By BILL VARIAN
Published July 27, 2007
The latest pitfall in the state's battle against skyrocketing property taxes is, quite simply, a matter of timing.
Already, we've heard about a quirk that might raise taxes this year for 100,000 Tampa Bay area homeowners who benefit from the 15-year-old Save Our Homes amendment, even though their property values have fallen.
Now, it turns out, the property tax "fix" approved by the Legislature last month contains another wrinkle that could raise tax rates.
The problem is timing. Lawmakers sought to fix the problem of taxes that had ballooned during a time of extraordinary increases in property values. But the fix is being imposed at a time when values are falling.
The bottom line: In communities where overall property tax revenues go down, local tax rates may go up.
"Under this scenario, local governments are allowed to receive the same revenue they received in the past year," said Tim Wilmath, director of appraisals for the Hillsborough County property appraiser. "So someone could end up with a higher tax bill than they did the year before, even though values are going down."
* * *
At their special session in June, lawmakers decided to sever the link between rising property values and higher government spending.
They capped the amount of property tax money city and county governments could raise. Basically, it would be anchored to the amount of revenue from the year before. The only increases would come from new construction and adjustments for inflation.
No matter how high property values soared, property taxes would not automatically rise with them.
The cap seemed to make good sense - as long as property values were going up.
But what if values go down?
Lower assessments should mean lower taxes. But remember, the budget is anchored to the previous year's revenue. Maintaining the same tax rate would mean lower revenue. So, local governments can raise tax rates to bring in as much revenue as the prior year.
And there's more.
Remember the part of the tax plan that allows governments to raise revenue to account for inflation?
Once again, governments can impose this cost (roughly 4 percent a year) on taxpayers even at a time of declining house values.
* * *
While total assessed value of a county or city doesn't decline often, it has happened.
In the early 1990s, the entire Tampa Bay area was gripped by a recession in the commercial market and flat home sales. Overall values fell slightly in 1992 in the city of Tampa and in Pinellas County, and were nearly flat in Hillsborough County.
(A footnote in a House analysis of the Legislature's tax plan addresses what would have happened if the tax cap had been in effect back then. "During the weak real estate market of the 1990s, property taxes grew less than would have been allowed under the cap.")
"We do follow the market both ways," said Pinellas County Chief Deputy Property Appraiser Pam Dubov. "It just doesn't lead us to a decline very often."
Elected officials will not have to raise tax rates to make up for declining assessments. But if they don't, they'll be locking themselves into lower revenues for years to come.
"They've got us painted into a corner," says Pasco County Commission Chairwoman Ann Hildebrand. "Is there any money to keep the lights on?"
Still, raising tax rates may be hard to explain to the taxpayers.
"If the millage goes up, to taxpayers, that's a tax increase," said St. Petersburg City Council member Rene Flowers, who is president of the Florida League of Cities. "So the issue for elected officials, particularly in an election year, is do I want to raise the millage?
* * *
Of course, elected officials will face the question only if overall assessments drop for the whole community, and not just for some individuals.
Though the commercial market is holding strong, sale prices for homes in Pinellas so far this year are down 7 percent compared to last year, with condos down 8.3 percent. Hillsborough home sales prices are down about 2 percent. At least a half-dozen beach cities in Pinellas County have seen their overall property values decline, in part thanks to falling condo prices.
For Tampa Bay as a whole, home sale prices in June compared with last summer were down 6 percent. Statewide they were down 5 percent.
* * *
This story may give some readers a sense of deja vu.
The St. Petersburg Times reported earlier this month on a quirk in enforcement of the Save Our Homes amendment, which limits annual increases in taxable value to 3 percent on homesteaded properties.
Voters, tired of rising assessments, approved the amendment to keep people from being taxed out of their homes.
This year, however, more than 100,000 Tampa Bay area homeowners will see their assessed values go down.
But the state interprets Save Our Homes to mean that taxable values can rise up to the "cap" regardless, letting local governments "recapture" some of the savings homesteaders have enjoyed. Even as property values decline.