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Amendment puts property tax debate back in spotlight

TALLAHASSEE — With a nudge from Gov. Charlie Crist, the great Florida property tax debate is back on.

Proposed property tax cuts, approved late Friday with little fanfare, hold big savings for businesses and first-time home buyers while creating new winners and losers. But this time there is some unusual opposition: The business community.

"It's a big mistake. This is a Band-Aid to a broken property tax system," said Bill Coleman, a commercial tax expert in Orlando who traveled to the Capitol last month to argue against the plan.

The proposal, which will go before voters in November 2010, calls for a new homestead exemption for first-time home buyers and reduces an existing assessment cap for nonhomestead property.

Together, they could save property owners about $570 million over three years, according to estimates from state economists.

(And that's how much would be taken from cities, counties, special taxing districts and schools. There is no formal opposition to the plan yet, though local governments say they cannot cut any more than they have.)

The constitutional amendment needs 60 percent voter approval statewide, a high bar. But Crist, who would likely campaign on the issue in a run for U.S. Senate or for re-election, has shown himself an effective motivator with Amendment 1 in 2008.

That was when the property tax debate was at its height, before the housing market collapse.

This year property taxes were a tenuous issue throughout most of the regular 60-day session, but the package ended up being one of the last bills passed as business came to an end Friday evening.

"Some things happen by magic," said Sen. Evelyn Lynn, the Ormond Beach Republican who sponsored the plan.

Crist had advocated for the plan before the start of session but did not consistently push the issue. Only late in the session did he begin to act, dropping in unannounced on committee meetings, and working on key legislators, including Senate President Jeff Atwater. The Florida Association of Realtors also engaged in heavy, last-minute lobbying.

But Lynn may have gotten it over the hump by scaling back the effect on local governments and schools, which have lost hundreds of millions in revenue under Amendment 1, approved in 2008, and other property tax cuts.

Earlier last week, Lynn's plan remained in the trash bin because Senate leaders told her it was too expensive.

The first-time home buyer break now applies to anyone who has not owned a home in Florida or elsewhere in the last eight years, down from a once-planned three years.

The Senate plan is also less generous than what the House wanted because it provides a 25 percent exemption on just value, up to $100,000. The House sought a 50 percent exemption up to $250,000.

The new exemption would phase out over five years as savings under Save Our Homes, the 3 percent assessment cap that protected property owners from the rapid value increases of recent years, accumulated.

Advocates say it will coax renters and young families into buying homes and depleting unsold inventory. There is currently about a year's supply in every major market.

"Right now people aren't shopping, they aren't looking and aren't buying unless it's a giveaway price," Lynn said.

It also provides some balance against the protection longtime homeowners enjoy — an advance of sorts on Save Our Homes. "It makes our system a little more fair," said Trey Price, a lobbyist for the Florida Association of Realtors.


Far more controversial is the 5 percent assessment cap for nonhomestead property.

A 10 percent cap was approved under Amendment 1 and went into effect this year. It was a small measure of assurance for business owners and second homeowners who have shouldered a larger share of the property tax burden.

But a tighter assessment cap, which would not apply to school levies, could create the same disparities that Save Our Homes does now for homestead property owners.

The 3 percent cap favors people who have lived in a property for a long time so a person who just moved into a neighborhood pays a lot more taxes.

"In five years it's pretty sure the tax burden on new, expanding and relocating businesses will be higher," said Kurt Wenner of TaxWatch, a state watchdog group that is generally supportive of the ballot proposal.

What's more, Wenner said the cap could put pressure on local government to increase the millage rate to collect as much money — a side effect that could raise everyone's taxes.

"Those are valid concerns," said Sen. Thad Altman, the Rockledge Republican who chairs the Finance and Tax Committee and who helped get the plan rolling. "No tax structure is perfect and there's going to be some imperfections, but the overall public benefit outweighs that."

Crist shrugged off the concerns. "The people will decide," he said this week.

Because the proposal does not go to the ballot until 2010, lawmakers could make revisions.

One idea is to prevent an assessment from going back to full market value — essentially wiping away the savings from the cap — unless the property is substantially changed. So, for instance, a McDonald's could become a Burger King without penalty.

Ballot language

Property tax limit for nonhomestead property; additional homestead exemption for new homestead owners

The State Constitution generally limits the maximum annual increase in the assessed value of nonhomestead property to 10 percent annually. This proposed amendment reduces the maximum annual increase in the assessed values of those properties to 5 percent annually. This amendment also requires the Legislature to provide an additional homestead exemption for persons who have not owned a principal residence during the preceding 8 years. Under the exemption, 25 percent of the just value of a first-time homestead, up to $100,000, will be exempt from property taxes. The amount of the additional exemption will decrease in each succeeding year for 5 years by the greater of 20 percent of the initial additional exemption or the difference between the just value and the assessed value of the property. The additional exemption will not be available in the 6th and subsequent years.

Amendment puts property tax debate back in spotlight 05/06/09 [Last modified: Friday, May 8, 2009 1:54pm]
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