Thursday, April 26, 2018
News Roundup

Tallahassee tax cuts leave local governments in the lurch

TALLAHASSEE — The Florida Legislature is eyeing even more tax cuts this year, celebrating its free-market ethos by slashing business taxes and allowing consumers to "keep more of their own money."

But as lawmakers take credit for handing out tax cuts to businesses and homeowners, most are not coupling the revenue reductions with equal-sized cuts in spending, leaving local governments to sort out how to balance their budgets.

"We're trying to take credit for cutting taxes when we're, in essence, really just telling somebody else 'You need to cut,' " Rep. Fred Costello, R-Ormond Beach, warned fellow lawmakers during a committee meeting where lawmakers approved more than $600 million in cuts to local governments.

In total, the Legislature has advanced proposals for several billion dollars in new unfunded tax cuts that, if passed, will come out of the coffers of cities and counties across the state. Local governments, which have hired lobbyists to fight back against some of the cuts, say state lawmakers are leaving them with a bleak choice: Either cut already-pared-back services and salaries to offset billions of dollars in reduced revenue, or raise property tax rates to cover some of the shortfall.

It's a choice that cities and counties across the state have been making for the past four years, as a continuing recession and housing market crash have made gaping budget holes a perennial headache.

With the real estate market still in the dumps, unions at their wits' end out over concessions and, now, more state-mandated revenue cuts on the way, the coming year could mean even more red ink for local budgets. That most likely means yet another round of bitter budget fights and bone-deep cuts.

"We're at the bottom of our revenue stream at this point," said Amber Hughes, a legislative advocate for the Florida League of Cities, an advocacy group for local governments. "We're down 20 percent in property taxes since 2006. We're back to 2005 levels, yet we have the population of the 2012 levels and the costs of 2012."

State lawmakers began much of their push to cut taxation last year, slashing corporate taxes and passing a homestead exemption that voters are expected to approve at the November ballots. The cost to local governments: $616 million per year, if millage rates hold steady.

This year, there are at least a dozen proposals making their way through the Legislature that could further handicap cities, counties and special taxing districts. Part of Gov. Rick Scott's plan to "make Florida the best place in the world to do business," many of the proposals are billed as pro-business tax cuts.

Rep. Eric Eisnaugle, R-Orlando, is pushing a bill that would eliminate the Tangible Personal Property Tax — a nagging tax business owners pay on their equipment — for small businesses this year, with the option to get rid of it for all businesses later. The hit to local governments: $20.3 million a year.

"I think we can count on Florida small businesses to bring this economy back, quickly and in a powerful way," he said in support of the tax cut just before his colleagues voted for it. "So, let's just basically get government out of the way so they can do that."

That sentiment is at the heart of a pro-business philosophy that has become near-gospel among conservative lawmakers since last year, permeating from the governor's office through the Republican-dominated Legislature.

The fervor for cutting business taxation, regulation and litigation as a formula for job creation has intensified under the Scott administration, and local government advocates protest they have been caught in the crossfire in the rush to appease job creators. There is growing concern among some legislators that state lawmakers are taking the credit for cutting taxes, while local governments get stuck with the bill.

"This piece of legislation is a feel-good legislation," Rep. Patrick Julien, D-North Miami Beach, cautioned lawmakers last week as they discussed further tax cuts. "It makes you feel good, because you believe you're helping, but … all you're doing is you're taking that tax burden and you're shifting it somewhere else."

In the Legislature this year, there are proposals to cut taxes on communication services companies (a $100 million hit to local governments), to eliminate taxes on real estate sales associates ($3.8 million), and to slash sales taxes on manufacturing equipment ($10.4 million), private plane repair ($2.3 million) and electricity at produce plants ($200,000).

The tax cuts are welcomed by the business community, but they come at a high cost that critics say will ultimately fall on local communities. As property tax revenues fall even further this year, local governments will again have to weigh tough decisions that run the gamut from shuttering libraries to ending social service programs to delaying new projects. With fewer options to cut after several years of concessions and layoffs, local officials may have to consider raising property tax rates, a politically dangerous and unpopular option.

In Hernando County, commissioners considered several cuts to balance the budget last year — including ending mosquito control, closing parks and slashing benefits for public employees. It's likely that property values will be even lower this year, and Tampa-area governments will have to seek further cuts.

"We expect taxable values to be down for next year another 4 percent," said Davin Suggs, legislative advocate for Florida Association of Counties, an advocacy group for county governments.

The state is also looking to cut some distributions to local governments, as it struggles with its own budget shortages. A budget amendment offered last week by Sen. Joe Negron, R-Stuart, would slash state spending on hospitals by $218.7 million, forcing local governments to make up the difference.

As the Legislature eyes more cuts — including raids on trust funds for local housing and transportation programs — it is moving to provide the governor's office with about $130 million for incentives and tax breaks aimed at drawing businesses to the state.

Sensing the pain felt back in their home districts, some lawmakers have stood up against new local government cuts, recently striking down a new property tax cut and a local business tax cut that together would have costs cities and counties nearly $750 million per year.

"If the state thinks some of the revenue mix for the locals should be changed, then we should replace that revenue stream," said Costello, who is pushing for holistic tax reform. "There will be a zeal to look at reforms next year, due to the constant picking (on local governments) that has happened this year."

In the meantime, business-friendly, small-government lawmakers continue to plow ahead with a tax-cutting agenda, the full impact of which will not be known until cities and counties face the daunting task of drafting their budgets later this year.

"We've had a couple of successes, and there's more time left to make our case," said Hughes. "But even if we're successful on the big issues, it could be death by a thousand cuts."

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