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Business Observer Thursday, Apr. 30, 2009 9 years ago

Property tax parade

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Property tax bills marched to the Capitol with influential Gulf Coast legislators. The bills could benefit taxpayers for years to come if local government lobbyists don't rain on the parade.

Property tax bills marched to the Capitol with influential Gulf Coast legislators. The bills could benefit taxpayers for years to come if local government lobbyists don't rain on the parade.


Next week is National County Government Week, but with the Legislature wrapping up its annual session, property taxes may never be more out of favor than now — unless you happen to be a city, county or school board.

Over the first part of this decade, Florida, and certainly Gulf Coast counties, got too expensive for too many people, especially non-homesteaded property owners. Emblematic was the growth in local government tax revenues of which property taxes are the largest single source.

From 1994-2004, the total revenues of Florida counties, cities and special districts grew 108%, according to a Florida TaxWatch report. Florida local governments levied about $31 billion in property taxes in fiscal year 2007-08, more than twice the $15.3 billion collected during fiscal year 2000-01.

And one of the quickest and most effective ways to take care of that has been to go to the Legislature or ballot box to cut property taxes.

Exhibit 1: Amendment 1 passed with 64.1% voter approval in January 2008. The constitutional amendment, in part, doubled the homestead exemption to $50,000 for most, and puts a cap of 10% per year on how much the assessed value of a non-homestead property can increase.

Property owners and their state legislators aren't satisfied. A parade of property tax bills march on this year.

Exhibit 2: The “Cut Property Taxes Now” group wants a 1.35% cap applied to the taxable value of all real estate. And they might get it if the Legislature passes a pair of resolutions and a 2010 referendum wins 60% voter approval.

Another bill calls for a statewide referendum and has the support of Gov. Charlie Crist, but not the Florida Association of Counties. It would lower the non-homestead property cap from 10% to 5% per year. It would als0 provide first-time homestead properties with an additional exemption equal to 50% of the property's just value in the first year, limited to $250,000.

According to the Florida Association of Realtors' (FAR) Web site, “The Senate bill was changed significantly for the worse to include a break only for first time ever homebuyers, and the 5% assessment cap was amended to include a provision for income stream of the property.” The FAR is urging the Senate to take up and pass the House version.

Another, “The Recapture Bill,” proposes a constitutional amendment to require that the assessed value of homesteaded property not be increased when the just value decreases, so the taxable value would only go up if the millage rate increases. (One mill equals one-tenth of 1% of assessed value.)

The Senate version is sponsored by Senate President Pro Tempore Mike Fasano, R-New Port Richey, so passage looks promising. The House version has reached the House floor.

Five property tax bills and a half dozen joint resolutions to amend the Florida Constitution have the potential, if all were to pass, to lop off 20% or more of local governments' tax base over the next few years.

Defending count governments, FAC's response is: “FAC continues to lobby against and help stall many proposed changes to Florida's property tax structure.”

The big daddy of them all, and the one that local governments have most reason to fear, is House Bill 385 and its Senate companion, Senate Bill 738. It's making a comeback after the Florida Supreme Court ruled in January that the ballot summary was “misleading.”

Property taxes reform must be crafted carefully based on the lessons of past laws.

Though it may be stating the obvious these days, even the president of the Florida Association of Property Appraisers, Duval County Property Appraiser Jim Overton, sees the devil in the details of the Save Our Homes property tax limits when he says,
“Business properties are overtaxed in Florida in comparison to homesteaded properties.”

Commercial property and other non-homestead property owners have seen it firsthand. Some saw their property taxes triple in a few years, and have now become more vocal in showing up at normally sparsely attended county budget hearings. And they aren't shy about contacting their legislators.

Proposals range from the narrow: a property tax exemption for soldiers receiving hazardous duty pay; to the broadest: the 1.35% cap on all parcels of real estate that could cut property tax revenue statewide by $6 billion.

In the middle are bills where certain transfers of ownership between family members would not be treated as a change of ownership that would otherwise trigger reassessment and loss of Save Our Homes protection. Anotherbill, committee substitute for House Bill 825, implements Amendment 6 to protect working waterfronts from being assessed based on potential use rather than actual use.

The 1.35% solution
Take away the 1.35% solution and collectively the other property tax legislation could cut several hundred million dollars from local government budgets. But that's nothing compared to the $6 billion annual reduction predicted in a staff analysis for this bill.

Cut Property Taxes Now claims its $8 billion and would reduce property tax collections by 26% statewide. Given the $31 billion statewide property tax revenue last year, $6 billion represents a 19% cut.

This is the bill that sets the 1.35% total ad valorem tax cap on all real estate, and it's already on the House floor for a vote. And though it has a tougher road in the Senate, its sponsor is influential Sen. Mike Bennett, R-Bradenton, chairman of the Community Affairs committee. If approved by the Legislature, it would go to voters in November 2010.

