Voter-passed tax referenda generate a bonanza for local governments, inviting pushback from the Legislature
by Amy Keller
Updated 2 months ago
The Great Recession of the late 2000s blew a hole in Marion County’s budget. Property values in and around Ocala plunged, dragging tax receipts down with them. Options to deal with the cash crunch were few. “We didn’t want to their homes and jobs,” says Kathy Bryant, a Marion County commissioner since 2010.
She and her colleagues slashed spending instead. By 2015, she says, the county had backlogged millions of dollars of transportation and any longer. The proposed solution? Ask voters to sign off on a local option, four-year, one-cent sales tax increase.
Voters passed the sales tax referendum with 55% approval in 2016, and in 2020, more than 70% of Marion County voters extended the penny tax for another four years. In the years since, the pennies (totaling $97 million through new fire station, 11 fire engines, 34 ambulances, other firefighting, rescue and police equipment. Construction is underway on a new forensic and hike property taxes when people were losing public safety projects that it couldn’t put off the end of fiscal year 2019-20) have paid for a helicopter, 315 sheriff patrol cars and a slew of evidence building for the sheriff’s department, and more than 64 miles of road projects have been completed. “We’re much better now than we were,” Bryant says. “It certainly has been a tremendous blessing for our community.”
Local governments rely on property taxes and charges for services (like water and sewer) for more than half of their revenue. Other revenue sources include some state sales tax receipts that the state shares with counties and cities. Florida law also gives counties the option to add certain limited surtaxes on top of the state sales tax, with the funds going to meet specific local needs (box, page 89).
The local option taxes — which typically require local voters’ approval via referendum— have been a fiscal blessing for dozens of other counties as well as Marion. Over the past decade, local voters have passed 63 sales tax referenda worth an estimated $3.1 billion, according to a Florida TaxWatch analysis. During the same period, voters approved 74 property tax hikes worth $1.75 billion (primarily for schools) and $6.7 billion in bond referenda to fund everything from jails to parks to burying utility lines.
While all that taxing may seem counterintuitive in a state that prides itself on having no state income tax and a reputation for low taxes in general, voters tend to view the targeted local option sales tax increases more favorably than property tax increases or taxes assessed by the state.
“The bottom line is that they are more successful than requests for more general tax increases because voters more clearly see how the money will be spent. The need for the requested increase is usually more evident as well, and often they have a time limit or definitive expiration date,” says Susan MacManus, a professor emerita of political science at the University of South Florida.
Voters also tend to trust “local people to do what they’re saying they’re doing with money” more than they do state or federal government officials, MacManus says. “The higher up you go, people just don’t have faith that it’s going to be spent in the way it’s sold to the public.”
The trend has met with some pushback from state lawmakers who argue that it’s too easy to increase taxes at the local level — and that the phenomenon contributes to runaway government spending. Legislation enacted in 2018 requires that counties or school districts publish a performance audit at least two months before any referendum for a local discretionary sales tax.
Under a law that went into effect in 2019, proposed local option sales tax increases can only appear on the November general election ballot — and can’t be decided during special elections or primaries, which generally attract a lower turnout. Last year, state Reps. Bob Rommel (R-Naples) and Michael Grieco (D-Miami Beach) introduced legislation proposing an amendment to the state constitution that would have required a super-majority vote (two-thirds majority) for local tax referendums — the same threshold the Legislature must meet to raise taxes. It died in committee.
Bryant, the Marion County commissioner, believes local governments need more flexibility, not less, in how they raise and spend revenue. “Our sales tax has been very successful,” she says.
Marion County (with support from the Florida Association of Counties) has asked the Florida Legislature to allow it to take 10% of that sales tax to be used for recurring operating expenses. Bryant says more spending flexibility might enable the county to reduce property taxes.
“For the most part,” she says, “when you’re talking about recurring costs, most of that comes from our millage. That leaves the property owner to pick up the bill.”
