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Small-business owners salute changes to tax formula

CLEARWATER — Ken Christman's taxes were $5,000 per year when he bought the 14-room Golden Villa Motel on Clearwater Beach in 1996.

Today, they've climbed to more than $18,000.

That's largely due to the state's "highest and best use" policy, which taxes waterfront land based on what could be built on the property — not what's actually there. So a small mom-and-pop beach motel's property could be assessed at the same rate as land sold to build a giant condominium tower.

But Christman is hoping a proposal passed Friday by the Florida Legislature will halt his ever-increasing tax bill.

State lawmakers say it will, and small-business owners up and down the state's shorelines are ecstatic. But local leaders are still wrestling with just what the legislation will mean for tax rolls and for property owners.

The legislation — House Bill 909 — will make it tougher for county property appraisers to assess a commercial property at its highest and best use, lawmakers say, because it would require appraisers to assess properties based on the income they generate, not their potential.

Appraisers must consider "the legally permissible use of the property" as well as whether it needs zoning changes, permits or additional roads before it could be used for something different, such as a condo tower.

Christman welcomes the change. He paid $530,000 for the Villa in 1996, and the property appraiser estimates its worth at close to $1-million now. The jump came after a developer was willing to pay more than $18-million for the land across the street to build a condo-hotel tower.

"This is a welcome relief. I could never figure out how they could tax you on something you're not," said Christman, 56. "This may let us stay open a little while longer."

• • •

The effects on local and state government are potentially significant, but undetermined.

The Hillsborough Property Appraiser's Office estimates the bill could affect 1,000 commercial properties around Tampa Bay.

Hillsborough Chief Deputy Property Appraiser Warren Weathers said the proposal requires appraisers to take into account whether the property has the high-priced permits, roads, water and sewer necessary to build at the highest and best use.

"That has been fairly well ignored in the last few years," he said. "(It) will come to the front burner now that it's in the law."

Pinellas County Deputy Chief Property Appraiser Pam Dubov said her office is still looking for guidance from the state Department of Revenue to determine how to apply it.

But the bill's sponsor, Rep. Peter Nehr, R-Tarpon Springs, said the rules couldn't be clearer.

"This is probably, from a business standpoint, the most important bill for small business in the last five or six years," he said. "Now they'll have a better way to fight (appraisals). Before there was nothing they could do. Now you can't say: 'It's automatically worth this much.' "

If signed into law by the governor as expected, the new rule won't be applied until September and won't be reflected in this year's property tax bills.

Clearwater Mayor Frank Hibbard, an opponent of assessing properties at their highest and best use, said he was "thrilled we finally got something to help businesses over the long haul and protect existing uses that create the character in our waterfront communities."

He said he doesn't expect the new limitations to hurt city coffers, since property values are dropping. But when the real estate market eventually recovers, the properties won't rise in value as quickly as in the past, so cities could take a hit.

• • •

In the meantime, many small-property owners say that they're happy something has been done but that it should have been done sooner.

The decline of the mom-and-pop motel has been in motion for decades, but it has increased recently in the wake of devastating hurricanes and the condominium boom.

Pinellas County for example, has lost more than 4,000 rooms in the past five years.

And because speculators spent big money for the land, it drove up the prices of their nearby neighbors.

"It's been horrible. We can't pay those kind of taxes," said 72-year-old Richard Lonnon, who has owned the 20-unit Commodore Waterfront Apartment Motel in Treasure Island since 1976. "When I got here it was all vacant lots and now you have all these condos sitting here vacant. I'm glad (the Legislature) did something anyway."

Patricia Hubbard, chief financial officer for Hubbard Properties LLC, agreed.

The company, which owns a vacant 32,000-square foot parking lot in Madeira Beach, has watched the lot's property value jump 35 percent in the past three years to $1.1-million.

The company uses the lot for its Friendly Fisherman Seafood Restaurant, some shops and a marina at John's Pass Village & Boardwalk, and doesn't charge for parking.

"Once property values started jumping, they jumped the jump," Hubbard said, referring to the lot the company has owned since the early 1990s. "Assess it for what it is, not what it could be. It just didn't make sense."

>>FAST FACTS

Fluctuating tax bills

The St. Petersburg Times talked to a number of small-business owners about a state plan that is supposed to make it tougher for property appraisers to use the "highest and best use" formula when determining how much a property is worth. Small-business owners say their property is unfairly appraised and has risen dramatically when it shouldn't. Property values decreased in 2007 due to the slump in the real estate market.

Here's a look at a few of those jumps in assessed values:

Clearwater Beach: the Golden Villa motel

2004: $684,200 ($15,715 in taxes)

2005: $860,000 ($19,983 in taxes)

2006: $1,095,581 ($23,844 in taxes)

2007: $921,672 ($18,375 in taxes)

Treasure Island: Commodore Waterfront Apartment Motel

2004: $1,500,000 ($28,808 in taxes)

2005: $1,980,000 ($38,557 in taxes)

2006: $2,300,000 ($42,722 in taxes)

2007: $ 1,700,000 ($29,048 in taxes)

Small-business owners salute changes to tax formula 05/06/08 [Last modified: Wednesday, May 7, 2008 3:11pm]
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