TBO.com - TBO is Tampa Bay Online

Understanding Amendment One

ADVERTISEMENT

The Tampa Tribune

Published: January 13, 2008

Updated: 01/12/2008 06:22 pm

What's In Amendment One

•Doubling the homestead exemption for primary homeowners to $50,000

•Making Save Our Homes tax protection portable for homeowners who want to move to a new primary residence, up to $500,000

•A $25,000 tax break on tangible personal property for businesses

•A 10 percent cap on annual rises in assessments for property without homestead exemptions

What It Leaves Out

•Additional tax assistance for first-time homebuyers

•Reforms to reduce or eliminate the tax inequities that Save Our Homes creates among longtime homesteaders, first-time homebuyers and owners of nonhomesteaded property

•A guarantee that lawmakers will hold public schools "harmless"

•Alternative sources of revenue to offset tax cuts

•Anything to stop cities and counties from raising their tax rates to compensate for revenue lost as a result of the amendment

Who Benefits And How Much

From the doubled homestead exemption: Statewide, average savings would be about $240 for owners of homesteaded property, costing nearly $4.67 billion over the next five years. In Hillsborough County, the average savings would be about $300.

That savings could be eroded if local governments raise their millage to compensate for a shrinking tax base. If Hillsborough County commissioners did this, the average savings could drop to about $250.

From portability: Savings from the amendment would be higher for longtime owners of homesteaded properties who have amassed substantial savings under the Save Our Homes plan and now want to move to another primary residence. Under current law, those homeowners would lose those savings by moving. This change would cost the government nearly $2.7 billion in revenue over the next five years, state analysts say.

"What I and the lieutenant governor heard from people in '06 during the campaign, people felt trapped in their homes," Crist said. "They felt like they didn't have the opportunity to go to a larger home if they were a young family starting to grow and wanting to get more square footage for their family to enjoy. Or if they're like my mom and dad ... and they might want to contemplate downsizing."

Portability "affords freedom" to such homeowners, he said.

From the 10 percent cap for nonhomesteaded property: The amendment would provide some security for businesses, landlords and second-home owners by preventing enormous spikes, but probably no immediate savings would emerge because the average annual growth in value for these properties has been only 5 percent.

"We're going to continue to push for more relief, but this is an important first step," said Trey Price, public policy representative for the Florida Association of Realtors, which is spearheading the "Yes On One" campaign.

From the $25,000 tax exemption on tangible personal property: Business savings from this provision would amount to $194 million by 2012, state analysts say. The National Federation of Independent Business recently touted this benefit in a mass mailing, which said passage of the amendment would relieve more than 1 million businesses from having to file tangible personal property returns.

Who Loses?

Public schools expect to lose about $1.6 billion over the next five years if the amendment passes. State lawmakers shielded schools from the effects of several of the provisions in the amendment, and they have pledged to fund education fully if it passes. But they did not include anything in the amendment that guarantees a replacement of lost revenue for schools, which depend heavily on property-tax revenue.

The Florida Parent-Teacher Association, which opposes the amendment, has warned that counties and cities may have to cut programs and personnel such as after-school tutoring, school resource officers and school crossing guards.

Sen. Mike Haridopolos, co-author of the amendment, said the Legislature's track record is proof of its commitment to funding schools.

"Where have we spent the money in better budget years?" said Haridopolos, R-Melbourne. "It went to education and Medicaid. Last year, when it was a bad year, we still increased spending by $355 per student. That's an increase of over $7,000 over the previous year for my daughter's class."

Karen Woodall, a social services advocate who is chairing an anti-Amendment One coalition, took a different view of the Legislature's history of funding education. Woodall noted that lawmakers have consistently boosted the proportion of school funding that local communities must provide.

The "required local effort" for school funding increased from almost $7.4 billion to $7.9 billion this fiscal year.

"I don't have any evidence that they will hold education harmless," she said. "I believe they have a desire to do that, but having a desire and making it happen are two different things. It's just a verbal commitment."

The proposed amendment would reduce property taxes by as much as $9.3 billion over five years by shrinking the local tax base. That would reduce money for local governments and services. But nothing in the amendment prevents local governments from raising property tax rates to make up for the revenue they would lose as a result.

