Agenda 10/28/2014 Item #10A10/28/2014 10.A.
EXECUTIVE SUMMARY
Recommendation to accept information on the record contrary to information presented
under Agenda Item 10.13 to present factual information available by public record
regarding the Clerk of Courts contract for banking services with First Florida Integrity
Bank as adopted under Agenda Item D.A. at the September 23, 2014 Board meeting.
OBJECTIVE: To present factual information as obtained by public record to clarify all
issues regarding the new banking services contract adopted by the Board on September 23,
2014 and to advise the Board it has no authority to take action on Agenda Item 10.B.
CONSIDERATIONS: On September 23, 2014 at a regular Board meeting, the Board of
County Commissioners approved with a 3 to 2 vote the Clerk of Court Banking Services
Agreement with Florida First Integrity Bank (FFIB) under Agenda Item 13.A. The voting
majority for this agenda item is Commissioner Henning, Commissioner Nance and
Commissioner Fiala. See Exhibit A.
Since approving the Clerk of Courts' FFIB Banking Services Contract, Commissioner Hiller
has raised questions regarding the legality of the contract and the process by which a
contract/agreement was negotiated.
It shall be placed on the record that no such Sunshine Violations occurred related to the final
Selection Committee created by the Clerk. The initial Selection Committee failed to advertise
its vendor presentation meetings and prior to this committee making any recommendation to
the Clerk it was dissolved. A new Selection Committee with different members was formed
with all meetings properly advertised.
The Selection Committee advertised its vendor presentation meeting with FFIB which can be
found online at http:/ /www .collierclerk.com /clerksoffice /functions /purchasin /public-notices-
and- invitations -to- bid /rfp -2014- 001 - banking- services/banking- services- recordinas /. From the
Clerk's minutes of the FFIB vendor presentation, FFIB clarified that although the vendor
"requested" a $25 million minimum account balance it was not required and therefore was not
included in the agreement. See Exhibits A and B.
Commissioner Hiller's Agenda Item 10.13. on this agenda would require the Board to
reconsider its approval of Agenda Item 13.A. from September 23, 2014. The Board must
adhere to its Reconsideration Ordinance (codified as Section 2 -41 in Municode) in order to
reconsider an item, which requires a motion "made by a member who voted with the
majority" following delivery to the County Manager of "a written memorandum stating that
the member intends to introduce a motion to reconsider." The memorandum must be
submitted to the County Manager at least six days prior to "the second regular Commission
meeting following the meeting at which the motion for reconsideration was adopted."
Agenda l O.B. does not meet this requirement. See Exhibit C.
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Furthermore, the County Attorney emailed Commissioner Hiller his opinion that the Board
does have a valid contract with FFIB and the Board has regularly waived its purchasing policy
specifically with urgent circumstances regarding the immediate need for banking services.
See Exhibit D.
Additional concerns have been raised concerning the Clerk utilizing a third -party, not the
County's depository-bank as the investment and securities holder is recommended by the
Government Finance Officers Association (GFAO). As part of GFAO's recommended Best
Practices its Executive Board in October 2010 adopted the following recommendation:
"GFOA recommends that state and local governments utilize independent third -party
custodians to safeguard their investments and protect against safekeeping /custodial risks."
The Government Finance Officers Association additionally stated in its recommendation
report that, "In a third -party safekeeping agreement, the government arranges for a finn other
than the party that sold the investment to provide for the transfer and safekeeping of the
securities. Financial firms should not serve both as government broker - dealer and
custodian... Custody normally does not take place in the governmental entities depository
bank." See Exhibit E.
FISCAL IMPACT: None.
LEGAL CONSIDERATIONS: This item is approved as to form and legality, and should be
heard concurrently with Item I O.B. -JAK
RECOMMENDATION: Recommendation the Board has no authority to take action on
Agenda Item IO.B. because Commissioner Hiller was not in the voting majority for the
September 23, 2014 Agenda Item 13.A, and therefore a reconsideration would be in violation
of the Board's Reconsideration Ordinance.
Prepared by: Commissioner Tom Henning
Exhibits: A) FFIB Banking Services Agreement; B) Excerpt Minutes July 30 Vendor
Presentation FFIB; C) Reconsideration Ordinance Section 2 -41; D) Email CAO to
Commissioners and Email Attachment; E) GFAO Safekeeping and Third Party Best Practices
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COLLIER COUNTY
Board of County Commissioners
Item Number: 10.10.A.
10/28/2014 10.A.
Item Summary: Recommendation to accept information on the record contrary to
information presented under Agenda Item 10.13 to present factual information available by
public record regarding the Clerk of Courts contract for banking services with First Florida
Integrity Bank as adopted under Agenda Item 13.A. at the September 23, 2014 Board meeting.
(Commissioner Henning)
Meeting Date: 10/28/2014
Prepared By
Name: SmithCamden
Title: Executive Coordinator to Commissioner,
10/14/2014 10:47:59 AM
Approved By
Name: DurhamTim
Title: Executive Manager of Corp Business Ops,
Date: 10/22/2014 12:50:35 PM
Name: OchsLeo
Title: County Manager, County Managers Office
Date: 10/22/2014 3:06:46 PM
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10/28/2014 1O.A.
Contract Number 2014 -001
MASTER BANKING SERVICES AGREEMENT
The Master Banking Services Agreement ( "Agreement ") is entered into as of the 1' day of November,
2014 among the Clerk of the Circuit Court and Comptroller of Collier County, Florida ( "Clerk "), the Collier
County Board of County Commissioners ( "Board ") and First Florida Integrity Bank ( "Bank "), collectively
the "Parties."
Recitals
WHEREAS, the Clerk has requested that the Bank provide certain banking and treasury management
services (collectively, the "Banking Services ") to the Clerk; and
WHEREAS, the Board has requested Banking Services through the Clerk, as the custodian of the Board's
funds, for the Bank to provide certain banking and treasury management services; and
WHEREAS, the Bank has agreed to provide the Banking Services to the Clerk and the Board; the Clerk
and the Board have agreed to accept the Banking Services, upon the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereby
covenant and agree as follows:
Section 1. Purpose and Effect of this Agreement:
Delineation of Banking Services
The banking services to be provided to the Clerk and the Board by the Bank shall consist of:
(a) Each of the specific requirements, terms and conditions set forth in the Request for
Proposal (RFP) 2014 -001 Banking Services (Exhibit A) dated May 12, 2014 which RFP is
hereby incorporated by reference in its entirety; and
(b) Each of the services, terms and conditions set forth in the Bank Proposal (Exhibit B)
dated June 13, 2014, which Bank Proposal is hereby incorporated herein by reference in
its entirety; and
(c) Each of the terms, conditions and provisions of the specific banking service agreements
provided for in the Exhibits detailed in Section 14 of this Agreement, hereinafter
collectively referred to as the "Exhibits," which are attached hereto and made a part
hereof. Unless the context requires otherwise, all references to this "Agreement," and
use of the terms "herein," "hereby," "hereof," "hereto," "hereunder" and the like shall
be deemed to include the RFP, the Bank Proposal, all other Exhibits attached hereto,
and this Agreement.
Section 2. Controlling Provisions
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Except as otherwise specifically provided in Section 6 hereof, in the event of any conflict
between the specific provisions of this Agreement or any of the Exhibits hereto, on the one
hand, and the requirements or provisions of the RFP and /or Proposal, on the other hand, the
requirements or provisions of the written Agreement shall control. Wherever possible, the
provisions of all documents shall be construed in such a manner as to avoid conflicts between
provisions of the various documents. It is the intention of the Parties that the Exhibits hereto set
forth the day -to -day operational procedures to be complied with in connection with the Clerk's
ordering of and the Bank's provision of specific banking services covered by the Proposal. In that
connection, the Parties hereby acknowledge and agree that, in the event that the Clerk or the
Board elects to utilize any banking services not specifically set forth in the Proposal, or in the
event that the Bank, in the normal course of its business, develops specific service agreements
in the future for banking services requested by the Clerk or the Board in addition to those
covered by the Exhibits hereto, the Parties will execute specific service agreements with respect
thereto. Such agreements shall be consistent with the terms and provisions of the RFP, the
Proposal and this Agreement, and in form and substance reasonably acceptable to the Parties,
and such agreements shall be deemed to be a part of and subject to this Master Banking
Services Agreement, whether or not so stated in such service agreement.
Section 3. Services to be Rendered
The Clerk may establish a reasonable number of additional demand deposit accounts or time
deposit accounts with the Bank at no extra cost.
All banking services and online services, specified in Exhibit B of this Agreement, shall be
available at commencement of this Agreement.
The Clerk and the Board reserve the right to segregate merchant services, retail and wholesale
lockbox (Lockbox) and other associated electronic services related to merchant services and
Lockbox initially, or with sixty (60) days written notice to the Bank at any time during the term of
this Agreement. Any segregation of services shall be reflected in a corresponding decrease in
the monthly fee as specified in Exhibit C of this agreement. The Board shall have the right to
independently enter into separate service agreements at any time during the term of this
Agreement.
Section 4. Payment for Services
Subsequent to the first year of service, which is without charge, general banking and custodial
fees shall be billed on a monthly basis pursuant to Exhibit C and shall be paid in accordance with
Florida's Prompt Payment Act, Florida Statute 218.74. Payment for merchant services, or any
additional services agreed upon, shall be billed on a monthly basis with sufficient detail to allow
the Clerk to assess services used and paid in accordance with Florida's Prompt Payment Act,
Florida Statute 218.74. In no event shall the fee for general banking services and custodial
services exceed $7,500 per month, excluding merchant services, for the initial term of the
contract.
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Section S. Interest Rate Paid on Collected Balances
All balances available for overnight investment shall earn interest as indicated by the formula in
Section III, Scope of Banking Services of the RFP at 95% of Daily Effective Federal Funds. The
interest rate on available balances shall never fall below 25 basis points. The Bank reserves the
right to offer a more favorable interest earnings rate, provided that the interest rate on
available balances shall never fall below 95% of Daily Effective Federal Funds or 25 basis points,
whichever is greater. All balances in excess of the $250,000 Federal Deposit Insurance
Corporation (FDIC) insurance shall be collateralized by the Bank in accordance with all applicable
Florida laws. Account statements shall be provided on a monthly basis.
Section 6. Representations, Warranties and Covenants
(a) The Bank hereby represents and warrants to the Clerk and the Board that it has full
power and authority to enter into this Agreement and fully perform its obligations
hereunder without the need for any further corporate or governmental consents or
approvals, and that the persons executing this Agreement are authorized to execute and
deliver it. Assuming the due authorization, execution, delivery, legality and
enforceability hereof by or against the Clerk and the Board when executed and
delivered by the Parties, this Agreement will constitute a valid and binding agreement of
the Bank, enforceable against it in accordance with its terms, subject only to the
application of general principles of equity and limitations arising from bankruptcy,
insolvency, moratorium and other similar laws affecting the rights of creditors generally.
(b) The Bank has not employed or retained any person employed by the Clerk to solicit or
secure this Agreement and it has not offered to pay, paid, or agreed to pay any person
employed by the Clerk any fee, commission percentage, brokerage fee, or gift of any
kind contingent upon or resulting from the award of this Agreement.
