BRADENTON -- The Florida Legislature sent a proposed constitutional amendment toward the Nov. 2012 ballot Wednesday that will not only apply lower Save Our Homes-style caps on commercial property tax assessments, but also reduce property taxes for those buying a home for the first time in three years with a special 5-year, 50 percent exemption. That may cut taxes for buyers below what homestead neighbors with identical property values will pay.
The exemptions will exclude any part of the property tax bill dedicated to public schools, so the measure is not as generous as it might seem. School taxes are invariably the largest portion of property taxes.
The Florida Association of Counties doesn't think that's fair, among other objections, it said in an April 15 press release. It also opposes the 2012 ballot measure.
Under the Joint Resolution that sent the measure to the voters, the cap on non-homestead properties will be reduced from 10 percent to 5 percent. On homestead properties (after the six months needed to get that exemption), first-time homebuyers will get a one-time 50 percent exemption up to $200,000. That will be eliminated at the rate of 20 percent per year and is not subject to the Save Our Homes cap as it fades away.
For the first few years, first-time home buyers would pay lower taxes than owners of homes of identical value which only get the Save Our Homes cap. House Joint Resolution 381, which passed the Senate (SB 658, AND SJR 772) May 3, won final approval in the State House of Representatives Wednesday on a vote of 25-12, with three Republicans against it and one Democrat voting for it. Enabling legislation (HB 1173) will go the governor while the resolution goes to the 2012 ballot. It could be altered by legislators in next year's session and may also be contested in court.
Although the cap, if adopted in 2012, might make existing and new homes prices more attractive and foster a surge in tales in the short run, it may also force county governments to adopt more austere budgets for many years to come. That can mean reduced police and fire coverage, intermittent road repairs, shorter hours at libraries and parks, and many other non-school impacts.
The association says it would cost counties $121 million the first year and $990 million by the fifth year, and also says the law is "incomprehensible" and institutionalizes tax disparities.
For instance, the association says two commercial property owners with the same valuation would be differently impacted if one decides to expand and buys a new location.
Here's how: Let's say Business A and Business B have been at the same locations for 30 years, and both are in the same business - selling hamburgers. Under a law passed in 2010, both now enjoy a 10 percent cap on property tax increases. If voters pass the ballot measure, the businesses will see the 10 percent cap cut to 5 percent. For homeowners, the 3 percent Save Our Homes cap on tax increases will remain the same.
Initially, legislators wanted to reduce the permitted 10 percent increase for business property. As a compromise, the Florida Association of Counties proposed a 7 percent cap on increases. Meanwhile, House legislators wanted a 3 percent cap. Ultimately, the Senate's 5 percent cap prevailed, so all commercial properties ended up with a 50 percent better tax cap on any increase in their assessments.
Of course, if the 3 percent Save Our Homes cap got cut the same way, the homesteaded owner's increased assessment would be limited to 1.5 percent a year (and nobody's proposing a constitutional amendment to do that - yet).
The problem, according to the association of counties, comes when Business A decides it wants to expand and buys a new location to do so. Remember, it's paying the same tax rate as Business B up to that point. Now, Business A opens a new location down the street on a lot that is far more expensive today than it would have paid back in 1980.
In these circumstances, Business A will enjoy the same 5 percent cap on tax increases that Business B has, yet will pay it on a far larger base value. Instead of the $100,000 it might have paid in 1980, the new location might cost $1,000,000 in 2007 - even if the property is the same size and sales are the same at both the old and new stores. The Business B competitor will pay on the value assessed in 1980 and also has its tax increase capped at 5 percent per year. The $5,000 increase Business A and B will pay at their older locations with the 5 percent cap may be 10 times greater for Business A at the new location - with the same 5 percent cap.
With Business B's lighter tax load, it might be able to improve the quality of food, hire more waiters and cooks, do some landscaping, get better equipment, pay for a dining-room renovation, hire new waiters and a better cook, buy more advertising and make small, non-assessable improvements that could well put Business A at a strong disadvantage.
"In this time of economic hardship, we don't need a more complicated tax system that puts government in the position of picking winners and losers. We don't need to put new start-up businesses at a competitive disadvantage with their more established counterparts," the association said..
"And we don't need to shift the property tax burden back toward residents," it said. "It is not only wrong to arbitrarily saddle one group of taxpayers with a higher tax rate for an identical property - it's bad for business. In these troubled economic times, we ought to be encouraging economic investment, working to attract small business, and championing competition," said the Florida Association of Counties April 15 press release. The FAC's communications director, Cragin Mosteller, reiterated that view when she spoke to The Bradention Times on Wednesday.
The legislators backing the proposed amendment see it another way.
"Potential inequities already exist when one considers similar properties," said Gregory Giordano, chief legislative deputy to State Sen. Mike Fasano (R-11), the author of the measure who represents parts of Citrus, Hernando, Pasco, and Pinellas counties.
"For example," Giordano told The Bradenton Times, "a rental home next door to a home in which the owner resides. The owner of the rental property has a 10 percent assessment cap. The other owner has a 3 percent assessment cap. In the example of the hamburger store, currently the new business owner will take into consideration the cost of the property and the tax obligations or benefits that may be attached to the property before they purchase it.
"To take advantage of the 5 percent cap that is part of the resolution for non-homestead properties, the Revenue Estimating Conference has indicated that only properties with extraordinary value increases and corresponding fast-rising taxes will be impacted. It can be fairly predicted that due to the current economic conditions these conditions may not be extant for another five years or so. If it is demonstrated that this does not work or is economically unfeasible, the 5 percent cap sunsets in 2023.
"In other words," Giordano said, "the voters will have to reauthorize this provision if they want it to continue."
Giordano also took aim at the county association's claim that the measure would shift the tax burden to homestead property owners.
"The final portion that is mentioned [in the FAC's April 15 release] is the tax burden shift. Currently, about 60 percent of the market value of property is homestead property. However, only about one-third of the taxes come from these parcels. Thus, the remainder of the tax burden is [on] businesses and those who buy non-homestead property. With the 5 percent assessment, the shift from homestead owners to non-homestead owners will slow. Homestead owners will continue to take advantage of a cap that is 2 percent lower than the 5 percent cap for non-homestead property."
As a compromise, legislators gave in to the association's request that, rather than use the higher state median home value of $124,000 to calculate the 50 percent exemption, assessors use unique county median home values - lower, the same, or higher - to calculate property taxes. Schools are " held harmless" under the measure - meaning their tax revenues are not impacted, Giordano said.
While seeing inequities in various aspects of the law, the Florida Association of Counties is far more worried about the long-term impact of tax revenue reductions than the fates of Business A and Business B. Potentially losing an an additional $121 million in 2013 and up to $990 million five years later is not a small-change issue.
For individual counties, those lost revenues may measure in the billions of dollars over the years before 2023.
The state has just adopted a new $70-billion, 2011-12 state budget for that requires spending cuts that hit public safety personnel, teachers, health and mental health facilities, parks and more, the years ahead may seem like an uphill - and losing - battle.
"They're trying to fix capitalism," Manatee County Commissioner At Large Joe McClash said of the legislators.
Given that hopeless task, McClash opposes the ballot measure. Unless an effort to get it on the Florida presidential primary ballot seven or eight months earlier succeeds, which legislative insiders say is unlikely, voters will have a long time to think about it.
And unless they see things the counties' way, they will usually vote for whatever saves them money in the short-term. The long-term, of course, is in other hands.
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