MSTU & 2008 TAX NOTICES - FAQS
We have had several inquiries regarding the recent TRIM notice for the 2008 taxes. In response, we would like to address the most common questions.
1. Why are taxes being collected when the beach project has not started?
The reason why the taxes are being assessed is that the bond was secured in 2006. The proceeds from the bond are being held in an account that is solely for the benefit of the project (i.e. cannot be used for anything else).
The bond was secured in 2006 by the Board at the recommendations of the SJPBAC Finance Committee, the county attorney and the bonding agent. There were a number of reasons for bonding in 2006, but the two primary reasons were to a) ensure that funds were available at the time that they would be needed based on our timeline; and b) to take advantage of the interest rates available in the market at that time. As a result of bonding in 2006, the MSTU had to be assessed beginning in 2006 to meet the debt service requirements. The MSTU will still be assessed over a 7 year period, so the initial MSTU will still end in 2013 (last year of tax for this MSTU).
2. Why did the MSTU rate go up this year?
The MSTU rates did go up this year, with the reason being that there is a fixed bond debt payment that must be made each year. Taxable property values overall dropped approximately 10% for gulf-front properties and 14% for gulf-interior properties. As a result, it was necessary to raise the rate to meet the debt service obligations. Once again, the bond proceeds are being held to pay for our project and CANNOT be used for any other purpose.
Some property owners did not experience a decrease in taxable value; while other experienced a significant decrease and others, only a slight change. This has to do with the simple fact of when a property was purchased and the purchase price. As we all are aware, property values on the Cape have dropped dramatically since the boom that occurred a few years ago. Property owners who bought properties during this time period can expect to see a drop in their taxable values on their latest TRIM notice; however, property owners who purchased their properties prior to this time period or more recently may see little or no decrease at this time. The taxable values are submitted to the State of Florida, as is done each year, for approval and verification of property values.
Since the bond payments are fixed each year, there is a fixed dollar amount that must be collected each year to meet the debt service obligation for that given year. Therefore, the MSTU millage rate will vary from year to year based on the taxable values of the properties in each taxing district. Simply stated, if property values increase, the millage rate will decrease; if property values decrease, the millage rate will increase.
Just as a reminder, the gulf-front taxing district is responsible for approximately 70% over the overall debt service obligation, the gulf-interior taxing district is responsible for approximately 25% of the overall requirements and the TDC bed tax is responsible for approximately 5% of the requirement.
3. What happens with the taxes that have been collected should the project fail?
First, and most importantly, we do not anticipate that the project is going to fail as a result of the petition. We have been through many hurdles and are confident that we will make it though this one. However, in this unlikely scenario, it would be a complicated situation at best. As a result, we can only provide a general answer to this question at this time.
The proceeds from the bond would certainly be available to retire existing debt and presumably, there would be a surplus that could be returned to the property owners who have paid the tax; however, as is normal with any bond, there are costs associated with securing the debt and prepayment penalties. After paying these costs and retiring the debt, any residual taxes would be returned to the property owners.
The first bond payment was made on August 1, 2007, as required, which included a principal payment of $ 1,225,000, along with the related interest. The taxes that are being assessed now are necessary to make the August 1, 2008 required payment.
Once again, we do not anticipate the latest bump in the road to cause our project to fail. The proceeds from the bond are being held for our project and CANNOT be used for any other purpose. Unfortunately, we are in a "holding" pattern at this time until the outstanding petition has been disposed of, either through a voluntary dismissal or through the legal system.
We appreciate all of your continued support and patience! Please join us on Friday for our next meeting. As a reminder, we will be meeting in the BOCC meeting room at 9:00 a.m.
Sincerely,
Susan Wright & Laurel Eiler, Co-chairs SJPBAC
