Property-tax lament: `So, where's my tax break?'

Article Courtesy of The Miami Herald


Published August 31, 2008

Gov. Charlie Crist promised Floridians that their tax bills would ''drop like a rock'' if they voted for property-tax reform in January.

Now, with prospective tax bills in hand, disillusioned South Florida homeowners and investors say the decrease is more like a soggy bag of Styrofoam packing peanuts.

''I was expecting a lot more than this,'' said retired shipping manager Alfonso Llanes of Palmetto Bay.

Llanes is one of more than 400,000 South Florida homeowners who are discovering that taxes are going down -- but not by much, and not nearly as much as the dramatic dives in real market values over the past two years.

That's because the assessed value of their primary residences -- the amount that counts for tax purposes -- still rose this year. It's one of the key consequences of a property-tax system that rewards longtime homeowners while penalizing those who bought when real-estate prices soared, as they did a few years ago. That law, called Save Our Homes, prevented taxes from skyrocketing in lock step with market values, but now that home prices are falling, it is undermining efforts to ease the tax burden.

Even the reform plan's staunchest supporters admitted at the time that it wouldn't solve the property-tax crisis. Some relief, they argued, was better than none.

New rules doubled the exemption on most homesteaded properties to $50,000 and created a way for some homeowners to transfer up to $500,000 in tax-shielded value to a new one.

While property owners like Llanes expected more tax relief than they are likely to get, it's a start, said Crist spokesman Sterling Ivey.

''We're seeing some reductions across the state,'' Ivey said. ``Just because your [tax] notices aren't going down, we believe that they are going down across the state.''

Voters, Ivey noted, may have the opportunity to reduce their tax bite further if a proposal to replace property taxes to fund schools with a sales-tax hike gets a green light from the state Supreme Court.

Llanes, the retiree from Palmetto Bay, is facing a scenario that will be quite common across Florida during this fall's budget season.

The market value of the 2,800-square-foot home that Llanes acquired when his wife died four years ago plummeted by $157,000 between last year and this year. Yet, the taxable value increased by $15,000.

Llanes paid $9,464 in property taxes last year. Depending on a number of variables, he's looking at a proposed tax bill ranging between $8,861 and $9,110 this year.


"My market value is down almost 30 percent. Thirty percent! I have more exemptions than I did last year because I'm a senior now and they passed the tax reform. But I'm paying almost the same in taxes. How can that be?''

The answer goes back to Save Our Homes, a voter-approved amendment that radically altered the way property is taxed in Florida.

Since 1995, the Save Our Homes amendment has capped how much the assessed value on homesteaded properties can rise each year at 3 percent or the increase in the Consumer Price Index, whichever is lower. Assessed value -- the key to the taxes that owners actually pay -- generally resets closer to the market value when a home sells.

With each passing year, Save Our Homes created growing disparities, often on the same block. One home, owned by the same family for decades, might be assessed at hundreds of thousands of dollars less than an identical house, because it had recently been sold to another family at a higher price.

In a declining real-estate market, Save Our Homes requires property appraisers to continue to apply the increase in taxable values when the Save Our Homes value remains less than the real-market value.

This year, 323,105 homeowners in Broward County fall into this category, where market values have plummeted but their taxable values increased 3 percent.

In Miami-Dade County, more than 112,000 homeowners fit the same profile. Still, nearly 102,000 of them will see their taxes stay flat or dip slightly, because the new $50,000 homestead exemption offsets the rise in assessed values.

Just ask Joseph Fashano, a retiree from Pennsylvania, who has seen the market value of his Eastern Shores condo drop by $70,000 this year, while the taxable value increased by $6,000.

Even with the voter-approved exemptions, Fashano's prospective tax bill remained virtually the same.

''Tax reform? It's all double-talk,'' said Fashano, who moved to North Miami Beach in 2001. "They're talking out both sides of their faces. I think they used that as an excuse to cut services.''

Even with the declining housing market, the gap between Save Our Homes and actual market value is massive.

Marcus Sera, Miami-Dade's appointed property appraiser, estimates that the $66 billion gap between Save Our Homes and actual values results in a $1.2 billion savings to homeowners.

In Broward, that gap is about $61 billion between Save Our Homes and real-market values, costing government agencies about $1 billion in lost revenue.


Another common complaint revolves around the expectation that all market values would be reduced as home prices continue to decline.

That hasn't happened -- in part because Florida tax bills are calculated on eight-month-old information and comparable sales leading up to Jan. 1, 2008.

This year's steep market declines won't be reflected until next year's tax notices.

The TRIM (Truth in Millage) notices received by homeowners in the past 10 days are projections. Final bills will be mailed by Nov. 1, once governments hold hearings and settle on a final rate.

Another key element of the tax-reform package hasn't had a major impact on home sales or the tax system yet.

Property appraisers say they haven't been overwhelmed with applications from homeowners taking advantage of new ''portability'' provisions. Portability allows people to sell their current homesteads and transfer up to $500,000 in tax-shielded ''Save Our Homes'' value to a new home.

It was designed to help seniors and other longtime residents who wanted to sell but couldn't afford the higher tax exposure on a new property.

Investors, speculators and owners of rental property that wasn't sheltered from the vagaries of the marketplace by Save Our Homes are finding even less relief under the new property-tax rules.

Coky Michel, a retired public-school teacher, is struggling to pay the taxes and upkeep on a South Miami rental property that she and her husband inherited when her mother died six years ago.

They paid $8,709 in property taxes on the three-bedroom, three-bath house last year. Depending on an array of factors, their likely tax bill will fall between $8,527 and $8,955 this year.

Appraisers pegged her house's market value at $408,000, Michel said. "I guarantee you I can't sell that house for $408,000. My point is: If prices have been going down for more than a year, why isn't my tax bill showing it?''

The biggest winners -- and the ones least likely to be complaining to property appraiser's offices -- are the people who bought homes and condos at the peak of the market in 2005 and 2006 and have been paying much higher taxes than their neighbors down the street who have lived there for decades.

The additional $25,000 homestead exemption, and the narrowing gap between market and assessed values, could reap a tax savings of $1,000 to $2,000 after counties, cities, schools, and water and hospital districts finalize their budgets.


This is always a busy time of year at the local property appraiser's offices, with the release of TRIM notices. Always dense and complicated for the average citizen to decode, they became even more inscrutable with the latest amendments factored in.

''There's a lot of confusion out there,'' said Broward Appraiser Lori Parrish, who is answering 300 e-mails a day from angry taxpayers. "There usually is this time of year, but it's gotten worse.''