Property Tax Relief 2011:
Who Wins? Who Loses?
2011 Florida League of Cities Annual Conference
August, 12, 2011
2011 Legislature Passed HJR 381
Amendment 4 on 2012 Ballot - Grants
selective new property tax breaks if voters
approve the proposed constitutional
changes
•
Why did the Legislature approve it?
•
What does it do?
•
How will it affect cities and other
local governments?
•
How will it affect taxpayers?
•
Who wins? Who loses?
What Does HJR 381 Do?
Three primary elements:
1) Non-homestead Assessment Cap – drops from 10% to 5%.
2) “First-time” Homesteader exemption – 50% of value
phased-out over five years.
3) Assessment Caps - Anti-Recapture so that assessed value does
not go up by CPI or 3%, if just value drops; applies to both
Save Our Homes and to the Non-Homestead Assessment Caps.
Only the Save Our Homes Anti-Recapture change affects Schools.
FLC 2011 Annual Meeting Orlando
Why Did Legislature Approve HJR 381?
•
Simple answer is that it appears to grant
additional tax relief (but not in a way that will
affect state finances).
•
A more complete answer requires some
historical context.
•
The 2007 Legislature approved numerous
statutory and constitutional property tax
measures.
I wouldn't ever set out to hurt
anyone deliberately unless it was,
you know, important —like a league
game or something.
Dick Butkus
FLC 2011 Annual Meeting
Orlando
In 2006, Charlie Crist promised to fix
the property tax crisis.
•
Fiscal 2007, Total Property taxes rose to $30.4 B
–
Double the $15.3 B in Fiscal 2001
–
For 6 years, compound annual growth rate of 12.1%
•
Non-school property taxes increased even more
–
from $8.8 B to $18.1, a six-year annual rate of 12.8%
•
Increases were fueled by the real estate boom.
•
As local millage rates fell, non-homestead owners
paid a disproportionate share of the increases.
What Happened Between Fiscal 2001 and
2007? Why Did Property Tax Shoot Up?
•
In the 6 years thru FY 2007, non-school
property taxes rose at 12.8% annually, but
total economic activity in Florida increased at
only 6.8% per year over the same period.
•
For most 20+ years before FY 2007, property
taxes and economic activity (measured by
Florida Personal Income) moved in tandem.
•
The impact of the real estate boom on taxable
values severed the historic relationship.
FLC 2011 Annual Meeting Orlando
Why Did Property Tax Shoot Up? Weren’t
Elected Officials Concerned?
One of the primary reasons was the Save Our
Homes Assessment Cap.
–
When market values rise rapidly, SOH keeps
homestead increases at or below 3%.
–
Also, millage rates were falling as taxable value went
up, often enough to make homestead taxes fall.
–
Property owners without SOH bore the brunt of the
tax increase, but homesteaders, the preponderance of
voters, were largely satisfied or disinterested.
The Legislative View – Soaring
Property Taxes Spurred Legislature
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0%
Economic Activity and Non-School Property Taxes
% Changes Tended to Even Out Until Post-911 Era
Non-School Property Taxes Total Economic Activity FLC 2011 Annual Meeting Orlando
The Legislative View – Soaring
Property Taxes (Cont’d)
2.09% 1.81% 2.13% 2.56% 1.7% 1.8% 1.9% 2.0% 2.1% 2.2% 2.3% 2.4% 2.5% 2.6% 2.7%
Non-School Property Taxes as a Percent of
Economic Activity (Personal Income)
Legislature Explored Linking
Property Tax Growth to Income
•
From Fiscal 1991 through 2003, property taxes
relative to income stayed in a narrow band
–
Ratio did not fall below 1.8%
–
Nor did it rise above 2.1%
•
But beginning in Fiscal 2004, property taxes
began to grow much faster than the state’s
economy.
FLC 2011 Annual Meeting Orlando
Legislature Looks at Property Tax
Caps Based on Economic Growth
18,129 14,665 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 $M ill io ns pe rF is ca lY ea r
NonSchool Property Tax Levies
-Maximum Levy if Annual Increases Limited to
Economic Growth (Measured by Personal Income)
Legislative Solution: Millage
Rollbacks and Caps on Increases
FLC 2011 Annual Meeting Orlando
$18,129 $14,669 16,064.7 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 $M ill io ns pe rF is ca lY ea r
Unprecedented Drop in Non-School Property Taxes
From FY 07 to FY 11, NS Taxes Down $3.5B or 19%
Why? Real Estate Bust, 2007 Rollbacks, Caps & New Tax Breaks
Actual Non-School Ad Valorem Levies NS Property Taxes Capped at Economic Growth
The Stated Goals For the 2007 Property
Tax Breaks Have Been Met & Exceeded
•
Through Fiscal 2011, Non-School Property
Taxes have declined by $3.5 billion, or 19%.
•
Non-school property taxes are likely to decline
again this year, even as rates increase.
