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GOVERNMENT WATCH by Sean Roth | Real Estate Editor
With property taxes and insurance hogging the front burner, the state Legislature still managed to eke out a new cable TV franchise system, seed money for venture capital firms and other pro-business legislation.
Faced with two complex issues weighing it down and a looming budget shortfall, the 2007 Florida legislative year was largely seen as underwhelming for businesses and Floridians in general.
Even so, many business groups, including the Florida Chamber of Commerce, Associated Industries of Florida and the Florida Restaurant & Lodging Association, give legislators high marks for an overall good year for industry. The two biggest pieces of legislation - insurance and property taxes - may have ended up as highly imperfect compromises, but several of the lesser bills made positive steps.
The Legislature's insurance battle started off the first special session and ended with the governor signing House Bill 1A. The bill expanded the Florida Hurricane Catastrophe Fund to offer property insurers less expensive reinsurance. However, the bill temporarily froze insurance rates and policy cancellations, repealed all the planned 2007 rate increases and required insurers to get state approval for all future rate increases.
Further, it authorized the state-owned Citizens Property Insurance Corp. to provide commercial coverage statewide and coverage to non-homesteaded properties. Citizens will start offering those commercial policies by Jan. 1. The bill also increased the ability of Citizens to compete directly with private insurers.
That bill was followed in May with the Hurricane Preparedness & Insurance law (CS/SB 2498), which among other things froze Citizens' rate increases until Jan. 1, 2009, and lowered the qualifying threshold for property-owners.
In the legislature's second special session, it passed the Ad Valorem Taxation bill (HB1B), a bill that reduced county, city and other municipal property taxes starting in the 2007-2008 fiscal year and went on to limit future tax growth.
Governments were required to reduce their taxes by 3% to 9%. Future tax growth was also limited to the rolled back rate plus per capita personal income in the state, without an "extraordinary" vote of the local government or a public referendum.
Following the death of the super homestead exemption a fourth special session was called in October with the hopes of again lowering property taxes for property-owners.
Facing a deadline to put a proposed constitutional amendment on the Jan. 29 ballot, the Legislature and governor approved a new amendment proposal that doubles the homestead exemption, except for school taxes, for properties valued more than $50,000. A $25,000 exemption is also available for each tangible personal property return starting in January. The proposal offers homestead property owners the ability to transfer tax savings of up to $500,000 to a new Florida home
The amendment proposal also grants commercial property owners and other non-homesteaded property owners a 10% assessment cap similar to Save Our Homes that would sunset after a decade.
Following the constitutional vote in January, most legislators and legislative observers expect the two issues to come up again in the '08 session to correct many of the perceived inadequacies of the current bills.
"We feel that it's time for the Legislature to take a more detailed look at the commercial property insurance issue in the next session," says Jennifer Krell Davis, communications director for the Florida Chamber of Commerce. "Our suggestion would be to focus on a market-driven solution. We're in the process of talking to members now and CFO Alex Sink, and we're also committed to talking to the industry on the best way to get there."
While growing property tax troubles for business owners and non-homesteaded property owners drove much of the need for property tax reform, neither won to the same degree as homesteaded property owners under the proposed amendment.
"There's always that natural inclination for politicians to want to satisfy the biggest group of voters," says Barney Bishop, president and CEO of Associated Industries of Florida. "It is interesting that I don't think there was this great cry across the board about property taxes from homesteaders. They had the cap regardless so their taxes were only going up 3%."
Bishop says the compromise 10% property tax cap for business owners was likely the best that could have come from the previous session, but that the cap is still too high. Even more worrisome, Bishop asserts is the automatic sunset of the cap after only a decade.
"It's going to be really difficult to get the citizens of Florida to vote to continue the cap into the future," Bishop says.
Here are the other highlights:
• While no one was really completely pleased with the outcome of the property tax or insurance bills, newcomers to the TV-delivery business, such as Verizon, won a clear victory with the passage of the Cable TV/Video Services Franchises bill (CS/CS/HB 529). The new law changed the regulatory framework for cable/video franchise approval from the municipalities to a new state system. Business organizations expect the bill to increase the speed at which competitors introduce TV services statewide.
• Lawmakers choose to help early business funding with the Venture Capital Investments bill (HB 83), which created the Florida Opportunity Fund, a $30-millon private not-for-profit, to match dollar for dollar early stage venture capital funds. The Venture Capital bill also created the $1-million Commercialization of Public Research, an institute designed to act as a clearinghouse to support the commercialization of research created by the universities, colleges and other publicly supported organizations. It also contributed $4 million to a grant program.
"There are a lot of (business) ideas that are created in Florida that don't stay in Florida," Davis says. "A lot of those ideas leave the state because they can't find that early stage venture capital. This is about keeping those ideas and businesses in the state."
• The Entertainment Industry Economic Development bill (CS/CS/HB 1325) created a tax credit program of $25 million to attract films and other video production in the state. The bill specified separate levels of funding for TV and film, independent Florida filmmakers and digital media and adds an 2% incentive for family-friendly productions.
• Another pro-business, but much more diverse, law was the Growth Management bill (HB 7203) designed ostensibly to streamline growth management oversight. In a significant acknowledgment to the construction industry, the bill clarifies for other regional governments that proportionate fair share funding requirements do not require development projects to pay to fulfill or improve a community's prior transportation backlog.
"This recognizes that it's not fair to ask a developer to pay for the sins of other developments," says Richard Gentry, a legislative consultant to Associated Industries. "Developments are only responsible for their fair share. Projects can't be made to make up the backlog. This was championed by Tom Pelham (secretary) at the Department of Community Affairs as a recognition that the pure concurrency rules of Senate Bill 360 needed to be more grounded in reality"
Jay Brady, executive director of the Gulf Coast Builders Exchange, says it's a little too early to know how big an impact the bill will have on the industry. He's waiting to see just how local governments interpret it.
"It potentially offers some advantages, but we need to see if they will water it down through impact-fee credits and other things like that," Brady says.
The bill also created a pilot alternative review process for comprehensive plans in highly developed areas including Pinellas and Broward counties and the cities of Jacksonville, Miami, Tampa and Hialeah. In exchange for using the new program, plans avoid having to go through the state compliance review program.
Overall, the bill is looking at how to deal with concurrency issues in urban environments, such as how do you relieve traffic congestion in a developed downtown environment where widening a road isn't practical.
Citing the market for real estate, the bill also extends the expiration date for all DRIs under active construction by another three years.
• Several business groups also celebrated the passage of the Ballot Initiatives bill (CS/SB 1920), which says that private property owners can control and stop ballot petition efforts on their property.
• Another less obvious bill that benefits business, Bishop says, is the Elections bill (CS/HB 537) principally because of its negative impact on the Florida Hometown Democracy constitution amendment.
The bill allows any petition signer to revoke his/her signature within 120 days of the petition being verified by a supervisor. The Associated Industries of Florida is currently conducting a petition-signature revocation program to defeat the Hometown Democracy constitutional amendment proposal.
"Regardless of the issues, when people deal with petition takers it's all oral, it's not in writing and what they're saying doesn't have to be true," Bishop says. "This gives us and others time to contact the signers and explain 'You might have been told this, but here are the consequences.'"
But the bill's future is in doubt as opponents have already challenged the legality. With one early victory - a Leon County Circuit judge ruling - Bishop still expects the bill to reach the state Supreme Court.
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