Real Estate News

Tax break might be good for homeowners, but it’s bad news for counties and cities

Broward County Mayor Barbara Sharief speaks out against a legislative bill that would increase Florida’s homestead exemption.
Broward County Mayor Barbara Sharief speaks out against a legislative bill that would increase Florida’s homestead exemption. TAMPA BAY TIMES

For Florida homeowners, it sounds almost too good to be true: Another break on property taxes in the form of a bigger homestead exemption.

For legislators, it’s an easy way to seek favor with voters in an election year because the tax break requires their approval in 2018.

But for counties and cities, it’s a disaster in the making that they warn would cut property taxes for some but force higher taxes on businesses and snowbirds or force cuts in basic services such as police and fire protection.

In a year when local officials say the Legislature is trying to override home rule as never before, counties are mobilizing to defeat legislation to increase the homestead exemption from $50,000 to $75,000 of the first $100,000 of a home’s taxable value.

The change would, in effect, tax a $100,000 home as if it were worth $25,000, or a $200,000 home as if it were worth $125,000.

Broward Mayor Barbara Sharief said her county would lose $40 million a year — the equivalent of what it costs to run the county parks department for a year.

“Making up that revenue would cause us to cut services and shift the burden to other taxpayers,” Sharief said. “This is not a tax cut. This is a tax shift.”

Miami-Dade would lose $76 million a year in property tax revenue, according to the Florida Association of Counties.

“Businesses would have to pay that burden, or we would have to raise the millage rate,” said Pinellas Commissioner Ken Welch, whose county stands to lose $27 million. “It is not a tax cut. It is definitely a shift in the tax burden.”

Counties say a $75,000 homestead exemption would worsen a tax unfairness problem caused by Save Our Homes, a provision in the Constitution that limits increases in the assessed value of homesteaded property to 3 percent a year.

As a result, state economists have found that the property tax burden has increasingly shifted from owner-occupied homes to businesses and to non-homestead properties, such as vacation homes and apartment complexes, especially in coastal areas.

Dozens of opponents of the higher homestead exemption filled a House Ways & Means Committee hearing, but it did little good as the Republican-dominated panel passed the bill on a 13-6 vote.

“It’s about putting money back in taxpayers’ pockets,” said the chairman, Rep. Jim Boyd, R-Bradenton.

“Let’s let the voters decide,” said Rep. Dane Eagle, R-Cape Coral.

One of the few Republicans to criticize the idea is a freshman House member, Rep. Don Hahnfeldt, from The Villages, a mecca of middle-class retirees.

Hahnfeldt said the higher exemption would be “devastating” to local communities, and many Villages homeowners would see little benefit because their home values are far above average.

Property taxes have been steadily rising across Florida as home values bounced back after the Great Recession.

The average owner of a single-family home in Miami-Dade paid $4,129 last year, more than in most large counties across the U.S., but about one-fourth of the $16,000 average in New York’s Westchester County, one of the nation’s wealthiest enclaves.

The Florida homestead exemption bills (HB 7105 and SB 1774) still must win support from three-fifths of the members of the House and Senate to reach the ballot, or 72 House members and 24 senators.

If only three Republican senators join forces with the 14 Democrats, the idea would die on the Senate floor.

The Senate version is sponsored by Sen. Tom Lee, R-Thonotosassa, and faces tough committee votes where its fate appears shakier.

The Florida Association of Counties will focus its lobbying on senators, including the Senate’s biggest hurdle for the proposal, the Senate Appropriations Committee, chaired by Sen. Jack Latvala, R-Clearwater.

Latvala declined to state his position on the issue Thursday.

But he was honored at the county group’s convention last June for his support of local home rule authority.

“When I get the budget done, we’ll try to find time to think about that,” Latvala said.

The proposed hike in the homestead exemption would not include property taxes for schools, which the Legislature needs to balance the state budget every year.

Statewide, the projected one-year loss of tax revenue to counties, cities and special taxing districts is $750 million.

But that doesn’t tell the complete story.

The higher exemption would protect the state’s 29 poorest counties from losing any more property tax revenue.

That means a major subsidy would be paid to them by the other 38 counties, and that was enough to draw a “no” vote from Rep. Evan Jenne, D-Dania Beach.

“This is not responsible to my constituents,” Jenne said.

Herald/Times staff writer Mary Ellen Klas contributed to this report.

Contact Steve Bousquet at Follow @stevebousquet.

History of the homestead exemption

Florida’s homestead exemption began in 1934, when residents feared losing their homes during the Depression for failure to pay taxes. The original exemption was $5,000. Voters increased it to $25,000 in 1980 and again in 2008 to $50,000. The first $25,000 of a home’s value is exempt from property taxes. The next $25,000, from $25,000 to $50,000, is taxable, what’s known as the “doughnut hole.” Only U.S. citizens are eligible for the exemption.