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Property Tax Amendment Could Raise Rates

By CATHERINE DOLINSKI, The Tampa Tribune

Published: January 10, 2008

TALLAHASSEE - Voting this month for a plan to cut property taxes may spark a rise in your local property tax rate, eroding savings for homeowners and increasing tax bills for other property owners.

The constitutional amendment proposed on the Jan. 29 ballot would reduce property taxes by as much as $9.3 billion over five years by shrinking the local tax base. But nothing in the amendment prevents local governments from raising property tax rates to make up for the revenue they will lose.

If the amendment passes, Hillsborough County might have to raise taxes by about 1 mill to offset its revenue losses, speculates Tim Wilmath, valuation director at the Hillsborough County Property Appraiser's Office. That would reduce the expected average savings Hillsborough homeowners would have received from $300 to about $250.

While homeowners would see less savings, nonhomesteaded property owners - such as those with a second home or business - likely would see their tax bills increase, said Kurt Wenner, tax research director for the fiscally conservative Florida TaxWatch group, a critic of the amendment.

The amendment's potential to push up tax rates largely has escaped the public's notice, Wenner said.

Although some local governments have hit constitutional limits on their property tax rates, others still have the flexibility to raise rates enough to recoup revenue losses, he said. "It's certainly going to happen, to some degree."

The push-pull between the tax base and tax rate stems from the way cities and counties set their tax "rollback" rates, the starting point of budget negotiations every year for local governments.

Per Florida's Truth In Millage (TRIM) law, cities and counties must "roll back" their property tax rates to a level that will bring in the same amount of revenue raised the previous year, adjusted for new construction and annexation. If a city or county wants to impose a higher rate, it must advertise a tax increase.

That's where the proposed Constitutional amendment comes in. The amendment would cut taxes by increasing exemptions and capping increases in tax assessments for more properties. But it lacks one important detail: how that shrinking of the tax base may affect the rollback rate.

If the amendment passes, cities and counties will be able to boost their local tax rates to compensate for their losses in taxable value, unless their current tax rates are hitting the constitutional limit of 10 mills.

In other words, the rollback rate essentially would become a "roll forward" - and without triggering the requirement to advertise a tax increase. Continuing drops in property values, which would erode the tax base even further, could roll rates forward even more.

For example:

•Tampa had a citywide taxable value of $26.8 billion in 2006, with a tax rate set at 6.4 mills. This raised $171 million for city services.

•For 2007, the TRIM law required officials to adopt a rollback rate of 6.0 mills, which would generate the $171 million raised the year before.

•A one-time, 5 percent tax cut lawmakers imposed during their June 2007 session further reduced the tax rate, to 5.7 mills.

•If Amendment One, combined with declining property values, shrinks the city's taxable value by 15 percent, the city could "roll forward" its tax rate to 6.5 mills to generate the $171 million.

If that were to happen, a home assessed at $200,000 would be taxed $1,300 at 6.5 mills instead of $1,140 at 5.7 mills.

Burden Hits Nonhomesteaders

An increase in the tax rate primarily would affect nonhomesteaded property owners, whose tax burdens could increase, said Jill Chamberlin, spokeswoman for House Speaker Marco Rubio. That's because those properties would lack the Save Our Homes cap of 3 percent on assessments that homesteaders enjoy.

If passed, the amendment would cap rises in nonhomesteaded property assessments at 10 percent - below recent record-high spikes seen in recent years, but above the average 5 percent annual growth in value. The amendment offers no new tax exemptions on nonhomesteaded properties.

"The Speaker has said over and over that this amendment doesn't go far enough," Chamberlin said. "I think everyone agrees this is an imperfect bill."

Early voting gives residents the chance to approve or reject the proposed amendment as soon as Monday. Voting ends when the polls close Jan. 29, the official date of the presidential primary race that appears on the same ballot.

If the amendment passes, local governments should not roll tax rates forward - even if the law permits it, said Trey Price, public policy representative for the Florida Association of Realtors.

If they do raise rates, said Price, whose organization is leading the charge to pass the amendment, "maybe this is some kind of wake-up call that is desperately needed by the citizens. Seeing illogical tax increases ... should encourage people to go to their local governments and say, 'You can't keep these higher rates. They need to be lower.'"

Sensitive To The 'Spirit'

Hillsborough County Commissioner Mark Sharpe said the commission remains sensitive to the fact that the obvious "spirit" of the amendment is tax reduction. "We want to work with the Legislature."

At the same time, he said, local governments must meet their responsibilities to maintain adequate infrastructure for their communities.