The impact on the locals would depend on the millage rates and on the method to be chosen, under a future law, to distribute taxes collected from properties where the limit applies.

Property owners in parts of the state where the combined millage exceeds 13.5 mills would pay less property tax in the future. It's possible that local governments could become motivated to jack up their millage rates this year in an attempt to get all they can, while they can. Statewide, the average millage rate in 2007 was 18.46 or 1.846%.

Coming on top of an expected 30% plus drop in taxable values this year in at least one southwest Florida county — Lee County — something's got to give: either the millage rates are going up, local government and school board budgets will get slashed big time, or some combination of the two.

And in Sarasota County, commissioners were warned recently by budget staff to plan for 20% to 25% less in property tax collections.

That scenario is being repeated in discussions in other local government chambers up and down the Gulf Coast. But that's not stopping Manatee County government from entering a float in the DeSoto Heritage Festival Parade for the first time in recent memory.

Happy National County Government Week.

The Big Dog

Here is the wording for HJR 385/SJR 738, which caps total property taxes.

“Proposes constitutional amendment to limit total ad valorem tax on parcel of real property to 1.35% of highest taxable value of property; applies limitation to all ad valorem taxes on real property except those levied for payment of local bonds issued to finance or refinance capital projects authorized by law and approved by vote of electors or to refund outstanding bonds or levied for periods not longer than two years when authorized by vote of electors; requires Legislature to provide for distribution of revenues collected on parcels that exceed 1.35% limitation.”

It is estimated that the amendment would reduce annual total school, county, municipal and special district property tax revenues by at least $6 billion. The impact on individual property owners, cities, counties, school districts and special districts will depend on the tax rates levied by all those taxing authorities.

For example, for properties located in an area where the combined millage rates levied by all taxing authorities do not exceed the 1.35% limit, there will be no benefit to the property owner and no impact on the taxing authorities. For properties located where the combined millage rates exceed the limit, the property owners will get tax break.

If the Legislature provides for a pro-rata distribution of the taxes collected, each taxing authority will receive a proportionally reduced amount from what was levied. For example, if the combined millage rate levied by taxing authorities is 16.88 mills, each taxing authority will collect 80% (13.50/16.88) of the taxes levied on the affected properties. Alternatively, if the Legislature provides for a priority system to distribute the taxes collected, some taxing authorities may collect the entire amount levied while others may not collect anything.

The bill passed in the House 79-37 and is in the Senate Finance and Tax Council. The effective date is Jan. 1, 2011 if approved by voters in November 2010.

Property Tax Reforms


Here is a list of the property tax bills that could become law this year.

CS/HB 101/SB 744 — Homestead Assessments
Revises criteria under which transfer of homestead property is not considered change of ownership.
Impact: Some transfers of ownership will not trigger reassessment and the loss of Save Our Homes benefits. Loss of property tax revenue to counties is considered insignificant.
Last action: Passed 118-0 in House, in Senate Policy and Steering Committee on Ways and Means
Effective Date: July 1, 2009

CS/CS/HB 521, compare SB 1006, SB 1102 — Ad Valorem Tax Assessment Challenges
Revises the burden of proof requirements in taxpayer challenges to ad valorem tax assessments of value; requires property appraisers to prove compliance with specified laws and appraisal practices; provides presumption of correctness under specified circumstances; provides taxpayer burden of proof requirements.
Impact: Taxpayers are more likely to prevail in challenges to valuation assessments and thereby reduce the assessed value of their property. Negative fiscal impact on local governments of $157 million in FY 2009-10, increasing to $693.5 million in FY 2013-14, assuming current millage rates.
Last Action: Passed 110-3 in House; SB 1006 in Policy and Steering Committee on Ways and Means; two-thirds vote requirement for a mandate may apply.
Effective Date: Upon becoming a law and shall first apply to assessments in 2009

CS/HB 825, (similar CS/CS/SB 1468) — Ad Valorem Taxation of Working Waterfront Property
Requires the classification and assessment of specified properties based upon current uses, not the highest possible use.
Impact: Estimated that it will reduce local government revenues by $46.9 million in FY 2010-11, assuming current millage rates, and may result in the reduction of the property taxes on working waterfront properties, and thereby reduce pressure on these properties to convert to highest value use.
Last action: First reading on House floor; in Senate Policy and Steering Committee on Ways and Means
Effective Date: Oct. 1, 2009, applies to assessments beginning Jan. 1, 2010

