| Date of Meeting: | December 11, 2007 |
| Date Submitted: | December 5, 2007 |
| To: | Honorable Chairman and Members of the Board |
| From: | Parwez Alam, County Administrator Vincent Long, Deputy County Administrator Ken Morris, Intergovernmental Affairs Coordinator |
| Subject: | Consideration of the January 29, 2008 Proposed Constitutional Amendment on Property Tax Reform |
Statement of Issue:
This agenda item requests Board consideration of the January 29, 2008 proposed constitutional amendment on property tax reform (Attachment #1).
Background:
At the December 12, 2006 Workshop on Property Tax Reform, staff presented numerous property tax reform proposals under consideration by the Florida Legislature. During the workshop, the Board deliberated these proposals and issued statements of support and opposition to individual proposals. Based on the December 12, 2006 Workshop on Property Tax Reform, the Board has taken a position on each of the four individual components contained in the January 29, 2008 proposed constitutional amendment but has not taken a position on the proposed amendment in its entirety.
During the FY 2007/08 Annual Board Retreat, staff provided the Board information on the proposed constitutional amendment on property tax reform scheduled for a statewide referendum on January 29, 2008. The Board directed staff to prepare an agenda item for the regular Commission meeting on December 11, 2007, outlining the proposed amendment to give the Board an opportunity to take a formal position on the issue.
Analysis:
On January 29, 2008, Florida voters will have the opportunity to weigh in on the proposed constitutional amendment on property tax reform. At least 60% of the electorate must approve the amendment for its successful passage. The proposed constitutional amendment on property tax reform has four components including the doubling of the homestead exemption, a $25,000 exemption on tangible personal property, Save Our Homes portability, and a 10% cap on non-homestead properties.
Doubling of the Homestead Exemption:
The proposed amendment would provide an additional $25,000 homestead exemption for the value of homestead property above $50,000. Therefore, the exemption skips the second $25,000 of value and applies to the third $25,000 of value for a homestead property. The Legislature skipped the second $25,000 of value in order to prevent homestead properties in fiscally constrained counties, where property values are typically less than non-fiscally constrained counties, from being completely exempt from local government tax rolls. Under this proposal, the doubling of the homestead exemption does not apply to school levies.
The Board deferred to the Florida Association of Counties on this issue who sought for the local option of doubling the homestead exemption rather than a one size fits all approach. Should the voters approve the proposed amendment, the anticipated revenue loss to the County from doubling the homestead exemption is $9.6 million.
$25,000 Exemption on Tangible Personal Property (TPP):
Florida Statutes defines TPP as all goods, belongings, and other articles of value capable of manual possession and whose chief value is essential to the article itself. It is any item, other than real estate, which is used in business. For example, the TPP tax is levied on furniture, fixtures, machinery, equipment, tools, signs, supplies, and any other assets used by a business. The proposed amendment would provide a $25,000 exemption on TPP for all tax levies, thereby eliminating the TPP tax for many small businesses.
Although the $25,000 exemption on TPP would result in a $1 million loss in revenue to the County, the Board supported the Florida Association of Counties in advocating for the exemption to help businesses.
Save Our Homes (SOH) Portability:
At the December 12, 2006 workshop, the Board discussed several different forms of SOH portability including statewide, in-county, and county to county reciprocity through inter-local agreements. The current proposal would allow homestead property owners to transfer their SOH benefit, up to $500,000, to a new homestead within two years of giving up their previous homestead. If the just value of the new homestead is more than the previous home’s just value, the entire differential can be transferred (dollar for dollar); if the new homestead has a lower just value, the amount of the accumulated benefit that may be transferred is proportional to the value of the new homestead (the percentage of savings). SOH portability applies to all taxes, including school tax levies.
If passed by the voters, this provision will also apply retroactively for those who gave up their homestead in 2007. Staff’s primary concern about statewide portability is the inability to determine the fiscal impact when citizens move to Leon County from other counties and transfer their SOH differential. Residents moving to Leon County from counties with significantly higher values in property can negatively effect the County’s tax rolls. Therefore, the Board opposed all forms of statewide portability during its workshop on December 12, 2006.
10% Assessment Cap for Non-Homestead Property:
The Board endorsed a 10% cap on non-homestead properties to provide limitations in tax increase during a booming real estate market. Under the proposed amendment, non-homestead property will have a 10% assessment cap (similar to Save Our Homes) but the cap will apply only to non-school levies. The 10% cap will sunset after 10 years, when it will be presented to the voters for re-approval. Most residential property will be reassessed at just value when it is sold; commercial property and residential properties with 10 or more units will be reassessed after a significant improvement or a sale. The 10% cap on non-homestead properties can not effect the County budget until FY 2010, nor will it effect the budget until the real estate market rebounds.
Fiscally Constrained Counties:
The proposed amendment requires the Legislature to provide an annual appropriation to fiscally constrained counties to make up for revenue reductions resulting from the adoption of the constitutional amendment by the voters. There is no "ceiling" on the state appropriation to compensate the fiscally constrained counties and the Legislature has not designated a specific funding source that will be used to compensate these counties. The Florida Association of Counties has requested that the state funds dedicated for county appropriations not be targeted for payment to the fiscally constrained counties because that would be at the expense of the non-fiscally constrained counties.
Impact of the January 29, 2008 Proposed Constitutional Amendment
Should 60 percent of the voters approve the proposed constitutional amendment, the doubling of the homestead exemption, the $25,000 exemption on tangible personal property, and the portability of SOH will factor in to the County’s FY 09 budget. The 10% assessment cap on non-homestead properties will not factor in to the County budget until FY 2010.
Under the current statutes, the Board has the ability to increase property tax collections through various voting thresholds. These provisions also apply to the EMS MSTU.
Should the voters approve the amendment resulting in a reduction in the County’s ad valorem tax base, the Board will have the option to offset the reduction by increasing the millage rate within the statutory revenue cap guidelines described above. Therefore, the Board may raise the millage rate by simple majority vote without issuing a notice of a tax increase under the current law. If the Board chooses to absorb the reduction in ad valorem revenue due to the passage of the constitutional amendment, staff estimates a $10.655 million loss in revenue for County programs in FY 09.
The table below illustrates the estimated fiscal impact of the proposed constitutional amendment if the Board chooses not to raise the millage rate to offset the loss in revenues.
Conclusion:
Based on the December 16, 2006 Workshop on Property Tax Reform, the Board supported the $25,000 exemption on TPP and the 10% assessment cap on non-homestead properties. The Board opposed the doubling of the homestead exemption and the statewide portability of SOH. Should the voters approve the amendment by at least 60%, the anticipated revenue loss to the County is estimated at $10.655 million in FY 09. However, the Board will have the option to offset the revenue loss by increasing the millage rate under the current statutory revenue caps.
Options:
1. Support the January 29, 2008 proposed constitutional amendment on property tax reform.
2. Oppose the January 29, 2008 proposed constitutional amendment on property tax reform.
3. Do not take a position on the January 29, 2008 proposed constitutional amendment on property tax reform.
4. Board Direction.
Recommendation:
Board Direction.
Attachments:
1. January 29, 2008 Proposed Constitutional Amendment of Property Tax Reform
2. Florida Association of Counties 2008 Position on Property Tax Reform