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Guest Column

Many factors, forces affect annual property tax rates

By ALVIN MAZOUREK
Published January 4, 2007

As we enter 2007, Hernando County residents face a real estate market significantly different than the beginning of 2006. The volume of sales in the county is down, the number of building permits is down, the number of active real estate listings in the Multiple Listing Service (MLS) is up and sale prices are up.

What's that? The volume of sales are down, but the prices are up? How can that be? How is this going to affect your tax bill?

This seemingly strange phenomenon is a perfect opportunity to explain the current property tax system in Florida and address some of the proposals that might appear on the 2008 ballot.

The property tax system in Florida is based on an assessment date of Jan. 1 of each year. To assess the 125,000-plus properties in Hernando County on Jan. 1 of each year, the sales from the prior year are analyzed.

For example, the tax bill you received in November 2006 was based on values established on Jan. 1, 2006 using sales data from 2005. The effective date for the 2007 tax roll was Monday, using sales data from 2006. This is called assessing in "arrears".

The dollar value and volume of sales of single-family residences in Hernando County have increased each year since 1995. In 2006, for the first time in 11 years, the value and volume of all single-family residence transactions decreased by 32.55 percent and 39.10 percent, respectively.

However, the average individual sale price rose by 10.76 percent. This is not as much as the past few years, but it did go up.

So, what does this mean?

It means that when we analyze the sales activity in 2006 to establish the 2007 tax roll values, they likely will go up. And if the millage rates remain the same, property tax bills also will go up.

If the property assessments rise, the only way the resulting taxes can remain the same or go down is if the millage rate is adjusted downward.

Technically this is called "rollback," which is the millage necessary to generate the same revenue as the prior year, with the new or current year's assessments.

So, you think, "Well, my neighbor has his house for sale and has been steadily lowering the asking price. So the market must be declining, right?"

Yes and no. Yes, his asking price has come down. This likely is a result of the last speculators and "flippers" leaving the market. And no, if his final sale price indicates a flat or increasing market.

Whatever the effect of the 2007 real estate market is, it will be reflected in the 2008 tax roll.

To make things more confusing, let's say you live in your home and have a homestead exemption and have experienced the property tax benefit of Save Our Homes, or SOH, for several years. Say that your market value is $150,000 and your assessed value because of SOH is $110,000. Say several homes in your neighborhood sell in 2007 for between $130,000 and $140,000, all below your market value of $150,000.

Will your assessment go down in 2008? Will your taxes go down? Again, yes and no. Here's why:

If we reduce your market value to, say, $135,000, that is still $25,000 more than your assessed value. So, under the SOH law, your assessed value must go up the maximum 3 percent, or the cost of living, whichever is less, until we meet market value. The annual SOH figure is provided to all elected property appraisers in the state by the Department of Revenue.

So, it's likely your market value could go down, your assessed value could go up, and unless there is a millage reduction, your taxes would go up as well.

Keep in mind, there are a number of committees, tax groups and associations offering a variety of alternatives to the current property tax system in Florida. Some of the ideas being debated are repealing Save Our Homes; instituting a revenue cap on local governments; assessing properties using a 5-year moving average of value; replacing property tax with a 14 percent state sales tax. Each one of these would have a dramatic effect on the overall tax roll and your individual tax bill.

For more information on values and how property is assessed, please visit our Web site at www.co.hernando.fl.us/pa. For information regarding proposed changes to the Florida property tax system, please visit www.propertytaxreform.state.fl.us.

Should you have any questions, please call our office at (352) 754-4190. We are here to serve you.

Alvin Mazourek is Hernando County Property Appraiser. Guest columnists write their own opinions on subjects they choose, which do not necessarily reflect the opinions of this newspaper.

[Last modified January 4, 2007, 01:17:59]