34-11 INDUSTRIAL DEVELOPMENT AUTHORITY

Issue: Is the Industrial Development Authority a component unit of the County?

The Industrial Development Authority ("IDA") was created by resolution of Miami-Dade's Board of County Commissioners (the "Commissioners") in accordance with Florida Statutes Part III, Title XI, Chapter 159.44 to 159.53. The members of IDA are appointed by the Commissioners (per 159.45 (3)) to serve four-year terms. Upon expiration of a member's term the Commissioners reappoint the member or appoint a new member to a four-year term. Any member may be removed by the Commissioners for "misfeasance, malfeasance, or willful neglect of duty."

IDA is a separate legal entity that is allowed to enter into contracts, sue or be sued, and issue revenue bonds. The bonds must be secured solely from revenues derived from the sale, operation, or leasing of projects or other payments received under financing agreements with respect thereto, subject to the approval or disapproval of the commission. The approval by the Commissioners is only ministerial (procedural) in nature (GASB Statement #14, paragraphs 17 and 18) and for purposes of and pursuant to Section 147(f) of the Internal Revenue Code of 1986 (tax-exempt status). The bonds are not deemed to constitute a debt or obligation of the County.

Reference:

GASB 34, par. 124:

The financial statements of the reporting entity should allow users to distinguish between the primary government and its component units by communicating information about the component units and their relationships with the primary government rather than creating the perception that the primary government and all of its component units are one legal entity.

GASB 14, par. 20:

Definition of component units. Component units are legally separate organizations for which the elected officials of the primary government are financially accountable.

GASB 14, par. 21:

The following circumstances set forth a primary government's financial accountability for a legally separate organization.

A).  The primary government is financially accountable if it appoints a voting majority of the organization's governing body and (1) it is able to impose its will on that organization or (2) there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government.
B). The primary government may be financially accountable if an organization is fiscally dependent on the primary government regardless of whether the organization has (1) a separately elected governing board, (2) a governing board appointed by a higher level government, or (3) a jointly appointed board.

GASB 14, Par. 26: Imposition of will is defined as:
"The ability to significantly influence the programs, projects, activities, or level of services performed or provided by an organization."

The determination of whether imposition of will takes place is a matter of judgment. However, imposition of will is evident if any of the following takes place: (Par. 26)

A). Appointed members can be removed at will by the primary government.
B). The budget can be modified or approved by the primary government.
C). Rate or fee changes that affect revenues can be modified or approved by the primary government.
D). Decisions other than those related to the budget, rates, or fees may be vetoed, overruled, or modified by the primary government.
E). Management personnel may be appointed, hired, reassigned, or dismissed by the primary government.

"Other conditions may also indicate that a primary government has the ability to impose its will on an organization. In determining whether imposition of will exists, a distinction should be made between substantive approvals and ministerial (or compliance) approvals as discussed in paragraphs 17 and 18."

GASB 14, Paragraph 17, lists three examples of ministerial or compliance oriented approval as opposed to substantive approvals. They include:

1). "A requirement for a state agency to approve local government debt after review for compliance with certain limitations, such as debt margin calculation based on a percentage of assessed value.
2). A requirement for a state agency, such as a department of education, to review a local government's budget in evaluating qualifications for state funding.
3). A requirement for a county government official, such as the county clerk, to approve tax rates and levy amounts after review for compliance with tax rate and levy limitations."

Paragraph 18 has an example of substantive approval. "For example, budgetary approval is substantive if a government has the authority to reduce or modify a special-purpose government's budget."

Evaluation:

The County's relationship with IDA needs to be evaluated to determine if financial accountability exists (GASB 14, par. 21 above). The various situations where imposition of will is evident also need to be examined (GASB 14, par. 26, a - e above).

The Commissioners appoint all members of IDA's governing board. However, the Commissioners cannot impose their will on the IDA due to their inability to remove the board members at will (a). The members may be removed by the Commissioners for the cause of misfeasance, malfeasance, or willful neglect of duty. Otherwise, the members serve their four-year terms until they expire. Furthermore, IDA does not provide specific benefits to, or impose specific financial burdens to the County.

The other situations where imposition of will is evident (b - e) also fail. Per Florida Statutes, Chapter 159.45 (6), "Any action taken by the authority under the provisions of ss. 159.44-159.53 may be authorized by resolution at any regular or special meeting (of the IDA board), and each such resolution shall take effect immediately and need not be published or posted." With regards to the requirement that the Commissioners approve the sale of IDA bonds, the approval is ministerial in nature and not substantive.

Position:

It can be concluded that the Commissioners cannot impose their will on the IDA board and IDA is fiscally independent. The County is not financially accountable for IDA, and therefore, IDA is not a component unit of the County.