Home | Business News | Browse by Publication | F | Florida Bar Journal

Murphy deed right-of-way reservations: a 1930s taxpayer bailout yields right-of-way cost savings.

Article Excerpt
In 2008, global recession gripped the economy. A nationwide collapse of the residential and commercial real estate markets led to the tanking of the financial system, prompting a credit freeze. As a result of the collapse, foreclosure rates ran rampant; world stock markets plummeted in value; financial institutions holding toxic mortgage assets and risky derivatives failed; state and local governments cut budgets due to declining tax revenue; and some economists predict higher unemployment and perhaps inflation in 2009-10. Economists described the economic downturn of 2008 as the most serious economic crisis since the worldwide Depression of the 1930s.

To address the economic crisis, federal governmental financial intervention has included 1) a $168 billion tax rebate stimulus package in February 2008; 2) a $700 billion bailout of the financial institutions in October 2008; and 3) a $787 billion economic stimulus package in 2009. Taxpayer repayment of the financial institution bailout is in the form of government-owned equity shares in participating banks; the shares are predicted to repay the taxpayers with interest.

Taxpayer bailouts of economic crises and promises of taxpayer repayment with interest are not new economic stimulus tools. Eighty years ago, the Florida Land Boom of the early 1920s, the Land Bust of 1926, and the worldwide Depression of the 1930s destroyed Florida's land-based economy and produced a massive tax revenue crisis. Florida's governmental financial intervention, which included a stimulus package, taxpayer bailout, and promises of repayment with interest, is found in the 1937 Murphy Act. (1) The Murphy Act bailout stimulated the economy and forgave delinquent taxpayers at a significant cost to taxpayers current on their tax obligations, as well as state and local governments. Murphy deeds returned state-owned lands to tax defaulted landowners reserving right-of-way easements for future roadway construction. Florida's state government promised a repayment of lost tax revenue to taxpayers and state and local governments in the form of future right-of-way cost savings along existing public roadways. (2)

One of the authors of this paper, with 20 years experience, and other Murphy deed experienced right-of-way staff persons, describe the reservation of right-of-way easements for future road widening as an ingenious method to achieve a return on the taxpayer bailouts. However, the work effort to recover the cost savings intended by the Murphy Act is arduous.

This article discusses the Murphy deed reservations and the continuing recovery of right-of-way cost savings for taxpayers and state and local governments.

Florida's Land Boom and Bust

Under the federal Swamp and Overflowed Lands Act of 1850, the Trustees of the Internal Improvement Fund (TIIF) (3) received title to two-thirds of the land mass of Florida. (4) The lands were sold to homesteaders and speculators, initially at less than $1 per acre; in 1920, lands sold for as high as $2 per acre. Property values during the 1921-1925 Land Boom increased five times over the former values. (5) An influx of people and commerce to the state increased demand for roads, utilities, and bridges, and local governments sold bonds to pay for the improvements. In Orange County alone, a $7 million bond issue in 1926 financed 86 road construction projects. (6) By 1929, local governments issued a total of $600 million in bonded debt. (7) Property taxes and millage rates increased because the revenue to service the bonded debt came exclusively from property taxes. (8)

The Land Boom collapse in 1926 and the worldwide recession in 1929 caused the value of Florida land to plummet to "the vanishing point." (9) In 1926, the tax roll assessment exceeded $600 million; by 1937, when the Murphy Act was passed, the tax roll assessment fell to $408,573,992, of which $97,363,816 was certified to the state for nonpayment of taxes. (10) The Land Bust was so severe that property tax liens often exceeded the land's market value; consequently, many landowners stopped paying taxes. The Murphy Act describes Florida's economy as an "unbelievable financial reverse." (11) Concerning bonded debt service, the Murphy Act states: "lands ... certified to the state for non-payment of taxes ... are rendering no revenue in support of [s]tate, [c]ounty, or [c]ity [g]overnment." (12)

Between 1929 and when the Murphy Act was passed in 1937, the legislature's consistent tax policy was to provide liberal inducements to delinquent taxpayers to redeem tax certificates and to purge the tax rolls of property held by the state for the nonpayment of taxes. (13)

Chief Justice Terrell described that period by the following:

In the main, the legislature was attempting to salvage the flotsam and jetsam from the 1925 suckers' interlude, erstwhile called the boom. The pots of gold metamorphosed from town lots to cut over lands by the optimism and psychosis of that era changed suddenly to a medley of pyramided mortgages and delinquent tax certificates. The assumed values...

View this article FREE - Now for a Limited Time, try Goliath Business News
Free for 3 Days!