ATLANTA -- As a controversy about the use of lease financings gathers steam in Brevard County, Fla., a state lawmaker said last Friday that he is considering introducing legislation to regulate such transactions in Florida.
Rep. Harry C. Goode Jr., D-Melbourne, said the bill he plans to introduce during the Legislature's upcoming 1992 session would focus on requiring issuers in Florida to provide more information to the public on prospective lease financings.
"Although the use of these kinds of transactions is growing in this state, unfortunately there are no statutes that regulate them," Rep. Goode said. "There needs to be a law that strikes a balance between the flexibility they may provide and the public's need to know more details."
Rep. Goode said that, as currently envisioned, his legislation might stipulate that local governments hold at least two advertised publised hearings on proposed lease financings. The governments would also be required to fully describe the leasing entities involved.
In addition, he said, the bill would require that the developer entering into the lease with the local government be chosen on the basis of a competitive bidding process. The bidding requirement might also apply to the investment bankers chosen to underwrite tax-exempt securities backed by lease appropriations, he added.
Rep. Goode said that as a representative from Brevard County, he has a particular interest in such legislation.
Brevard County has recently become embroiled in a controversy over a $23.9 million certificates of participation financing sold in 1989 to fund a governmental operations center.
Last month, the county's commissioners voted to call a referendum on whether to terminate the lease backing the 1989 certificates of participation deal, following complaints about building defects in the government center.
Brevard County's recent actions have attracted widespread attention in public finance circles because the referendum, scheduled for March 1992, is apparently the first attempt to put an already completed lease transaction to a public vote.
"I think that if we had had regulations on lease arrangements in place in 1989 that provided for more public airing of details about the [government-center lease] deal, Brevard County might not not be facing all the problems it has had with this lease," Rep. Goode said.
However, he said his bill would not require that voters give prior approval to lease financing. In addition, the bill would only apply to lease arrangements used to fund acquisition of real estate, and not to lease arrangements involving equipment. Rep. Goode noted he introduced legislation in 1990 that would have required issuers to obtain approval for already completed as well as prospective lease deals. That legislation died in committee.
"I realize now that a bill requiring that lease financings pass a voter referendum is probably not going to pass," he said. "If I introduce a bill this time, I want to concentrate on educating voters in advance of what they are getting into when their local government enters into these deals," he said. "Also, I want to be sure that the steps leading up to the lease are done with full light of public knowledge."
The use of lease financings in Florida has grown significantly since April 1990, when the state's high court affirmed these transactions as a valid method of funding acquisition of real estate. Some observers had predicted that $2 billion of debt would be sold immediately, but that has not happened.
Lease participants attribute the relative lack of activity to a reluctance by local governments to commit themselves to large building projects in a time of fiscal austerity and uncertainty about the state's participation in shouldering the burden of such projects.