Charter Referendum 2024

How we got here

Since North Port was incorporated in 1959, the City Charter has prohibited the City from borrowing any money without voter approval. This led previous City leaders to take a “pay as you go” approach to our capital projects and infrastructure needs: Save up the millions of dollars needed to fully fund a project before starting it.

This has caused projects to stretch on for years and balloon in costs. A good example is the Price Boulevard Widening Project. The community and City leaders have argued for many years that this project has been needed. However, as the City worked to save money for the improvement, the project costs continued to rise. Initially, the widening project was estimated to cost less than $3 million, but a decade later, the estimate has grown to $80 million. Congestion on Price Boulevard has been an ongoing issue, but we were not able to address it until voters approved up to $80 million in bonds to pay for this project in November 2022.

It's true that the City could borrow money to pay for a specific project with approval from voters in a referendum, but that isn’t ideal. Referendums typically only occur every two years with the general election cycle. This can delay our ability to address critical needs, especially during an emergency. Off-cycle elections can be expensive for taxpayers (estimated at $100,000 or more) and run the risk of lower voter participation.

‘Pay as you go’ problems

The “pay as you go” approach is a lot like a family having to save up to pay for a new house in full up front instead of taking out a mortgage and spreading out the cost over many years. There are a few problems with the “pay as you go” method:

• It’s not sustainable for a growing city
• It’s expensive due to rising costs
• It places the burden on current taxpayers, rather than including future residents
• It causes delays in projects
• It leads to aging infrastructure and deferred maintenance

Why change the charter?

Based on research completed by our team and outside financial advisors, North Port is the only city out of 411 in the state of Florida whose charter prohibits the borrowing of money or incurring any debt without voter approval. Our sister General Development Corporation cities in Florida all updated their charters decades ago to remove the restrictions about borrowing money. Every other Florida city and county routinely relies on borrowing – in the form of bonds, loans, leases or other borrowing instruments – to pay for growth and infrastructure needs and keep their community going.

Our charter limitations mean that each time we need to borrow money to pay for a large infrastructure project, the City has to prepare a voter referendum and get approval from a majority of North Port voters. This must be done in a general election occurring every two years, or in a special election at an added cost of $100,000 or more. These restrictions can delay the City from addressing emergencies or critical needs and can lead to higher costs. 

Also, due to our charter’s restrictions on borrowing, the City has not been able to meet timelines for state, federal or similar loans that had very low to no interest rates. We are missing out on opportunities for “free money” that could be used to pay for expensive infrastructure projects.

With the ability to borrow money in order to respond to an emergency, fix essential infrastructure or meet regulatory requirements, the City could invest in these projects and address current needs in a timely manner without adding burden to our taxpayers. The costs can be spread out among current and future residents.

The proposed charter change applies to revenue bonds (to be paid from identified revenue streams) and not general obligation bonds that are paid with property taxes.

 What can't be funded?

• The proposed Nov. 5 charter change would not allow the City to fund a new police headquarters, since the cost is expected to exceed the proposed $15 million borrowing cap per project. A police headquarters project would require its own voter referendum and will be discussed by the City Commission publicly in the future.
  
  
• Similarly, the proposed charter amendment only applies to safety and public health projects. For example, park improvements and renovations would not qualify.
  
  
• In accordance with the State Constitution, general obligation bonds (bonds that are paid back using property tax revenue) will still need to be approved by voter referendum in a general election on an individual basis. The proposed charter change will only apply to revenue bonds that would be paid back through special revenue funds such as utilities or road & drainage.

Following Hurricane Ian, the City was faced with significant damage to essential infrastructure, including the four waterway crossings on Price Boulevard, erosion around Water Control Structures 106 and 123 and damage to the police department headquarters roof, to highlight a few. The cost for just those repairs exceeded $3 million.  In addition, the City contracted a debris management company and monitor to assist with the collection of over 2.6 million cubic yards of debris at an expense of nearly $45 million.

In order to respond to the emergency quickly, the City was not able to delay work in order to schedule a referendum to provide voters the opportunity to voice their opinion on financing this work. The City’s charter restriction also prohibited the City from applying for low to no interest loans offered by state and national agencies.  Instead, the City reallocated funds planned for other projects and work toward the emergency response. 

Our roads and bridges need to be maintained, upgraded and expanded to keep traffic moving and provide safe and reliable evacuation routes. The City maintains 814 miles of roads.

Examples of unfunded CIP projects: 

Rehabilitation/replacement of two bridges annually in fiscal year 2029-39 ($80 million total)

North Port has 64 water control structures, many of which are aging and need to be replaced in order to prevent flooding and help keep stormwater flowing safely across the city in the rainy season and during storm events.  

Examples of unfunded CIP Projects:

Rehabilitation/replacement of two water control structures annually from fiscal year 2029-39 (roughly $4 million each)

New fire stations and police facilities will need to be built to provide adequate public safety across our 104 square miles.

