Florida Property Taxes, New Legislation is Only a Step in the Right Direction

Florida Property Taxes

“The three problems with real estate in Florida are property insurance, property taxes and bad publicity.”

- Nancy Reilly, president Florida Association of Realtors

Florida property taxes have more than doubled in the past ten years – a rise of 108% since 1998 – so it should come as no surprise that property taxes are at the top of the list of most homeowner complaints. The current Legislature made a political commitment to reduce property taxes, and for months we’ve been speculating about just how they were going to accomplish that. It was a given that simply cutting taxes across the board would only provide temporary relief – there are far too many issues tied up into the whole Florida property tax puzzle. Cutting taxes was not going to be enough – it was going to be necessary to address the problems that led to the spiraling property taxes. Among the things that any tax reform legislation passed would have to address:

It must reduce the current tax burden.
It must address the steep rise of property taxes
It must address the inequities brought about by the Save Our Homes amendment
At the same time, it must balance the needs of long time homeowners against those of first time home buyers, business owners, landlords and seasonal residents
It must address the problem of long-time residents “trapped” in their current homes because moving would mean “losing their time in” in the Save Our Homes scheme
It must do these things with a minimum effect on school spending.

In June, the state Legislature passed three bills in a special session that are meant to address many of these problems. But do they?

June 12-14 of this year, the Legislature passed three new bills:

While these bills address many of the issues above, they fall short of addressing those that will jump-start the flagging market. At issue is the effect that homestead exemptions have on taxes for investors, businesses and landlords. Both the current assessments cap and the new super-homestead exemption apply only to properties that are designated as primary residences of their owners. The Super-exemption is a step in the right direction, but it’s only the first step of a long process.

House Bill 1B – Statutory Tax Cut and Tax Cap

Cities, counties and special districts must cut next year’s property taxes by 3-9%. The exact amount of the cut for each entity will be dependent upon how fast property taxes have risen in that particular city, county or district. The faster the taxes have risen, the steeper the cut they will have to make. Education levies are exempt from the cut. Jurisdictions that have not levied taxes in the last five years are exempt from the cut.

Local governments do have the option of over-riding the cut, but to do so will require a vote by either the government or the people as follows:

If a government wishes to exceed the cut and collect up to the amount collected in 2006-2007 (plus new construction) requires a 2/3 vote by the governing body
If a government wants to collect the level of taxes raised by the 2006-2007 rate, it requires a unanimous vote from boards of less than nine members and a ¾ vote from boards with nine or more members.
If a government wishes to collect more than that requires voter approval

This one time tax cut addresses the need for immediate tax relief, and it does so in a way that takes into account the degree of tax raises over the past five years.

In addition, House Bill 1 B limits tax rate raises in the years after 2009 to the growth of new construction and per capita income. That’s currently 4-5%. The cap can be overridden by up to 10% over the cap with a 2/3 vote of the governing board. Anything more than that will require a unanimous vote or a voter referendum. In other words, this bill states that taxes can’t rise any faster than the income of its residents rises unless the governing board or the voters themselves agree. The tax cut is welcome relief, but it’s only a partial solution. It will still be possible for municipalities to hold investors, second home owners, owners of rental properties and business owners to more than a fair share of their taxes.

Senate Bill 4B Constitutional Amendment

The Senate has proposed a constitutional amendment to replace the current Homestead Exemption and Save Our Homes with a new exemption which has been dubbed the super-homestead exemption. Under the new exemption, homeowners can exempt 75% of the first $200,000 of their home’s assessed value and 15% of the next $300,000. Anything over $500,000 is not exempted. The minimum exemption is $50,000 ($100,000 for low income seniors) and the maximum is $195,000. In the future, the $500,000 maximum cap will increase along with the increase in per capita income.

The amendment includes a cap adjustment for 2008-2009 to prevent the tax burden being shifted to non-homestead properties, which may be overridden by local governments as the tax cuts above may be overridden.

Residents may choose to keep their Save Our Homes exemption as long as they remain in their current homes or move to the super-homestead exemption. Residents who move to a new home will have the super-homestead exemption.

The third bill passed calls for a special election in January so that voters can make their voices heard and either pass or reject the constitutional amendment proposed in Senate Bill 4B.

The effect of this has been to unfairly apportion the amount of taxes paid by those who own properties in which they do not live full time. By extension, the inequity in the tax structure is a powerful disincentive to those who buy rental property for income purposes, investors, and to second home owners who have always been a major part of the real estate industry here in Florida. By further extension, it indirectly places a large part of the tax burden on the shoulders of renters, who see their rents raised higher and higher as their landlords try to keep up with spiraling property taxes.

The bills also only partially address one of the major issues that voters and others have always had with Save Our Homes – its lack of portability. While the amendment will allow homeowners to choose to keep their Save Our Homes assessment rates, that choice is only valid as long as they remain in their current homes. The eventual intent is to do away with the assessment cap altogether, removing the protection that long-time residents have had against the rapidly rising value of property.

Overall, the tax reform bills will reduce taxes and slow the rate at which they rise. They do not, however, address one of the fundamental problems with the current tax structure – the inequity in the levy of taxes between homesteaders and all others. The current legislation is a step in the right direction, but it’s only a step. If we want to see real change, we’ll have to hold our legislators accountable to continue on the path to making Florida real estate taxes reflect the real world where the tax burden should be apportioned fairly to all those who own property, not just those who live in it.

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Date: Wednesday, August, 8th 2007 @ 12:00:39 AM
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