Amendment 4 offers big tax break for some, revenue drain for local governments

Published Oct. 15, 2012

TALLAHASSEE — It is the longest of the 11 amendments on Florida's longest-ever ballot, and its multibillion-dollar impact could mean major tax relief for first-time home buyers, owners of second homes, small businesses and, especially, large corporations. But it could also mean higher taxes for Florida residents and massive cuts to struggling local governments.

As voters decide whether to vote up or down on Amendment 4, hanging in the balance could be a few hundred dollars in tax cuts for the average new home buyer, and as much as $600,000 in tax breaks for multimillion-dollar properties like the famed Fontainebleau hotel in Miami Beach.

Proponents of Amendment 4 argue it will create thousands of new jobs while reinvigorating the state's troubled housing market and saving homeowners millions of dollars.

Opponents paint a much grimmer picture: full-time Floridians shouldering the tax burden of snowbirds and corporations, while governments are forced to make bone-deep cuts to social services.

"It will definitely mean cuts to services, unless (local officials) raise the millage rates," said Jack McCabe, CEO of McCabe Research & Consulting, a real estate firm in Deerfield Beach. McCabe said he is in favor of property tax reform and efforts to revive the housing market, but called Amendment 4 a "patch job" that will shift tax costs from businesses onto longtime homeowners.

Florida voters will ultimately decide, as the amendment — along with 10 others on this year's ballot — requires a 60 percent margin to make it into the Constitution.

Both sides have used ads and social media in an attempt to distill the complex 700-word amendment into digestible sound bites like "Tired of getting your assets taxed off?" and "Tax breaks for wealthy snowbirds?"

The Florida Association of Realtors has poured $3.5 million into the campaign to pass the amendment, with ads that key to homeowners' frustration with property taxes.

"Our taxes were out of sight — it just broke us," said David Umbstead, a Lake Wales homeowner featured in a pro-Amendment 4 ad. "They've taxed us to death. If the taxes would've come down, it would've probably saved us. But there's no hope at this point."

Who benefits

According to estimates, Amendment 4 would provide tax relief worth about $1.7 billion over four years, with large breaks going to owners of second homes and businesses that own commercial property. Those groups would benefit from a section in the amendment that replaces the current 10 percent cap on annual property tax increases for nonhomesteaded properties with a new 5 percent cap.

In a battered real estate market that has recently been buoyed by international home buyers, housing professionals say lowering taxes for nonpermanent residents will help boost home sales. Business groups support the tax cuts for businesses as a way to create more jobs.

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"Think of the savings to small-business owners, and how much extra money they'll have to hire more employees," said John Sebree, vice president of public policy for the Florida Realtors, in a Web ad. "The small-business owners I talk to say they're afraid to commit to new employees because they just don't know how much their property tax bill is going to be from year to year."

In some cases, the extra money saved by businesses could be significant. Because properties like the Fontainebleau in Miami Beach have multimillion-dollar gaps between their market value and their "taxable" value, lowering the cap on annual increases could double the time it takes for the taxes to catch up to the market. A 5 percent cap means up to 20 years of below-market tax bills, and could create millions of dollars in savings for businesses. Critics say the new tax cap will shift the costs from corporations and real estate investors onto permanent residents.

Fontainebleau officials did not return calls or emails requesting comment.

"Everyone who owns a great big plaza or office building will benefit from this," said McCabe. "This is a terrible piece of legislation because it will put more of the burden for taxes on full-time Florida residents."

Another section of Amendment 4 provides a new homestead exemption for first-time home buyers, potentially reducing their tax bills by thousands of dollars over the first five years of home ownership.

For homeowners buying a first home — or for those who have not owned a home in the last three years — the property tax discount could amount to as much as 50 percent, a sum that would shrink by one-fifth each year over five years.

"We have to grow our housing industry in this state," said Sen. Mike Fasano, R-New Port Richey, who sponsored the bill putting Amendment 4 on the ballot. "We've got to get our real estate industry moving again."

Fasano said he originally decided to sponsor the bill to put an end to Florida's unpopular "recapture rule," which allows some homeowners to experience a property tax increase even when their home values decline.

Amendment 4 would allow the Legislature to repeal or amend the recapture rule, which was created in the wake of the Save Our Homes law that caps property tax increases for permanent residents.

"It's not fair to homeowners that they see the value of the home goes down but their taxes go up," Fasano said.

Who opposes it

Opponents of Amendment 4 — including city and county governments that rely on property tax revenue — say the real estate industry is using the recapture rule to gin up support for an amendment that's really about tax cuts for snowbirds.

Those cuts, they say, would cripple local governments, forcing either deep cuts to social services or tax hikes on full-time residents to make up for lost revenue.

Local governments have seen property tax revenue decline — along with the sagging housing market — for nearly five years. That has led to perennial budget fights, layoffs of government workers and painful cuts to services like libraries and parks.

As the real estate market begins to recover, advocates for local governments claim Amendment 4 would cause government coffers to lose more ground. If local officials decide that they cannot make up the budget shortfall with new cuts, they'll have to raise tax rates, said Amber Hughes, of the League of Cities, an advocacy group for local governments. That would effectively force permanent residents to shoulder tax increases as a result of Amendment 4.

St. Petersburg, facing a $10 million budget shortfall, is planning a tax rate increase for 2013, the first rate hike in 22 years. If Amendment 4 passes, local leaders say the tax rolls will shrink further by hundreds of millions of dollars. "We're below 2004 property tax collections, but we still have populations that are 2012 and we still have costs that are 2012," Hughes said.

Ads from each side

Fasano counters by saying the amendment would boost the home building market, leading to new revenue for local governments, and more jobs. A study by Florida Tax Watch found that the amendment would produce 350,000 home sales and 20,000 jobs over the next decade.

Those numbers are being highlighted in ads by the Florida Realtors, part of a well-funded campaign to garner 60 percent of the vote. A smaller campaign was recently launched by an advocacy group for local governments, hoping to kill the amendment.

For the most part, education groups have stayed on the sidelines, as the law was written in a way that shields school funding from being affected.

History shows that Florida voters generally favor constitutional amendments that reduce property taxes, as several have passed in recent decades.

Amendment 4 may not get the attention that previous property tax overhauls have received because the amendment, nearing 700 words, is so long.

"Most people, I believe, don't read through these things and many times don't understand them," McCabe said. "If (voters) come away with the conclusion that 'This is going to lower my taxes,' they'll vote for it."