Five steps to sensible property tax relief
By RICK BAKER Special to the Times
Published April 26, 2007
The Florida Legislature is in the final days of evaluating a program of property tax changes that will have a significant impact on the future of Florida.
The need for action and the disparity within the present system is clear. Like other communities in Florida, this disparity is reflected in St. Petersburg's residential and commercial tax bills. New home buyers pay significantly more in taxes than their long-term neighbors with the same value properties. Homesteaded property owners in our city have seen property tax increases averaging under 2 percent per year for the last six years. In contrast, some small businesses and second home owners have seen assessed values, and thus tax bills, increase by as much as 20 to 30 percent in one year. As the city and county reduced millage rates, the savings were passed on to all taxpayers, so the homestead property owners' taxes are actually less than their taxes were last year. Yet the tax increases to the nonhomesteaded property owners were still substantial, since their increases in assessed values dwarfed the decreases in millage rates.
Much of the debate has been targeted at waste in local government. While government can always be more efficient, this criticism is overstated, at least as applies to our city. Ninety-five percent of our new property tax revenues received in the past six years have gone to increases in five areas: fuel, property insurance, medical insurance, retirement plan costs and police. The first four areas, which are very difficult to significantly reduce, are more than 200 percent higher than six years ago. Police costs are almost 40 percent higher during that period in response to the need to attract and retain police in the face of a nationwide shortage.
St. Pete has reduced its property tax rates in 14 of the past 17 years (from 9.632 to 6.6 mills). Despite improving services at all levels, and ushering in a historic renaissance, we have budgeted 57 fewer employees than we had six years ago when our current team took office. Our total operating budget increased an average of 4.48 percent per year since 2001; the general fund operating budget annual increase was 6.1 percent. Those increases would have been 2.67 percent and 3.25 percent, respectively, had the above-described five expense increases not exceeded the inflation rate.
The levels of local government revenue reduction in the present legislative proposals will absolutely require significant cuts in the level and quality of basic services our residents have come to expect. After social services, arts, civic and economic development programs are dropped, basic services such as parks, public safety and libraries will be subject to reductions, possibly severe ones.
What is needed is specifically targeted property tax reform that (1) provides a level of present relief to the nonhomesteaded property owners; (2) helps avoid a repeat of the dramatic nonhomestead tax increases of recent years; (3) provides greater fairness between new homesteaded property buyers and longtime homeowners; (4) helps longtime homeowners move to another home without dramatically increasing their tax burden; and (5) does not so adversely impact the budgets of our local governments that we cripple their ability to provide the services that have helped make our quality of life high and have driven our state's economic expansion.
The legislative proposals on the table are targeted more at reducing local government revenues than at helping those taxpayers whose taxes have gone up the most in recent years. A general reduction in local government tax revenues would actually result in the least savings going to the nonhomesteaded properties that have been hurt the most. Shifting the homeowners' tax burden to a sales tax that raises far less revenues will substantially benefit our most wealthy taxpayers, but it will also cripple our local governments and do little to help the nonhomesteaded taxpayers.
A more targeted approach, with the following elements, could come closer to achieving the above-described reform goals:
1. Allow a defined portability of Save Our Homes savings.
2. Double the homestead exemption for new home buyers in a manner similar to the Senate proposal for first-time home buyers.
3. Adopt a cap on increases in nonhomesteaded valuations of 8 percent. This is the core of a plan adopted by Nevada in 2004 when facing a similar situation as Florida is now experiencing. The 2007-08 valuations should be determined assuming the cap had been in place one year ago so that the 20-30 percent increases some nonhomesteaded properties experienced with the 2006 trim notices would be shaved back. This provides some present relief to nonhomesteaded taxpayers and ensures that we will not repeat the striking increases of recent years.
4. Adopt both the House and Senate proposal to provide businesses a $25,000 exemption for tangible personal property taxes.
5. Find a compromise between the House and Senate approaches to modify the assessment techniques in order to prevent property appraisal abuses, and allow for rational property valuations for affordable housing properties.
These proposals would not solve all of the property tax system problems overnight. But they would provide a meaningful level of relief to property owners who have seen the worst increases, prevent a repeat of one-year, 20-plus-percent tax increases and significantly reduce local government revenues without casting a shadow over their future ability to provide services.
The lost revenue to our city in the first year from this proposal would be in the millions of dollars. Like the legislative proposals being considered, it would have an impact on our budget and service levels, but not as crippling as some alternatives being considered in Tallahassee. Most importantly, it will provide meaningful relief to those whose taxes went up the most in recent years.
Rick Baker is mayor of St. Petersburg.
[Last modified April 25, 2007, 21:09:47]
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