An Overview of Property Tax Reform

1
An Overview of Property Tax Reform

Kent Olson Budget Officer City of
Jacksonville September 28, 2007
2
Issues to Discuss

• Statutory Changes for FY2008
• The Constitutional Amendment
• Fiscal Year 2009 with and without
  Amendment
• Fiscal Year 2010 and beyond
• Long-term Implications

3
Statutory Changes Fiscal Year 2008 For Cities
and Counties

• The penalty stroke rolled-back rate minus 3,
  5, 7, 9 (only FY08)
• Revised rollback calculation to include
  dedicated increment value (TIF)
• Fire/EMS MSTUs are to be treated as independent
  special districts (only for FY08)
• Loss of ½ cent sales tax revenues for
  non-compliance (more later)

4
Example of DR420TIF Calculation
5
DR420 With TIF Included
6
Statutory Changes Fiscal Year 2008 For
Independent Special Districts

• The penalty stroke rolled-back rate minus 3
  (only FY08)

7
Statutory Changes Fiscal Year 2008 For Counties
Only

• Counties authorized to levy a public hospital
  surtax
• Maximum rate shall exclude these revenues for
  calculating the maximum millage rate
• Add back to maximum millage rate after penalty
  reduction has been applied

8
More Statutory Changes For Fiscal Year 2008

• Final Changes to Assessment Roll
• If final changes are greater than 1 (for
  cities, counties, schools and water management
  districts) or 3 for all other taxing
  authorities, now must adjust the millage rates to
  take in no more than adopted rate (200.065(5)(b))
• Current law is may adjust (200.065(6))
• Failure to reduce will result in finding of
  non-compliance

9
Example of 1 adjustment
10
New Forms to Complete Woo Hoo!!

• DR420TIF need to complete only if you have tax
  increment financing districts in your
  jurisdiction
• DR420 C-P, M-P, or I-P (choose yours)
• DR420C, DR420M, or DR420I
• DR487P (voluntary)
• DR487 V
• DR420 and DR487 are revised (added bonus)

11
Example DR420 M
12
Example DR420 M (cont.)
13
Going For Broke Busting the Cap in FY08

• Majority vote Rolled-back rate minus penalty
• Two-thirds vote Return to Rolled-back Rate
• Unanimous vote (¾ if 9 or more) Return to
  Current Millage Rate (FY07 Rate)
• Referendum up to 10 Mil Cap

14
Cap Busting Second Hearing

• Need to make sure votes are there to go to
  levy a higher millage rate
• The Vote and Form DR487P is recommended to be
  sent to DOR within 3 days of final hearing
• Levying higher than what the millage vote
  allows will cost you ½ cent sales tax for a 12
  month period

15
Implications for Cap Busting

• Exceeding the state imposed cap in FY08 will not
  establish a new base for FY09 (discussed in
  detail later)
• The State Legislature, especially if the
  Amendment fails, will look to make more changes
  to property tax legislation
• Potential Property Owner wrath

16
DR 487 V

• New form added to record Councilmember or Board
  member votes
• If jurisdiction busts the cap, the names of each
  governing body member is listed on the form,
  indicating if they voted yes, no or not
  present or not voting

17
Non-Compliance

• If Dept of Revenue review indicates
  non-compliance with maximum rates or failure to
  adjust rate after final certification
• Determination within 30 days of submittal
  deadline (30 days after adoption)
• Repeat hearing and advertisement process
• Notice includes Previous Notice . . In Violation
  of the Law
• Revised millage adopted recertified with State
  within 15 days of adoption not sent to PA or TC

18
Non-Compliance Notice Language

• THE PREVIOUS NOTICE PLACED BY THE  (name of
  taxing authority)  HAS BEEN DETERMINED BY THE
  DEPARTMENT OF REVENUE TO BE IN VIOLATION OF THE
  LAW, NECESSITATING THIS SECOND NOTICE.

