Title
Sale of Voluntary Cleanup Tax Credits (NB)
Staff requests authorization to negotiate a contract for broker services with Foss and Company to market the City's Voluntary Cleanup Tax Credits.
Explanation
The City has $228,224.94 of Voluntary Cleanup Tax Credits (VCTC) it received from the State of Florida as a result of the cleanup of brownfield sites (Poole Roofing and CSX sites) and staff estimates the City may receive an additional $2 to $2.5 million of credits in the next two to five years. The Utility's portion of the issued credits and proceeds from the sale of the credits will be used to offset the financial impact of the remediation to the ratepayers. Some of the credits were issued to the City in 2003 and must be transferred within 5 years of the date of issuance. The VCTC can be applied toward Florida Corporate Income Tax and are transferable pursuant to Chapter 220.1845(g)(2), F.S. and Rule 62-788.400(6). Each transferee has 5 years after the date of the transfer to use its credit (see Section 220.1845(1)(c).F.S).
Staff began exploring options to sell the credits in 2004 and has pursued several alternatives during the past 3 years with minimal results. Some of the alternatives undertaken were issuing a request of interest letter to suppliers, researching potential markets by contacting FDEP and other public entities receiving the credits, and conducting a search of potential brokers to market the credits. These activities revealed there was one firm specializing in marketing the credits (Foss and Company) and there was little interest in the supplier community for these credits.
General Government and Utility staff met to develop a strategy to sell the credits. The group recommended the issuance of a RFP for broker services, which allowed proposals from entities desiring to purchase the credits and provided for the use of the agreement for future VCTC issued to the City. Utilities Purchasing issued the Request for Proposal on November 6, 2006. The RFP was sent to three prospective respondents, a letter was issued to 8 companies or individuals listed as transferees by FDEP and advertisements were placed in the South Florida and Tampa business journals and the Gainesville Sun. In addition, the RFP was placed on the GRU website and Demand Star.
Two proposals were received, one from Foss and Company and one from Rinker Materials. Foss and Company is proposing to perform broker services at a fee of $.05 for each $1.00 of credit sold with estimated proceeds of $0.70 to $0.85 for each $1.00 of credit. Rinker Materials submitted a proposal to purchase the credits at $0.50 for each $1.00 of credit. Staff evaluated the proposals and believes the use of Foss and Company to broker the credits will provide the greatest return to the City.
Foss and Company has handled one-third of all the VCTC certificates issued by the State of Florida since the inception of the VCTC program and has 24 years experience in the tax credit industry. They currently have a contract with another municipal utility within the State to market and sell over $750,000 of VCTC. The negotiated agreement with Foss and Company will include a provision to allow the City to utilize the agreement for future credits issued to the City, at the City's option.
Recommendations
The City Commission: 1) authorize the General Manager, or her designee, to negotiate and execute an agreement with Foss and Company for broker services to market the City's Voluntary Cleanup Tax Credits; and 2) authorize staff to execute any documents necessary to complete the sale transaction(s).
Fiscal Note
The proceeds from the sale of the existing credits are estimated to be in the range of $159,000 to $193,000. Future VCTC from this project may total $2 to $2.5 million over the next two to five years.
Drafter
Prepared by: Ruth H. Davis, Administrative Services Director
Submitted by: Karen Johnson, Interim General Manager