Florida Property Tax Legislation

The Special Session on Property Tax Reform has ended with some significant changes.

Here is a recap of the various issues included during the property tax reform debate as it has evolved since it first became a major issue during the 2006 elections.

Portability – The biggest issue during the campaign was the inability of people to move. They were benefiting from the Save Our Homes cap on their existing home, artificially lowering their property taxes despite a significant rise in their property values. This surge in values in recent years means that any new home (either new construction or an existing home that is purchased) will naturally have higher property taxes due to a higher property value – even for comparable features.

The proposed constitutional amendment does not specifically address portability, and may not solve the problem noted during the campaign. Homeowners are allowed the choice of retaining their current Save Our Homes limitation on the taxable value of their home or may switch to a percentage-based ‘super exemption.’ The Legislature estimates around 3/4ths of homestead owners would save more money under the super exemption, under the short term. However, the super exemption would remove annual limitations on property values.

Over time, the super exemption would result in higher property taxes than maintaining the Save Our Homes exemption. Thus, if anyone plans to remain in their current home for a longer period of time, they would be better under Save Our Homes. Moreover, homestead owners in coastal communities could see some significant increases in their appraised value, resulting in much higher taxes even with a possible $195,000 exemption.

Homestead owners who move will lose their Save Our Homes and get benefits under the super exemption. While the taxes on the new home will be less than under the current system, they could still be a problem for some homeowners. The result could be a significant problems for families looking to move to a larger, more-expensive home; while seniors downsizing will see a benefit.

Partially Resolved.


Non-Homestead Property – The second issue that arose during the campaign was the growing trend of non-homestead property, especially commercial and rental properties, bearing a greater and greater share of the property tax burden. The statutory changes made by the Legislature provide an equal benefit to homestead and non-homestead properties by rolling back taxes and providing a cap on future increases in tax collections.

However, because Save Our Homes is maintained under the current plan, the inequity will remain for the forseeable future.

Unresolved.


Roll Back – One way to provide immediate relief is to change the “roll back” rate. This is the millage rate a local government would have to assess to bring in the same amount of revenue year-to-year. Various proposals had used a complicated formula of going back to 2000-2001 (or 2003-2004) and recomputing the rate as if a revenue cap had been in place.

The changes roll back the total tax collections for cities, counties, and special districts to their current year levels (2006-2007), then require a cut of 3%, 5%, 7%, or 9% from the new rolled back rate depending on the amount each city, county, or special district had increased their per capita tax collections above an expected growth rate from 2001 to 2006. Hillsborough County, for example, will have to reduce its total ad valorem taxes by 5% from the 2006-2007 collections (about $80 to $90 million).

Resolved.


Limit Local Government Revenue – Like the rate roll back, the Legislature has been fairly consistent about wanting to limit the growth in total revenue a local government can see year-to-year. Legislators assume that higher property valuations will mean a significant cut in the millage rate.

The change limits growth to the annual increase to the growth in personal income, not including things such as property taxes dedicated for bonds or taxes resulting from new construction.

Resolved.


Tangible Property Exemption – The proposed constitutional amendment includes a $25,000 exemption for tangible property.

Resolved.


Just Valuation – Various mechanisms had been proposed to deal with the proper valuation of property. Most of them included the removal of the “highest and best” use, usually replacing it with some definition of current use. Another proposal included valuing income-producing properties based on the income generated, rather than their market value. Additional proposals for appealing the valuation through value adjustment boards have also been discussed.

The issue was not included in the legislation that passed, but has been deferred until the 2008 Legislative Session.

Unresolved.


Required Local Match – Most people fail to realize the legislature requires school districts to collect a minimum amount of property taxes to participate in the Florida Education Finance Program. This “required local match” is beyond the control of the local school board.

One proposal dealing with the required local match would allow a one-time reduction by using the funds freed-up from line items Governor Charlie Crist vetoed in the 2007-2008 General Appropriations Act. However, the House and Senate leaders were unwilling to use non-recurring funds (vetoed funds) for recurring expenses (the operation of schools).

Off the Table.


Assistance to renters – Because renters do not directly pay property taxes, a couple of proposals surfaced requiring rental-property owners to pass savings along to their tenants. The legislation does not address the issue.

Unresolved.


First Time Home Buyers – Another proposal surfaced late during the regular session to provide assistance to residents buying their first home. This proposal was a response to granting homestead owners portability in their SOH cap. However, the super exemption removes the distinction between previous homeowners and first-time buyers.

Resolved.


Voters Bill of Rights – The Senate had proposed, and the House accepted, to require local governments post their revenues and expenditures in some format on the Internet. This issue is not addressed in the legislation.

Unresolved.


Eminent Domain Proceedings – One issue relating to the old SOH portability was the process where homestead owners are required to move due to eminent domain. Like the first-time home buyers, this issue is mitigated by the percentage-based exemption.

However, long-term homestead owners are threatened because they will retain their existing SOH-based exemptions. Thus, when they are forced to move, they face a larger increase in property taxes than a similar home owner who did not retain their SOH cap (because the capped value was less than the percentage-based exemption).

A homeowner who elects to keep his/her SOH exemption would lose that exemption when forced to move due to an eminent domain proceeding.

Unresolved.


Special Election – The House and Senate passed a bill to hold a special election to consider an amendment to the constitution, the ‘super exemption’ amendment, on January 29, 2008 – the day of the presidential preference primary.

Resolved.


Increase Homestead Exemption – Governor Crist proposed to double the homestead exemption. The super exemption is significantly more than that. It has a minimum $50,000 exemption to a maximum of $195,000 depending on property value.

Resolved.


Repeal of Homestead Property Taxes – Rubio had proposed repealing all homestead property taxes and increasing the sales tax. He has subsequently abandoned this position.

Resolved.


Statutory changes: House Bill 1B.

Constitutional Amendment: Senate Bill 4B.

3 Responses to Florida Property Tax Legislation

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