(c) The Bank is aware of the conflict of interest, and ethics laws, of the ordinances of Collier
County and rules and regulations of the Clerk and the Board, and of the State of Florida,
and covenants that the Bank will fully comply in all material respects with the terms of
said laws, ordinances, rules and regulations.
(d) This Agreement constitutes a valid and binding agreement, enforceable against it in
accordance with its terms, subject only to the application of general principles of equity
and law and limitations arising from bankruptcy, insolvency, moratorium and other
similar laws affecting the rights of creditors generally. The Clerk further represents and
warrants to the Bank that it has authorized the Clerk's Director of Finance and
Accounting, or persons designated by them in writing, to execute and deliver
documents to the Bank as necessary hereunder or reasonably deemed appropriate by
such officers to effect the transactions contemplated hereby. The Clerk acknowledges
and agrees that the Bank is fully authorized and directed to accept orders, requests and
authorizations from such officers on the Clerk's behalf in connection with the
implementation or provision of any of the banking services covered by the Proposal.
Such authorization and direction shall not be deemed to prohibit or preclude the Bank
from relying upon actions or requests of Deputy Clerk's so long as the Bank reasonably
Contract No. 2014 -001 Page 3 of 8
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believes, in good faith, that such persons have been authorized to act on behalf of the
Clerk or the Board.
(e) At the request of the Bank, the Clerk and the Board agree to cause its designated
officials or their designees to execute such signature cards as the Bank deems
reasonably necessary for purposes of establishing appropriate security measures in
connection with the banking services to be provided hereunder. The Clerk and the
Board agree to provide any and all documentation the Bank requires to execute and
appoint such designated officials or their designees.
(f) The Bank covenants to provide the Clerk, and when requested by the Board, with
quarterly updates to the Bank's Qualified Public Depository status and current pledge
level (25%, 50 %, 110% or 150%) commencing quarter ended December 31, 2014.
Section 7. Indemnification
The Bank shall indemnify and hold harmless the Clerk, the Board and their authorized agents
and employees from or on account of any losses, costs, claims and damages resulting from any
breach of fiduciary duty committed during or on account of any operations connected with this
Agreement and by any act of negligence in connection with the same; and by or on account of
any negligent act or omission or willful misconduct of the Bank or its subcontractors, agents,
servants and employees and from any breach of this Agreement. The Bank further agrees to
indemnify and hold harmless the Clerk, the Board and their authorized agents and employees
against any claims or liability arising from or based upon the violation of any applicable federal,
state, county or city laws, by -laws, ordinances or regulations by the Bank, its subcontractors,
agents, servants or employees and from any breach of this Agreement.
Section 8. Limitation of Liability
Notwithstanding any other term or provision of this Agreement, the Clerk and the Board shall
not be liable to the Bank for any amount in excess of the actual loss sustained by the injured
party, and in no event shall the Clerk and the Board ever be liable hereunder or in any action in
tort arising out of the services or relationship to be provided or established hereunder for any
indirect, special, incidental, punitive or consequential loss or damage of any kind, including lost
profits or opportunities or damage to reputation (whether or not advised of the possibility
thereof) arising or allegedly arising therefrom.
Section 9. Term and Termination
(a) This Agreement shall have an initial term of (5) five years, beginning on November 1,
2014 and expiring on October 31, 2019, with an option to renew upon mutual
agreement of the "Parties" for an additional (3) three, (1) one year periods. Banking
service charges for the optional renewal period(s) must be mutually agreed upon and
will be based on charges proposed. Proposed charges shall not exceed the average of
the monthly Consumer Price Index- All Urban Consumers (12 -Month Percent Change —
Not Seasonally Adjusted) and measured October 2014 through September 2019.
Contract No. 2014 -001 Page 4 of 8
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(b) The contract may be terminated with cause by the Bank upon providing written notice
to the Clerk of the Circuit Court and the Board no less than (180) one hundred and
eighty days prior to the effective date of such termination. The Clerk and the Board may
terminate the agreement with or without cause with the financial institution upon (30)
thirty days written notice prior to the effective date of the termination. Under no
circumstances will any damages be paid by the Clerk or the Board as a result of the
termination of this contract.
(c) If the Bank does not comply with terms of this Agreement, the Bank shall be given
notice to the specific default in writing. The default(s) shall be corrected within ten (10)
days.
(d) The Clerk and /or the Board, from time to time, during Bank business hours and with at
least two (2) business days prior notice to the Bank, shall have the right to audit the
Bank's books and records with regard to the accounts and services provided to the Clerk
and /or the Board hereunder to ensure that all aspects of the Agreement are being met.
Such audit will be performed at the expense of the Clerk and /or the Board.
(e) In the event the Clerk and the Board are not allotted funds for any fiscal period or funds
previously allotted are subsequently recalled, the Clerk and the Board may terminate
the agreement. Upon the occurrence of such non - appropriation, the Clerk and the
Board shall not be obligated for payment of any future deliverables for which funds
have not been so appropriated.
Section 10. Changes
The Clerk may, from time to time, request changes in the scope of services of the Bank for
accounts specific to the Clerk of Courts to be performed hereunder. Such changes in services,
which are mutually agreed upon by and between the Clerk and the Bank, shall be incorporated
in written amendments to this Agreement.
The Board may, from time to time, request changes in the scope of services of the Bank for
accounts specific to the Board to be performed hereunder. Such changes in services, which are
mutually agreed upon by and between the Clerk and the Bank, shall be incorporated in written
amendments to this Agreement.
Section 11. Waiver
No waiver of a breach of any provision of this Agreement shall constitute a waiver of any
subsequent breach of the same or any other provision hereof, and no waiver shall be effective
unless made in writing.
Section 12. Severability
Should any provisions, paragraphs, sentences, words or phrases contained in this Agreement be
determined by a court of competent jurisdiction to be invalid, illegal or otherwise unenforceable
under the laws of the State of Florida or the Clerk and /or the Board, such provisions,
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paragraphs, sentences, words or phrases shall be deemed modified to the extent necessary in
order to conform with such laws, and to the extent they cannot be so modified, then same shall
be deemed severable, and in either event, the remaining terms and provisions in this Agreement
shall remain unmodified and in full force and effect.
Section 13. Governing Law
This Agreement shall be construed and enforced according to the Laws of the State of Florida.
Any litigation arising out of this Agreement shall be in the appropriate state court having
jurisdiction in Collier County, Florida.
Section 14. Exhibits
The following documents are attached hereto and incorporated by reference herein:
Exhibit A — RFP 2014 -001 Banking Services
Exhibit B — First Florida Integrity Bank Proposal in response to RFP 2014 -001 RFP Banking
Services
Exhibit C — First Florida Integrity Bank Pricing Proposal in response to RFP 2014 -001 Banking
Services
Exhibit D — First Florida Integrity Bank letter waiving $25M minimum balance requirement
Exhibit E — Custodial Agreement with Infinex Financial Group
Exhibit F — Wholesale Lockbox Agreement with First Florida Integrity Bank
Additional service agreements may be added from time to time as mutually agreed upon by the
Parties, and any service agreement may be terminated separately and severally without
affecting the continued enforceability of all other provisions of this Agreement as to non -
terminated services.
Section 15. Notices
All written notices, demands and other communications required or provided for hereunder or
under any of the Exhibits hereto, except service issues, which may be addressed by telephonic
communication or other method provided hereunder, shall be sent by certified mail, return
receipt requested, postage prepaid, in the case of mailing, or by overnight or same day courier,
or by electronic transmission producing a written record, or hand delivered to the following
address and person bearing the following title for each party hereto or such other addressee or
person as shall be designated by a party in a written notice given in the manner required
hereby:
Clerk:
Dwight E. Brock
Collier County Clerk of the Circuit Court
3315 Tamiami Trail East Suite 102
Naples, Florida 34112 -5324
Phone: (239) 252 -2745
Email: Dwight.Brock @collierclerk.com
Bank:
First Florida Integrity Bank
Nancy Ortega, Senior Vice President
3560 Kraft Road
Naples, Florida 34105
Phone: (239) 325 -3748
Email: nancyortega@ffibank.com
Contract No. 2014 -001 Page 6 of 8
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Attest:
Attest:
10/28/2014 10.A.
Board:
Leo Ochs, Jr.
Collier County Manager
3299 Tamiami Trail East Suite 202
Naples, Florida 34112 -5746
Phone: (239) 252 -8383
Email: Ieoochs@colliereov.net
All notices shall be deemed delivered when received.
Section 16. Service Issues
All service issues related to the everyday operations of the Clerk and the Board shall be
responded to on the same business day.
Section 17. Force Maieure
Clerk and Board agree that the Bank shall not be responsible or liable for any delay in its
performance under this Agreement or any losses arising out of delays and /or interruptions of
business due to acts of God, acts of public enemy or war, riots, civil disturbances, power failure
beyond the Bank's reasonable control, telecommunications failure beyond the Bank's
reasonable control, severe adverse weather conditions or other causes beyond the Bank's
reasonable control. This time, if any, required for such performance under this Agreement shall
be automatically extended during the period of such delay or interruption.
Section 18. Assignment
The Parties shall not assign this Agreement or any interest herein, or delegate any of its duties
hereunder, without the other party's prior written consent, except that it is agreed by the Clerk
and the Board that the Bank may delegate certain services to be provided through independent
contractors as described in any Exhibits attached hereto. In addition, the contract shall not be
transferred by merger, sale or acquisition, in whole or in part without providing 60 days' notice
to the Clerk and the Board. All costs to the Clerk and the Board associated with the merger, sale
or acquisition shall be borne by the Bank.
IN WITNE,�S WHEREOF, the Parties have executed this Agreement hereto:
Depp�y Clerk
Clerk of the Circuit Court
By:
Dwigh Bro
Clerk of the rcuit Court a
Comptrolle of jollier Coo
Tom Henning
Chairman, Board of County
Contract No. 2014 -001 Page 7 of 8
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missioners
10/28/2014 10.A.
Attest
By:
Garrett S. Richter
President, first glorha Integrity Bank
App,revVgs 0 Aof rrj and legality:
By: _— I
Jeffrey A. K
County AM
Contract No. 2014 -001 Page 8 of 8
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July 30, 2014 RFP 2014 -001
Excerpt: Vendor Presentation 1
Time 50:09 to 51:25
Derek Johnssen — Assistant Finance Director, Clerk of Courts - Finance and Accounting Department:...
requested minimum balance of $25 million dollars and the requested was another semantics issue that
we needed to go over. is requested required, and if so what happens if it dipped below that balance?
What would the ramifications be?
Garrett Richter — President — First Florida Integrity Bank: I would tell you there would be no
ramifications. In fact, as was discussed in the public meeting the balances as our research has told us
have never really gone below that. I know you prefer to have the opportunity if market scenarios
change to move funds into other alternative investments that is an advantage to the Clerk. We can
remove the $25 million dollar minimum balance with the confidence, we can do that because we're
confident that we can provide the best services and at a very competitive market driven rate
environment. So it would be no negative consequences.
Derek Johnssen: So, in short, for my simple, now caffeine addled mind, it is a request not a
requirement.
Garrett Richter — President — First Florida Integrity Bank: We can, we can. Yes
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Sec. 2 -41. - Reconsideration of matters generally.