Some might decide against imposing a higher millage for political reasons, fearing they will anger voters or state leaders. Others already may be at the constitutional limit on millage. But tax analysts are predicting that rates would rise in many areas.

That prospect is cold comfort right now, especially given the statutory tax cuts that local governments have already begun absorbing, Woodall said. That mandated tax cut, priced at $15 billion over five years, has cost more than 200 Florida firefighters their jobs, for example. More cuts could affect things such as 911 response times and plans for expanding libraries, she said.

"It's not rocket science," she said. "As you squeeze resources, you have to make choices."

More Pros And Cons

The Florida League of Cities opposes the amendment because it exacerbates existing tax inequities created by Save Our Homes, said Mike Sittig, the group's executive director. By making the Save Our Homes tax cap portable, he said, lawmakers have made a "very unfair tax more unfair."

Owners of nonhomesteaded property already bear a disproportionate share of the tax burden because they are assessed at much higher rates, he said. If localities raise their tax rates in response to the amendment passing, the burden would again shift to property owners with little or no Save Our Homes tax protection.

"When you add the portability feature, you are going to cause that shift to move even faster from homestead to nonhomestead," he said. "And you are going to force a new, higher burden on the first-time homebuyer - whether that person is coming from Ohio or whether it's my children that are trying to buy their first home. All the money that is saved by the individual because of the portability will be borne by somebody else."

Continuing to pile the tax burden on nonhomesteaded property owners will harm Florida's economy in the long run, said Kurt Wenner, tax research director of TaxWatch.

Second-home owners from other states are important to the state's economy, he said, because they pay property taxes but use only limited services. "Snowbirds have always been a good deal for the average Florida homeowner," he said. "If they start moving away, someone is going to have to pick up the slack."

But supporters such as Crist and Haridopolos say Amendment One is critical for stimulating Florida's economy. If property values continue to fall and the real estate market remains stagnant, they say, revenue from property taxes will plummet, guaranteed.

Amendment One features such as portability will encourage more people to buy and sell homes, Haridopolos said. That will not only fire up the real estate market, he said, but it also will boost employment and the sale of goods related to construction and home improvement.

More retail and real estate sales would replenish the state's coffers as well because Florida relies on both a sales tax and a tax on real estate transactions.

"What's killing us right now is the lack of transactions," he said. "It pays for everyone - the economy, even the government, when you have more transactions. All of the dominoes will fall."

QUESTIONS FROM READERS

Q: How will the doubled homestead exemption work?

A: Current law exempts the first $25,000 of your primary home's value from taxation.

The amendment would "double" that by exempting the third $25,000 of your home's value.

In other words, the first $25,000 of your home's value would remain exempt from taxation. The next $25,000 (up to $50,000) would be taxed. The amendment would exempt the next $25,000 of your home's value (from $50,000 to $75,000). You would pay taxes on whatever value remains, above $75,000.

Q: Will I lose my 3 percent assessment cap if this passes?

A. No. The Save Our Homes program, which caps annual rises in assessments for primary homeowners, would remain in place. In fact, the amendment would expand the program by allowing homeowners to transfer the savings they have amassed under the program to their next home, should they wish to move. This is the "portability" feature of the plan.

Q: How would Save Our Homes portability work?

A. Homeowners would be able to transfer their Save Our Homes benefit of up to $500,000 to a new primary residence. If they move to a more expensive home, the entire benefit transfers; if they downsize, the same proportion of value is transferred. The provision is retroactive, to include 2007 home buyers.

Q: Does the amendment include special help for seniors?

A: There is nothing in the proposal that pertains to seniors specifically. However, the portability feature is expected to appeal especially to seniors, who may want to downsize but fear losing their Save Our Homes tax protection by moving.

Keyword: Property Tax, to calculate the potential effect of the amendment and for information on early voting, which begins Monday. Reporter Catherine Dolinski can be reached at (850) 222-8382 or cdolinski @tampatrib.com.

Loading Comments...

Email Print

ADVERTISEMENT