19
Non-Compliance (cont.)

• If Dept of Revenue determines non-compliance is
  remedied recertified, no penalty
• If compliance is not recertified, penalty
• If non-compliance is not remedied, penalty
• Penalty 12 months of sales tax revenues
• Does not apply to independent special districts

20
Non-Compliance Corrected

• If excess taxes are collected, held by tax
  collector in trust
• Excess may only be used to reduce taxes in
  subsequent fiscal year

21
The Constitutional Amendment
22
The Constitutional Amendment

• Super-exemption 75 of first 200K 15 of next
  300K of Just Value
• 500K limit is adjusted for Florida per capita
  personal income (PCPI)
• 500K limit may also be increased by 2/3 vote of
  Legislature
• Minimum exemptions 50K for low-income
  seniors, 100K

23
The Constitutional Amendment (cont.)

• Owners of property prior to 1/1/08 can choose
  exemption method irrevocable election to abandon
  SOH at any time
• All transactions on or after 1/1/08 shall be
  subject to super-exemption
• SOH grandfathered, but on its way to extinction

24
The Constitutional Amendment (cont.)

• Provides that Legislature shall limit ability of
  cities, counties and special districts to
  increase property taxes
• Provides a 25,000 exemption for tangible
  personal property
• Affordable housing will be assessed using the
  income method
• Commercial waterfront properties assessment
  rules will be made by general law

25
Fiscal Year 2009 with Amendment

• Per capita personal income added to rolled-back
  rate calculation (pass or fail)
• Must use penalty millage rate from FY08 to
  calculate rolled-back rate
• New levy limits
• Adjustment to tax base for loss due to amendment

26
Maximum Levy Limits FY09Amendment Passes or
Fails

• Applies to Cities, Counties and Independent
  Special Districts
• With a majority vote, rolled-back rate
• With a 2/3 vote, 110 of rolled-back rate
• With unanimous vote or referendum, can go above
  110 of rolled-back rate

27
Sample of RBR Calc in FY09
28
Sample of RBR Calc in FY09 (cont.)
29
Additional Provisions for FY09 Millage Rates if
Amendment Passes

• With a 2/3 vote, can recover 67 of loss due to
  adjusting the tax base
• A unanimous vote or referendum approval can go
  above the 67 difference

30
Loss Calculation if Amendment Passes
31
Amendment Fails
32
Fiscal Year 2009 Amendment Fails

• Rolled-back rate calculation includes per
  capita personal income
• Must use penalty millage rate from FY08 to
  calculate rolled-back rate
• New levy limits

33
Maximum Levy Limits Amendment Fails

• Applies to Cities, Counties and Independent
  Special Districts
• Same Limits as if Amendment Passes
• With a majority vote, rolled-back rate
• With a 2/3 vote, 110 of rolled-back rate
• With unanimous vote or referendum, can go above
  110 of rolled-back rate

34
Fiscal Year 2009 Amendment Fails (cont.)

• Main difference we dont lose our tax base
• However, the January election provides another
  opportunity to tinker
• Rules may change again
• Rolled-back rate calc same as if amendment passes

35
Fiscal Year 2010 and Beyond!

• Busting the cap in FY09 resets the base at which
  RBR is calculated
• RBR adjusted for per capita personal income
  (same as FY09)
• Levying this adjusted RBR will not require
  advertising for a tax increase (same as FY09)

36
Maximum Levy Limits 2010 and after

• Same as 2009
• With a majority vote, adjusted rolled-back rate
• With a 2/3 vote, 110 of rolled-back rate
• With unanimous vote or referendum, can go above
  110 of rolled-back rate
• Non-compliance loss of ½ sales tax for 12
  months (cities and counties)

37
Future Considerations

• The unprotected properties still have no
  property tax relief under the Amendment
• Likely to get cap in next legislative session
• Citizen groups have mobilized to press additional
  changes
• 30-40-50 assessment plan, among others
• High percentage of market value assessments (85)
  will lead to future crises

38
Long-Term Considerations

• In the long run, were all dead.
• - John Maynard Keynes

39
Long-term Implications

• Property tax revenues will be under increasing
  scrutiny and control of State
• Diversification of revenues will be critical
• Expenditure controls (especially for personnel
  costs) will become even more important
• Greater emphasis on fees and user charges

40
Where to Find Maximum Millage Rate Discussions

• Changes for FY08 FY09 200.185
• Changes for FY09 (if Amendment passes) 200.186
• FY2010 and after 200.065(5)

41
Additional Resource

• Online Sunshine(www.leg.fl.us)
• DOR(http//dor.myflorida.com/dor/property)
• DOR(http//dor.myflorida.com/dor/property/07specfo
  rms/emergforms.html)