Property Tax Reform

1
Property Tax Reform

• Review of the 2007 Special Session of the Florida
  Legislatureand Beyond
• Florida Association of REALTORS

2
The problem

• People are locked in their homes
• A special election to get reform sooner rather
  than later
• Commercial and non-homestead properties should
  have an assessment cap
• Huge problems with highest and best use
• Taxes should have be rolled back for significant
  savings

3
High Expectations!

• The Governor kept saying property taxes would
  drop like a rock. 
• The House Speaker floated the idea of increasing
  sales tax to buy-out property taxes on Homestead
  property.

4

• We deserve to have high expectations from our
  elected officials because total property tax
  levies have increased by 99 between
• Fiscal Years 2000 and 2007

5

• We didnt get to where
• we are overnight
• The property tax system evolved and in most
  cases there were good intentions 

6
Save Our Homes

• Few in this room probably supported Save Our
  Homes at the time it passed in 1992, but it had
  what voters believed was a valid purpose at the
  time.
• Save Our Homes has created huge inequities among
  taxpayers. 

7
Save Our Homes

• Because of Save Our Homes, local taxing
  authorities have increased the burden on
  non-homestead properties to compensate for the
  homestead savings.

8

• The three problems with real estate in Florida
  are property taxes, property insurance and THE
  MEDIA.
• Nancy Riley
• 2007 FAR President

9

• Dont believe everything you read in the
  newspaper!!!

10

• Im not here to tell you what passed the
  legislature is something I would have written if
  I were writing the perfect bill.
• But, I do want to tell you that it is MUCH
  better than current law.

11
The Legislature passed three bills

• Statutory Rollbacks which are immediate and
  already signed by the Governor
• Constitutional Amendment that creates a Super
  Homestead Exemption and a few other items
• Special Election

12
Phase One

• Statutory millage rollback
• Local government revenue cap 

13
Phase One (Continued)

• For the upcoming 2007-08 fiscal year that begins
  October 1, 2007
• All local governments (except school boards) will
  have to reduce total property tax revenues by a
  specified percentage (0-9) based on their 5-year
  history of levies. 
• Independent special taxing districts that levy ad
  valorem taxes are all subject to a 3 percent cut.

14
Phase One

• This rollback affects Commercial,
• Non-Homestead and Homestead properties equally

15
Revenue Cap

• Instead of an assessment cap (such as Save Our
  Homes), there is an overall revenue cap limiting
  what governments can collect from property
  taxes. 
• This will protect everyone, including commercial
  and rental housing, from big and unpredictable
  property tax increases from year-to-year. 

16
Assessment Cap versus Revenue Cap

• SOH is an assessment cap on Homestead properties
  only.  It reduces the taxable value but it does
  not limit the tax rate.  
• Local govts have had to keep millage rates
  artificially high to compensate for the taxable
  value that is shielded by Save Our Homes. 
• The phenomenon especially hurts commercial and
  non-homestead properties who have no assessment
  limitations.

17
Revenue Cap (Continued)

• The revenue cap requires a local government to
  collect the same amount of revenue it did in the
  previous year (adjusted for new construction and
  statewide personal income growth)

18
Revenue Cap (Continued)

• A revenue cap offers guaranteed protections for
  individual properties, much like an assessment
  cap.  However, every property in the jurisdiction
  will benefit from a revenue cap, rather than only
  Homesteads.
• The millage rate applies equally to all
  properties and the revenue cap will continually
  push the millage rate down.  Again, this is good
  for every class of property.

19
Revenue Cap (Continued)

• This is the first ever guaranteed property tax
  protection for commercial and non-homestead
  properties in Floridas history!

20
Phase One

• The statutory rollback equals 15.6 billion in
  tax relief over five years

21
Phase Two

• Proposed amendment to Floridas constitution
• If passed, the amendment will offer voters a
  choice of continuing their Save Our Homes
  protection if they have homesteaded property, or
  choosing a super-homestead exemption. 

22
Super-Homestead Exemption

• 75 of the first 200,000 of a homes value
  and15 of the next 300,000
• Every homestead receives at least a 50,000
  exemption
• The maximum homestead exemption would be 195,000

23
Super-Homestead Exemption(Cont.)

• Benefits workforce community such as police,
  firefighters, nurses and teachers
• Median price of an existing home in Florida was
  237,000 in May 2007
• Under Save Our Homes, the homestead exemption is
  25,000
• Under the super homestead exemption, a homeowner
  would receive 155,550 in exemption

24
Super-Homestead Exemption (Cont.)

• The upper threshold of 500,000 is indexed to
  personal income, so it will increase at about 4
  a year
• The amendment also allows the Legislature to
  increase the upper threshold limit with a 2/3
  vote

25
Super-Homestead Exemption (Cont.)

• First time homebuyers and people who move will be
  afforded substantially bigger savings - up to
  195,000 in exemptions, compared to the only
  25,000 that they receive now
• This new plan also assures most people that they
  wont be hit with a tax bill many times what they
  pay now on their next home purchase.

26
Super-Homestead Exemption (Cont.)

• If approved, current homesteaders will be given a
  choice of how they want to be taxed. 
• You can choose to stay with Save Our Homes or
  adopt the new Super Homestead system

27
Super-Homestead Exemption (Cont.)

• There is no deadline for the choice, but it can
  only be made for your current homestead. 
• Transferring a homestead or moving will put that
  owner in the new super-homestead exemption
  system.

28
Phase Two (Continued)

• 25,000 tangible personal property tax exemption
  for businesses
• This local tax is paid by businesses on shelving,
  office equipment, and other materials. 
• 1 million of Floridas 1.3 million businesses
  will be completely exempt from this tax and
  many of those will be REALTORS.  While the
  annual dollar savings average 500 per year, the
  exemption eliminates the annual filing
  requirement for those exempt.

29
Phase Two (Continued)

• Additional Changes
• Further protects low-income seniors
• Authorizes the Legislature to help working
  waterfronts and affordable housing with
  assessment changes

30
Phase Three

• A special election for constitutional changes is
  called for January 29, 2008. 
• Delaying consideration of these reforms until
  November 2008 would have forced a delay of
  implementation of the new super-homestead
  exemption by another year. 
• This would mean more people would be locked in
  their homes and for another year!

31
Whats Next?

• FAR has received assurances that assessment
  methods for commercial and other property types
  will also be addressed in the next regular
  session of the legislature. 
• Most importantly among these is Highest and Best
  Use.

32
Tax and Budget Reform Commission

• Tax and Budget Reform Commission which is
  appointed to meet every 20 years has been named
  recently and our president is one of those
  appointments. 
• The Commission will continue to meet for the next
  several months and will be able to put amendments
  directly on the November, 2008 ballot.