(a) Any matter which has been voted upon by the Board of County Commissioners may be
reconsidered as follows:
(1) By a motion to reconsider made by a member who voted with the majority if such motion is
made prior to the adjournment of the meeting at which the matter was voted upon. If there were
no public speakers on the item, or if all of the public speakers for the item are still present in the
boardroom following a successful motion to reconsider, the Board may elect to rehear the matter
during that meeting, or direct the County Manager to place the item on the agenda for a future
meeting as set forth in subsection (2). If there were public speakers for the item, and not all of the
public speakers are still present in the boardroom following a successful motion to reconsider, the
County Manager will place the item on the agenda for a future meeting as set forth in subsection
(2)•
(2) By a motion to reconsider made by a member who voted with the majority if such motion is
made at a regular meeting following the meeting at which the matter was voted upon, but only in
accordance with the following:
a. Where a member who voted with the majority wishes the Board to reconsider a matter
after the adjournment of the meeting at which it was voted on, the member shall deliver to
the County Manager a written memorandum stating that the member intends to introduce a
motion to reconsider. The memorandum shall state the date of the regular meeting at which
the member intends to introduce such motion, and shall be delivered to the County Manager
at least six days prior to such meeting. The purpose of this requirement is to allow the staff
to advise the Board of the legal or other ramifications of reconsideration.
b. No motion to reconsider shall be made any later than the second regular Board meeting
following the Board's vote on the matter sought to be reconsidered.
c. Upon adoption of a motion to reconsider, the County Manager shall place the item on an
agenda not later than the second regular Commission meeting following the meeting at
which the motion for reconsideration was adopted.
d. All parties who participated by speaking, submitting registration forms or written
materials at the first hearing, shall be notified by the County Manager of the date of
reconsideration.
(b) This section shall apply to any matters which may lawfully be reconsidered except those matters
which are covered by Paragraph 7 below.
(Ord 1 1. �'l ?4, 1`' ?: Ord ;1o. 07 50, ` ?; Or 'Vo. 009 -52. i 1 )
• Sec. 2 -42. - Reconsideration of land use matters.
(a) Applicability;. Any matter in which the Board of County Commissioners or Board of Zoning
Appeals, as the case may be, has denied a request to change the land use designation of a parcel of
land, a request for site specific rezone initiated by a petitioner or his or her agent, variance, conditional
use, license, permit or other land use - related request.
(b) Request, for Reconsideration bY Petitioner. A request for reconsideration may be made only by the
petitioner. The petitioner may request reconsideration of a petition in writing to the County Manager
no later than 15 days from the date of the Board's action denying the original petition. Except as
provided below, this request shall be jurisdictional, and no motion for reconsideration may be made by
any member of the Board where such a request was untimely. If State or Federal submission and /or
approval schedules pertaining to the petition are extended within 6 months following the denial of the
original petition, upon Public Petition initiated by the petitioner, the Board may extend petitioner's
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request for reconsideration by majority vote, and on a second motion made by any Commissioner,
place the issue of reconsideration for a date certain on which the action or petition will be reconsidered,
but in no event shall such reconsideration take place less than 14 days nor more than 45 days from the
date the motion to reconsider is adopted.
(c) Motion for reconsideration by a Board member who voted in the majority. Any member of the
Board who voted with the majority (or in the case of a rezoning or change in land use designation,
voted against) on the original action or petition may move for a reconsideration of the action or petition
at any regular meeting of the Board within 15 days of the date of the request for reconsideration. If no
regular meeting of the Board occurs within 15 days of the request for reconsideration, the Board
member may move for a reconsideration of the action or petition no later than the first meeting of the
Board that follows the County Manager's receipt of the request for consideration. This motion shall be
made during that portion of the Board's agenda entitled "Board of County Commissioners." If no
motion for reconsideration is made during this time period, the request shall be deemed denied. The
motion may specify a date certain on which the action or petition will be reconsidered, but in no event
shall such reconsideration take place less than 14 days nor more than 45 days from the date the motion
to reconsider is adopted.
(d) Action on motion for reconsideration. The Board shall either act on the motion for reconsideration
at the meeting at which such motion is made or may table the motion for no longer than the next
regular meeting of the Board. If the motion is not finally acted upon by the adjournment of-the next
regular meeting of the Board after the motion has been made, it shall be deemed to have been denied.
(e) Scheduling ofpetition for reconsideration. If the motion for reconsideration is granted, the County
Manager shall schedule the petition on the agenda for the regular Board meeting which was specified
in the motion for reconsideration, or if no date is specified then on the second regular Board meeting
following the meeting at which the motion is granted.
(f) No hearing or debate on motion for reconsideration. A motion for reconsideration shall not require
public hearing, and neither the petitioner nor any other person shall have the right to address the Board
considering the merits of such a motion. However, the Board may request information of the petitioner,
the staff or any other person in order to better inform itself prior to acting upon the motion. The
purpose of this provision is to prevent either the petitioner or any other person from debating the merits
of the petition prior to its full consideration at a regularly scheduled Board meeting where the petition
is reconsidered.
(g) [Procedures outlined.] The procedures outlined herein shall not constitute an administrative
remedy, and the defense of failure to exhaust administrative remedies shall not be raised if a petitioner
declines to utilize these procedures and instead elects to pursue judicial remedies following the denial
of the petition. The time period for seeking judicial relief following denial of those matters
contemplated by subsection (a)(2) of this section shall run from the time the Board votes on such
matter, and a motion hereunder shall not alter such time period.
(h) [Initial vote.] Where the initial vote was made after an advertised public hearing, any
reconsideration of such vote shall comply with all advertisement and notice provisions that were
legally required for the initial public hearing.
tJf't:. No, "O'-d No- 88-41. q i_ f111 -a' 6,.
Packet Page -282-
10/28/2014 10.A.
SmithCamden
From: KlatzkowJeff
Sent: Tuesday, October 14, 2014 9:14 AM
To: CoyleFred; FialaDonna; HenningTom; HillerGeorgia; NanceTim
Cc: OchsLeo
Subject: FW: Purchasing Ordinance - Bank Services Contract Motion
Attachments: Frankenmuth.doc
Commissioners: Please consider this a one -way communication.
-Jeff
From: Klatzkow3eff
Sent: Friday, October 03, 2014 11:16 AM
To: HillerGeorgia; GEORGIA HILLER
Cc: HayesKaren
Subject: Purchasing Ordinance - Bank Services Contract Motion
Commissioner:
With respect to Item 13A of September 23`d,s Board meeting, in which the Clerk "Recommended the Board of County
Commissioners (Board) approve the attached newly proposed three -party agreement for Banking Services between the Clerk, the
Board and First Integrity Bank and acknowledge any waivers of the Board's Purchasing Policy as the solicitation was made in
accordance with the Clerk's purchasing policy," my thought process was as follows:
1. The Florida Supreme Court in Frankenmuth determined that a governing body has the ability to ratify an unauthorized
:ontract provided that (1) the Board initially has the power to enter into such an agreement; (2) that the ratification be conducted in the
lame manner as if the agreement had initially come to the Board; and (3) that the Board has full knowledge of the material facts
related to the agreement.
2. The Purchasing Ordinance, which was derived from the County's long - standing Purchasing Policy, provides in relevant
part as follows:
Sec. 2 -195. - Competitive Bid Process.
E. Waiver of Irregularities: The Board of County Commissioners shall have the authority to waive any and all irregularities in any and
all formal bids within lawful guidelines. (Ord. No. 2013 -69, § 10)
Sec. 2 -215. - Waiver of Ordinance.
The Board of County Commissioners shall have the authority to waive any and all Purchasing Ordinance provisions within lawful
guidelines and upon formal Board action. (Ord. No. 2013 -69, § 30)
Lawful guidelines as forth in Florida Statutes include (by analogy):
Florida Statute Sec. 255.20 Local bids and contracts for public construction works; specification of state- produced lumber.
(c) The provisions of this subsection do not apply:
1. If the project is undertaken to replace, reconstruct, or repair an existing public building, structure, or other public construction
works damaged or destroyed by a sudden unexpected turn of events such as an act of God, riot, fire, flood, accident, or other urgent
circumstances, and such damage or destruction creates:
a. An immediate danger to the public health or safety;
b. Other loss to public or private property which requires emergency government action; or
c. An interruption of an essential eovemmental service.
Packet Page -283-
10/28/2014 10.A.
Moreover, the Purchasing Ordinance grants the County Manager great discretion to enter into agreements if exigent
circumstances or an emergency exists. Since the County Manager has only that power delegated to him by the Board, the Board also
has like power to act.
Sec. 2 -21C. - Exigent Circu�m�stances, Emergency and Board Absence Purchases.
In case of an exigent circumstance, which is defined as any circumstance requiring immediate action or attention, a valid public
emergency, or during the Board's extended recess session(s) (all efforts should be made to obtain Board approval prior to anticipated
recesses) whereby a purchase is necessary, the County Manager shall authorize the Purchasing Director to secure by open market
procedure as herein set forth, any commodities or services. The County Manager shall have the authority to take actions including, but
not limited to the issuance of contracts, change orders, and/or supplemental agreements. Any action shall be reported at the first
available meeting of the Board of County Commissioners. The County Manager under the same consultations noted above shall
further be authorized to approve payment(s) to vendors at the time of or shortly after purchase should the circumstances warrant.
These payments shall be reported at the first available meeting of the Board. (Ord. No. 2013 -69, § 25)
It is my opinion that a bank depository is an essential governmental service, and that facing the expiration of an existing
depository agreement without a replacement depository bank in place constitutes an exigent circumstance.
I had several discussions with the County Manager prior to this September 23rd meeting. I asked Leo several times whether
he could secure an extension of the current agreement with Fifth - Third. At the time of the September 23rd meeting, my understanding
was that the best Mr. Ochs could then do was to get the Board at the September 23" meeting to sign a letter requesting Fifth -Third
grant an extension, which Fifth -Third would consider with no assurance that they would positively act on it. There was no Executive
Summary on the published September 23rd agenda seeking such a letter, nor was such a request made on the Change Sheet
When the Clerk initially came forward with an agreement between the Clerk and First Integrity, asking in essence that the
Board ratify his agreement, I stated that I would not sign off for legality. In that agreement the Board was not a party, and there was
no protection for the Board should it take the requested action. When the Clerk amended the agreement to include the Board as a
party, the agreement then fell within the confines of both the Frankenmuth decision and the Board's Purchasing Ordinance. The
alleged irregularities of the process were discussed in detail during two public meetings. The Board, with full knowledge of the
irregularities, had the lawful ability to waive any and all requirements and irregularities under the Purchasing Ordinance. The Board's
decision was further bolstered by the fact that there was no substitute depository bank in place (which constituted an exigent
circumstance as well as the loss of an essential government service), nor was there any requested action on the Agenda that the Board
send a letter request to Fifth Third seeking an extension, which requested action would have given the Board the opportunity to
continue this item one meeting.
With this background, I prepared a proposed motion that the Chair could use provided the public hearing be consistent with
the above. The purpose of the motion was to capture the considerations set forth above, in order to give the Board maximum
protection against any claim should the Clerk's request be approved by majority vote.
With respect to your question regarding the meeting, at Commissioner Fiala's request Leo and I met with Crystal and Derek
Johnssen on September 15`h. The primary issue was what could be done to get an acceptable Bank depository agreement to the
Board. The three party agreement, as modified with staffs' input, resulted from this meeting.
