Florida Constitutional Law: Bonds

Florida Constitutional Law is a favorite of the Florida Board of Bar Examiners. I've noticed from teaching this exam for quite a few years that many are hoping that if the subject is tested, bonds and other financing issues don't show up. As such, a post about bonds. 

Florida has to balance its budget. To that end, it may borrow money but not for ordinary operating expenses. Rather, it may borrow for capital improvements (roads, airports, buildings, etc.). For these purposes, the state may borrow by issuing bonds, and two types of bonds that the state may issue are revenue bonds and general obligation bonds.  It's essential to understand the differences well.

Revenue bonds designate and limit the source of funds from which repayment is made. The source of these funds are generated from the project for which the bond was issued. So if bonds are issued to build a road, the source of the funds that will be used to pay back the loan could come from the tolls that people will pay to use the road. Importantly, bondholders (those who are waiting to be paid back) may not look to funds raised from general taxation or other non-designated sources. 

General obligation bonds pledge the full faith and credit of the issuer (in this case the state) to use the general taxing power to raise funds to repay the loan. Though these bonds are valid, if they are to be payable from ad valorem taxes (taxes that a local government levies on real property and certain items of personal property) and if these taxes will mature more than 12 months after issuance, then they must be approved by the electors. There are exceptions to this 12-month rule, however: bonds financing pollution control, property acquisition for state roads, construction of state bridges, water projects, school construction, and local road acquisition and construction are exempt. 

On the topic of balancing the state budget, one final point should be noted: the governor and cabinet are authorized to establish reductions necessary to achieve a balanced budget. Each branch of government implements its own reductions.