Property Tax Relief 2011: Who Wins? Who Loses?

Transcription

1 Property Tax Relief 2011: Who Wins? Who Loses? 2011 Florida League of Cities Annual Conference August, 12, 2011 Alan Johansen

2 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? FLC 2011 Annual MeetingAugust, Orlando12,

3 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 phasedout 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 MeetingAugust, Orlando12,

4 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. Why all the changes in 2007? FLC 2011 Annual MeetingAugust, Orlando12,

5 I wouldn't ever set out to hurt anyone deliberately unless it was, you know, important like a league game or something. Dick Butkus August, 12, FLC 2011 Annual Meeting Orlando

6 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. FLC 2011 Annual Meeting August, Orlando12,

7 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 August, Orlando12,

8 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. FLC 2011 Annual Meeting August, Orlando12,

9 The Legislative View Soaring Property Taxes Spurred Legislature 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 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 August, Orlando12,

10 The Legislative View Soaring Property Taxes (Cont d) 2.7% Non-School Property Taxes as a Percent of Economic Activity (Personal Income) 2.6% 2.5% 2.56% 2.4% 2.3% 2.2% 2.1% 2.0% 1.9% 2.09% 2.13% 1.8% 1.7% 1.81% Non-School Property Taxes as a % of Personal Income August, 12, 2011 FLC Annual Meeting Orlando

11 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 August, Orlando12,

12 Legislature Looks at Property Tax Caps Based on Economic Growth $20,000 Non-School Property Tax Levies - Maximum Levy if Annual Increases Limited to Economic Growth (Measured by Personal Income) $18,000 18,129 $16,000 $Millions per Fiscal Year $14,000 $12,000 $10,000 $8,000 $6,000 14,665 $4, Legisl. Estimate of Non-School Property Taxes without Cap NS Property Taxes Capped at Economic Growth August, 12, 2011 FLC Annual Meeting Orlando

13 Legislative Solution: Millage Rollbacks and Caps on Increases $20,000 $18,000 $16,000 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 $18,129 16,064.7 $Millions per Fiscal Year $14,000 $12,000 $10,000 $8,000 $6,000 $14,669 $4,000 Actual Non-School Ad Valorem Levies NS Property Taxes Capped at Economic Growth August, 12, 2011 FLC Annual Meeting Orlando

14 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 August, Orlando12,

15 Property Taxes Reductions To Date Exceeded the 2007 Legislated Goals Most Local Governments Can Expect Another Decline In FY Based on Current Estimates, Can Expect Modest Growth in FY $22,000 $20,000 $18,000 18,129.3 $Millions per Fiscal Year $16,000 $14,000 $12,000 $10,000 14, ,071.0 $8,000 $6,000 $4,000 Non-School Ad Valorem Levies NS Property Taxes Capped at Economic Growth August, 12, 2011 FLC Annual Meeting Orlando

16 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 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 shrinking and to show modest growth. FLC 2011 Annual Meeting August, Orlando12,

17 FY Non-School Property Taxes Will be Less than an Income-Based Cap Even a Cap Starting with FY Taxes $20,000 $18,000 $16,000 $14,000 $12,000 $Millions per Fiscal Year $10,000 $8,000 $6,000 $4,000 $2,000 $0 NS Property Tax Levies & Estimates NS Property Taxes Capped at Economic Growth August, 12, 2011 FLC Annual Meeting Orlando

18 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 governments in their districts. FLC 2011 Annual Meeting August, Orlando12,

19 HJR 381 WILL HAVE SIGNIFICANT IMPACTS ON THE TAX BASE THESE IMPACTS ARE DELAYED & GROW IN AN ATYPICAL FASHION. Estimated Impacts of Provisions* in HJR 381 (All Amounts in $ millions) IMPACTS ON COUNTY TAXABLE VALUE TAX ROLL ISSUES 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 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% FLC 2011 Annual Meeting August, Orlando12,

20 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 MILLAGE RATES BY COUNTY Estimated Impacts of Provisions* in HJR 381 (All Amounts in $ millions) IMPACTS ON COUNTY TAXABLE VALUE TAX ROLL ISSUES 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) *** 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) Tax Impacts --All Non-School (164.6) (349.5) (543.4) (737.7) FLC 2011 Annual Meeting August, Orlando12,

21 Conclusions: Non-school property taxes in Florida experienced unprecedented increases through FY Those increases have since been reversed; current levies are well below the appropriate levels established by the 2007 Legislature; and non-school levies are expected remain suppressed for some time. Additional reductions in the property tax base do not appear warranted without clear, specific policy objectives and should take into account the impacts on local governments and on taxpayers unlikely to benefit from the changes. August, 12, 2011 FLC Annual Meeting Orlando