Renovation time for 'Save Our Homes'?
A Florida law that helps keep property taxes in check has kept some stuck in homes. A proposal would let you take your cap with you.
By JONI JAMES
Published January 15, 2006
TALLAHASSEE - During the blazing runup in home values in Florida, the state's popular cap on property taxes has developed a reputation as something of a prison.
Sure, longtime homeowners have enjoyed the fruits of higher home values without the pain of higher taxes because taxable home values cannot rise more than 3 percent a year.
But the down side of that good fortune is that people who want to move, into bigger or even smaller homes, face a sharply higher tax bill as they surrender the tax cap.
But that may not be true much longer.
What looked like a radical idea a year ago - to allow Florida homeowners to take part of their tax cap with them when they buy a new home - isn't so radical anymore.
Leaders in the Legislature, including the next Senate president, Ken Pruitt, are embracing the idea that Florida's "Save Our Homes" property tax cap needs to be portable so Floridians have one less hurdle to buying a new home, be it empty-nesters wanting to downsize to a condominium or a young family needing more bedrooms.
"The status quo is becoming untenable," said Sen. Steve Geller, D-Hallandale Beach, one of the proposal's sharpest critics last year, who now embraces it. "A lot of people are trapped in their homes."
Just a year ago, the idea stalled in both chambers over criticism of its long-term effect on local governments, which are funded almost entirely by property tax revenues, and the potential to shift more of the tax burden to business and rental properties.
Further, the plan could sharply exacerbate the inequities that Save Our Homes already has created in the property tax base. Right now, two neighbors in identical homes can pay radically different taxes if they bought their homes years apart.
But the climate for changing the system has grown more favorable in Tallahassee as lawmakers have heard complaints from constituents and fears have risen that the real estate market might be cooling.
Seven bills addressing the issue already are filed for the 2006 legislative session. And last week, in the first hearing, the proposal that had been shut out last year sailed unanimously through the Senate Community Affairs Committee with bipartisan support. It faced sharp objections by the Florida Association of Counties.
"Four years ago I got laughed out of committee," quipped Sen. Mike Haridopolos, R-Melbourne, who has filed the bill repeatedly with Rep. Carl Domino, R-Palm Beach Gardens. "Now everyone likes it. It's great."
Because the original Save Our Homes was done by constitutional amendment, anything to change it would have to be approved by the voters as well. First, 60 percent of the members of both chambers would have to agree to put it on the November ballot as a proposed constitutional amendment. Then, a simple majority of voters is required to adopt it.
Here's how the Domino-Haridopolos proposal would work: A homeowner with a house whose taxable value is $100,000, but who sells it for $300,000 would get to take the difference ($200,000) with him or her to the new home. If the new home cost $400,000, they would only pay taxes as if it was worth $200,000.
There are some limits.
The homeowner would only enjoy the full benefit of the transfer if the new home being purchased cost at least as much as the sales prices of the old one. When buying a less expensive home, the property owner would only be able to transfer a partial, pro-rated benefit. And no homeowner could use the law to have a new home with a lower taxable value than the one they just sold.
Domino contends that rule means Florida's local governments won't suffer. Plus, contends Pruitt, local governments could use a diet: Property tax collections have doubled in the past decade to $22.4-billion, far faster than the state's population growth.
But critics, state economists, and even Gov. Jeb Bush, see it differently in a state where property taxes pay for everything from schools and police to parks and senior citizen services.
They say the plan would slow the growth in the state's property tax collections because it would remove a key reason Florida's Save Our Home hasn't had more impact on property tax collections. Every time a home is sold in Florida, it's taxable value is reset based on current market values.
Remove that mechanism and Florida counties, cities and schools would lose as much as $5.4-billion annually by 2012-13 and much more into the future, state economists estimated last year.
Domino disputes the projection because he said the economists didn't consider that some homes' taxable values would be readjusted when their owners left the state or died. A new estimate is expected to be set this week.
"I think it's a great idea, but it has just a huge out-year (future) fiscal impact," Bush said last week. "Cutting other people's taxes is appropriate sometimes, but you've got to be (careful)."
But Bush doesn't have any formal role in whether the measure makes the ballot. Unlike laws passed by the Legislature, which Bush can veto or sign, joint resolutions to place ballot questions before the voters don't require the governor's signature.
One clear hurdle to the plan does remain: House Finance and Tax Committee Chairman Fred Brummer, R-Apopka, who for two years has kept Domino's plan from being heard in his committee. On Friday, he said he still doesn't like it.
"I'll hear it after the "All-Hell Hockey Team' is announced," Brummer said. "And that takes at least a year after hell freezes over."
In fact, Brummer is a key critic of the original Save Our Homes amendment.
"It's the perfect reverse Robin Hood because it steals from the poor and gives to the rich," he said. "It provides the greatest value to the most expensive homes."
Indeed, as home values have escalated, so has the Save Our Home benefit for wealthy homeowners. Last year, owners with homes valued at more than $500,000 accounted for 49 percent of the Save Our Homes exemption though they only made up 19 percent of Florida's owner-occupied homes.
House Speaker Allan Bense could intervene. Last week, he made no promises, but noted, "There are folks hurting out there, I would like to provide some help."
Even Florida's Association of Counties has changed its tactics. After outright opposing the plan last year, this year it's telling lawmakers it is aware there is a problem that needs to be addressed.
But the association wants lawmakers to wait to hear recommendations from the committee of experts that will be formed next year as part of the state's mandated 20-year review of tax and finance issues. The committee's suggestions will be put before voters as amendments to the state Constitution in 2008.
So far, there's little sympathy for the idea, particularly in South Florida, where rising insurance prices are piling into an already-expensive house market. Sales of existing homes in the region were down by as much as 25 percent in November in some counties.
"I'm thinking of my 86-year-old grandmother, and if she wanted to move or needed to move, what we should do," said Sen. Alex Villalobos, R-Miami, who is expected to become Senate president in 2008 and voted for the Domino plan Tuesday.
"I can't go home and tell her our plan is to wait two more years."
Joni James can be reached at email@example.com or 850 224-7263.
[Last modified January 15, 2006, 10:35:25]
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