Okaloosa County BOCC — April 24, 2014 — VII.a.(1) MSBU Staff Report

TOURIST DEVELOPMENT DEPARTMENT MEMORANDUM DATE: April 24, 2014 TO: Tourist Development Council FROM: Ed Schroeder, Tourist Development Department Director Charlotte Dunworth, Finance, Administration, & Compliance Manager SUBJECT: Western Destin Beach Restoration MSBU Ordinance Repeal Background Staff has been directed by BCC and TDC to research the feasibility of repealing the special assessment levied to fund the Western Destin Beach Restoration Project. Assessment revenues along with proceeds from the first percentage of the tourist development tax were pledged for the repayment of the $5 million Hancock Bank Revenue Note funding the project. The assessment was to be levied for a maximum of eight years; the first was FY 2008-09. If levied for its full term, the last year would be FY 2015-16. The bank has provided its consent to release the assessment as one of the pledged revenues. To finalize the release of the assessment pledge, the County would need to repeal the Ordinance creating the MSBU. If the MSBU is repealed, only first percentage tourist development tax dollars would be available for annual debt service payments. Discussion During the first six years of the MSBU, a total of $4.3 million has been collected: Fiscal Year FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 YTD FY 2015 FY 2016 MSBU Revenue $937,431 $898,550 $881,666 $879,502 $361,478 $324,167 TBD TBD The special assessment has been used before tourist development taxes to pay expenditures. In essence, the MSBU paid for construction costs and the first penny plus MSBU for the two years remaining will fund debt service payments through October 2020. Based on FY 2014 budgeted revenues of $350K, an additional $700K may be collected during the last two years of the MSBU. The exact amounts would be determined by the Annual Assessment Resolutions. Fundamentally, repealing the MSBU for the remaining two years will result in approximately $700K in additional tourist development taxes being used for this project. This funding will need to come from reserves or a reduction in capital improvements, which would be determined during the budget process. The graph illustrates a $700K impact on reserves (cash carryforward & contingencies) over the life of the debt service through FY 2021. For simplicity of MSBU impact comparison, personnel & operating expenses are presented as unchanged from FY14 levels and capital is budgeted at $125K annually per the adopted five-year capital improvement program.