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Rate increases could erase savings from proposed property tax cut

By Scott Wyman | South Florida Sun-Sentinel

January 11, 2008

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Florida homeowners might not save as much as they thought if the proposal on the Jan. 29 ballot to revamp the property tax system passes.

Nothing would stop local governments from raising tax rates to recover any revenue they lose. They wouldn't even have to say it's a tax increase.

It's a scenario far from what voters have been told in the lead-up to the vote.

Gov. Charlie Crist and other supporters of the constitutional amendment have trumpeted that homeowners and businesses will save more than $9 billion over the next five years, with taxes for the average homeowner dropping $240 a year. Crist's Vote Yes on 1's Web site says it's "a tax cut — guaranteed by law."

It also contradicts the gloomy future portrayed by opponents in which tax cuts force governments to lay off cops and firefighters and close parks and libraries.

The state Department of Revenue confirmed Thursday there is no tax cut guarantee. Homeowners could see smaller savings depending on what cities, counties, school boards and other service districts decide about their tax rates. Businesses, snowbirds, landlords and property investors could pay more.

"This is absolutely shameful," said Charlotte Greenbarg, leader of the Broward Coalition representing area condo and homeowner associations. "It's just unimaginable they write laws the way they do. There is always a loophole."

A spokeswoman for Crist said the governor's office was aware of the tax increase possibility when he signed the law last fall, but expected local governments to follow the will of voters. Via e-mail, Crist said it would be "unconscionable" for officials to raise rates if voters want lower taxes.

"The citizens will speak loud and clear when they vote those officials out of office," Crist wrote.

If voters approve the proposal, the homestead exemption would double on all but school taxes, and homeowners would be allowed to take their tax breaks with them when they move.

State law already dictates that counties and cities roll back their tax rates to a level that brings in the same amount of revenue as the previous year with adjustments for new construction and annexation.

To exceed that limit requires a super-majority vote of the government or a public referendum. It also must be advertised as a tax increase.

Legislators did nothing to change those rules. Earlier proposals contained language barring local governments from recouping any losses.If a government's tax base shrinks because of the proposal, the "rollback" rate would adjust upward to compensate for dollars lost in the Jan. 29 measure. The government could set the rollback rate and declare that state law says it isn't a tax increase.

The only restriction would be that tax rates cannot exceed 10 mills, or $10 for each $1,000 in assessed property value. But most governments in South Florida are far from that cap.

Palm Beach County Property Appraiser Gary Nikolits said since local governments will have the option of raising their tax rates to offset any loss in property values, it's "not a budget cut in any way, shape or form."

"Will it save people money? It's going to be a wash," he said.

An owner of a home with an assessed value of $300,000 would be taxed at $250,000 for the non-school portion of the tax bill if the amendment passes, rather than $275,000 as would be the case today. However, the city and county could raise the rates they charge on $250,000 and thus reduce the savings created by the extra cushion.

Kurt Wenner of Florida TaxWatch said the state tax system also would become less fair. Unshielded by exemptions homeowners enjoy, business and other property owners would feel the full force of tax rate increases and pay a larger share of local taxes, he said.

That tax rates could increase has been a little-known fact.

State Rep. Jack Seiler, a Wilton Manors Democrat heavily involved in legislative negotiations, said he had not thought through the scenario. While saying it was not necessarily a loophole, he said he wished the Legislature had adjusted the "rollback" rate.

Local governments had been gauging the impact of the tax proposal based on estimates from state economists. Many had been predicting layoffs and sweeping cuts in services.

Lost revenue to governments were projected to top $1 billion in Broward County and $890 million in Palm Beach County. But those state estimates were calculated as if the tax rates remained the same over five years.

Palm Beach County Administrator Bob Weisman said he had been preparing his 2009 spending plan as though he'd have to make cuts.

"I was playing it straight, as I understood the circumstances," he said.

In Broward, word of the tax-increase option came as a result of an effort by Property Appraiser Lori Parrish to pin down state revenue officials on how they developed their estimates. She received an e-mail from a senior official at the Department of Revenue laying out the scenario Wednesday evening and revealed it at a forum on the referendum later that night — to the astonishment of local officials there.

Governments across the county began asking their financial and legal staffs Thursday to re-examine the wording and impact of the referendum. County Commissioner Ilene Lieberman was among those who were surprised.

"The referendum is meaningless and not what it appears to be," she said. "Talk about a shellgame."

Staff Writer Joshua Hafenbrack contributed to this report.

Scott Wyman can be reached at swyman@sun-sentinel.com or 954-356-4511.