Saturday, April 7, 2007

The Property Tax Puzzle

Property tax reform is one of the biggest, if not the biggest, issue facing the state legislature this year. There has been much hand wringing all around. Many hare brained schemes have been floated. Civic Concern has just published a thoughtful, reasoned history of the property tax problems in Florida and proposed some solutions.

Some commenters on the St. Peterburg Times Buzz Blog piece on this report claim that
The people want major reduction in property taxes
Others argue

I don't think "the people" want a bunch of half-cocked, sound bite ideas. ... Recent polls show they're pretty skeptical of all the various proposals.
Most of "the people", i.e. the voters in this state are already benefiting from the "Save Our Homes" tax cap. Homesteaders in the City of St. Petersburg saw their City taxes stay essentially flat this year in dollar terms. These are not "the people" clamoring the most for property tax reductions. The "Save Our Homes" amendment has worked exactly as it was intended. Homesteaders are not being forced out of their homes by rising property taxes. There have been some unintended consequences, some foreseen, others unforeseen.

The foreseen consequences are that other property tax payers would pay a larger share of the tax burden if homestead property taxes were "capped". That is certainly happening. Business property owners, and by extension, renters have been seeing their uncapped property valuations and their taxes going through the roof with the recent boom in real estate prices. Chief among the unforeseen consequences are homesteaders being "trapped" in their current homes because they couldn't afford the taxes on a new property if they moved and had to step up to current market valuations.

One of the most curious scenes in this whole property tax situation is how local governments are made out as the whipping boys in this "debate". I say curious because just last fall Leadership Florida did a comprehensive survey of Florida residents. Among the key findings in this survey was the relative approval ratings of the various levels of government. Fully 61% of the respondents see the state government as doing only a fair or poor job. County governments were rated fair or poor by 55% of respondents. Only 38% of city dwellers rated their city governments as fair or poor. The state government, which people like the least, is pointing the tax reform gun right at the heads of local governments, which people like the most. I'm not sure how well that is going to work out for them.

Besides, the increasing revenue requirements of local governments are not entirely of their own making. One of the biggest drivers of increasing expenditures by local governments is growth. And that is not just on a linear basis, because growth does not pay for itself. The new taxes generated are not sufficient to pay for the increased capital needs (roads, schools, sewer) or service needs (police, fire, garbage collection) caused by the growth. Neither have we collected sufficient impact fees to pay for this growth. This, in effect, has shifted the tax burden for growth onto existing tax payers and not the new ones.That is the major reason I am not at all bothered by the apparent inequities in taxes paid for newly built homes relative to existing homes covered by the "Save our Homes" amendment. To the extent that local governments could have ameliorated this situation by charging higher impact fees, it is their fault. To the extent that the state did not do a better job of regulating growth and anticipating the increased costs, it is their fault.

But the question really is not about the blame game. The question is what to do to solve the very real property tax problems that do exist. First, here is what not to do. Arbitrary roll backs of local government revenues are not the answer. Most local elected officials are much more careful with their taxpayers dollars than the folks in Tallahassee ever were. Do you really want them deciding how much your local government can spend on your police and fire departments?

We can do something to stop the bleeding for non homestead property owners. We can change the way properties are valued. Currently, non homestead properties are valued on the basis of their "highest and best use". That is to say that the corner ice cream shop will be taxed as if it were a luxury condo building site if that is what the appraisers deem the "highest and best use" for the property. Changing the valuation method to one based on the value of the current use of a developed property would keep businesses and renters from being pilloried by higher taxes due to speculation in the real estate market.

We can fix one of the unintended consequences of the "Save Our Homes" amendment. We can make the tax benefit accrued by a homestead property owner portable. If the difference between the market value and the capped value of a property is X, we could let that homestead property owner take that X amount of benefit to a new homestead with them. Some say that this might not withstand constitutional scrutiny. I believe that problem could be overcome by carefully crafting the law and developing an appropriate legislative history. All citizens would in fact be treated the same for tax purposes because they could all accrue tax benefits on an equal basis.

These two measures would solve the most egregious issues involving property taxes that we currently face. Turning back the clock and pretending that local governments could maintain the same level of services with less money is nonsensical. Having Tallahassee decide what those levels ought to be really makes no sense. Providing solutions that will work into the future is what we should be striving for.


gatordem said...

So, am I completely nuts, or does this make some sense?

Librarian 2 said...

It makes very good sense. Now how do you get it to the people in Tallahassee?

gatordem said...

You can email the link or the piece itself to your legislators. You can write a letter to the editor. You can call your legislators. You can blog about it. You can get this message to your local elected officials so they can bring it up to the legislators.

If we all do this together, we can make a difference.

Sunny said...

Hi all.

From what I hear in my neck of the Florida woods is that citizens do not trust anyone-the state or local government level-with their tax money.

If local officials just took care of the police and fire budgets, that would be one thing...but over here on the East Coast, this commission is spending our hard earned money on everything under the sun. They simply cannot stay on a budget.

The word is in Central Florida-make local government stick to a budget. That's what people want-why can't that happen? Why?

And I pose a question to you all? Why does Florida have such a powerful county government system in the first place? Think about the money that flows through the county and the potential of mismanagement.

How about more local control?

gatordem said...


You don't want to get me going on County governments. Not here in Pinellas, where we've got 24 municipalities and one County government to deal with. Our municipalities are actually suing the County right now (although I believe they've reached a settlement).

The main problem with getting any government to be responsive is citizen participation. When the tax issue got boiling last year, it was at a point in the year when all the local governments were at the end of their year long budgeting process. This is a process that typicaly is ignored by the populace.

If you want to make a difference, you've got to get involved early. Now is the time. Find out when your local governments budget meetings are being held and show up.

Your local elected officials will be glad you did.

Sunny said...

Do you feel there is any way to streamline government at the county level?

And I would love to hear your thoughts on this subject...I am so tired of watching the local municipalities cave to the county.

Komodo said...

No one seems to be including the fact that last year Tallahassee legislators voted to divest the state budget of two-thirds of their shared responsibilities for the school systems and put this off on the property owners. In some areas, these property owners consist of retirees and widowed women on fixed incomes.

This, coupled with the unfair property assessment method of "highest and best use", has resulted in spikes in property taxes for some (a two bedroom bungalow in Bartow) while virtually no tax impact on new housing elsewhere (five bedroom, new construction in Winter Haven).

In recent hearing sessions with state legislators,
property owners and renters alike sited lavish pay raises for state, county, and local legislators as the
net results of rocketing property taxes.