Joint Committee on Property Tax Reform – Meeting Recap
June 5, 2007
The Joint Committee on Property Tax Reform met on Monday, June 4th to continue the discussion on selected issues dealing with property tax relief. Rep. Dean Cannon (R-Winter Park) opened the meeting with discussions on the letter that was sent by Speaker Marco Rubio (R-Miami) and Senate President Ken Pruitt (R-Port St. Lucie) on the agreements they have reached regarding the structure for a tax relief and reform plan, and agreements regarding the timing and method for implementing the plan.
Both have agreed on a two prong approach with the first part dealing with immediate tax relief and reform that will be done statutorily and the second part for further tax relief and reform through a Constitutional Amendment. The statutory plan requires cities and counties to cut their property taxes based on a formula tied to their past taxing performances (over the past 5 years). According to Rep. Cannon, this will reset the millage rate. Also included in the statutory plan is a cap on future property taxes with growth no faster than personal income. However, local governments may override the cap and the cuts by an extraordinary vote. The Legislature feels that this first step will give every category of property taxpayer some relief with the mandatory tax cut and cap.
The next step in the plan will be to eliminate the “Save Our Homes” (SOH) exemption and the current homestead exemption and replace it with a new homestead exemption based on the value of the homesteaded property with tiers of lower exemptions for higher values. Since a few property owners would have greater benefits under the current SOH amendment, there will be a “grandfather” clause for those homeowners. The constitutional amendment needed to make these changes will be included in the January 29, 2008 Presidential Primary Election. According to Rep. Cannon the January 29, 2008 date was selected for several reasons, the most important of which, is that there is no extra cost for the election since a statewide vote is already scheduled. Also it allows flexibility for counties and cities as it is in their budget year. Lastly, the vote will happen approximately a month before next year’s regular session of the Legislature so that no matter the outcome, the Legislature will be able to act on the decision of the voters.
House and Senate staff gave a presentation on selected property tax relief and reform issues during yesterday’s meeting. These issues include tangible personal property; low-income seniors; working waterfronts; and affordable housing.
Tangible personal property is “all goods, chattels, and other articles of value” but does not include real property, inventory, household goods owned by a resident, or vehicles. Since there is no minimum value to the tangible personal property that must be reported for tax purposes approximately 1.3 million companies filed tangible property tax returns in 2006. 77% of those who filed had less than $25,000 in tangible personal property. If there was an exemption for tangible personal property up to $25,000, approximately 1 million taxpayers would not have to file and it would reduce tax revenues by $223 million. And since every location must file a separate tax return, taxpayers with multiple business locations will receive multiple exemptions. Both taxpayers and property appraisers would save with this exemption.
Due to a constitutional amendment passed in 2006, any county or city may allow an additional homestead exemption of up to $50,000 for any person 65 or older whose household income does not exceed $24,214. This only applies to taxes levied by the enacting county or city; schools and special district taxes are not included in the exemption. In 2006, 53 counties and 178 municipalities had implemented the exemption. Low income seniors may defer all ad valorem taxes and non-ad valorem assessments whereas all seniors may defer the portion that exceeds 3% of household income with limitations. Other options for consideration is to make the additional $50,000 homestead exemption mandatory, rather than a local option; replace the $50,000 additional homestead with a 100% exemption from property tax for persons 65 and older who meet the current income limit with a cap; or apply the additional $50,000 homestead exemption to all taxing authorities, not just counties and cities.
Working waterfronts was another topic of discussion for the Joint Committee. Commercial working waterfronts are facing increasing expenses, including taxes and insurance. Due to land cost and regulatory oversight, establishing new working waterfronts with public access may not be financially feasible. Maine has a constitutional amendment for the assessment of commercial fishing activities and Florida may want to consider the same similar to the current treatment of land used for agriculture, high water recharge to Florida’s aquifers, and land use for noncommercial recreational use.
Affordable housing was also a hot topic at the meeting. According to staff, housing costs have increased 110% but income has grown only 11%. An example in the presentation showed that in 2003, the median household had sufficient income to purchase a single-family home selling at the median price in 52 counties; by 2005 this was true in only 18 counties. There are current programs that provide affordable housing through documentary stamp taxes; federal funds; and charitable organizations. Unfortunately the Florida Constitution does not provide an exception to the just value standard for assessment of property in the affordable housing programs. Last session, HB 1375 by Rep. Mike Davis (R-Naples) passed during the recent legislative session authorizes a county or city to adopt an ordinance to allow for the deferral of property taxes and non-ad valorem assessments if the owners of the property are operating, rehabilitating, or renovating affordable rental housing property. The use of the property as affordable housing must be maintained over the deferral period or the total amount of deferred assessments, taxes and interest becomes due and payable on November 1 of the year in which the use of the property was changed. Although last Session several attempts were made to change how affordable housing property can be assessed, it is predicted that if statutory changes are made they will be subject to litigation. A constitutional amendment may need to be considered with some type of mechanism for the legislature to make necessary adjustments.
Other issues briefly discussed were how property was valued and the assessment appeal process.
Members are still curious on how Community Redevelopment Agencies; fiscally constrained cities and counties; new cities and Special Districts will be handled. Rep. Cannon did state that Special Districts will have roll backs but to a lesser degree than local governments. Due to so many questions by members of the Joint Committee it was determined that another meeting needed to be scheduled before Special Session begins next week. Tentatively they have selected Monday, June 11 in the afternoon for the next meeting.
Below are documents that were recently released. One is a letter from Speaker Rubio that provides an additional explanation to the agreement achieved by him and Senate President Rubio.
The other is a response from the House Majority Office to the House Democrats’ plan, which is based on using the median value of homes in a particular county.
Letter from Speaker Rubio
House Majority Response