Retiring Hospital Debt
During the most recent Census count, Holmes County, a small rural county about halfway between Tallahassee and Pensacola, had 19,653 residents. In 2020, 4,562 of them voted to approve a half-penny tax hike to help pay off debts racked up by Doctors Memorial Hospital, one of the only hospitals in the region. The community hospital in Bonifay took out $16 million in bonds to build a facility in 2008 and has struggled to pay off the debt as it provides charity care. The 20-bed hospital spent $1 million on uncompensated patient care in 2019 alone and in 2020 made a profit of just $14,666. The five-year surtax, which will expire in 2026, is expected to bring in $600,000 annually.
Lowest Rate in State
Citrus County, north of Tampa Bay, is the only county in the state without a local option sales tax, meaning that shoppers there pay just a 6% tax on purchases. But that distinction may soon disappear. Scott Carnahan, chairman of the Citrus County Board of Commissioners, says the board plans to discuss levying a surtax to help pay for road resurfacing. If history is a guide, it won’t be a slam dunk. Voters in the conservative county — Republicans and No Party Affiliation voters comprise nearly 74% of the electorate — rejected a Cent for Citrus referendum to pay for road repairs in 2014 and torpedoed a half-cent sales tax increase for school repairs on the 2016 ballot.
Tax Ruled Unconstitutional
Hillsborough County’s adoption of two new sales taxes in 2018 — a penny hike for transportation and a halfcent for schools — boosted the county’s sales tax rate to 8.5%, the highest in the state. It dropped to 7.5% after the Supreme Court struck down the transportation tax as unconstitutional.
In 2018, Hillsborough County citizens (56.4% of those who voted) approved a penny sales tax proposed by a group called All for Transportation to repair roads, revamp Tampa’s bus system and make other transportation improvements. The spending plan didn’t sit well with Hillsborough Commissioner Stacy White, who believes that commissioners (not a formula developed by a special interest group) should decide how taxpayer money is spent. The Florida Supreme Court agreed and struck the sales tax down in a 4-1 decision. Still unclear is what will happen to the half-billion dollars in taxpayer funds that was collected in the meantime. While county commissioners are already contemplating putting a new penny sales tax on the ballot in 2022 to replace the All for Transportation tax, the move could face even greater headwinds. Jake Hoffman, president of the Tampa Bay Young Republicans, says many households are still struggling from the economic fallout of COVID-19; talk of tax hikes in Washington could lead to tax fatigue, he says. “My biggest argument right now is at the federal level we just printed $5 trillion, and they’re working on a $3.5 trillion infrastructure package. If you want transportation, don’t come and ask taxpayers for money, go ask Joe Biden for the money,” Hoffman says.
Backlog of Maintenance
Last election, 67.3% of Duval County voters gave a thumbs up to a 15-year, half-penny sales tax increase to upgrade its schools. Duval schools are the oldest in the state — 44 years old on average — and state funding cuts since 2008 reduced facility funding by nearly $300 million in the years since. That’s contributed to a $243-million maintenance backlog expected to balloon to $1 billion by 2024, given the age of the Duval schools. The county took in nearly $52 million in half-penny funds this year, and the school district expects to see $79 million by the end of the year. Plans are already underway to construct a new “prototype” elementary where Rutledge H. Pearson Elementary (built in 1956) currently sits. The new school — Duval’s first in a decade — will open in the fall of 2023.
In 2020, more than 70% of Volusia County voters approved a 20-year extension of two property taxes — Volusia Forever, which levies 1/5 mill to preserve and protect environmentally sensitive lands in the county, and Volusia ECHO program, which uses 1/5 mill funds for facilities for environmental, cultural, historical and recreational purposes. More than 38,000 acres have been preserved under Volusia Forever since its inception. Grants from the ECHO program have been used for trails, parks, sports complexes, dog parks, playgrounds and many other projects. Grants have also supported museums, historic properties and environmental learning centers, such as the Marine Discovery Center in New Smyrna Beach that teach the public about the biodiversity of marine and plant life in Florida’s Indian River Lagoon.
