Okaloosa County BOCC — October 6, 2015 — RESTORE Financing Alts 091615 Final2

ERINL. DEADM To: Terrell Arline, Esq., Bay County Attorney From: Erin Deady, Esq. g_(’_ Amity Barnard, Esq. Mark Mustian, Esq. Re: Options for Advancing RESTORE funds within Federal Grant Programs Date: September 16, 2015 This memorandum provides a brief summary of funding mechanisms used in conjunction with federal grant programs to potentially accelerate the distribution of such funds. The purpose of the research is to potentially address needed flexibility in the distribution of Resources and Ecosystems Sustainability, Tourist Opportunities, and Revived Economies of the Gulf Coast States Act of 2012 (“RESTORE Act”) settlement funds. If the settlement is a 15-year level distribution, funding amounts may not be sufficient to cover project costs in any given year if they exceed that equal payment amount. This could present obstacles to project implementation if higher dollar amounts are needed to implement early projects. The other challenge is for counties to administer a 15-year program thus requiring larger administrative funds, longer staff time commitment, etc. In addition, in many cases it is likely that earlier implementation of environmental and economic restoration projects will compound benefits over time. The ultimate goal will be to achieve a settlement that is flexible to account for varying degrees of project funding needs, does not excessively prolong administration of a program that could waste administrative efforts and funds, and provides the maximum contribution to Gulf environmental and economic restoration. There may be alternatives that help address these issues. Specifically, this memorandum provides information on the following: e Grant Anticipation Revenue Vehicle (“GARVEE”)-like bonds; e Grant Anticipation Notes (“GANs”); and e Other “conduit” sources of financing. Additional research will likely be required to determine whether any of the mechanisms referenced below could be utilized similarly in the context of RESTORE implementation. One issue that will also warrant additional research will be how interest on financing can be treated in any of these repayment mechanisms, as well as any tax exemption impacts. Regardless, specific legal authority will be needed to expend settlement funds for debt services. Finally, the Gulf Coast Ecosystem Restoration Council (“Council”) and Treasury Standard Grant Terms and Conditions will have to be reviewed for any potential constraints on assignment of funds. I Grant Anticipation Revenue Vehicle Bonds GARVEE bonds are used to fund major capital projects with debt backed by future Federal-aid disbursements in highway projects (Title 23 grants). Section 311 of the National Highway System Designation Act of 1995 significantly expanded the eligibility of bond and other debt instrument financing ! National Highway System Designation Act of 1995, Pub. L. No. 104-59, §311, 109 Stat. 568 (1995). 1 costs for Federal-aid reimbursement. This change to the Federal-aid program was codified into permanent highway law asan amendment to 23 U.S.C. § 122, providing an explicit statutory authorization for this repayment mechanism’s use. GARVEE bonds come in several variations, including: short-term, long-term, backstopped, stand-alone, direct, and indirect GARVEE bonds. Bond-related costs eligible for Federal-aid reimbursement include interest payments, retirement of principal, and any other costs incidental to the sale of an eligible bond issue. GARVEE bonds may be issued on a tax-exempt basis. Pros of their use: There are several benefits to using a GARVEE-like bond, including: 1) accelerated project delivery, 2) cost savings as a result of acceleration, 3) ability to structure large projects that need a variety of financing tools, and 4) avoidance of bond referenda.? Notably, they also allow for reimbursement of interest costs. Cons of their use: Enabling legislation is required at the state level for state transportation departments to issue GARVEE debt. In Florida,