•
Current and near-term non-school property
taxes are well below a cap based on economic
activity as measured by income.
FLC 2011 Annual Meeting Orlando 18,129.3 14,668.8 14,071.0 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 $22,000 $M ill io ns pe rF is ca lY ea r
Property Taxes Reductions To Date Exceeded the 2007 Legislated Goals
Most Local Governments Can Expect Another Decline In FY 11-12
Based on Current Estimates, Can Expect Modest Growth in FY 12-13
Non-School Ad Valorem Levies NS Property Taxes Capped at Economic Growth
Why is the Legislature Again Proposing
New Property Tax Breaks?
•
The recent tax levies that exceeded economic growth
have been reversed and non-school taxes have fallen.
•
In fact, non-school property taxes are currently
below an income-based cap, even one with a base
year of 1975-76.
•
Non-School taxes will fall again this year.
•
These new tax breaks will benefit narrow groups of
taxpayers, shift the tax burden to others, and will
take effect just a the tax base is likely to stop
FY 2011-12 Non-School Property Taxes
Will be Less than an Income-Based Cap
Even a Cap Starting with FY 1975-76 Taxes
FLC 2011 Annual Meeting Orlando $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 $M ill io ns pe rF is ca lY ea r
NS Property Tax Levies & Estimates NS Property Taxes Capped at Economic Growth
No Real Answer to the Question:
« Why is the Legislature Again Proposing New
Property Tax Breaks in HJR 381? »
•
Why are the provisions in HJR 381 needed?
–
Little to no policy justification was offered in support.
–
The state’s Revenue Estimating Conference provided
only aggregated, statewide impact estimates and
even those estimates are found in footnotes.
•
Legislators who voted for HJR 381 did so with
little to no idea what the potential impacts would
be on their constituents and on the local
HJR 381 WILL HAVE SIGNIFICANT IMPACTS ON THE TAX BASE
THESE IMPACTS ARE DELAYED & GROW IN AN ATYPICAL FASHION.
FLC 2011 Annual Meeting Orlando
August, 12, 2011 19
Estimated Impacts of Provisions* in HJR 381
(All Amounts in $ millions)
IMPACTS ON COUNTY TAXABLE VALUE
TAX ROLL
ISSUES
2013
2014
2015
2016
First-Time Homesteader 50% / 5-Year Exempt.
(3,556)
(7,110)
(10,439)
(13,330)
Non-Homestead Cap from 10% to 5%**
(10,839)
(23,536)
(37,298)
(52,217)
Anti-Recapture - All Capped Properties***
(952)
(1,922)
(2,827)
(2,981)
ALL IMPACTS OF HJR 381
(15,347)
(32,568)
(50,564)
(68,528)
* If approved at the general election in November 2012, the first impacts will be on the 2013 tax roll.
** The Anti-Recapture provisions require implementing legislation, and the provisions will not apply unless the legislature acts. *** The 2016 non-homestead cap taxable value impact was estimated based official estimates for prior years.
2013
2014
2015
2016
COUNTY TAXABLE VALUE - CURRENT LAW
1,358,338
1,434,844
1,524,207
1,620,294
ALL IMPACTS OF HJR 381
(15,347)
(32,568)
(50,564)
(68,528)
HJR 381 Impact as % of County Taxable Value
-1.1%
-2.3%
-3.3%
-4.2%
THE IMPACTS OF HJR 381 ON THE NON-SCHOOL TAX BASE CAN BE
USED TO DEVELOP TAX IMPACTS ON NON-SCHOOL GOVERNMENTS
BASED ON FY 2010-11 MILLAGE RATES BY COUNTY
Estimated Impacts of Provisions* in HJR 381
(All Amounts in $ millions)
IMPACTS ON COUNTY TAXABLE VALUE TAX ROLL
ISSUES 2013 2014 2015 2016
First-Time Homesteader 50% / 5-Year Exempt. (3,556) (7,110) (10,439) (13,330)
Non-Homestead Cap from 10% to 5%** (10,839) (23,536) (37,298) (52,217)
Anti-Recapture - All Capped Properties*** (952) (1,922) (2,827) (2,981)
ALL IMPACTS OF HJR 381 (15,347) (32,568) (50,564) (68,528)
* If approved at the general election in November 2012, the first impacts will be on the 2013 tax roll.
** The Anti-Recapture provisions require implementing legislation, and the provisions will not apply unless the legislature acts. *** The 2016 non-homestead cap taxable value impact was estimated based official estimates for prior years.
TAX IMPACTS ON LOCAL GOVERNEMENTS TAX ROLL
HJR 381 Estimated Tax Impacts ($Millions) 2013 2014 2015 2016*** County Governments (103.7) (219.9) (341.3) (462.4)
Municipal Governments (37.7) (80.4) (125.5) (171.1)
Independent Special Districts (23.1) (49.2) (76.6) (104.2)
FLC 2011 Annual Meeting Orlando