Examples of unfunded CIP Projects:

Future fire stations through fiscal year 2041:

• Future Fire Station A - FY25-27 ($4.7 million)

• Future Fire Station B - FY31-32 ($2.7 million)

• Future Fire Station C - FY34 ($14.4 million)

• Future Fire Station D - FY37 ($3.5 million)

Clean, safe and reliable drinking water and wastewater services that conform with federal health, safety and environmental standards are needed for both current and future residents. With the ability to borrow, the City can address wear and tear on our aging utilities infrastructure.

A transfer station is needed to help efficiently manage garbage, keep Solid Waste assessments steady for homeowners and keep the city clean and free of debris.

Solid Waste Transfer Station ($15 million)

Is this referendum giving the City a blank check to spend money?

No. The City would still follow a rigorous process to ensure responsible borrowing and debt management.

• Any borrowing or incurrence of debt would need to be approved by a majority of the City Commission in at least two public hearings. This ensures transparency and accountability, allowing public input and scrutiny of the borrowing decision.
• In accordance with the State Constitution, general obligation bonds (bonds that are paid back using property tax revenue) will still need to be approved by voter referendum in a general election on an individual basis. The proposed charter change will only apply to revenue bonds.
• The City’s debt management policy will include various measures of debt affordability, both quantitative and qualitative, to ensure responsible and affordable use of debt financing for its capital needs.
• Issuing bonds involves coordinated efforts among several external and impartial professionals. The City retains an independent financial advisor to assist in making borrowing decisions, determining the timing and structuring the finance. The financial advisor collaborates with the City to develop a preferred repayment schedule, considering the City's budget needs and revenue streams. This professional guidance adds an extra layer of oversight and expertise.
• Before issuing any bonds, the City will utilize standard and best management practices to engage one or more credit rating agencies to provide an independent opinion on its creditworthiness and ability to make timely payments of principal and interest. Underwriters and investors rely on the credit quality judgment made by the rating agencies and demand higher interest rates for lower-rated bonds. Bond credit ratings are somewhat similar to personal credit scores. Before obtaining a car loan or mortgage, lenders assess personal credit scores to evaluate the borrower's ability and willingness to make payments. A City’s bond credit ratings directly impact interest rates, just like personal credit scores do.

Why do city and county governments borrow money?

According to financial experts, governmental entities have been using debt for over 200 years to fund important public projects like water systems, roads, governmental buildings and others.

Borrowing money spreads out the cost of capital projects over time, so future residents who will benefit from them also help pay for them. This approach avoids burdening current users or residents with paying 100 percent of the costs.

What other financing options could the City consider besides revenue bonds?

The City may consider a range of financing options besides revenue bonds, such as bank loans, state revolving fund loans, commercial paper notes, line of credit, and others as outlined in the City's debt management policy. These options allow the City to make prudent and cost-effective decisions tailored to the specific needs of each project. For instance, the City may obtain bank loans if they are financially feasible and appropriate. The City’s financial advisor, who continuously monitors market conditions, may recommend financing certain capital projects with bank loans if lower interest rates are available, as these loans can offer a more cost-effective way to borrow compared to issuing revenue bonds. Additionally, the City may pursue state and federal programs, such as State Revolving Fund Loans, which offer below-market interest rates that may even be forgiven for qualifying projects, such as water supply and distribution facilities, stormwater control and treatment projects, and solid waste disposal facilities.

Commercial paper notes may also be utilized when interim funding for capital projects is needed, provided it is financially feasible and appropriate. Throughout this process, the City’s financial advisor will carefully evaluate all available options and recommend the best possible financing approach, always with a focus on maintaining the City's long-term financial health. 

Can’t you just spend based on how much money you have saved up?

The "pay as you go” method, where all of the money needed to pay for a project is saved up before the project begins, is not sustainable for growing cities. It’s more expensive and can lead to high fees or taxes for current residents and delays in capital improvements due to rising costs over time.

Additionally, borrowing enables cities to recover from emergencies and disasters or to meet other critical infrastructure needs through immediate access to funds they do not otherwise have.

What funding opportunities has North Port missed out on due to the lack of borrowing authority?

Following Hurricane Ian in 2022, the State of Florida offered local governments loans with little or no interest to help pay for recovery.

The State Revolving Fund, offered by the Florida Department of Environmental Protection, provides low-interest loans to local governments to plan, design and build wastewater, stormwater or drinking water systems. Interest rates on these loans are below market rates, and the principal may even be forgiven.

Unfortunately, the City of North Port has not been able to take advantage of either of these borrowing opportunities within their required timeframes due to our Charter limitations.

How are the City’s finances? Are we in good position to borrow money?

The City’s financial rating by Moody’s, a leading global provider of credit ratings, research, and risk analysis, was upgraded from Aa3 to Aa2 on Feb.14, 2023. This ranking represents one of the highest quality ratings, with minimal risk. It demonstrates the City’s strong financial management and fiscal responsibility. This rating indicates a solid financial foundation, enabling the City to borrow at more favorable interest rates, (in some cases zero percent interest) reducing the overall cost of borrowing.

