On Thursday, February 8th, AIF chief executive Barney Bishop III was invited to give testimony to the Senate Finance & Tax Committee on the issue of escalating property taxes. His testimony is as follows
"Thank you, Mr. Chairman, for your invitation this morning to testify before your committee. I’m Barney Bishop, President & CEO of Associated Industries of Florida, and I’d like to take this opportunity to speak about Governor Crist’s property tax proposal and then I’d like to present some other recommendations. But overall, let me say that there is no doubt that the continuing significant increases in assessed value of home and businesses in Florida is outstripping the ability of homeowners and businesses to pay their taxes. If Florida is to continue to grow, we must have relief. It is important to understand, that in our mind, Florida’s economy is not tourism, nor agriculture, it is all about growth. If we do not continue to grow, to attract new residents and help current businesses to expand and attract new businesses, then Florida will be unable to pay for the infrastructure backlog that currently exists. So we must grow, and to do so, we must have a property tax policy that incentivizes this to continue to occur.
First, with respect to Governor Crist’s proposal, I’d like to say that we support much of his package as presented yesterday. Specifically, with respect to the portability of the Save Our Homes Constitutional Amendment, we support this idea because it is imperative that people be able to buy new homes and move, because there are always other people that will want to move into the home they just vacated. We believe that portability needs to be a one-time benefit as recommended by Florida TaxWatch in their recent report. We also believe that we need the turnover in housing because of our continued growth, and since the ever increasing property tax bills are a disincentive to move, we need to remove this impediment. And the portability concept needs to go both ways – whether a citizen is upsizing or downsizing, and we believe the Governor’s proposal on portability accomplishes this in a fair and equitable manner.
Regarding capping the annual property tax on businesses and renters to 3% per year, we support this concept as well. Under the current Save Our Homes amendment, non-homesteaded property and businesses bear the brunt of the status quo shift in property taxes from homesteaded owners.
The Governor’s proposal to exempt small businesses who have less than $25,000 in intangible personal property tax from paying such is also a worthy idea, and will save a significant number of small businesses from having to pay this tax, probably close to a million current payers would not have to pay this tax in the future. This will help the vast majority of small businesses in Florida, which is the backbone of Florida’s economy.
I have saved for last the Governor’s proposal for doubling the current homestead exemption to $50,000 because we would like to reserve judgment on this idea. We certainly understand the desire for further property tax relief for Florida homeowners, and so conceptually we could support this idea. However, we believe that we may be able to get to the same goal – of significant property tax reduction for homeowners – without having to undertake a new constitutional amendment Having said that, I have a few recommendations that I want to share with you in a moment; however, if it is incumbent that the homestead exemption be doubled, then at least consider implementing it in a constructive way, a way which will not adversely impact small and rural counties whose tax base to begin with is very limited. So, I would suggest that if you are going to double the exemption, that you consider taxing the first $25,000 of all property, then applying the homestead exemption to the next $50,000 layer, and then resume taxing anything above $75,000. In this fashion, at least small and rural counties, where significant chunks of land may be vacant, or have state or federal parks within their boundaries, or military bases, or they are simply sparsely populated, that these counties will not lose significant taxable property off of their respective tax rolls. By allowing the first $25,000 to be taxed, these counties are saving some tax base, and yet, the doubling of the homestead exemption can still be implemented, just at the second layer instead of on the first taxable layer.