CS/HB 1031/CS/SB 1580 (compare) — Property Tax Payments
Allows charter counties to limit amount of interest charged for unpaid property taxes (currently 18%); eliminates minimum charge for late property tax payment in charter counties; allows charter counties to require tax collectors to accept three or six equal partial payments of property taxes.
Impact: Charter counties may experience a revenue decrease by limiting the amount of interest charged for unpaid property taxes, and by eliminating a minimum charge for late property tax payments. Property owners with delinquent property taxes may see a reduction in interest charges. Possible constitutional issue.
Last action: In House Economic Development and Community Affairs Policy Council; Passed 40-0 in Senate
Effective Date: July 1, 2009

CS/CS/SB 2244 (compare House PCB FTC 09-02) — Land Used for Conservation Purposes
Implements constitutional amendment and specifies conservation purposes for which land must be used to qualify for property tax exemption.
Impact: Reduces local property tax revenue by $51 million annually; requires Legislature to appropriate money for payments in lieu of taxes to fiscally constrained counties that experience a reduction in revenue because of the exemption and assessment limitation. Owners in perpetual conservation easements will be fully exempt, and owners of land used for conservation purposes may pay lower property taxes.
Last action: Passed 115-0 in House; Second Reading on Senate floor
Effective Date: July 1, 2009; applies to property tax assessments on or after Jan. 1, 2010
Effective Date: July 1, 2009

HJR 97/SJR 532 — Property Tax Assessment Limit and Additional Homestead Exemption for First-Time Homestead Property Owners
Proposes a constitutional amendment to provide first-time homestead property owners with an additional homestead exemption of 50% of a property's just value in first year, limited to $250,000; reduces the amount of additional exemption in each succeeding year for five years; applies to properties purchased on or after Jan. 1, 2010. Senate bill limits annual increase in assessed value of nonhomestead property
Impact: This would provide tax relief to first-time homebuyers. Some owners of residential rental and commercial real property will see tax assessments decline. First-time homebuyers who purchase homes in 2010 and thereafter will get a temporary reduction in property taxes. New properties, or properties that have changed ownership or undergone improvements, will be assessed at just value and be at a competitive tax disadvantage compared to older properties. Total estimated tax reduction for the three fiscal years beginning in 2011 is $601 million.
Last action: Amendments added on House floor; In Senate Education Pre-K-12 Appropriations Committee
Effective Date: Jan. 1, 2011, and applies to properties purchased on or after Jan. 1, 2010

CS/HJR 833/compare CS/CS/SJR 1302 — Homestead Ad Valorem Tax Credit for Deployed Military Personnel
Proposes constitutional amendment to require additional property tax exemption for members of the U.S. military who receive homestead exemption and were deployed in the previous year on active duty outside continental U.S., Alaska, or Hawaii in support of designated military operations.
Impact: If in effect for FY 2009-10, it is estimated that the potential statewide negative fiscal impact would be about $13 million, assuming current tax rates.
Last action: Passed 115-0 in House; Second reading on Senate floor
Effective Date: January 1, 2011

HJR 1087/SJR 1164 (compare) — Assessment of Homestead Property that has a Declining Value
Revises requirements for annual changes in assessments of homestead property to prohibit increases in assessed value of homestead property if market value of property decreases.
Impact: Homestead property owners will not experience an increase in assessment if the just value of the property declines. Estimated property tax reduction of $57 million (assuming current tax rates) for local governments in fiscal year 2011-12, increasing to $113 million in 2013-14.
Last action: On House floor; in Senate Finance and Tax Council
Effective Date: Jan. 1, 2011

HJR 1155/CS/SJR 1550 (compare) and SJR 1934 (compare) — Disabled Veterans' Property Tax Discount; Property Tax Exemption for Soldiers Receiving Hazardous Duty Pay
Proposes constitutional amendment to expand the availability of property tax discounts on homesteads of veterans who became disabled as result of combat to include those who were not Florida residents when they entered military; authorize Legislature by general law to exempt from property taxes homestead of members of U.S. military who have received hostile-fire pay or imminent-danger pay.
Impact: Veterans eligible for the discount would receive the discount beginning in 2011. Fiscal impact is unknown.
Last action: In House Finance and Tax Council; CS/SJR 1550 In Senate Finance and Tax Council
Effective Date: Jan. 4, 2011.

CS/HJR 7057 - Reduction in Limitation on Non-homestead Property Annual Assessment Increases
Proposes a constitutional amendment to reduce from 10% to 5% a limitation on annual increases in assessments of non-homestead real property.
Impact: Non-homestead real property owners to which the 5% limitation applies may pay fewer taxes over time. Property owners not subject to the limitation may pay higher taxes if local governments adjust their millage rates to account for the tax base loss. If applied to assessments on Jan. 1, 2010, the statewide negative fiscal impact on non-school property taxes would be $100.1 million in FY 2010-11, $185.2 million in FY 2011-12, and $266.4 million in FY 2012-13, assuming current millage rates.
Last action: Passed 115-0 in House, message sent to Senate
Effective Date: Jan. 1, 2011

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