Jeffrey A. Klatzkow
County Attorney
(239) 252 -2614
- - - -- Original Message---- -
From: HillerGeorgia
Sent: Friday, October 03, 2014 7:55 AM
To: KlatzkowJeff
Cc: HayesKaren
Subject: Purchasing Ordinance - Bank Services Contract Motion
Jeff,
Please email the specific section of the purchasing ordinance that you relied on for allowing the board to waive the purchasing
ordinance by motion due to exigent circumstances.
Did you verify that exigent circumstances existed? If so, how?
Packet Page -284-
10/28/2014 10.A.
Please provide the specific law that you relied on to allow the board to waive procurement irregularities with respect to the bank
services solicitation and contract.
Please provide a memo detailing your conversation in the meeting with you, Leo and the Clerk's staff ahead of the last board meeting
where you determined how to craft the motion you then advised Commissioner Henning to make. When and where was that meeting
held? Who was in attendance?
With thanks,
Commissioner Georgia Hiller
Sent from my iPad
Under Florida Law, e -mail addresses are public records. If you do not want your e-mail address released in response to a public
records request, do not send electronic mail to this entity. Instead, contact this office by telephone or in writing.
Packet Page -285-
LexisNexis 0
FOCUS - 20 of 24 DOCUMENTS
FRANKENMUTH MUTUAL INSURANCE COMPANY, etc., Appellant, vs. ERNIE
LEE MAGAHA, etc., et al., Appellees.
No. SC96384
SUPREME COURT OF FLORIDA
769 So. 2d 1012; 2000 Fla. LEXIS 1889; 25 Fla. L. Weekly S 697
September 21, 2000, Decided
PRIOR HISTORY: [ * *1] Certified Question of
Law from the United States Court of Appeals for the
Eleventh Circuit - Case No. 98 -2962.
COUNSEL: J. Lofton Westmoreland and William R.
Mitchell of Moore, Hill, Westmoreland, Hook & Bolton,
P.A. for Appellant.
Paula G. Drummond, Pensacola, Florida, on behalf of
Appellee Ernie Lee Magaha; and David G. Tucker, Ja-
net Lander, and James M. Messer, Pensacola, Florida, on
behalf of Appellee Escambia County, Florida, for Ap-
pellees.
Carole Sanzeri, Senior Assistant County Attorney, Pi-
nellas County Attorney's Office, Clearwater, Florida, for
the Florida Association of County Attorneys, Inc., Ami-
cus Curiae.
JUDGES: LEWIS, J., WELLS, C.J., and SHAW,
HARDING, ANSTEAD, PARIENTE and QUINCE, JJ.,
concur.
OPINION BY: LEWIS
OPINION
[ *1014] LEWIS, J.
We have for review two questions of Florida law
certified by the United States Court of Appeals for the
Eleventh Circuit as determinative of a cause pending
before that court and for which there is no controlling
precedent. Specifically, the Eleventh Circuit has certified
the following questions to this Court:
10/28/2014 10.A.
Page 1
(1) UNDER FLA. STAT. §
125.031, WHICH REQUIRES AP-
PROVAL OF THE BOARD OF
COUNTY COMMISSIONERS FOR
CERTAIN LEASE - PURCHASE [ * *2]
AGREEMENTS, CAN A COUNTY BE
HELD TO HAVE APPROVED A
CONTRACT ABSENT FORMAL RES-
OLUTION AND BASED SOLELY ON
ACTS AND OMISSIONS OF THE
COUNTY COMMISSION? IF SO,
WHAT STANDARD GUIDES THE
CONSIDERATION OF WHETHER A
COUNTY COMMISSION HAS "AP-
PROVED" A CONTRACT OR
AGREEMENT? (2) IF THE
LEASE - PURCHASE AGREEMENT
HAS BEEN APPROVED, DOES THE
NON - SUBSTITUTION CLAUSE IN
THE LEASE - PURCHASE AGREE-
MENT THAT PROVIDES FOR A
PENALTY UPON
NON - APPROPRIATION AND EX-
PLICITLY DISCLAIMS USE OF REV-
ENUES FROM AD VALOREM TAXA-
TION VIOLATE . ARTICLE VII, § 12,
OF THE FLORIDA CONSTITUTION?
Frankenmuth Mutual Insurance Co. v. Magaha, slip
op., No. 98 -2962, slip op. at 10 (11th Cir. Aug. 25,
1999). We have jurisdiction. See art. V, § 3(b)(6), Fla.
Packet Page -286-
10/28/2014 10.A.
Page 2
769 So. 2d 1012, *; 2000 Fla. LEXIS 1889, * *;
25 Fla. L. Weekly S 697
Const. As more fully explained below, we answer the
Note 2: One payment
first certified question in the affirmative and determine
of $ 200,000, two pay -
that a board of county commissioners may approve a
ments of $ 120,000, three
lease - purchase agreement under section 125.031, Florida
payments of $ 134,964,
Statutes (1999), even absent formal resolution, if such
and a final payment of $
board is not required by local ordinance or charter to take
319,743.
action by formal resolution, as is the status of the local
Note 3: One payment
charter here. Further, we outline a three -prong test to
of $ 200,000, six payments
[ * *3] guide courts in determining whether an approval
of $ 419,008 and a final
without formal resolution has occurred. Finally, we also
payment of $ 827,860.
answer the second certified question in the affirmative,
as rephrased below, and determine that the
nonsubstitution clause implicates article VII, section 12
of the Florida Constitution, notwithstanding the attempt-
Flowers signed each of these agree -
ed disclaimer.
ments as "Escambia County Comptroller."
Although he warranted in paragraph 20 of
I. FACTS AND PROCEDURAL HISTORY
the master lease that he had obtained a
resolution of the "governing body" of the
On September 6, 1995, Frankenmuth Mutual In-
jurisdiction authorizing him to execute the
surance Company (Frankenmuth) filed a two -count
lease, in fact, Flowers neither requested
complaint in the [ *1015] United States District Court
Es-
nor obtained the permission of the Es-
for the Northern District of Florida, Pensacola Division,
cambi a County Board of County Com-
cambia
Iam
against both Escambia County, Florida, and Ernie Lee
ners ("the Board" or "the County
Magaha (Magaha), the Clerk of the Circuit Court for
Commission ") _before signing the agree -
Escambia County. Frankenmuth sought declaratory
ment.
relief in Count I of the complaint and injunctive relief in
Count II. All three parties moved for summary judgment
The master lease contains a number
after participating in discovery, and the federal district
of provisions relevant [ * *5] to this dis-
court set forth the following facts in considering the par-
pute. Paragraph 21 includes a
ties' motions:
"non- appropriation clause," which pro-
vides the lease will terminate in any given
year if the "legislative body or funding
authority" fails to appropriate funds to
In May 1992 Escambia County
make the lease payments. The same para-
Comptroller Joe Flowers signed a master
graph also contains a "non- substitution
lease agreement with Unisys Leasing
clause," providing that, in the event of
Corporation ( "Unisys "), under schedule
non- appropriation, Flowers agrees not to
01 of which, Flowers agreed to
purchase or rent any substitute computer
lease - purchase a Unisys Model A -11
equipment for the balance of the appro-
mainframe computer. [ * *4] ' The
priation period and the one following it.
schedule called for seven annual pay-
Finally, an addendum clarifies that noth -
ments totaling $ 2,353,814.1 In July 1993,
ing in the lease shall be construed to con -
the parties signed a second schedule
stitute a pledge of ad valorem taxes and
agreeing to add a Unisys imaging system
that, in the event of default, the Lessor has
for eight annual payments totaling $
no right to compel the County Commis -
1,164,635.2 In May 1994, the parties
sion to appropriate funds to make the
signed a third schedule adding further
lease payments.
equipment and restructuring the finance
The agreement continued without in-
arrangement for schedule 01. This third
cident for several years after it was exe-
aped
schedule called for eight annual payments
cuted. Flowers used the equipment for a
totaling $ 908.3
variety of municipal functions, including
Note 1: Six payments of
county payroll and central data processing
services for the County Commission as
$ 304,112 and one pay-
well as the Road, Mass Transit and Solid
ment of $ 529,142.
Waste Departments. (Ken Gardner Depo.
Packet Page -287-
10/28/2014 10.A.
Page 3
769 So. 2d 1012, *; 2000 Fla. LEXIS 1889, * *;
25 Fla. L. Weekly S 697
23 -24). In 1992 Unisys sold and assigned
the lease to Chicorp Financial Services,
Inc. Chicorp, in turn, sold it to Franken-
muth Mutual Insurance [ * *6] Company
( "Frankenmuth ") - -the [ *1016] current
owner of the lease and the plaintiff in this
case.
Although the County Commission
and Flowers both regarded the Comptrol-
ler to be a fee officer 4 rather than a
budget officer, the evidence shows Flow-
ers submitted his budget to the County
Commission each year setting forth the
fees he anticipated collecting, the expens-
es he anticipated incurring and any antic-
ipated shortfall between the two. Each
year Flowers requested [that] the County
Commission appropriate funds to cover
the shortfall, which for fiscal years ending
1992, 1993 and 1994, amounted to
roughly half the Comptroller's total budg-
et. In each of those years, Flowers listed,
respectively, $ 301,563, $ 304,561 Z and $
304,113 as a budget expense titled "Debt
Service -- Computer." Each year, the Board
appropriated Flowers' requested funds
without question. 3
Note 4: Under Florida law, "fee of-
ficers" are ones "assigned specialized
functions within county government and
whose budgets are established inde-
pendently of the local governing body,
even though said budgets may be reported
to the local governing body or may be
composed of funds either generally or
specifically [ * *7] available to a local
governing authority involved." §
218.31(8), Fla. Stat. (1993).
The County Commission had no di-
rect knowledge of the Unisys computer
equipment, however, until it began dis-
cussing implementing its own computer
network system in 1993. By letter dated
August 3, 1993 Flowers wrote to the
Board's chairperson explaining his office
already had a central data processing sys-
tem and that the Board should adjust its
plans to integrate that system. At a June
28, 1994 meeting the County Commission
voted to amend its technology plan to
make use of the Comptrollers computer
equipment.
In late 1994, Flowers became the
subject of considerable controversy when
Escambia County lost millions of dollars
in bad derivative investments made by
Flowers' office. The political uproar led to
a grand jury investigation and, eventually,
a four -count indictment charging Flowers
with malfeasance. Count Four specifically
charged Flowers with malfeasance for
entering into the Unisys lease in violation
of Florida law. Flowers pled no contest
and resigned from office.
Thereafter, on August 1, 1995, the
Florida Legislature abolished the Office
of Escambia County Comptroller [ * *8]
by repealing the Special Act that had cre-
ated it. See Ch. 95 -529, Laws of Fla. As a
result, Escambia County's elected Clerk of
the Circuit Court, Ernie Lee Magaha,
became responsible for the constitutional
duties formerly held by the Office of
Comptroller. 5 In the aftermath of these
events, Magaha and the County Commis-
sion obtained and reviewed, for the first
time, the Unisys master lease and sched-
ules signed by Flowers. After investiga-
tion and discussion, the County Commis-
sion determined the Unisys equipment
was too old, too big, too expensive and
too ineffective to serve the County's
needs. The County Commission therefore
advised Frankenmuth it [ *1017]
would not make the 1995 schedule 02 and
schedule 03 payments of, respectively, $
120,000 and $ 419,000. The Commission
further advised Frankenmuth it consid-
ered the lease void and unenforceable due
to Flowers' failure to obtain approval be-
fore signing it
Note 5: In most Florida
counties, the Clerk of the
Circuit Court serves a dual
function: he or she manag-
es the circuit and county
court system and serves as
"ex officio clerk of the
board of county commis-
sioners, auditor, recorder
and custodian of all county
funds." [ * *9] See Fla.
