October 22, 2014

Taxes

Tax Squeeze

Save Our Homes has divided Florida into tax-break haves and Have-Nots

Mike Vogel | 12/1/2006

Since 2000, according to research by the state Property Tax Reform Committee, personal income in Florida has grown 39%, and the growth in population plus inflation has been 32%, but property taxes have grown 80% (led by special taxing districts at 110%, followed by cities, counties and schools). Source: Property Tax Reform Committee
Hemant Patel bought a run-down 50-room motel on Biscayne Boulevard in Miami in 1996. He closed the motel for a year, renovated it and since then has enjoyed success renting rooms for $110 to $120 per night inseason and $65 to $70 off-season. What he hasn't enjoyed of late has been the taxes. The tax bill this year on his Midtown Inn is $170,000, up from $40,000 a decade ago. His profit last year was $60,000. "This year we won't make a profit, or we'll have to borrow money to pay the taxes," says Patel. The city and county, he says, are interested in the most taxes they can wring from the property and not "whether we can survive or not."

Snowbirds, landlords, first-time home buyers and other commercial property owners tend to share Patel's feelings -- and their growing dissatisfaction could mount into the kind of taxpayer revolt that spawned California's property tax-capping Proposition 13 or Colorado's government budget-capping Taxpayer's Bill of Rights. The "concern is we're spending money at a higher rate than underlying inflation and population growth," says Don DeFosset, former CEO of Tampa-based Walter Industries and chairman of the state's Property Tax Reform Committee, which is examining whether to recommend local government spending caps. "Taxes are going up dramatically. People are not very happy about it."

Behind much of the unhappiness are the unintended consequences of Florida's Save Our Homes constitutional amendment, which passed in 1992 and took effect in 1995. Save Our Homes caps -- by 3% or the inflation rate, whichever is lower -- how much a Florida resident's primary home can increase in taxable value. The cap doesn't apply to rental property, business property or second homes.

In the years since the law took effect, property values have soared. The overall value of the state's property tax base has increased a minimum 10% each year since 2001, topped off by an 18.4% jump in 2005 and a 25.4% spurt in 2006. And those increases are averages. In Lee County, the Lehigh Fire District saw an 89% increase in value this year. (The effect of this year's real estate slowdown won't show up until the 2007 appraisal.)

Tags: Banking & Finance, Housing/Construction

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