Roll-forward millage hike could mitigate tax Amendment losses

‘Roll-forward’ millage hike could mitigate tax Amendment losses

by Deborah Nelson
January 14, 2008

If Florida voters pass a proposed tax reform Amendment, local governments will still have the option of offsetting its impact through what state officials are calling a ‘roll-forward” tax millage rate increase. Most homeowners would still see a portion of Amendment savings; but part of homeowners’ tax burden would likely shift to business and non-homesteaded properties, according to County Property Appraiser data.

Homes assessed under $50,000 may not see any savings at all from the Amendment, says Santa Rosa Property Appraiser Greg Brown, if officials opt to raise tax rates in response to Amendment-based cuts.

Governments may compensate for Amendment-based losses by raising the millage rate until tax revenues reach a specific cap amount. If the millage rate goes up, homeowners would stand to lose some Amendment savings – because taxes on non-exempt property would increase.

At this year’s millage rate, homeowners paid 6.0953 dollars for every $1,000 in assessed home value. Brown estimates next year’s ‘roll-forward’ millage at 6.72697.

Visit the Property Appraiser’s website for details on how the Amendment would impact your property at www.srcpa.org

Revenue caps, established by June 2007 legislation, would still impose the only limit on local government income, even if the Amendment succeeds, Brown pointed out at a recent League of Women Voters forum.

The June 2007 legislation forced local governments to roll revenues back to 2006 levels. Starting in 2009, they must cap growth at new construction and per-capita income levels (currently four to five percent, statewide, according to Florida Tax Watch).

The 2007 legislation doesn’t apply to schools, and may be overridden by supermajority commission vote or public referendum.

Santa Rosa officials were forced to reduce this year’s tax millage rate to meet the new requirements.

In recent years, Santa Rosa property tax revenues have increased annually…without a need to raise the millage rate.

That’s because property values have increased every year. At the same millage rate, rising home values translate to rising tax revenues.

Santa Rosa government must advertise those ‘automatic’ revenue increases as a tax hike, even when the millage rate stays the same, because homeowner tax bills also increase with property values.

To cut revenues this year, as the new law requires, local governments had to reduce property tax millage rates until incoming dollars sank to the new, allowable limit.

This year, Santa Rosa government took in $1.8 million less in property taxes than last year, per county budget documents -- a three percent reduction from $58.6 to $56.8 million.

Last year, revenues increased 34 percent: from $43.5 to $58.6 million, due to hurricane-related property value increases. The year before, revenues increased by 10 percent, according to County budget documents.

But the proposed Amendment focuses on which properties can be taxed -- as opposed to how much income government can collect.

The Amendment would reduce the available property that could be taxed by adding another $25,000 homestead exemption for home values over $50,000. Homesteaded properties already get a $25,000 exemption. Brown estimates Santa Rosa County homeowners would save about $153 from the added exemption, at this year’s millage rate. The county would lose $6.1 million in revenues, unless officials raised the millage rate. Schools would not be impacted.

Gulf Breeze residents could save a maximum of $192.31; Milton: $222.26 and Jay: $203.51; because the new homestead exemption would also apply to the additional taxes levied by municipalities.

Estimated homeowner savings with a “roll-forward” millage increase. Some savings from the additional Homestead Exemption (Add. Hex) would be offset by tax increases on non-exempt portions of property.

The Amendment would also allow homeowners to take accumulated Save-our-Homes exemption percentages with them to new homes. Save-our-Homes slows the amount of home value that can be taxed to a 3 percent increase each year. This part of the Amendment is expected to impact schools by reducing the total amount of assessed property available for schools taxing. This year’s schools millage rate, 7.1230, is slightly higher than the county rate of 6.0953.

The Amendment would also create a $25,000 tangible property tax exemption for businesses. Currently, business owners must pay the millage rate tax on property like furniture, computers and equipment, every year. Unless officials raise millage rates, Brown predicts $869,705 in county, and $1,016,342 in schools revenue losses from the tangible property exemption.

And the Amendment would cap taxable assessment value increases on non-homesteaded property to 10 percent each year.

In total, the Amendment would exempt about $1.15 billion worth of Santa Rosa property from taxation, per the Property Appraiser. That translates to a $7 million loss in county revenues, if officials don’t raise millage rates to compensate.

But county government would retain that option: officials could raise millage rates on remaining, taxable property up to the point where it would bring in revenue amounts allowable by last June’s legislation.

A millage increase would likely reduce the Amendment’s overall savings to homeowners, because portions of property that are not exempted by the Amendment would then be taxed at the higher rate.

But because the Amendment provides fewer exemptions to business and non-homesteaded properties, millage hikes would likely redistribute some tax burden from homeowners to businesses and non-homesteaded property, Brown affirmed.

Homes assessed at under $50,000 would not qualify for the extra homestead exemption, and could end up with no savings at all: Brown notes that a home assessed at $49,999 would get only the existing $25,000 exemption – reducing its taxable value to $24,999. If commissioners raise next year’s millage to the projected ‘roll-forward’ rate, that property would end up with a higher tax bill than this year (Brown estimates $15 would be the maximum tax hike possible next year on a property assessed at $49,999).

Homes assessed at under $50,000 would not get the Amendment’s added Homestead Exemption, and could end up with a higher tax bill if millage rates increase to compensate for Amendment losses.

State officials are calling potential Amendment-induced millage hikes a “roll-up” or “roll forward,” rate says Brown.

The term contrasts with “rollback” rates: “rollback” refers to the amount, when property values increase, that officials must reduce this year’s millage to bring in the same amount of revenue as last year.

Brown notes that even though governments would have the ability to recapture some Amendment-related revenue cuts through millage hikes, raising rates could prove politically challenging.

If officials decided not to raise millage rates, the Amendment’s new exemptions would end up sharply reducing local tax revenues.

Santa Rosa government’s projected $7 million revenue loss represents 12.3 percent of county ad valorem tax income, according to Brown.

Editor's note: All graphics used on this page courtesy of the Santa Rosa County Property Appraiser. For more information visit www.srcpa.org.