SAVE OUR HOMES! - Florida Tax Reform

At a recent Marketing Meeting at the Tallahassee Board of Realtors, a presentation was presented by a FAR representative regarding the Florida Tax Reform. This amendment will be voted upon by the residents of Florida in the State wide election on 29 January 2008. Attached is that presentation for your use (Thanks to Don Pickett for passing this along).

The problem...

• People are locked in their homes
• A special election to get reform sooner rather than later
• We did not support a simple doubling of the Homestead Exemption
• Huge problems with highest and best use
• Taxes should have been rolled back for significant Savings

High Expectations!

• The Governor kept saying property taxes would "drop like a rock."
• The House Speaker floated the idea of increasing sales tax to buy-out property
• taxes on Homestead property.

We deserve to have high expectations from our elected officials because total property tax levies have increased by 99% between Fiscal Years 2000 and 2007

We didn't get to where we are overnight!

The property tax system evolved and in most cases there were good intentions

Save Our Homes

• Few in this room probably supported Save Our Homes at the time it passed in 1992, but it had what voters believed was a valid purpose at the time.
• Save Our Homes created huge inequities among taxpayers.
• One house next door to another pays very different property taxes.
• Because of Save Our Homes, local taxing authorities have increased the burden on non-homestead properties to compensate for the homestead savings.
• "The three problems with real estate in Florida are property taxes, property insurance and negative publicity." (Nancy Riley 2007 FAR President)

Don't believe everything you read in the newspaper!!!

• I'm m not here to tell you what passed the legislature is something I would have written if I were writing the perfect bill.
• But, I do want to tell you that it is MUCH better than current law.

The Legislature passed three bills...

1. Statutory Rollbacks which are immediate and already signed by the Governor
2. Constitutional Amendment that creates a Super Homestead Exemption and a few other items
3. Special Election

Phase One

• Statutory millage rollback
• Local government revenue cap
• For the upcoming 2007-08 fiscal year that begins October 1, 2007:
• All local governments (except school boards) will have to reduce total property tax revenues by a specified percentage (0-9%) based on their 5-year history of levies.
• Independent special taxing districts that levy ad valorem taxes are all subject to a 3 percent cut.

Revenue Cap

• Instead of an assessment cap (such as Save Our Homes), there is an overall revenue cap limiting what governments can collect from property taxes.
• This will protect everyone, including commercial and rental housing, from big and unpredictable property tax increases from year-to-year.

Assessment Cap versus Revenue Cap

• SOH is an assessment cap on Homestead properties only. It reduces the taxable value but it does not limit the tax rate.
• Local gov'ts have had to keep millage rates artificially high to compensate for the taxable value that is shielded by Save Our Homes.
• The phenomenon especially hurts commercial and non-homestead properties who have no assessment limitations.

Revenue Cap (Continued)

• The revenue cap requires a local government to collect the same amount of revenue it did in the previous year (adjusted for new construction and statewide personal income growth)
• A revenue cap offers guaranteed protections for individual properties, much like an assessment cap. However, every property in the jurisdiction will benefit from a revenue cap, rather than only Homesteads.
• The millage rate applies equally to all properties and the revenue cap will continually push the millage rate down. This is good for every class of property.
• This would be the first ever guaranteed property tax protection for commercial and
• non-homestead properties in Florida's history!

Phase One

The statutory rollback equals $15.6 billion in tax relief over five years

Phase Two

• Proposed amendment to Florida's constitution
• If passed, the amendment will offer voters a choice of continuing their Save Our Homes protection if they have homesteaded property, or choosing a super- homestead exemption.

Super-Homestead Exemption

• 75% of the first $200,000 of a home's value and 15% of the next $300,000
• Every homestead receives at least a $50,000 exemption
• The maximum homestead exemption would be $195,000
• Benefits workforce community such as police, firefighters, nurses and teachers
• Median price of an existing home in Florida was $237,000 in May 2007
• Under Save Our Homes, the homestead exemption will be $25,000
• Under the super homestead exemption, a homeowner will receive $155,550 in exemption
• The upper threshold of $500,000 is indexed to personal income, so it will increase at about 4% a year
• The amendment also allows the Legislature to increase the upper threshold limit with a 2/3 vote
• First time homebuyers and people who move will be afforded substantially bigger savings - up to $195,000 in exemptions, compared to the only $25,000 that they receive now
• This new plan also assures most people that they won't be hit with a tax bill many times what they pay now on their next home purchase.
• If approved, current homesteaders will be given a choice of how they want to be taxed.
• You can choose to stay with Save Our Homes or adopt the new Super Homestead system
• There is no deadline for the choice, but it can only be made for your current homestead.
• Transferring a homestead or moving will put that owner in the new super-homestead exemption system.
• $25,000 tangible personal property tax exemption for businesses
• This local tax is paid by businesses on shelving, office equipment, and other materials.
• 1 million of Florida's 1.3 million businesses will be completely exempt from this tax - and many of those will be REALTORS®. While the annual dollar savings average $500 per year, the exemption eliminates the annual filing requirement for those exempt.

Additional Changes:

• Further protects low-income seniors
• Expressly authorizes the legislature to limit the authority of local governments to increase property taxes
• Authorizes the Legislature to help working waterfronts and affordable housing with assessment changes

Phase Three

• A special election for constitutional changes is called for January 29, 2008.
• Delaying consideration of these reforms until November 2008 would have forced a delay of implementation of the new super-homestead exemption by another year.
• This would mean more people would be locked in their homes and for another year!

What's Next?

• FAR has received assurances that assessment methods for commercial and other property types will also be addressed in the next regular session of the legislature.
• Most importantly among these is Highest and Best Use.

Tax and Budget Reform Commission

• Tax and Budget Reform Commission which is appointed to meet every 20 years has been named recently and our president is one of those appointments.
• The Commission will continue to meet for the next several months and will be able to put amendments directly on the November 2008 ballot.

UPDATE 8/6/07

I received the following information, forwarded by Ed Cohn, from the office of Representative Carl J. Domino:

This is obviously a very HOT topic.

Joe Manausa, MBA
Century 21 Manausa & Associates
www.manausa.com

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