Const. art. VIII, § 1(d).
The Florida Constitution
also provides, however,
that individual counties
may choose to divide the
Packet Page -288-
769 So. 2d 1012, *; 2000 Fla. LEXIS 1889, * *;
25 Fla. L. Weekly S 697
Clerk's duties between two
county officers, one man-
aging the courts and the
other serving as custodian
of county funds. Fla.
Const. art. V, § 16. In
1972, Escambia County
chose to divide the duties
between two elected offic-
ers: a Clerk of the Circuit
Court and a Comptroller.
See Ch. 73 -455, Laws of
Fla. When the Legislature
abolished that Act, the du-
ties of the Comptroller re-
verted to the Clerk of
Court.
Consequently, in September 1995,
Frankenmuth filed this suit asking the
court to declare the lease agreement valid
and enforceable and to enjoin the County
Commission and the Clerk of Court (as
constitutional successor to the Comptrol-
ler) from breaching the agreement. While
the case proceeded through discovery, the
County Commission purchased, in April
1996, a replacement computer system. As
a result, Frankenmuth now seeks declar-
atory relief only. These motions for sum-
mary judgment followed.
Frankenmuth Mut. Ins. Co. v. Magaha, 1996 U.S. Dist.
LEXIS 15930, 10 Fla. L. Weekly Fed. D 340, D 340
(N.D. Fla. Aug. 30, 1996).
1 According to the master lease agreement, ti-
tle to the computer equipment vested in Flowers,
the lessee, with Unisys retaining a security inter-
est in the equipment and the right to repossess the
equipment. Also under the master lease agree-
ment, Flowers generally accepted responsibility
for all risks related to the equipment. An adden-
dum executed by the parties in September 1992
abolished Unisys' security interest in the equip-
ment and its right to repossess the equipment, in-
stead substituting other available remedies in the
event of default, including seeking compensatory
damages from the lessee should the lessee refuse
to (1) sell the equipment; or (2) voluntarily return
10/28/2014 10.A.
Page 4
the equipment (with legal and beneficial title) to
the lessor.
[ * *10]
2 The actual amount listed in Flowers' letter to
the Board of County Commissioners dated May
8, 1992, for "Debt Service - Computer" actually
was $ 301,561, not $ 304,561.
3 Flowers' budget request for the fiscal year
ending September 30, 1992, was made by letter
dated June 6, 1991, almost one year before the
agreement with Unisys was executed. Further, the
amount listed in the 1991 budget request for
"Debt Service - Computer" was $ 301,563, simi-
lar to the annual payments called for under the
Unisys lease agreement. Finally, Flowers' budget
request for the fiscal year ending September 30,
1993, was made by letter dated May 8, 1992, also
before the agreement with Unisys was executed.
As noted in footnote 2, supra, the amount listed
in the 1992 budget request for "Debt Service -
Computer" was $ 301,561, similar to the annual
payments called for under the yet- to -be- executed
Unisys lease agreement.
After considering the above - listed facts, the federal
district court made several determinations. See 1996 U.S.
Dist. LEXIS 15930, *19 -24, 10 Fla. L. Weekly Fed. at D
341 -43. First, [ * *11] the court determined that even
though the County Commission had not approved the
lease - purchase agreement prior to its execution as re-
quired by section 125.031, Florida Statutes (1993), the
Commission had subsequently approved the agreement
by (1) appropriating funds to pay for computer equip-
ment; (2) voting to change its own technology plan to
integrate the computer equipment; and (3) taking no ac-
tion after learning that an elected official in Escambia
County had entered into a lease - purchase agreement in
possible violation of section 125.031. ° See Franken-
muth, 1996 U.S. Dist. LEXIS 15930, *20, 10 Fla. L.
Weekly Fed. at D 341. Second, the court determined that
the agreement's nonsubstitution clause rendered illusory
both the nonappropriation clause and the express dis-
claimer regarding ad valorem taxation, thus causing the
agreement to be void as violative of article VII, section
12 of the Florida Constitution. See Frankenmuth, 1996
U.S. Dist. LEXIS 15930, *20 -22, 10 Fla. L. Weekly Fed.
at D 341 -42. Third, the court determined that the
nonsubstitution clause was void as against public policy
because the clause "effectively contracted [ * *12] away
the taxpayers' right to a central data processing [ *1018]
system for up to two years." See 1996 U.S. Dist. LEXIS
15930, *22, 10 Fla. L. Weekly Fed. at D 342. However,
the court further determined that the nonsubstitution
clause was properly severable from the remainder of the
agreement. See id. Finally, the court determined that
Magaha had no contractual obligations to Franken-
Packet Page -289-
769 So. 2d 1012, *; 2000 Fla. LEXIS 1889, * *;
25 Fla. L. Weekly S 697
muth. See 1996 U.S. Dist. LEXIS 15930, *23 -24, 10
Fla. L. Weekly Fed. at D 343. In accordance with theses
determinations, the district court declared:
Escambia County's Board of
County Commissioners ratified the lease
and all schedules between Unisys and Joe
Flowers, the Comptroller of Escambia
County. As the County Commission has
failed to appropriate funds to make the
lease payments, Frankenmuth may exer-
cise its rights under the non - appropriation
clause in paragraph 21 [of the
lease- purchase agreement]. Franken-
muth may not enforce the
non - substitution clause, however, because
it is void for violation of Article VII, § 12
of the Florida Constitution and for viola-
tion of public policy. Frankenmuth has
no contractual rights against Ernie Lee
Magaha, Escambia County's [ * *13]
Clerk of the Circuit Court.
1996 U.S. Dist. LEXIS 15930, *23 -24, 10 Fla. L.
Weekly Fed. at D 343. Frankenmuth appealed to the
Eleventh Circuit, and Escambia County cross - appealed.
See Frankenmuth, No. 98 -2962, slip op. at 2
4 To support this third finding, the federal dis-
trict court stated: "The evidence shows the ac-
counting firm of Saltmarsh, Cleveland & Gund
advised the County Commission through a 1994
independent audit that an elected official of the
county had entered into a long -term lease agree-
ment in possible violation of section 125.031."
Frankenmuth Mut. Ins. Co. v. Magaha, 1996
U.S. Dist. LEXIS 15930, 10 Fla. L. Weekly Fed.
D 340, D 341 (N.D. Fla. Aug. 30, 1996). The
record shows that the independent auditing report
stated, "Elected officials of the County have en-
tered into lease purchase arrangements to obtain
need property and equipment ... [that] appear to
fall within the category of transactions 'which
must be approved by the governing body of the
County." This language is almost identical to that
contained in the same auditing firm's 1991 report,
which also did not specify what officials had en-
tered into lease- purchase agreements in possible
violation of section 125.031.
10/28/2014 10.A.
Page 5
[ * *14] On appeal, the Eleventh Circuit discussed
the issues regarding the execution of the lease - purchase
agreement and the validity of the nonsubstitution clause.
See id. at 5 -9. After discussing these issues, that court
certified for this Court's consideration the two questions
of law set forth above. Id. at 10. We now address those
questions in turn.
H. ISSUES AND ANALYSIS
A. THE FIRST CERTIFIED QUESTION
In the first certified question, the Eleventh Circuit
has asked us to determine whether, consistent with the
requirements of section 125.031, Florida Statutes, a
board of county commissioners may approve a
lease - purchase agreement absent formal resolution, and,
if so, what standards guide consideration of whether such
an approval has occurred. As explained below, we de-
termine that a board of county commissioners may ap-
prove a lease - purchase agreement under section 125.031,
even absent formal resolution, if a governing charter or
ordinance does not require the board to take action by
formal resolution, as is the situation here. 5 Further, we
provide a three -prong [ * *15] test to guide the determi-
nation process as to whether an approval without formal
resolution has occurred. Before we reach the first certi-
fied question, however, we must first address Franken-
muth's argument that Flowers, as the Comptroller of
Escambia County, had the independent authority to enter
into the agreement with Unisys even absent any approval
whatsoever by the Escambia County Board of County
Commissioners (the Board). If Frankenmuth's argu-
ment on this point is correct, then we need not reach the
first question certified by Eleventh Circuit.
5 The parties have not referred us to any provi-
sion in the Escambia County Code requiring the
Board to take action in some specified manner.
After careful consideration, we find Frankenmuth's
argument regarding Flowers' independent authority to
bind the governmental entity to be without merit. It is
clear that Flowers, as Comptroller of Escambia County,
was a constitutional officer under the Florida Constitu-
tion. See art. V, § 16, Fla. Const.; art. VIII, § [ * *16]
1(d), Fla. Const.; see also Alachua County v. Powers,
351 So. 2d 32, 35 -43 (Fla. 1977). It does not follow,
however, that Flowers had the independent authority to
enter into the agreement at issue here. As we noted in
Powers, the clerk of the circuit court-or the comptroller
if duties are divided between two offices- derives author-
ity and responsibility from both "constitutional and stat-
utory provisions." Powers. 351 So. 2d at 35: see also
Escambia County v. Flowers, [ *1019] 390 So. 2d 386,
387 (Fla. 1st DCA 1980) (stating that Flowers' duties as
Packet Page -290-
769 So. 2d 1012, *; 2000 Fla. LEXIS 1889, * *;
25 Fla. L. Weekly S 697
comptroller were enumerated by legislative prerogative);
cf. State v. Walton County, 93 Fla. 796, 800, 112 So.
630, 632 (1927) (noting that "[T]he board of county
commissioners of each county are constitutional officers,
and under the terms of the Constitution their powers and
duties shall be fixed and prescribed the Legislature. ");
Weaver v. Heidtman, 245 So. 2d 295, 296 (Fla. lst DCA
1971) (observing that counties are "subject to legislative
prerogatives in [ * *17] the conduct of their affairs "). By
enacting section 125.031, the Legislature clearly estab-
lished that agreements such as the one at issue here may
not be entered into without approval by a board of coun-
ty commissioners. This is not an instance where the
clerk of the circuit court is acting as an arm of the judi-
cial branch and thus under judicial control and not the
control of the Legislature. See Times Publishing Co. v.
Ake, 660 So. 2d 255, 257 (Fla. 1995). Therefore, the
Legislature's pronouncement in section 125.031 is con-
trolling here, and Flowers did not have the independent
authority to enter into the agreement with Unisys without
the approval of the Board. 6
6 It is interesting to note that Flowers entered a
nolo contendere plea to the charge of violating
section 125.031, Florida Statutes; if Franken-
muth's argument were correct, then Flowers' plea
would have responded to a charge having abso-
lutely no basis in law. Further, Frankenmuth's
argument on this point is inconsistent with lan-
guage contained in the underlying agreement,
which stated in paragraph 20(b): "Lessee [Flow-
ers] has been duly authorized by the Constitution
and laws of the applicable jurisdiction and by
resolution of its governing body (which resolu-
tion, if requested by Lessor, is attached hereto), to
execute and deliver this Lease and to carry out its
obligations hereunder." If Frankenmuth's argu-
ment regarding Flowers' authority were correct,
the language in the agreement regarding a resolu-
tion by the governing body of the jurisdiction
would be superfluous and meaningless.
