Politicians don’t generally telegraph what they think about ballot issues for fear of alienating voters. Not in this case. Palm Coast Mayor Jon Netts this morning left no doubt about his position on Amendment 4, one of 11 proposed constitutional amendments before voters this November. Amendment 4 would create more tax breaks for property owners, including first-time home-steaders and commercial and rental properties, but it would further crimp local government tax revenue and more likely shift the tax burden to existing homeowners than lower it.
“Amendment 4 is very disturbing because,” Netts said, “at least in my mind, it takes an already screwy property taxing system and makes it screwier, if that’s possible.” He urged his fellow-council members to study the issue. The amendment is opposed by the Florida League of Cities, the advocacy organization for municipal governments.
“This is probably the most potentially damaging to local government in terms of sustainability,” Netts said. “It’s important that we understand what our good friends in Tallahassee are trying to do to us and for us.”
The amendment is heavily supported by Florida Realtors, who see in it a potential boon for home ownership because it offers an additional homestead exemption for any home-buyer who hasn’t had a homesteaded property in Florida in the previous three years. That includes anyone moving to Florida. There is an existing $50,000 homestead exemption. The proposal would add an additional exemption equivalent to 50 percent of the property’s market value. That exemption would phase out in increments over five years.
The proposal would also lower the rate at which non-homesteaded properties’ assessed values may rise. Homesteaded values’ assessments may not rise faster than 3 percent each year. (Since 2007, values have been falling. They’re not likely to rise faster than 3 percent for several years yet.) But Commercial and non-homesteaded properties, like second homes, rental property, vacant and farmland, may see their assessments rise by 10 percent a year. The proposed amendment would cap that increase at 5 percent. Again, the proposal is largely moot, because such properties aren’t likely to see values rise that fast in the near future. But should they do, the cap would also cap tax revenue—or force governments to increase the tax rate to make up for the lost revenue.
That’s why even among Realtors, there are strong dissenting vies over the proposal.
Barbara Revels, who chairs the Flagler County Commission and owns Flagler Beach’s Coquina Real Estate and Construction, has usually been an enthusiastic supporter of measures seen as benefits to the construction and real estate business. Not this time.
She said she and her partner at Coquina—Matthew Wilson, also a Realtor—are “adamantly opposed to Amendment 4. It will only exacerbate the problems for local governments to continue to keep services going.” Acknowledging that it’s a Realtor-led proposal, Revels described it as “very short sighted. If the loss of tax dollars due to the give-aways in Amendment 4 happen we will have to nearly max out the millage in the county to make up for the loss. The Realtors acknowledge it will be difficult for local governments to make up for the losses, but they try to sell it as sweeping bad inventory into home ownership and that property values will rise and make up for the loss.”
Revels doubts that would happen fast enough to keep everyone else’s taxes from going up. Local Realtors, she said, see through the gambit. “The ones I have spoken to are opposed to it,” Revels said.
Jay Gardner, the Flagler County Property Appraiser, is neither opposed to it nor in favor of it: he doesn’t take positions for or against political issues. But he leaves no doubt as to the proposal’s effects, or the underlying dishonesty of its promises: advocates of the amendment, Gardner said, never speak of its cost-shifting, and its effects on existing home-owners who have homestead exemptions. That’s the majority of property tax payers. They’re the ones who’ll end up paying higher taxes.
“You’re a homesteaded homeowner, you’re not a senior, you’re not someone who’s going to get a benefit of a military exemption, so when we pass these, someone is going to have to pay for it,” Gardner said. The principle applies to every tax exemption or tax break that benefits a particular segment of property owners. “It’s not a tax limiting thing at all. I don’t know why anybody thinks it is. It’s a tax shift.”
But Gardner doesn’t have an estimate of how much the proposal could cost Flagler’s local governments, should it become law. There’s been estimates of between $1 billion and $1.6 billion in revenue drops for the state. But local figures would be purely speculative, Gardner said, because it’s impossible to predict how many people would be moving in, how many would be new home-steaders, what the value of the home they’re buying, and on which the tax break would be calculated, would be, and so on.
Florida Tax Watch, a conservative group that supports the amendment, estimates that it would create 19,400 jobs over 10 years and lead to an increase in home sales of between 320,000 and 384,000 over 10 years. But the analysis does not specify what population projections it used. Some of the most reliable projections—by the University of Florida’s Bureau of Economic and Business Research—have been revised downward since the bursting of the housing bubble.
Netts heard no disagreement from fellow council members when he voiced opposition to Amendment 4. Even Jason DeLorenzo, a council member and the government affairs director for the Flagler County Home Builders Association, was behind the mayor. That was the case even though the president of the state Home Builders Association has endorsed Amendment 4. “The additional homestead exemption contained within Amendment 4 will benefit prospective homebuyers, current homeowners and Florida’s small businesses by giving incentives to qualified homebuyers,.” Dave Carter, the FHBA president, said in his President’s Message to the association last week.
DeLorenzo says the local association is “not touching it. We haven’t discussed it at all.” He added: “From my understanding of it I think it’s kind of shortsighted to restrict or handcuff local government revenues when the local governments know better what they’re going to need for infrastructure and so on.”