Why can’t growth pay for growth?

We cannot rely on developers to fix the City’s current or past infrastructure problems. By law, they can only pay for what their development specifically impacts. Impact fees are intended to help pay for the impacts of new development on public infrastructure, but they cannot be used to correct problems that already exist.

As the City grows, the demand for infrastructure such as roads, bridges, public transportation and utilities increases. While growth generates tax revenue, it often lags behind the need for these essential services and connections. 

Infrastructure projects are often expensive and long lasting. These projects will benefit citizens many years in the future. Without the ability to incur debt and spread the cost of the improvement across the lifespan of the infrastructure, current residents are required to fund the entire project, resulting in higher taxes and assessments.

Relying solely on growth to fund city development is not sustainable in the long term, because the City will always have to play catch up rather than building infrastructure at the time it’s needed. Economic downturns, shifts in demographics and changing market conditions can impact revenue streams, making it difficult to maintain essential services and infrastructure.

What’s up with the new Police Headquarters?

The North Port Police Department has severely outgrown its headquarters on City Hall Boulevard and needs of a new facility. In 2023, the City Commission directed staff to proceed with plans for constructing a new police headquarters on City-owned land located on North Toledo Blade Boulevard. In April 2024, the City Commission approved $4 million for the design of the new building.

The proposed Nov. 5 charter change would not allow the City to fund a new police headquarters, since the cost is expected to exceed the proposed $15 million borrowing cap per project. A police headquarters project would require its own voter referendum and will be discussed by the City Commission publicly in the future.   

Learn more about the proposed police headquarters at NorthPortFL.gov/PoliceHQ.

Which cost index is being proposed for the annual increase in the City’s borrowing cap per project, and why?

The Engineering News-Record (ENR) Construction Cost Index (CCI) is a measure of the changing costs of construction over time. It is derived by tracking the prices of a fixed basket of construction-related goods and services, which includes:

1. Material Costs: Prices of key construction materials such as steel, cement, and lumber.
2. Labor Costs: Wages and benefits for skilled labor, such as carpenters and bricklayers.

The index is calculated using a weighted average of these components, reflecting their relative importance in typical construction projects. The weights and specific items included in the index are chosen to represent a standard construction project, allowing the ENR CCI to serve as a reliable indicator of cost trends in the construction industry. This index is recommended for construction project expense forecasting rather than using the Consumer Price Index (CPI) because the CCI is specifically designed to reflect changes in costs associated with construction, while the CPI measures general inflation across a wide range of consumer goods and services.

The Debt Management Policy will provide specific guidance on the ENR CCI, including posting of the annual index and the resulting associated borrowing cap. 

Can tree fund money be used to repay a bond issued for a road construction project?

No, the use of pledged revenues must comply with local, state, and federal laws. Specific legal provisions and restrictions will vary depending on the type of pledged revenue. Some revenues have restrictions on how they can be used. For example, money from a tree fund can only be spent on certain types of projects and cannot be used for road construction. The bond issuance documents, developed in compliance with laws and regulations by outside bond counsel, will explain the exact terms and conditions for using the pledged revenues, including any additional rules the municipality must follow. The issuer of a bond is not required to use any other funds to repay the bond, only the revenues that have been specifically pledged.

City Commission Workshop

Sept. 9, 2024

City Commission Regular Meeting

July 23, 2024

City Commission Regular Meeting

July 9, 2024

City Commission Special Meeting

June 26, 2024

Wastewater officials speak to importance of borrowing, Daily Sun, Oct. 22

Vote ‘yes’ on North Port’s charter referendum(PDF, 118KB), opinion editorial column Daily Sun, Sept. 28

Commission talks debt management ahead of charter referendum, Daily Sun, Sept. 9

OUR VIEW: North Port needs to be able to borrow(PDF, 86KB), Daily Sun, Aug. 29

North Port placing city charter amendment on ballot, ABC7, July 24

North Port charter referendum now in the hands of voters, Fox 4, July 24

North Port referendum to approve borrowing for emergencies, public safety set for second reading, WGCU, July 16

Here's some information on ordinance to allow borrowing, Daily Sun guest editorial, July 14

North Port City Commission sets stage for referendum on borrowing for some spending, Sarasota Herald-Tribune, July 13

North Port poised to put borrowing, debt to referendum, Business-Observer, July 11

North Port moves closer to final wording for referendum on borrowing without public say-so, Sarasota Herald-Tribune, July 11

North Port Commissioners inch closer to putting referendum on ballot, Fox 4, July 11

North Port takes step to ask voters for permission to borrow money, Daily Sun, July 11

City Commission advances referendum to allow borrowing for emergencies, public safety, ABC7, July 10

City Commission advances referendum to allow borrowing for emergencies, City of North Port, July 10

 Borrowing on the ballot: North Port spreads message via website, Daily Sun, July 8