[ * *18] Turning now to the first question certified
by the Eleventh Circuit, we must consider the text of
section 125.031, Florida Statutes (1999):'
Counties may enter into leases or
lease- purchase arrangements relating to
properties needed for public purposes for
periods not to exceed 30 years at a stipu-
lated rental to be paid from current or
other legally available funds and may
make all other contracts or agreements
necessary or convenient to carry out such
10/28/2014 10.A.
Page 6
objective. The county shall have the right
to enter into such leases or lease - purchase
arrangements with private individuals,
other governmental agencies, or corpora-
tions. When the term of such lease is for
longer than 60 months, the rental shall be
payable only from funds arising from
sources other than ad valorem taxation.
Such leases or lease - purchase arrange-
ments shall be subject to approval by the
board of county commissioners, and no
such lease or lease - purchase contract shall
be entered into without said approval.
It is undisputed in this case that Flowers failed to obtain
the express or formal "approval" [ * *19] of the Es-
cambia County Board of County Commissioners (the
Board) before entering into the agreement with Unisys.
Therefore, the initial question we must answer is whether
the Board had the power to approve the agreement after
it was executed. We determine that Florida law clearly
establishes that the Board had the power to approve, or,
stated another way, ratify, that which was initially an
unauthorized agreement after it had been executed. See,
e.g., Ramsey v. City of Kissimmee, 139 Fla. 107, 111 -13,
190 So. 474, 476 -77 (1939); Brown v. City of St. Peters-
burg, 111 Fla. 718, 720, 153 So. 140, 140 (1933); cf.
City of Panama City v. T & A Util. Contractors, 606 So.
2d 744, 747 (Fla. [ *1020] 1st DCA 1992) (holding
that city ratified city manager's unauthorized termination
of contract between city and third party); Tolar v. School
Board of Liberty County, 398 So. 2d 427, 428 -29 (Fla.
1981) (finding that municipality's action taken in.viola-
tion of Sunshine Law could be later ratified if taken in
accordance with such law); see generally l0A Eugene
McQuillin, The Law of Municipal Co7porations, §
29.104 at 63 [ * *20] (3d ed. 1999) ( "It is a general rule
that whatever acts public officials may do or authorize to
be done in the first instance may subsequently be adopt-
ed or ratified by them with the same effect as though
properly done under previous authority. "). The disposi-
tive question thus becomes, what constitutes "approval"
by the Board within the meaning of section 125.031?
7 We quote the current version of the statute
because the Legislature has not amended the stat-
ute since 1989. See ch. 89 -103, § 1, at 279, Laws
of Fla. Thus, the current version of the statute is
the same as the version in effect at the time the
events in the present case transpired.
Section 125.031 does not define the term "approval"
as used in the statute, nor does the legislative history
underlying the statute shed any light on the matter. N Un-
der such circumstances, we must give the statutory ]an-
Packet Page -291-
769 So. 2d 1012, *; 2000 Fla. LEXIS 1889, * *;
25 Fla. L. Weekly S 697
guage its plain and ordinary meaning. See, e.g., [ * *21]
Green v. State, 604 So. 2d 471, 473 (Fla. 1992) ( "One of
the most fundamental tenets of statutory construction
requires that we give statutory language its plain and
ordinary meaning, unless words are defined in the statute
or by the clear intent of the legislature. "). In ascertaining
the plain and ordinary meaning of a term, reference may
be made to a dictionary. See id. ( "If necessary, the plain
and ordinary meaning of the word can be ascertained by
reference to a dictionary. ").
8 The Legislature created section 125.031,
Florida Statutes, in 1971, see chapter 71 -240,
section 1, at 1318 -19, Laws of Florida, and, as
stated in footnote 6, supra, has amended the stat-
ute only once since that time. See Ch. 89 -103, §
1, at 279, Laws of Fla. (increasing time period
implicating statute from 24 to 60 months). How-
ever, no legislative history surrounding these
amendments sheds light on the meaning of the
term "approval" as used in the statute.
[ * *22] In its opinion, the federal district court de-
fined "approve" as "to have or express a favorable opin-
ion of or "to accept as satisfactory." Frankenmuth, 10
Fla. L. Weekly Fed. at D341 (quoting Webster's Ninth
New Collegiate Dictionary at 98 (Merriam- Webster Inc.
1991)). In addition to the definition adopted by the fed-
eral district court, the dictionary definition of "approve"
also includes "to give formal or official sanction to."
Webster's Tenth Collegiate Dictionary at 57 (Merri-
am- Webster Inc. 1996). Thus, the dictionary shows that
the term "approve" may consist of either an informal or
formal expression of assent.
Florida case law ' also establishes that an approval
or ratification can occur without formal resolution. For
example, in Deutsche Credit Corp. v. Peninger, 603 So.
2d 57, 58 (Fla. 5th DCA 1992), the court stated, "Ratifi-
cation of an agreement occurs where a person expressly
or impliedly adopts an act or contract entered into in his
or her behalf by another [ * *23] without authority."
Similarly, in City of Panama City, the First District de-
termined that the city commission had ratified the city
manager's unauthorized termination of a contract be-
tween the city and a third party -even though the city
commission did not pass a formal resolution terminating
the contract -where the city commission knew the reasons
for the termination and then voted to award the contract
to a third party. See 606 So. 2d at 747; see generally l0A
McQuillin, § 29.106 at 82 (stating that ratification of a
municipal contract may occur "by the affirmative action
of the proper officials, or by any action or non - action
which in the circumstances amounts to approval of the
contract "): cf. hillearn Properties, Inc. v. Citv of Tal-
lahassee, 366 So. 2d 172 (Fla. 1st DCA 1979) (employ-
10/28/2014 10.A.
Page 7
ing doctrine of estoppel to bar city from challenging va-
lidity of agreements on grounds of lack of proper formal-
ities in the passage [ *1021] of such agreements). As a
result, we determine that the term "approval" as used in
section 125.031 does not require a board [ * *24] of
county commissioners to pass a formal resolution, unless
passage of such a resolution is required by the governing
law of the county. 10 We do note, however, that several
principles must be satisfied before a board of county
commissioners may be deemed to have approved an
agreement absent formal resolution.
9 See, e.g., State v. Mitro, 700 So. 2d 643, 645
(Fla. 1997) ( "In the absence of a statutory defini-
tion, resort may be had to case law or related
statutory provisions which define the term ....
").
10 We recognize that in reaching its decision in
City of Panama City, the First District distin-
guished the process of ratifying entry into an
agreement from the process of ratifying the ter-
mination of an agreement. See 606 So. 2d at 747.
However, the different policy concerns implicat-
ed in those distinguishable processes does not al-
ter the conclusion that an approval or ratification
of an agreement may occur absent formal resolu-
tion where the governing law of the county does
not require action by formal resolution.
[ * *25] First, we determine that an approval absent
formal resolution must be made in compliance with
Florida's Sunshine Law, which is of both constitutional
and statutory dimension. See art. I, § 24(b), Fla Const.; §
286.011(1), Fla. Stat. (1999). Under the Sunshine Law,
any meeting at which official acts are to be taken must be
open to the public, and no "resolution, rule or formal
action shall be considered binding except as taken or
made at such meeting." § 286.011(1), Fla. Stat. (1999);
see also, e.g., Zorc v. City of Vero Beach, 722 So. 2d
891, 896 (Fla. 4th DCA 1998) (interpreting Sunshine
Law). As we previously have stated, "The intent of [the
Sunshine Law] is to cover any gathering of the members
of the Board where the members deal with some matter
on which foreseeable action will be taken by the Board."
Tolar, 398 So. 2d at 428. Thus, for a board of county
commissioners to approve a lease or lease - purchase
agreement in accordance with section 125.031, we find it
necessary that such approval [ * *26] be made "in the
sunshine."
If an "approval" by a board of county commissioners
of a lease or lease purchase agreement under section
125.031 must be made in accordance with the Sunshine
Law, it necessarily follows that any subsequent ratifica-
tion of such an agreement must also be made in compli-
ance with the Sunshine Law. This is so because we have
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769 So. 2d 1012, *; 2000 Fla. LEXIS 1889, * *;
25 Fla. L. Weekly S 697
recognized that for a local government to properly ratify
a previously executed, unauthorized agreement, the
agreement must be ratified "in the same manner ... in
which it might have been originally adopted." Ramsey,
139 Fla. at 113, 190 So. at 477; see also Broward County
v. Conner, 660 So. 2d 288, 290 (Fla. 4th DCA 1995)
(interpreting Sunshine Law) ( "If the county could not
have entered into this contract without action taken at a
meeting, it necessarily follows that the actions of the
county's attorneys could not bind the county to specific
performance of a contract in the absence of proper com-
mission approval. "). As stated by the First District in
City of Panama City, the apparent policy justification
[ * *27] for the requirement set forth in Ramsey is that
"taxpayers should not be held accountable on a contract
unless the contract has been entered into according to the
strict letter of the law. Otherwise, corrupt (or merely
inept) public officials could subject the public to untold
financial liability." 606 So. 2d at 747.
Second, in addition to the requirement that a subse-
quent approval in the form of ratification be made "in the
sunshine" in the same manner that a formal approval
would have required, there are several other general
principles undergirding the concept of ratification war-
ranting our attention. In the vintage opinion of Ball v.
Yates, 158 Fla. 521, 527, 29 So. 2d 729, 732 (1946), this
Court stated, "Before ratification will be implied of an
act of an unauthorized agent it must be made to appear
that the principle has been fully informed and that he has
approved." In Peninger, 603 So. 2d at 58, the Fifth Dis-
trict Court of Appeal expounded upon the general pro-
nouncement made by this Court in Ball:
[ * *28] [ *1022] An agreement is
deemed ratified where the principal has
full knowledge of all material facts and
circumstances relating to the unauthorized
act or transaction at the time of the ratifi-
cation. G & M[v. Tropical Music Serv.],
161 So. 2d [5561 at 558. See also Ball v.
Yates, 158 Fla. 521, 29 So. 2d 729 (1946),
cert. den., 332 U.S. 774, 68 S. Ct. 66, 92
L. Ed. 359 (1947); Pedro Realty Inc. v.
Silva, 399 So. 2d 367 (Fla. 3d DCA
1981); Bach v. Florida State Bd. of Den-
tistry, 378 So. 2d 34 (Fla. 1st DCA 1979).
An affirmative showing of the principal's
intent to ratify the act in question is re-
quired. [Carolina - Georgia Carpet &
Textiles, Inc. v. ] Pelloni, 370 So. 2d 450
at 452. Moreover, the issue of whether an
agent's act has been ratified by the princi-
pal is a question of fact. One Hour Valet
of America, Inc. v. Keck,
157 So. 2d 83 (Fla. 2d DCA 1963).
Regarding the "full knowledge" requirement discussed in
Peninger, the First District stated the following in Bach
v. Florida State Board of Dentistry, 378 So. 2d 34, 36 -37
(Fla. 1 st DCA 1979):
[ * *29] Before one may infer that a
principal ratified an unauthorized act of
his agent, the evidence must demonstrate
that the principal was fully informed and
that he approved of the act. Ball v. Yates,
158 Fla. 521, 29 So. 2d 729, 732 (1946).
It is generally the rule that the doctrine of
constructive knowledge does not apply to
bring about ratification. The principal is
charged only upon a showing of full
knowledge, and not because he had notice
which should have caused him to make
inquiry, which in turn would have brought
to his attention the knowledge of the un-
authorized act of the employee. 2 Fla. Jur.
