WASHINGTON -- The Florida <
Legislature has scaled back a provision of its fiscal 1993 budget that had posed a threat to the state's office lease financings, state officials and bond analysts said yesterday.
The original provision would <
have mandated cuts of 15% in all the state's lease payments on office buildings. It sent an alarm through the Florida leasing community earlier this year, when Florida appropriators drafted it to cull more than $62 million of budget savings from lower rents that they had expected because of a statewide drop in commercial real estate values.
Standard & Poor's Corp. earlier <
this month in a CreditWeek Municipal commentary said the original provision would have caused a downgrading of state building lease financings.
But state officials insisted that <
any potential impact the provision might have had on outstanding issues -- principally $200 million of office lease revenue bonds issued in recent years by the state's division of facilities management -- was only inadvertent and was eliminated in budget negotiations this spring.
Legislators softened the provision <
considerably when they became aware of the problem for lease financings and also determined that they would not be able to get 15% savings in all the state's lease contracts, said Pete Mitchell, staff director of the state's House Appropriations Committee.
In the final version of the budget <
approved by the Legislature, the provision simply authorizes state agencies to reopen their lease contracts for office space, and instructs them to renegotiate those contracts with an eye toward saving $62 million through rent reductions, Mr. Mitchell said.
Last month Gov. Lawton Chiles <
vetoed the budget because of unrelated tax matters and sent it back to the Legislature for further negotiations, to begin next week. But the watered-down lease language is likely to survive those talks, according to both Mr. Mitchell and Martin Young, deputy director of the governor's budget office.
"The governor didn't include the <
language in his budget, but he wouldn't oppose the cost savings" that the Legislature is trying to achieve through rent reductions, Mr. Young said.
"It gives the agencies some legal <
basis, so when they go out and look at leases and decide they can't afford them anymore, they can cut the contract and go rent somewhere else," he commented.
Unlike the original lease provision's <
wording, the new language does not require each state lease contract to be reduced by 15%. And it specifies that any lease contracts to be renegotiated must be with private lessors.
All of the state's building lease <
financings involve governmental lessors, with the state essentially leasing the buildings from itself, said Timothy Tinsley, a bureau chief in the state's division of bond finance, and Sally Rutherford, vice president of Standard & Poor's Corp.
"I'm not aware of any lease purchase <
financing that could possibly be affected" by the redrafted provision, Mr. Tinsley said.
Ms. Rutherford agreed, saying, <
"At this point we would not foresee any changes in state law that would affect lease financings in Florida."
She added that, in any case, <
agencies would have had little incentive to reduce their payments on lease financings because they would have lost their equity in the buildings being purchased.
Dale S. Recinella, attorney with <
Ruden, Barnett, McClosky, Smith, Schuster & Russell, said the threat to lease financing has been "completely knocked out" with the new language.
But he added that, in the future, <
"Everybody in the industry needs to be very diligent that there is no attempt to make unilateral reductions on leases as part of a solution to the state's budget problems."
Many other state and municipal <
governments, fighting burgeoning deficits brought on by the recession, also may be tempted to take advantage of the fall in commercial real estate prices around the country to negotiate better rates on their office building leases, the analysts acknowledged.
"Changes in market value can <
have an impact on the intent to appropriate" lease payments if a municipality believes it can get a better rate elsewhere, Ms. Rutherford said.
While many municipalities may <
try to negotiate better rates on what she called "true" office building leases, the risk that they will try to tamper with or get out of public lease financings because of the office building glut remains "negligible," Ms. Rutherford added.
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