Are you tired of getting your assets taxed off?
That’s the tagline being pushed this year by supporters of a constitutional amendment that would reduce property taxes for some Florida homeowners.
But the idea is freaking out local governments, which have been making budget cuts and laying off staff for half a decade now, and would see more cuts if the measure passes.
Let’s take a look back at our current economic situation in the Sunshine State, shall we?
First there was the subprime mortgage crisis that hit in 2007. The next year brought the full-on recession that officially “ended” in 2009, but recovery from it has been lackluster at best. The result: Five straight years of stunted growth, with reduced property values leading to lower revenues for local governments, straining services.
In the case of St. Petersburg, a $9 million budget shortfall this year will result in the city’s first tax increase in 22 years.
And if Amendment 4 does pass this November, critics contend even more pressure will be put on local governments in the Bay area to raise taxes, make deeper budget cuts, or cut deeper into reserves, even if the economy begins to improve.
But supporters of the property tax-cutting measure say that in fact it will boost the economy enough to overcome diminishing ad valorem taxes.
It’s being touted as a win for Florida homeowners, as well as a gift to the virtually moribund construction industry. But opponents say that it’s unfair to year-round Floridians, not to mention its potentially deleterious effect on local services.
So what’s in this package?
First off, it would reduce the 10 percent cap on increases in property values of non-homesteaded properties to 5 percent.
The second provision is for first-time homebuyers, defined as those who have not owned a home in Florida in the past three years. They would receive an additional homestead exemption on half the appraised value of their home (up to $150,000), phased out over five years.
And lastly, the measure would rescind the “recapture rule,” a relatively little-known provision that has been the law since 1995 and has allowed property taxes to rise on some people’s homes even though their assessed value has decreased from the previous year. It’s the only part of the multi-pronged amendment that would cut into education funding.
Critics allege that the tax breaks are a boon to those wealthy enough to own a second home.
“We think when you give a tax break to snowbirds and investment property owners, that’s going to shift the tax burden to our full-time residents, and we just don’t think that’s how our property tax system should be structured,” says Cragin Mosteller with the Florida Association of Counties.
Her group is one of the biggest opponents of the measure, since it would have a potentially crushing impact on local governments who rely on property taxes, taking out $1.6 billion from counties over the next four years if the measure passes. Over the past five years, counties have already cut over $3 billion.
The income loss for cities over the next four years would amount to $447 million, according to John Thomas with the Florida League of Cities.
Since 2008, revenues have dropped more than $35 million in St. Petersburg, prompting Mayor Bill Foster to remark to Michael Van Sickler in the Tampa Bay Times that he was past cutting through the bone and was now in the “cremation phase,” leading to the tax hike.
To balance the two budgets he’s had to assemble since becoming Mayor of Tampa, Bob Buckhorn had to dig into the city’s previously robust pot of reserves to the tune of over $14 million.
Mark Anderson, a member of Tampa City Council’s Citizens Budget Advisory Committee, says this should be a concern for city officials going forward. He says the committee doesn’t see property taxes going up anytime within the next three years — regardless of whether Amendment 4 passes this year.
Hillsborough County faced a $14.5 million deficit this year, but Administrator Mike Merrill was able to balance the budget without having to lay anyone off or make any major disruptions to service. However, the county did lay off more than 160 employees over the previous two years.
Hillsborough County Commissioner Mark Sharpe says he’s sympathetic to the goal of enabling homeowners to stay in their homes and pay reduced taxes. But he’d really like to know the Legislature’s ideas on how to manage the basic needs of local government, such as funding parks, roads and schools. “I get it when I walk into the grocery store,” he says, “but they’ll begin to hear the same voices.” They also might begin to get it when they try to recruit a company to relocate here, he adds, “and the company laughs and says ‘Well, where are the services?’”
But running against a tax break for Florida homeowners isn’t exactly a winning strategy in an election year. So it’s perhaps not surprising that the two candidates in the race to succeed Rob Turner as Property Appraiser in Hillsborough County favor the measure.
Republican Ronda Storms supported the measure when it was proposed in the Legislature and says that while she respects the concerns of local governments, “the greater weight of my concern rests with property owners trying to hang onto their property and with the needs of our fragile economy.”
Her Democratic challenger, Bob Henriquez, is on the same page, saying he’s not convinced that the arguments by the cities and counties should take precedent over homeowners getting a break.
“I don’t think that’s a strong enough argument simply in of itself, just because we lose money. If we gain money because it helps the economy it can balance each other off.”
The measure was placed on the ballot in the spring of 2011 by Storms and her GOP colleagues, with plenty of Democrats joining in. Only two Bay area lawmakers voted against it, one being St. Petersburg House Democrat Rick Kriseman. He said the idea behind it was to give first-time homebuyers a chance to buy a home, but he questions the definition of a first-time buyer.
“It’s hard for me to look at the implications of it and the loss of revenue and the impact it’s going to have on our cities and counties when the people who are benefiting make their primary residences up north,” he says.
The St. Pete legislator says those who have had their homes foreclosed at the beginning of the housing bust could also be considered first-time homebuyers.
Ben Fairbrother, the campaign manager for Amendment 4, rebuts Kriseman, saying the tightening credit standards imposed by the banks are going to make it difficult for anyone who recently foreclosed to get a loan.
But he says that means someone who lost his home in the recession but has built back his credit should get a tax break. “I think it’s beneficial for Florida to have more buyers back on the market and buy up those vacant properties.”
As for the “recapture rule,” it was that issue that motivated New Port Richey state Senator Mike Fasano to craft a bill in the first place last year. Until a constituent complained to him about her tax bill going up while the assessed value had gone down, he had never heard of “recapture.”
“We focused on the recapture rule when the Florida Realtors came to us and said, ‘Could we incorporate all of these [measures] into one joint resolution, and would you sponsor it? And we said of course, yes,” the term-limited Senator running for a House seat told CL last week.
The Florida Association of Counties’ Mosteller says they could support the Fasano bill if it were just highlighting recapture, but says that “we think they put recapture in to lull our residents into feeling they were getting a deal.”
Florida Realtors has poured more than $2 million into the campaign to pass the measure, which will require 60 percent of the electorate’s approval to pass.
In addition to giving certain homebuyers a property tax break, advocates say it will lead to a boost in building new homes. A report produced by Florida Tax Watch specifically says at least 319,000 “additional home sales” would occur due to Amendment 4 during the 10-year period following its passage and implementation, leading to the creation of over 20,000 new jobs.
The history of property tax exemptions in Florida goes back to the 1930s, when developers and government officials gave homebuyers a $5,000 exemption to entice people to what the Gainesville Sun once described as “little more than an inhospitable swamp.” Over the years the exemption was increased, going up to $25,000 by 1980.
In 1992 Floridians voted for the Save Our Homes amendment, which put a cap on the annual increase in the assessed value of a resident’s home to 3 percent or the rate of inflation, whichever was lower.
But by the late ’90s inequities were being exposed by the law, such as the fact that owners of homestead properties being discouraged from moving, as they would lose their increasingly considerable tax advantage.
In 2008 Floridians voted for Amendment 1, which increased the homestead exemption to $50,000 and provided for “portability,” allowing the difference between market value assessments to be transferred to new homesteads.
And now there’s the latest attempt to provide property tax relief, Amendment 4.
State Senator Mike Fasano says he believes the benefits will outweigh the negatives of reduced revenues to cities and counties. “Our housing industry in the state of Florida is struggling,” he laments. “I mean, it’s struggling,”
But will this be the elixir that jumpstarts it all? The prospects remain highly dubious.