial boundaries.
Florida
In July 2010, the Federal Housing Finance Agency, which oversees Fannie, Freddie, and the Federal Home Loan Banks, said Florida PACE programs with priority lien status were of concern due to the lack of standard underwriting and energy retrofit guidelines among the various programs.
There