2d, Agency and Employment, § 52 at page
204 (1977).... There is no duty imposed
upon the principal to make inquiries as to
whether his agent has carried out his re-
sponsibilities. The principal "has a right to
presume that his agent has followed in-
structions, and has not exceeded his au-
thority." Oxford Lakeline v. First Nat.
Bank, 40 Fla. 349, 24 So. 480, 483
(1898). And, [ * *30]
Packet Page -293-
[w]henever he is sought
to be held liable on the
ground of ratification, ei-
ther express or implied, it
must be shown that he rati-
fied upon full knowledge
of all material facts, or that
he was willfully ignorant,
or purposely refrained
from seeking information,
or that he intended to adopt
the unauthorized act at all
events, under whatever
circumstances. Id.
769 So. 2d 1012, *; 2000 Fla. LEXIS 1889, * *;
25 Fla. L. Weekly S 697
Based on the above principles well established in
Florida jurisprudence, we determine that a three -prong
test is appropriate for determining whether an af-
ter- the -fact "approval," or ratification, has occurred in
satisfaction of section 125.031, Florida Statutes. First, a
board of county commissioners must have the power to
approve the agreement. " See, e.g., P.C.B. Partnership v.
City of Largo, 549 So. 2d 738, 740 (Fla. 2d DCA 1989)
(determining that city did not have authority to enter into
an agreement that effectively contracted away the city's
police powers). Second, a board of county commission-
ers must ratify an agreement in the same manner in
which the agreement would have been [ * *31] initially
approved. For example, as we stated above, the approval
must be made in accordance with the "Sunshine Law."
Additionally, where a charter or ordinance requires a
board of county commissioners to take action in a speci-
fied manner, such as by passing a formal resolution (un-
like the circumstances here), [ *1023] then an af-
ter- the -fact approval must satisfy the specified manner to
be valid. See Ramsey, 190 So. at 476 -77, 139 Fla. at
111 -13 (involving city charter requiring the city com-
mission to take action on certain contracts by ordinance
or resolution). Finally, in ratifying the agreement in the
same manner in which it initially could have been ap-
proved, a board of county commissioners must have full
knowledge of the material facts relative to the agreement.
As we have not been asked to determine whether a prop-
er ratification occurred in this case, we leave that ques-
tion open for determination by the Eleventh Circuit
based on the principles set forth above.
11 As will be addressed in our discussion con-
cerning the second certified question, Escambia
County argues that the first prong of this test has
not been met here because the Escambia County
Board of County Commissioners allegedly did
not have the power to initially approve the
agreement. Specifically, Escambia County argues
that (1) the agreement, based on its
nonsubstitution clause, required approval by vot-
er referendum due to its alleged practical
long -term impact on ad valorem taxes; and (2)
the nonsubstitution clause is not severable from
the agreement.
[ * *32] B. THE SECOND CERTIFIED QUESTION
The .second certified question presented by the
Eleventh Circuit has asked us to determine whether the
nonsubstitution clause contained in the underlying
10/28/2014 10.A.
Page 9
agreement violates article VII, section 12 of the Florida
Constitution, which provides:
Counties, school districts, munic-
ipalities, special districts and local gov-
ernmental bodies with taxing powers may
issue bonds, certificates of indebtedness
or any form of tax anticipation certifi-
cates, payable from ad valorem taxation
and maturing more than twelve months
after issuance only:
(a) to finance or refinance capital
projects authorized by law and only when
approved by vote of the electors who are
owners of freeholds therein not wholly
exempt from taxation ....
To more accurately reflect the procedural posture and
underlying facts of this case, we rephrase the second
certified question to read:
DOES THE
NONSUBSTITUTION CLAUSE IN THE
LEASE- PURCHASE AGREEMENT,
WHICH REQUIRES UP TO A
TWO -YEAR LAPSE IN COMPUTER
SERVICES UPON
NONAPPROPRIATION, VIOLATE
ARTICLE VII, SECTION 12, OF THE
FLORIDA CONSTITUTION, [ * *33]
EVEN THOUGH THE AGREEMENT
ALSO EXPRESSLY DISCLAIMS USE
OF REVENUES FROM AD VALOREM
TAXATION?
After careful consideration, we answer the second certi-
fied question, as rephrased, in the affirmative.
The 1968 revision to the Florida Constitution, which
produced article VII, section 12 of the Florida Constitu-
tion, became effective on January 7, 1969. 12 See State v.
County of Dade, 234 So. 2d 651, 652 (Fla. 1970). Since
that time, we have addressed the constitutional provision
on several occasions. Escambia County asserts that our
decisions in County of Volusia v. State, 417 So. 2d 968
(Fla. 1982), and Nohrr v. Brevard Countv Educational
Facilities [ *1024] Authority, 247 So. 2d 304 (Fla.
1971), " support a finding that the nonsubstitution clause
implicates article VII, section 12, while Frankenmuth
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769 So. 2d 1012, *; 2000 Fla. LEXIS 1889, * *;
25 Fla. L. Weekly S 697
attempts to distinguish JN6hrr and County of Volusia,
compelling the lessee to continue to ap-
primarily relying on our decisions in Murphy v. City of
propriate funds throughout the full lease
Port St. Lucie, 666 So. 2d 879 (Fla. 1995); State v.
term, thereby rendering the optional fea-
School Board of Sarasota County, 561 So. 2d 549, 553
tures of the nonappropriation and nonre-
(Fla. 1990); State v. Brevard County, 539 So. 2d 461
newal clauses illusory." Id. [ * *36] This
(Fla. 1989); [ * *34] City of Palatka v. State, 440 So. 2d
court agrees a non - substitution clause may
1271 (Fla. 1983); and State v. Alachua County, 335 So.
render a non - appropriation clause illusory,
2d 554 (Fla. 1976). In federal district court, the parties
thereby requiring a lease to undergo Arti-
presented arguments similar to those presented here, and
cle VII, § 12 voter referendum. While
the court there determined that the nonsubstitution clause
Florida's courts have not addressed the
contained in Paragraph 21 of the agreement implicates
precise issue, several decisions lead to
article VII, section 12 of the Florida Constitution, and
that conclusion. In Nohrr v. Brevard
thus the agreement could not have been approved absent
County Educational Facilities Authority,
a voter referendum. See Frankenmuth, 10 Fla. L.
247 So. 2d 304 (Fla. 1971), [ * *37] the
Weekly Fed. at D342. In essence, the court determined
court validated non - referendum revenue
that the inclusion of the nonsubstitution clause trans-
bonds that had been authorized to raise
formed the agreement into a long -term certificate of in-
money to build educational facilities. The
debtedness pledging ad valorem taxes. See id. at D341.
court deleted from the bonds, however,
In making this determination, the district court engaged
certain provisions that created a mortgage
in the following analysis:
on the property, allowing the bondholders
to foreclose in the event of default. The
Like many long -term municipal lease
court reasoned the mortgage would "mor-
agreements, the Unisys master lease con-
ally compel" the governing body to levy
tains a non - appropriation clause, provid-
taxes to avoid foreclosure in the event
ing that, if in any given year the govern-
bond payments could not be made from
ing body fails to appropriate funds to
non -ad [ *1025] valorem revenue. Id.
make the lease payments, the lease will
at 311. In effect, the mortgage provision
terminate. (Master Lease P 21). Such
amounted to a pledge of ad valorem taxes,
non - appropriation or non - renewal clauses
which is invalid absent approval by the
are essential to prevent long -term munic-
electorate.
ipal financing arrangements from being
Similarly in State v. Brevard County,
classified as debt under state law, thus
539 So. 2d 461 (Fla. 1989), the court ap-
triggering state -law requirements such as
proved a long -term lease - purchase ar-
voter referendum. See M. David Gelfand,
rangement which included an annual "re-
State & Local Government Debt Financ-
newal option" similar to the annual
ing, § 3:17 at 32 (Clark Boardman & Cal-
non- appropriation clause in the Unisys
laghan 1993).
lease. The court rejected an argument that
The Unisys lease [ * *35] also con-
the financing arrangement violated Nohrr,
tains a non - substitution clause, providing
but specifically noted the deal allowed the
that, in the event of non - appropriation, the
county to "terminate the lease without
Lessee agrees not to procure substitute
further obligation" in any given year. Id.
computer equipment [or equivalent ser-
at 463. Thus, the court reasoned, "with its
vices] for the remainder of the appropria-
'annual renewal option' under the lease,
tion period and the one following it.
[ * *38] the county maintains full budget -
(Master Lease P 21). Such clauses are a
ary flexibility."
common method by which the lessor cre-
In contrast, a non- substitution clause
ates an economic disincentive for the mu-
denies the county "full budgetary flexibil-
nicipality to exercise its non- appropriation
ity" because it renders the
rights. Gelfand § 3:17 at 32. As one
non- appropriation clause illusory by
commentator has noted, however, "there
compelling the municipality to make the
is considerable doubt about the enforcea-
lease payments or suffer a penalty. The
bility of the non - substitution clause and
Attorney General of at least one State has
its effect on the validity of the lease." Id.
opined a non - substitution clause compels
at 33. "The inclusion of the
lease payments and creates debt. See La.
nonsubstitution clause may be viewed as
Packet Page -295-
769 So. 2d 1012, *; 2000 Fla. LEXIS 1889, **
25 Fla. L. Weekly S 697
Atty Gen. Op. No. 86 -517, 1986 WL
236994;
Accordingly, the court must address
two issues to determine the validity of the
non - substitution clause in this case: (1)
whether the risk of non - substitution would
morally compel the County Commission
to appropriate funds for the lease pay-
ments; and (2) whether those funds would
come from ad valorem tax dollars.
A. Moral Compulsion
Had funds not been appropriated to
make the Unisys lease payments, the evi-
dence is undisputed the consequences of
non - substitution would have been disas-
trous. The Unisys equipment provided the
primary means for county payroll and
central data processing for the County
Commission and numerous other county
offices. At deposition, Flowers made the
following comments regarding
non - substitution:
Q: [ * *39] What would happen?
A: If they took the equipment out,
then we would be shut down. We would-
n't be able to operate.
Q: Why is that?
A: Because everything was on that
computer.
(Flowers Depo. at 65). Given these
facts, the court wastes little time finding
the County Commission would feel mor-
ally compelled to appropriate funds to
make the lease payments to avoid the risk
of running county government without a
central data processing ability for up to
two years. In this regard, the
non- appropriation clause is rendered illu-
sory and the lease creates a multi -year
debt.
