Local finance officials unsure of portability impact

By MICHAEL PELTIER
Tuesday, October 30, 2007

TALLAHASSEE — Lawmakers’ work may be over but for local government officials, the number crunching has just begun.

A day after Florida lawmakers passed a proposed property tax reform package that backers say will save taxpayers $12.5 billion over the next five years, school, county and municipal finance officials are trying to decipher from which pocket those savings will come.

Officials will have to wait until Jan. 29 to see if voters sign off on a proposal to double the homestead exemption, expand Save Our Homes protections and place caps on non-homestead properties.

But the speculation already has begun, even by groups that support portions of the plan.
“The cumulative effect of these assessment caps, the millage rollback and caps already in place, and the added exemptions, may thwart the ability for counties to provide the services their citizens demand,” said Teresa Jacobs, Florida Association of Counties president, in a statement following the vote.

Government financial officers in Lee and Collier counties say it’s too early to tell what impact the proposal will have on local coffers. Further, school officials must rely on promises made by lawmakers not to harm school funding by replacing lost local revenue with state funds.

Meanwhile, Lee County Property Appraiser and Save Our Homes founder Ken Wilkinson said Tuesday the “official” numbers are nothing but smoke.

Allowing homeowners to take Save Our Homes with them would result in a real estate rebound and subsequent economic boom that would erase the effects on local governments and schools, proponents said.

“This is an economic stimulant the likes of which we’ve never seen,” Wilkinson said. “It couldn’t have come at a better time. Overall I think it will be a plus.”

The increased homestead exemption is pretty straightforward.

The plan calls for increasing the exemption to $50,000. The first $25,000 would apply to all local taxes. The second $25,000 exemption, however, would only be placed on non-school related property taxes.

For some communities in Southwest Florida, the homestead issue is less dramatic because a small percentage of properties have a homestead exemption, Marco Island City Manager Bill Moss said.

Moss estimated that 75 percent of property on Marco doesn’t qualify for a homestead exemption.

“The impact for both Marco Island and Naples is going to be less dramatic than in other parts of the state,” said Moss, who has been hired as city manager in Naples.
Portability is another issue.

The proposal allows homeowners to take their Save Our Homes benefits with them when they move. Those purchasing more expensive homes can take all of the benefits with them up to $500,000. Those homeowners who downsize can take a portion of their savings with them.
For example, a resident purchasing a more expensive home who now lives in a home valued at $300,000, but who pays taxes on $100,000, would deduct the $200,000 from a new home’s just value for tax purposes.

Homeowners wishing to downsize could take a portion of their current Save Our Homes benefits.
For instance, say an owner of a $500,000 home wants to purchase a $300,000 home. The owner’s current house is assessed under Save Our Homes at $250,000. Portability would require their new home to be assessed at three-fifths of its just value, or $150,000.

Combined with the homestead and a $25,000 exemption for tangible personal property, lawmakers estimate the changes would cost schools and local governments $12.5 billion over five years.

Included in that statewide figure, city and county government funding in Collier would drop by $182 million compared to collections if the changes weren’t in place. Lee County governments would see a $380 million drop.

But just how many homeowners will decide to move is up for interpretation.

Lawmakers said as much Monday during the debate, when numerous speakers said it was at best an educated guess that will depend on many factors outside their control.

Moss and others in local government say they have yet to crunch the numbers.

For local budget writers, portability remains the biggest question mark.
They not only lack data, but also the rationale under which the figures were arrived at. So far, they haven’t gotten either.

“Portability won’t be easily quantified,” said Lisa Roberson, director of finance for Bonita Springs.
School officials aren’t affected by the additional homestead exemption because it doesn’t apply to school taxes. Portability is of greater concern because it could potentially dip into future revenues.

State officials estimate that public schools statewide would see a $2 billion reduction in future revenues based on lower property taxes paid by homeowners who move but are protected by Save Our Homes.

Collier and Lee schools would see potential revenue cut by $85 million and $109 million, respectively, according to House estimates.

Bob Spencer, executive director of financial services for Collier County public schools, said educators must wait until spring to see if lawmakers follow through on promises to do no harm to public school funding.

Secondly, educators must determine what lawmakers meant when they said it.
“We have to wait for a definition of what ‘hold harmless’ means,” Spencer said. “Does it mean all components of the tax or just some of it? I don’t have the answers and I don’t think anyone else does either.”