As it appeared in Otis White’s Urban Notebook (Government Magazine).
Two small Florida cities have stumbled into a business that will earn either your admiration or indignation: They issue tax-free municipal bonds for far-away projects. The city of Gulf Breeze (pop. 6,200), in the Florida panhandle, has floated nearly $2 billion in munis for a hotel in Orlando and resort projects for a Seminole Indian casino elsewhere in Florida, among other deals, the Baltimore Sun reports. Moore Haven (pop. 1,700), in South Florida, has issued $1.2 billion in bonds since 1997, mostly for projects in other places. Why? Because it’s profitable and, with some limitation, legal. Gulf Breeze has earned $5 million in fees since 1985, the Sun says. That averages out to $278,000 a year, or about 35% of the city’s 2004 budget. In Moore Haven, a desperately poor place where many live in mobile homes, city officials proudly point to the things their fees have bought: a fire engine, a dump truck and playground equipment. “It’s all legit,” the mayor says. “It’s a way for cities to afford stuff. Otherwise, there is no way we could.” Well, maybe legit. The IRS is questioning some of the bond deals, not because they money went outside the cities but because the IRS suspects some of the money wasn’t used for projects with genuine public purposes.
