Save Our Homes now shields far less property from taxes

Article Courtesy of The St. Petersburg Times

By Jeff Harrington

Published October 13, 2010

Love it or hate it, the Save Our Homes property tax break has wielded a mighty influence in shaping Florida's neighborhoods.

During the boom years of soaring property values, the 3 percent annual cap on increases in real estate taxes protected some homeowners from being forced out of their homes, or at least from having to tap their home's equity to stay put.

But Save our Homes also pitted neighbor against neighbor — with newcomers often saddled with paying thousands of dollars more in taxes than long-time homeowners in similar houses.

Neighborly inequity peaked in 2007, when Save Our Homes shielded Tampa Bay homeowners from paying taxes on $55.84 billion in property.

And today? The once-massive tax break has shriveled considerably.

Save Our Homes is shielding just $8.95 billion in property based on current tax bills, an 84 percent drop in three years, according to a St. Petersburg Times analysis.

More than eight out of every 10 area homeowners used to enjoy a Save Our Homes tax break back then; now it's less than half in many counties and shrinking. Statewide, the value of property shielded from taxes fell 60 percent in just two years, from $426 billion in 2007 to $168 billion in 2009.

Certainly, Save Our Homes is still very valuable to those who have been in their homes at least a decade. But if housing values erode further, or even stay stagnant for a couple years, the Save Our Homes "advantage" could disappear completely.

Paulette Stearns of the Hernando County Property Appraiser's Office predicts that scenario could happen as soon as next year. Back in 2007, Hernando residents were able to shield $2.5 billion of their property value from taxes under Save Our Homes. In recently mailed tax bills, with property valued down to 2001 levels, the amount shielded has fallen to a mere $247 million.

"Next year, if values continue to decline, it could mean there won't be any differentiation between assessed value and market value," Stearns said, adding that the "portability" issue of taking the tax break with you when you move would also become moot.

"It will reach a point of equalization," she said, "where they're going to start all over again."

Starting all over again is what critics of Save Our Homes have been advocating a long time. For every homeowner who relishes the tax break, there's another who objects to its inherent unfairness.

"When we tried to treat citizens with similar properties a similar way, we were on solid ground. As soon as we moved away from that and had differential taxation, we created an awful lot of mischief," said retired Florida State University President Talbot "Sandy" D'Alemberte, one of the leaders of a crusade on behalf of new homebuyers and out-of-state owners of second homes who don't qualify for the tax break.

D'Alemberte argued unsuccessfully last year for an appellate court to strike down Save Our Homes and is now lobbying for the U.S. Supreme Court to entertain the issue. The law is not only unconstitutional, he said, but impairs interstate commerce by discouraging Floridians from moving to other states that don't offer a similar incentive.

Moreover, he contends it's in Florida's best interest to have the law declared unconstitutional so states like Michigan and Ohio don't adopt a similar policy that would encourage retirees to stay in their home state to keep the tax break.

"It would destroy Florida's economy as soon as the incentive of people up north to move to Florida were taken away," D'Alemberte said. "It could be that tax shelters would trump sunshine."

Save Our Homes supporters, however, say the measure has been invaluable for Floridian homeowners and worked exactly the way it was supposed to: keeping tax increases modest amid wild swings in housing values.

"Are there people who benefitted from it in waterfront homes?" asked Pinellas County Property Appraiser Pam Dubov. "Yes… but there are also a whole bunch of folks whose incomes are a lot more modest who were probably able to stay in their homes because of this. Many of those people had tax bills kept in a reasonable range while neighbors were paying three or four times as much."

Born out of a citizens' petition drive in 1992, Save Our Homes has been a divisive issue now for nearly 20 years. And now that we're a bit closer to tax parity again, the debate over what should happen next is still divisive.

Beyond the fight to eliminate the tax shelter completely, some advocate more minor tweaks. Most commonly discussed, Dubov said, is getting rid of the "recapture" provision that lets taxes on Save Our Homes parcels rise up to 3 percent annually even in years of declining property values.

"This was a wonderful thing when the markets were going up. Unfortunately, no one ever saw the market turning," said Citrus County Property Appraiser Geoffrey Greene, who has lobbied unsuccessfully for a legislative change to the recapture rule.

"As market values are coming down, I believe their taxes should come down also," Greene said. "You're getting hammered by higher taxes on one end, and your house could be underwater (owing a higher mortgage than the property's worth) on the other end."

In Pasco County, Tax Appraiser Mike Wells said he's heard relatively few complaints from homesteaders, who have enjoyed the big tax break for years, now paying a modest increase based on cost of living.

"If you're out of work and can't make mortgage payments, any of this stuff looks bad," he said. "But a two or three percent increase is still not large enough to significantly damage somebody."

J. Reid Alexander, an architect in Largo and long-time beneficiary of Save Our Homes, agrees with Wells.

Alexander bought his house for $57,000 back in 1980 and figures he's put more than $150,000 into remodeling it. Through the years, he's likely saved tens of thousands of dollars in taxes, particularly compared to a neighbor across the street who paid about $500,000 for a similar house.

"Right now my taxes are going up, but I'm happy as a clam. I've no complaints," he said. "Quite frankly, I've enjoyed a break for so long, I can't complain about my taxes going up (even if) my value is going down."

In dealing with taxes, Alexander said, it seems someone is always upset — even if they don't know that they should be grateful. Warren Weathers, chief deputy property appraiser in Hillsborough County, offered an anecdote to back that up.

A long-time resident of Sunset Park in Tampa recently called his office to complain that her property taxes were going up $161 for the year while her home's assessed value dropped.

Weathers investigated her case. When property values were soaring, the woman's taxes were always kept in check. At one point, her home's market value peaked at $750,000 in 2006, but thanks to the cap, her home's assessed value didn't go above $325,000.

Weathers told the caller, "Ma'am. Do you realize between these 10 years you saved over $37,000? An average of $3,700 a year? This $161 is a little bit of a nibble" to recapture exempted tax revenue.

She calmed down, he said.

About Save Our Homes


A citizens' petition drive put the Save Our Homes tax break on the ballot in November 1992. Under the law, taxable values can rise only as fast as inflation or 3 percent a year, whichever is lower. Most years, inflation has been below 3 percent. Initially the impact was mild, but by the late 1990s and especially the mid-2000s, rising property values turned the tax break into a huge savings tool. By the market peak in 2006-2007, the tax break was worth several thousand dollars to many homeowners, far more than they received from the other typical tax break, the $25,000 homestead exemption on home values.


Save Our Homes: A Case Study


Bill and Gloria Campbell bought their home in Dunedin in November of 1992 for $200,000. By 2001, as property values around them were rising, the Save Our Homes tax break started to pay off, exempting them from paying taxes on $22,000 of their home's market value. Then the market turned crazy. By 2007, their home's value peaked at $574,100, but their assessed value was $309,651 because of the Save Our Homes' 3 percent annual cap. As a result they paid $5,357 in taxes instead of a potential $9,500 tax bill. This year, their proposed tax bill is up a few hundred dollars to $5,627 even though the assessed value of their house fell by $100,000. Still, tax-wise, they once again are winding up ahead. Without the Save Our Homes cap and homestead exemption, their property tax bill would have been $7,166.

Bill Campbell, 60, an insurance agent on the cusp of retirement, says most of his neighbors are also long-time homeowners who have benefited from Save Our Homes. "From what I can see looking around our community, it has served its purpose well," he said. "It worked."