B. Ad Valorem Taxes
A municipal debt does not trigger Ar-
ticle VII, § 12, however, unless it pledges
ad valorem tax dollars as its source of
payment. E.g. State v. School Bd. of
Sarasota Count-, 561 So. 2d 549, 552
(Fla. 1990). In this case, the addendum to
the master lease specifies no ad valorem
taxes are pledged:
Nothing herein shall
constitute a pledge by the
Lessee of the full faith and
credit of the Lessee, nor
does the Lessee pledge any
ad valorem taxes or other
moneys other than moneys
lawfully appropriated by
the County Commission of
Escambia County from
time to time. . . . Lessor
shall [ * *40] not have the
right to require or compel
the exercise of the ad val-
orem taxing power of, or
the appropriation of any
funds by the County
Commission to obtain the
payment or performance of
any of the Lessee's obliga-
tions created by this
agreement.
(Addendum P 1).
10/28/2014 10.A.
Page 11
Regardless of the above provision,
the court finds the lease, and in particular
the non- substitution clause, would inevi-
tably require the County Commission to
appropriate ad valorem tax dollars to
make the lease payments. The case is
[ *1026] similar to County of Volusia v.
State, 417 So. 2d 968 (Fla. 1982), in
which the municipality sought to secure
bonds by pledging "All legally available
sources of unencumbered county revenue
other than ad valorem taxes." The su-
preme court reasoned this pledge, along
with Volusia County's promise to do all
things necessary to continue to receive the
non -ad valorem revenue, would inevitably
lead to higher ad valorem taxes during the
life of the bonds. The court denied valida-
tion, reasoning, "that which may not be
done directly may not be done indirectly."
Id. at 972.; cf. Brevard County, 539 So.
2d at 463 (refusing to apply County
[ * *41] of Volusia to a case in which the
municipality, unlike Escambia County in
this case, "reserved the right to terminate
the lease without further obliga-
tion. ")County of Volusia applies squarely
to these facts. The size of the lease pay-
ments together with the consequences of
Packet Page -296-
769 So. 2d 1012, *; 2000 Fla. LEXIS 1889, * *;
25 Fla. L. Weekly S 697
non - substitution indicate the County
Commission would inevitably be forced
to spend ad valorem taxes dollars to fund
this lease. The addendum clause pledging
otherwise is illusory. For these reasons,
the court finds the non - substitution clause
violates Article VII, § 12 of the Florida
Constitution and is therefore unenforcea-
ble.
Frankenmuth, 10 Fla. L. Weekly Fed. at D341 -42
(footnote omitted).
12 The predecessor constitutional provision to
article VII, section 12, was article IX, section 6 of
the Constitution of 1885, which was effective
from 1930 until January 7, 1969. See State v.
County of Dade, 234 So. 2d 651, 654 (Fla. 1970).
That section provided:
The Legislature shall have
power to provide for issuing State
bonds only for the purpose of re-
pelling invasion or suppressing
insurrection, and the Counties,
Districts, or Municipalities of the
State of Florida shall have power
to issue bonds only after the same
shall have been approved by a
majority of the votes cast in an
election in which a majority of the
freeholders who are qualified
electors residing in such Counties,
Districts, or Municipalities shall
participate, to be in the man-
ner to be prescribed by law; but
the provisions of this act shall not
apply to the refunding of bonds
issued exclusively for the purpose
of refunding of the bonds or the
interest thereon of such Counties,
Districts, or Municipalities.
Art. IX, § 6, Fla. Const. (1885). In numerous
decisions, this Court held that various kinds of
debts were not "bonds" for the purposes of the
referendum requirement. See, e.g., State v. Miami
Beach Redevelopment Agency, 392 So. 2d 875,
895 -98 (Fla. 1980) (discussing this Court's cases
construing the predecessor constitutional provi-
sion); see generally Patricia M. Lee, Note, Bond
10/28/2014 10.A.
Page 12
Financing and the Referendum Requirement:
Harmless Creative Financing or Assault on the
Constitution ?, 20 Stet. L. Rev. 989, 992 -98
(199 1) (same).
13 In State v. School Board of Sarasota Coun-
ty, 561 So. 2d 549, 553 (Fla. 1990), this Court in-
dicated that our prior decision in Nohrr construed
the predecessor to article VII, section 12 of the
Florida Constitution. However, after reviewing
the opinion in Nohrr, it is clear that (1) the facts
in that case took place after the 1968 constitu-
tional revision became effective; and (2) this
Court was construing the new constitutional pro-
vision in that case.
We agree with the federal district court's thorough
analysis regarding the nonsubstitution clause in the pre-
sent agreement. While the addendum to the master lease
agreement states that there is to be no pledge of ad val-
orem taxes to fund the payments due under the agree-
ment, and further disclaims any right to compel the pro-
curement of ad valorem taxes, this is not a case where
there is a pledge of a specifically demarcated source of
revenue to satisfy the underlying obligation. See Murphy,
666 So. 2d at 881 [ * *42] (upholding bond validation
where non- ad valorem taxes were pledged as a supple-
ment to specifically demarcated source of revenue); City
of Palatka, 440 So. 2d at 1273 (validating bond where
two specific non -ad valorem sources of revenue were
pledged); Alachua County, 335 So. 2d at 556 -58 (vali-
dating bonds funded by pledge of revenue sharing funds
and race track proceeds). More importantly, this is not a
case where the county has retained "full budgetary flexi-
bility." See School Board of Sarasota County, 561 So. 2d
at 552 -53 (noting that school board could maintain "full
budgetary flexibility" under terms of agreement); " Bre-
vard County, 539 So. 2d at 464 (noting that "annual re-
newal option" under lease - purchase agreement would
allow county to maintain "full budgetary flexibility").
Instead, due to the expense and functionality of the
computer equipment covered by the agreement here, the
nonsubstitution clause interrelates with other lease provi-
sions, see County of Volusia, 417 So. 2d at 972, to "mor-
ally compel the county to pledge ad valorem taxes to
fulfill the obligations of the lease. See [ * *43] Nohrr,
247 So. 2d at 311. Accordingly, we answer the second
certified question, as rephrased, in the affirmative. "
14 In School Board of Sarasota County, we
noted that the school board's failure to appropri-
ate funds would result in "lease penalties," but
that even with such penalties, the board main-
tained its "full budgetary flexibility." See 561 So.
2d at 552 -53. As set forth in our opinion in that
case, the lease penalties included either purchas-
ing the constructed facilities or surrendering pos-
Packet Page -297-
10/28/2014 10.A.
Page 13
769 So. 2d 1012, *; 2000 Fla. LEXIS 1889, * *;
25 Fla. L. Weekly S 697
session of the facilities and the land upon which
those facilities stood for the remainder of the
lease term. See id. at 551. We emphasized, how-
ever, that the school board was "free to substitute
other facilities for those surrendered." See id.
Clearly, the presence of a nonsubstitution clause
here distinguishes this case from our decision in
School Board of Sarasota County, insofar as "full
budgetary flexibility" is concerned.
15 The federal district court determined that
the nonsubstitution clause is severable from the
remainder of the agreement, seeFrankenmuth,
10 Fla. L. Weekly Fed. at D342, but the Eleventh
Circuit has not asked us to make a determination
regarding severability. We decline to address the
severability issue here, given that the issue is not
novel and has not been fully briefed in this Court.
We do note, however, that if the nonsubstitution
clause is not severable from the remainder of the
agreement, then the entire agreement must be in-
validated as violative of article VII, section 12 of
the Florida Constitution.
[ * *44] I1I. CONCLUSION
As we have analyzed, the first certified question is
answered in the affirmative [ *1027] upon our deter-
mination that a board of county commissioners may ap-
prove in the form of ratification a lease - purchase agree-
ment under section 125.031, Florida Statutes, even ab-
sent formal resolution, where the board is not required by
local ordinance or charter to take action by formal reso-
lution. Further, we have established a three -prong test to
guide the determination of whether an approval without
formal resolution has occurred. Finally, we have re-
sponded to the second certified question as rephrased in
the affirmative upon the determination that, based on the
particular facts in this case, the nonsubstitution clause
implicates article VII, section 12 of the Florida Constitu-
tion. Accordingly, we return the record in this case to the
United States Court of Appeals for the Eleventh Circuit.
It is so ordered.
WELLS, C.J., and SHAW, HARDING, ANSTEAD,
PARIENTE and QUINCE, JJ., concur.
Packet Page -298-
GFOA Best Practice
Using Safekeeping and Third -Party Custodian Services
Background. The safety of public funds should be the primary objective of all
governments. One of the most important protections and a control against fraud is
the separation of the safekeeping and custody function from the investment
function Investment policies should include a section regarding independent third-
party safekeeping or custody of securities. By arranging to have securities held by a
third party, governments can effectively minimize safekeeping or custodial risk in an
investment transaction.
In a third -party safekeeping agreement, the government arranges for a firm other
than the party that sold the investment to provide for the transfer and safekeeping
of the securities. Financial firms should not serve as both government broker - dealer
and custodian. Safekeeping represe.tri:s a. C.in:incial in obligation to act on
behalf of the owner under the owner's control. Custody is a more clearly defined
control position by the agent responding to the owner's requirements. Custody
noranally does not take place in the governmental entities depository bank.
Investments should be settled in a delivery- versus - payment (DNT) basis. In this
procedure, the buyer's payment for securities is due at the time of delivery. Security
delivery and payment occur simultaneously. This practice ensures that no funds are
at risk in an investment transaction as funds are not released until securities are
delivered. ensuring the governmental entity has either money or securities at all
times during tlx: transaction.
Recommendation. GFOA recommends that state and local governments utilize
independent third -party custodians to safeguard their investments and protect
against sat keeping /custochal risks.
To accomplish this goal. GFOA recommends that goveriltnental entities:
1. compc°titiVeJN' Select third -party custodians and safe. - .keeping agents
2. have safe.kcepill.g/ctastoclia.l agrcemcnts revievl-cd by government legal counsel
prior to execution
3. evidence their safekcepiaag or custodial relationship void: a signed. written
Sc c.ttrtt4' -1"
n- erntnt tnat is reviewcL`_ by counsel an(d establishes the tarn: as its
agc:tl f
4. exccutt all inveslun nt transactions on u hasis
'. designate a sl >ecifsc DD-A demand dc-posit account) clearing account in
Conju31Ctio Vviy1h th`t safekeet)i.m or cusiod al t-c=; un",
Packet Page -299-
Gove,i,r en' F;noTice C 10/28/2014 10.A.
6. require that the independent third -party safekeeping agent or custodian mark
the portfolio to market at least monthly. Ideally, marking should take place daily
with independent pricing.
7. require reports and monthly statements to be received directly by the
governmental entity from the agent.
8. ideally, have electronic access to the safekeeping or custody account for
monitoring and reporting purposes, if cost effective.
9. require safekeeping or custodial agents to be insured for error and omissions.
10. require review of internal safekeeping and custodial procedures annually with
the independent auditor.
References.
Int esting Public .Funds, Second Edition., Girard Miller with M. Corinne Larson and
W. Paul Zorn, GFOA, 1998.
GFOA Sample Custodial Trust Agreement, 2006, www.gfoa.org.
4n.1
ntrocluction to C'oll7tctnli7it7, Public Deposits for Statc and Local Governments,
Second Edition, i't'I. Corinne Larson, GFOA, 2006.
GFOA Best. Practice Collateralizing Public Deposits (1984, 1987, 1993, 2000, and
2007)
GFOA Sample Security Agreement (long and short version) 2010. vovw.gfoa.org.
Approved by the GIOA's E,eecutive Board, October, 2010.
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