"Florida is very unique; we have exploded in population going from approximately 2 million in 1950 to over 19 million," Sharpe said. "Our infrastructure did not keep up. We've got to build stormwater systems; we've got to build schools. We've got to have the core infrastructure to sustain what I hope will be a modern and high-tech state. And it's going to require revenue."

Asked whether he would approve an increase in the property tax rate to offset revenue losses, Sharpe said he would have to consult the county's budget experts.

Wilmath, of the Hillsborough property appraiser's office, said he would be "stunned if they lower the millage rate below what the rollback required. I believe that every year, it will strictly be a mathematical calculation."

Even if the amendment does not pass, however, the decline of property values alone could shrink the tax base enough to roll the rate forward to some extent, Wilmath said. That, plus a provision in Save Our Homes requiring annual increases in assessments, likely would boost tax bills slightly for homesteaded property owners in 2008-09 if the tax amendment fails.

Save Our Homes not only limits annual increases in assessments to 3 percent, it also requires that assessments rise by up to 3 percent - even if market values drop. This provision of the program, known as recapture, affects homesteaded property owners regardless of the Jan. 29 vote.

Rollback Provision Left Out

Last summer, lawmakers addressed tax rates explicitly in a different tax-cut amendment that the state Supreme Court ultimately threw out. But that bill language was left out of the amendment that legislators approved in October to appear on the Jan. 29 ballot.

The now-defunct amendment that passed in June specified that local governments must set their rollback rates without accounting for how much the tax cuts in the amendment would shrink the tax base. Local governing bodies would have had to cast a supermajority vote to raise tax rates in order to offset those revenue losses. The Florida Supreme Court rejected that amendment, which would have created a "super" homestead exemption, on grounds that its wording was misleading.

The amendment that lawmakers approved in October came from the Senate, Chamberlin said, but House leaders were aware it did not address the roll-forward issue. "It's a jointly shared responsibility."

"We felt that this was the bill we could get through; it was clear in our minds what the intent of it was," said Sen. Mike Haridopolos, R-Melbourne, who co-authored the amendment. "We don't believe they should be able to reset the millage of the rollback rate to wherever they want."

If the amendment passes, he said, lawmakers will pass a bill this spring that addresses issues left unresolved by the original bill. "If we see that local governments use this as a backdoor way of not getting to the true rollback rate, it'll just give us more ammunition to place more restrictions on local government."

State Sets Rate Formula

Having the option to boost rates would seem to be a boon for local taxing authorities, many of which have sounded the alarm about potential cuts to local services. But local government groups aren't celebrating just yet.

Mike Sittig, executive director of the Florida League of Cities, told members in a video presentation after the October session that while some cities will lose money as a result of the amendment, others will not. Most of the fiscal implications of the amendment, he said, are unclear - to the detriment of governments and citizens both, he said.

"It's not fair to stand up and say the government will lose money because of this, unless you know exactly what your figures are," Sittig said.

One thing that is clear, he said, is that state law dictates how localities set their rollback rates. State law bases the rate on revenue levels from the previous year, not on tax rates. Even if the formula actually rolls the rate forward, he told members, "you will be following state law" by using it.

The roll-forward option will affect various localities differently because the state Constitution caps local property tax rates at 10 mills. With tax rates of 5.74 mills for the county and 4.38 mills for unincorporated Hillsborough, local millage could rise substantially before reaching the cap.

That assumes, however, that local governments would be willing to risk angering voters by approving an increase in the property tax rate. Doing so could prove difficult politically, TaxWatch's Wenner said, though he was surprised at how many localities voted by supermajority to override the taxation limits that lawmakers wrote into statute last summer.

With property values falling and local governments already absorbing statutory tax cuts that lawmakers passed last summer, Wilmath, of the Hillsborough County property appraiser's office, said he could not foresee local leaders cutting back tax rates below the state-mandated rollback rate, "even though that's what the public may expect."

Reporter Catherine Dolinski can be reached at (850) 222-8382 or cdolinski@tampatrib.com.

Reader Comments

Posted by ( dsjk100 ) on January 9, 2008 at 11:51 p.m. ( Suggest removal )

Where does the County Property Appraiser's Office get off speculating about a raise in the millage? This is totally outside the scope of his job function. The only people who can raise the millage is the county commissioners or the city councils. If this quote was given while on county time as a county representative the county should reprimand him. What this should show everyone is that you have another government bureaucrat trying to use scare tactics to protect himself. Maybe what government will do is freeze this guys salary or benefits, how’s that for a solution to the problem. Why doesn’t the Tribune run a story titled "PROPERTY TAX AMENDMENT COULD FREEZE EXORBORNANT SALLARIES AND BENEFITS". Shame on the tribune for running this type of government propaganda and supporting the politics of fear.

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Property Tax Amendment Could Raise Rates

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