Possible Penny for Transportation
Orange County has levied a half-cent sales tax to support the renovation and construction of schools since 2002 — and local leaders have considered asking for a penny sales tax increase to help pay for transportation improvements. Orange County Mayor Jerry Demings hosted several workshops to explore the idea in 2019 and early 2020 but put it on hold when the COVID-19 pandemic hit. With the economy bouncing back, he renewed the push this fall, noting that it could potentially raise $600 million a year. If county commissioners agree, the penny tax will appear on the November 2022 ballot.
Tax Extension Vote
Sarasota County voters will vote next November on whether to renew the county’s one-cent sales tax for the fourth time since it was first passed in 1989. The pennies have paid for the renovation of a BMX racing facility, several libraries, septic-sewer conversions and other projects. If approved, the tax, which expires in 2024, will stay in effect through 2039.
In 2018, Collier County voters narrowly approved (50.9%) the region’s first penny tax, which is expected to raise $490 million for the next seven years. Two years in, it’s paid for a new fire rescue station in Marco Island, and county commissioners recently approved $27 million for 10 bridge replacements east of Immokalee and Ave Maria, according to the Naples News. Other projects in the works include:
- Construction of the 150-acre Big Corkscrew Island Regional Park in Golden Gate Estates ($60 million)
- Construction of a new mental health crisis center ($26.5 million)
- Land purchases and incentives for affordable housing ($20 million)
- A 120-bed nursing home for veterans ($30 million)
- Upgrades to the county’s Domestic Animal Services Shelter ($6 million)
- Where government Gets Its Money
Where Government Gets its Money
With no state income tax — the state constitution forbids it — Florida’s state government generates the bulk of general revenue (75% to 80% depending on the year) from sales tax collections. It gets the rest from a variety of sources, including documentary stamp taxes, insurance taxes and corporate income taxes. At the local level, the biggest two chunks of funding come from ad valorem/property taxes and charges for services (such as electricity, gas, garbage collections and building inspections). Counties can also levy up to 12 cents of local option fuel taxes.
Sales Tax History
In 1921, West Virginia became first state to implement a state sales tax. Florida enacted a state sales tax in 1949, setting it at 3% and raising it three times over the next four decades. Today, 45 states and the District of Columbia collect state sales taxes and 38 states (including Florida) collect them at the local level.
Sales Tax Rate in Florida:
- 1949-1968 3%
- 1968-1982 4%
- 1982-1988 5%
- 1988 6%
Source: Florida Department of Revenue
Sales Tax Sources
A popular selling point for sales tax hikes is that out-of-state visitors pay a decent portion of them. Here’s how the state’s sales tax collections broke down in FY 2017-18:
- Households: 63.2%
- Businesses: 23.5%
- Tourists: 13.4%
Source: Legislative Office of Economic and Demographic Research
Florida vs. the Nation
Local sales tax rates in Florida are rising faster than the national average — up 0.39 percentage points from 0.62% in 2002 to an average local rate of 1.01% today. Nationally, local sales taxes have risen by an average of 0.29 percentage points over the same period.
“In Florida, local sales tax increases are referred to the voters and are tied to specific government functions, whereas in many states, they are treated as a general revenue source,” says Jared Walczak, vice president of state projects for the Tax Foundation.
“Voters tend to be more open to higher sales taxes when they are tied to services they care about than when they are simply associated with higher local government revenue,” he says.
Alabama and Georgia have seen even larger increases over the past decade, of 0.9% and 0.5%, respectively.
Florida Tax Facts
- While Florida collects less taxes per capita at the state level than most other states — ranking 48th in the nation — it comes in close to the middle (28th) in terms of local tax burdens.
- While the Florida Legislature has passed tax cuts every session for the past 12 years, Floridians have voted to increase their local taxes 142 times, approving taxes worth $4.8 billion on an annual basis. Taxpayers approved 72 bond issues totaling $6 billion over the same time period.
- In 2018 alone, Florida voters approved 13 local sales tax increases, 15 local property tax hikes and 21 local bond issues. The $3.5 billion in tax increases and debt amounts to the largest state or local tax increase in Florida history.
- More than half of all Florida government revenue — 52.6% — is raised at the local level, trailing only New York (54.8%).
Read more in Florida Trend's November issue.
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