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Florida's Amendment 4 a boon for first-time home buyers, but counties cringe

Shawn Merritt plays with daughter Angelina outside the house he bought last month in Wesley Chapel. As a first-time home buyer, he’d get a property tax break that would save him $1,000 in 2013 and another $2,000 over the next four years if Amendment 4 passes.
Published Oct. 10, 2012


Shawn Merritt, who bought a new house in Wesley Chapel last month, has 3,000 reasons to vote for Amendment 4.


As a first-time home buyer, he'd get a property tax break that would save him $1,000 in 2013 and an additional $2,000 over the next four years.


"That would be sweet," said Merritt, 24, who paid $165,000 for his 2,384-square-foot home. "I could use the money elsewhere."


So could the other big beneficiaries of Amendment 4: property owners who don't claim a homestead exemption, including investors, businesses, and owners of rentals and second homes.


But so could Pasco County budget chief Mike Nurrenbrock.


Passage of Amendment 4 would cost Pasco well more than $6 million over four years, according to a "conservative'' estimate by the Florida Association of Counties.


Over the past four years, Nurrenbrock has seen his county reduce hours at parks and libraries and eliminate more than 200 positions. It faces a $5.3 million shortfall for next year.


"Pretty soon the cuts will be to essential services," said Nurrenbrock.


It's the same all over the state. Amendment 4 goes before Florida voters in November at a time when the recession has forced county and city governments to trim spending over the past five years by $3 billion. If the amendment passes, they'll have to cut another $600 million by 2015, according to a legislative analysis, with more to come.


• • •


Amendment 4 would have little impact on the portion of property taxes that pays for public schools, which is roughly 40 percent of the total bill.


But aside from that, new owners of thousands of lower-priced homes would initially pay minimal taxes. For example, in the first year of the new law, first-time owners of homes valued less than $110,000 in Pinellas County would pay non-school taxes of $60 or less.


"I have mixed feelings about this," said Pinellas appraiser Pam Dubov. "It's a pretty big tax break."


Hillsborough already faces a $14 million budget hole for next year. If Amendment 4 passes, the county estimates a further revenue loss of between $6.8 million and $8.8 million, in just the first year. The latter figure approaches the county's entire parks and recreation budget.


"I am concerned," said Hillsborough County Administrator Mike Merrill. "We've had multiple years of lost revenue. We have cut very deeply."


• • •


Amendment 4 had strong support in the Legislature: The House vote was 105-11; the Senate, 25-12. To become law, it will need the support of 60 percent of voters this November.


Rep. Chris Dorworth, R-Lake Mary, was the bill's main sponsor. He is a real estate investor and developer. By spearheading the Amendment 4 initiative, he became the Florida Realtors' Legislator of the Year in 2011.


He believes Amendment 4 will help attract businesses to Florida by making property taxes more manageable without huge yearly increases.


"The idea behind this wasn't to see counties lose money," Dorworth said. "If they have to raise millage rates, they certainly can do that."


With campaign season revving up, Florida Realtors are spending big to push Amendment 4, which they say will boost home ownership, which in turn would increase their sales commissions.


The group started a Central Florida campaign last month with a $350,000 onslaught of television, radio, telephone and direct-mail ads.


Ben Fairbrother is running the TaxYourAssetsOff campaign for Taxpayers First, a creation of the Realtors' group. Florida's housing market, he said, has suffered because many potential first-time buyers have left the market in the wake of the housing crisis.


He believes counties would see revenue gains because more first-time buyers would boost demand for new homes.


"We need to do something now," Fairbrother said. "It would make the market stronger."


• • •


Amendment 4 is an attempt to reduce inequities produced by the state's current property tax system, particularly that which resulted from the Save Our Homes amendment in the 1990s.


It capped annual assessment increases for primary (or homesteaded) homes at 3 percent. Over time, that has caused recent home buyers to pay increasingly larger tax bills than longtime owners, even on homes with the same market value.


Other long-term impacts of Save Our Homes: owners of non-homestead properties, like second houses and commercial and rental properties, have paid more to make up for savings that have gone to primary homeowners. And owners of homesteaded properties were discouraged from moving because they would have lost their increasingly considerable tax advantage.


Voters addressed that latter impact by passing an amendment in 2008 to let homeowners take some of their Save Our Homes benefits with them when they move to another home.


Amendment 4 has three provisions:


• The first would reduce the 10 percent cap on increases in property values on non-homesteaded properties to 5 percent.


Assuming current millage rates, a legislative analysis put the revenue loss from that provision at $118.1 million in fiscal year 2013-14. It would grow to $406.5 million by 2015-16. That represents about two-thirds of the amendment's total budgetary impact.


• The second is for first-time home buyers. These are defined as those who have not owned a home in Florida in the past three years. They would receive an additional homestead exemption on half the appraised value of their home (up to $150,000), phased out over five years.


The tax loss is estimated at $38.1 million in 2013-14, eventually having an annual impact of $159.3 million.


The Florida House estimates that 40 percent of home buyers are first-time buyers. Projecting that onto the 7,239 Hillsborough property owners who filed for the homestead exemption last year means 3,175 would benefit from Amendment 4.


• The final provision has a relatively minor impact. It would allow the Legislature to repeal Florida's "recapture" rule. That allows the taxable value on Save Our Homes parcels to rise even as property values decline, if the home is still assessed below market rate.


That loss is estimated at $10.3 million in 2013-14, with a recurring impact of $32.5 million. This is the only provision of Amendment 4 that affects schools, with a statewide loss of $6.2 million the first year and a recurring loss of more than $17 million.


The Legislature estimates the total impact for all three provisions would be about $273 million in 2013, growing to about $600 million by 2016.


The revenue loss would continue to grow for at least two more years, but there are no estimates of the financial impact of Amendment 4 beyond 2016.


Why? The Legislature just doesn't make financial projections that far out.


• • •


Nurrenbrock, the Pasco budget chief, takes issue with the definition of first-time home buyers as those who haven't owned a home in Florida for three years. That will reward people who lost homes early in the foreclosure crisis, he said.


"If they sit out for three years, then they get a tax break for five years," he said. "The problem is (the Legislature) keeps tweaking laws that have unintended consequences."


Dubov, the Pinellas appraiser, wishes legislators would have let voters decide each provision separately, adding: "It's very complicated. This will be hard for people to understand."


For local governments, too, the long-term impact of Amendment 4 is difficult to pin down.


In Hillsborough, a county official estimates the cumulative five-year loss from the first-time buyer provision alone at more than $44 million. Based on statewide figures, that would represent less than a third of the county's total revenue loss.


• • •


Dorworth, Amendment 4's main legislative sponsor, said counties would not see big revenue losses because property values are not rapidly rising, and thus would not reach the lower tax cap on valuations.


He also said lowering property taxes for part-time residents is crucial.


"They are a huge part of our real estate market," Dorworth said. "They pump money into our economy."


Rep. Rick Kriseman, D-St. Petersburg, disagreed.


He voted against Amendment 4. He once served as a City Council member and doesn't believe that the amendment will trigger a rush to buy houses.


Part-time residents, he said, should not receive the same tax breaks as Florida's full-time home­owners.


"Their finances are better if they can afford a second home," he said. "That strikes me as wrong. Too much is focused on them."


Times researcher Carolyn Edds contributed to this report. Mark Puente can be reached at mpuente@tampabay.com or (727) 893-8459. Follow him at Twitter at twitter.com/markpuente.

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