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Three hard truths about local tax cuts in Florida

The phrase "ticking time bomb" is overused. But there's a story lurking out there about Florida's cities and counties that will only get bigger.

The story starts in 2007, when our Legislature went to Tallahassee to do something about property taxes.

And so it did. The big news was an amendment to our state Constitution that voters approved in January 2008:

• We doubled the homestead exemption for homeowners.

• We created "portability" for the Save Our Homes tax break when we move.

• We put a cap on tax assessments even for non-homestead property.

On top of that, we had a recession and a big drop in property values. So overall, Florida's cities and counties have had less money.

Plenty of people think that's great. But a growing number are worried about the effects on the community they live in.

I started by saying there is a big story lurking. I'm talking about another, lesser-known law passed in 2007 that is taking full effect only now.

From this year on, a Florida city or county cannot increase taxes by more than the rate of increase in Florida's per capita personal income.

(In fact, there are a lot of technicalities. Let's stick to the general idea — there's a cap.)

The Legislature said that taxes should not go up faster than Floridians' income.

And, hey, I am not arguing. Just pointing out the realities.

First reality:

In the short term, property values will continue to drop. Local governments will have the unhappy choice of raising tax rates just to stay even, let alone to reach this cap. So far most have said no, but the pressure on them is rising.

Second:

However, even when the economy improves, this new tax cap means that the cuts of recent years are permanent and will not be recovered.

"I think most people have no idea of that," says Tampa Mayor Pam Iorio. "They think this was a cyclical thing, that things will rebound and the government will fill its coffers again."

Tampa took in $162.5 million in property taxes two years ago. This year it took in $137 million. Next year's prediction is $127 million.

For the year after, even based on a projected growth in personal income of 2.7 percent, Tampa's limit will be $130 million, no matter how much things improve.

There is one loophole. Local governments can exceed the cap by a super-majority vote, or in extreme cases, in an election. But given the political climate, it seems unlikely.

This brings us to the third reality: Under the tax cap, Florida's local governments face a permanent, downward annual spiral of further cuts.

Costs such as insurance, pensions and health care can grow faster than the cap. How long, meanwhile, will police, firefighters and other civil servants go without a raise?

Bill Horne, city manager of Clearwater, refers to the coming years as "the new normal" — continued annual cuts in services and personnel. "Most of our expenses are in people," he says. "At some point, union contracts are going to start to reflect increases."

As I said, it is perfectly possible to consider this good and healthy. But it also will have real consequences on your street and mine.

Meanwhile, the Legislature, which has made local government its whipping boy, proposes more limits. Like everything that humans do, I suspect we will lurch far past the tipping point, and then complain about going too far.

Three hard truths about local tax cuts in Florida 01/20/10 [Last modified: Wednesday, January 27, 2010 2:55pm]
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