Last summer, the Sarasota County Property Appraiser showed a decrease of almost 3 percent in total taxable value on Longboat Key from 2019-2020. In 2019, the total taxable value of Longboat Key property in the Sarasota County section of the key amounted to $4,310,961,756. In 2020, the total value fell according to the Sarasota Property Appraiser’s Office to $4,189,967,770.
This has caused consternation in Town Hall, which depends on property values to raise money through taxes for operations.
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The Town hired a
consultant to seek an explanation and suggest remedies.
The consultant, John Tuccillo, has an undergraduate degree
from Georgetown and a doctorate in economics from Cornell.
He served as Chief Economist for the National Association of
Realtors for 10 years, and has overseen the Florida
Statewide System that compiles and analyzes indicators of
the real estate market.
On Monday, Tuccillo will present his findings to the Town
Commission. Longboat Key News obtained the report and in it
Tuccillo addresses what the Town can do in budgeting to
accommodate the drop in values as well as what prospects
Longboat Key faces in the future. The major points of the
report are as follows:
Despite recent trends, the real estate market in the North
Port-Sarasota-Manatee Metropolitan Statistical Area (MSA)
remains strong and continues to attract in-migrants.
The drop in valuation in the Town of Longboat Key can be
attributed to three factors: The condominium housing stock
in the Town of Longboat Key is the oldest of any major
jurisdiction in Sarasota County; Infrastructure issues have
significantly reduced the accessibility of the City of
Sarasota from the Key; New construction on the mainland has
reduced the attractiveness of Longboat Key.
While forecasting is always an iffy proposition, and none of
these factors will go away, values in the future are
expected to rise, with the strong possibility that this year
is a one-off.
There is little the Town can do to address the factors
driving valuation directly. Indirectly, there are four
things the Town can consider in order to smooth out the
annual valuation changes. It could consider using a two- or
three-year planning cycle to smooth out variations in
valuation, while still producing annual budgets. It can also
increase the transparency of the permitting process, working
more closely with the Sarasota County Property Appraiser’s
Office to generate a deeper body of information and thus
more accurate valuations. Third, it can use existing
measures to help older complexes to remodel and renovate, so
they are more competitive with newer condominium complexes.
Finally, the Town can continue to maintain and even enhance
its Economic Uncertainty Fund, to even out cyclical changes
in revenues and outlays.
Factors Affecting the Decline in the Taxable Value of the
Longboat Key Condominium Market
In general, the Sarasota real estate market is demand
driven. This is even more true for the high-end condominium
market (i.e., the price range represented on Longboat Key).
Wealthy homebuyers are willing to pay a price but are
looking for quality and convenience. They have bought a
second home or a retirement residence in Sarasota and want
as much time as possible to enjoy the area. Based on that
standard, Longboat Key is at a relative disadvantage
compared with other parts of the area, particularly downtown
Sarasota.
Older Housing Stock
The housing stock on Longboat Key is older than the stock in
other parts of Sarasota County. Table 2 displays the actual
and effective dates of construction for condominiums in
various jurisdictions within the County. “Effective” here
means last renovation or alteration. Only 1 percent of the
condominiums in the Town of Longboat Key have been built
since 2002. In most of the other jurisdictions, the year is
2017. For effective dates, the corresponding years are 2015
and 2018. Only Siesta Key comes close to having as old a
housing stock. These numbers may seem insignificant, but the
demand for high-end condominiums is largely a demand for new
construction, so even small differences in the age of the
housing stock can mean large changes in demand and thus
valuation. A related issue is the level of reserves for some
of the older condominium developments. In some cases,
condominium associations have kept fees low, preferring
one-time assessments for any major work. Buyers are aware of
this and prefer developments whose reserves are adequately
funded.
Accessibility issues
Longboat Key suffers from the problem of accessibility to
the City of Sarasota. Longboat Key is by and large a
self-contained community. It has all the services necessary
to its residents and ample recreational and entertainment
opportunities. For a long time, tourists and migrants
attracted to the area identified Longboat Key as Sarasota.
But the City of Sarasota remains a draw for those buying
into the area today, particularly with its cultural
amenities. Recently, infrastructure issues, particularly
construction and road alteration at the mainland end of the
causeway from the keys, have increased travel time and
reduced accessibility to the City. In fact, the construction
of the traffic circle at the intersection of US 41 and the
John Ringling Causeway will likely exacerbate the problem
for the next two years. These are unlikely to go away,
although they will abate somewhat. For now, and into the
foreseeable future, however, they are reducing the
desirability of buying or renting in the Town of Longboat
Key.
Strong competition
New construction is a strong competitor to condominiums in
the Town of Longboat Key. Not only, as described above, is
the housing stock in the Town of Longboat Key relatively
old, there has been significant activity in the development
of new high-end condominiums in the City of Sarasota. These
are attractive to buyers because they are new, but also
because they offer direct access to all the amenities of the
City, a strong draw for younger and more active retirees. In
addition, new construction responds directly to the
specifics of current demand. For example, as a result of the
pandemic, buyers are attracted to units with larger kitchens
and more flexible recreation and workspaces. Older housing
can respond to these demands only through renovation or
expansion.
Where Will Values Be in the Future?
The three specific factors described above will still be
operative going forward, but they will be diminished. The
age of the condominium stock in the Town of Longboat Key
will be refreshed as the St. Regis project comes on-line.
Although scheduled for 2023, reservations and presales will
positively affect valuation. Other smaller developments will
positively affect values are also in progress, notably the
renovations to the Longboat Key Club. In addition, as
construction projects are finished in the City of Sarasota,
the relative attractiveness between the City and the Key
will balance. The infrastructure problem remains, but
history shows that people adapt, and accessibility problems
will become routine and will be factored into behavior.
To a great extent, the market will dictate the course of
real estate values. There are, however, four actions that
the Town government can consider to adjust to the decline in
valuation.
Implement a two-year planning cycle that will smooth out
real estate cycles. Budgets are mandated to be done on an
annual basis. But a two-year planning process that produces
two annual budgets can accommodate changes in the real
estate market without significant fiscal disruption. The
Town is implementing a forecasting model which will be an
ongoing multi-year look atmajor revenues and expenditures,
thus allowing consideration of a number of “what if”
scenarios
.
Assist aging properties by providing a practical way to
redevelop. Right now, the Town is implementing two
initiatives in this regard. The Certificate of Built
Conditions will help a property document its grandfathered
entitlements. A new redevelopment ordinance will provide
flexibility for properties to redevelop while retaining
their current densities.
Increased transparency in the permitting process. The
appraisal process at the County is as accurate as the
available data will allow. Increasing the flow of
information about permitted renovations, alterations and
additions will allow a better (and likely higher) valuation
for the Town. Right now, the Town transmits its permitting
information to the Property Appraiser. Increasing the
cooperation between Town and County will create a richer
flow of information. Related to this, the Town can increase
its process of identifying non-permitted changes that might
be taking place.
The Town has implemented an Economic Uncertainty Fund. Using
this fund (now at $1.3 million) will allow the Town to
smooth out any one-year valuation decreases. The Fund could
be increased and maintained.”