Florida businesses wish for more tax relief
Business owners were among the first to call for reform, but a proposal does little for them.
By ALEX LEARY, Times Staff Writer
Published December 26, 2007
Travis Allred feels his auto shop slipping away. Thirty-five years after opening Brisco Bros. in Tampa, insurance and property taxes have become more than a burden.
"We're just breaking even each month, but I don't want to close up," Allred said. "They need to give us some real help."
To hear Gov. Charlie Crist tell it, help arrives Jan. 29 when voters take up the property tax cut proposal that he helped the Legislature create. Taxes, he says, would "drop like a rock."
But the plan gives little relief to business owners, who helped launch the cry for reform in 2006 after their tax bills jumped more than 40 percent in two years.
Research shows that the main provision aimed at businesses -- capping annual growth of a property's taxable value at 10 percent -- would rarely be triggered for commercial properties. The other provision is a $25,000 exemption on certain business property and some mobile home property.
"We would be less than frank if we said we are pleased with what the Legislature did for the business community," said Barney Bishop, chief executive of Associated Industries of Florida, one of the state's most influential business groups.
"The average increases for most businesses have been 4 to 6 percent," Bishop added. "To add insult to injury, the cap goes away in 10 years" unless voters reauthorize it in 2018.
The cap also applies only to taxes that fund local government; school taxes, which make up 40 percent of a bill, are not subject to the restriction.
"It's a waste of time," said Mary Bonfili, owner of El Cap restaurant in St. Petersburg. "Can't they go back and do this over?"
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As the cry for property tax reform ignited in local government chambers across Florida in 2006, hundreds of people showed up at public hearings. They were snowbirds and business owners, but not homesteaders.
Those with Save Our Homes, which caps growth on a homestead property's taxable value at 3 percent annually, had no reason to complain.
The soaring market was actually a good thing. Homesteaders enjoyed increased equity in their homes, but taxes were comfortably in check. In 2006, the average savings from Save Our Homes was about $1,700.
Commercial property owners, of course, were not as fortunate. In 2005, values jumped anaverage 17 percent; in 2006, 23 percent. Add second homes into the mix, and the values increased 30 percent in 2006 alone.
The savings for homestead homeowners also meant nonhomestead property owners were paying more of the overall tax burden. Save Our Homes, first implemented in 1995, has shifted about 25 percent more taxes to business and investment property owners, according to state tax data.
The January ballot measure, if approved, would shift that burden even more. Homestead property owners would see their exemption grow from $25,000 to about $40,000. Not only would the 3 percent assessment cap continue, but homeowners would be able to carry accrued savings when they move, which entrenches their advantage even more.
Whether business or second-home owners would see relief, however, is dubious as the real estate market has cooled for the foreseeable future.
In the past 20 years, property assessments for businesses have exceeded 10 percent only three times -- in 2004, 2005 and 2006. And state economists say those kinds of double-digit increases are not on the horizon.
The cap would have some effect due to isolated pockets of growth. By 2013, the plan could save commercial property and second-home owners $1-billion -- a fraction of the $7.2-billion that homestead properties will net from the plan over the same five years.
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Businesses and nonhomestead property owners never really had a chance in Tallahassee this year as politicians pledged to cut homesteaders' property taxes. A plan that would have phased out Save Our Homes and restored some balance to the tax structure was declared misleading by a judge, forcing the Legislature to start all over.
During a contentious second special session in October, the House pushed for a 5 percent cap that would have cost schools and local governments $20-billion over 10 years, according to one analysis. More moderate Senate members proposed the 10 percent cap and prevailed.
Sen. Daniel Webster, R-Winter Garden, the lead tax negotiator, argued that businesses wanted predictability. Knowing they would not have to budget more than a 10 percent assessment hike provided that, he said.
"How can it hurt?" asked Joel Goetz, owner of Jo-El's kosher grocery and deli in St. Petersburg, reflecting the take-what-you-can-get attitude among some in the business community.
"It's a step in the right direction," said David Daniel, a chief lobbyist for the Florida Chamber of Commerce.
Indeed, the prevailing strategy among the state's business establishment is to tacitly endorse the January ballot measure in hopes their needs will be addressed in the 2008 legislative session.
"We got commitments to come back and look at a number of issues in 2008," Bishop said. On the list is ending an assessment practice known as "highest and best," which can lead to bigger tax bills simply because a property could be used in more lucrative ways.
"We see this plan as a down payment for a brighter future," Bishop said.
Times staff writer Alex Leary can be reached at email@example.com or (850) 224-7263.