We believe, however, that we may be able to achieve significant property reduction through other ideas. The first of which is a shift in the way that property appraisers assess the value of property now. Currently, there are eight factors that a county appraiser can consider; unfortunately most of them, certainly the ones in the most populated counties, use the “best and highest use” standard. We suggest that the state mandate instead the “current use” standard, or the “income generated” standard, whichever is lowest. Since banks will not loan money simply on the “best and highest use” of the land, then there doesn’t have to be a presumption that this is the correct standard to apply; other that it will almost always generated the highest assessed values. Therefore, AIF supports Senate Bills 508 and 722, because those bills call for “current use” to become the new standard for assessing property in Florida. Furthermore, we would mandate that the “current use” standard be applied consistently across the state by all property assessors, again with the caveat that the “income generated” standard can also be utilized if it produces a lower assessment, and that the Florida Department of Revenue be tasked with ensuring that all tax rolls are assessed in the same consistent fashion If this new standard was applied to all assessable property, it is possible to secure very significant property tax reductions, and it may be possible that this might generate enough savings that a doubling of the homestead exemption may be unnecessary. We don’t know what the fiscal implications would be, but we would certainly want to understand this application before we went any further. I believe that The James Madison Institute said it best in one of their recent studies, by Dr. Randall Holcomb, that “rather than addressing the Save Our Homes issue specifically, it would be better to address the underlying problem of tax bills rising because of increasing assessed values of property.” I really don’t think it can be said any more succinctly than that.
Second, we would like to propose a significant reform in the truth in millage law, the so-called “trim” notice that is sent to all property taxpayers. First and foremost, the trim notices need to be clearly understood by anyone at the 8th grade level. I would dare say that it is difficult for many college graduates to easily understand the current trim notices that we receive. I understand that by necessity that will entail a longer notice, one probably longer than just one page, but if we as citizens are going to be expected to pay our property taxes, then we must have the information that we need in an easily comprehensible manner. It also means that the trim notices must more clearly define for citizens what the true “rolled-back millage rate” is. That is, what the real, true millage rate would be if it was to produce the same exact revenue as the previous year. Then the notice must clearly reflect that any millage rate that produces revenue above the previous year’s revenue is by law a tax increase. We must end this subterfuge whereby increased property values automatically produces enhanced revenues and local governments then obfuscate their desire to use these enhanced dollars to fund needs without the necessity of going back to the appropriate millage rate to begin with. In some counties, local governments are taking all of the increased revenues as a result of the increase in assessed property values and refusing to return any of those dollars to their constituents. The normal response by local elected officials is that citizens can have their say at election time; however, I would respectfully suggest that four years is a long time for political payback! I would also suggest that, as an alternative, another James Madison Institute idea that is certainly worthy of consideration is their recommendation that we redefine the rolled-back millage rate as that which would allow property tax revenues to increase only by the rate of inflation, and make that rate the default rate rather than defining the default rate as last year’s millage rate. Any millage rate beyond the default rate would then require the approval of voters.
Next, the trim notices should break out the costs attributed to each county constitutional officer, so that taxpayers understand fully how much they are paying for public safety, the clerk of the courts, the property appraiser, etc. In addition, we believe that special taxing districts, which have incurred some of the largest unabated tax increases in many counties, be fully listed and that in the future those taxing district officers, for lack of a better term, be elected across the board. For too many of these special taxing districts, these officials are appointed and thus not accountable directly to the public.
Next, I would suggest that we need more utilization of value adjustment boards per the recent suggestion of the Auditor General’s report. Many citizens and businesses would use this appeal methodology more except they believe the consequences of doing so will prejudice them in the future with the property appraiser. You will hear from property appraisers that this is not used much, and they are right, but it is because of the reason that I just cited.
Next, I would suggest that we should encourage local government to establish rainy day funds or budget stabilization funds at their level, as the state has done at this level. This could be accomplished say, over 5–10 years, and the total set aside amount should equal 5% of their budget. If this was implemented over 5 years, then 1% could be set aside annually, if 10 years, just ½ of a percent would be needed to be set aside. This would allow local government to create essentially a savings account, just like the state does, so that when there are downturns in the economy, there are dollars that can be accessed. In the meantime, the interest off of those dollars could be utilized in a constructive manner after citizen input.
Finally, we need to consider limiting expenditure growth for local government to no more than the sum of population growth plus inflation as advocated by The James Madison Institute, or population growth plus income growth. Any local government expenditure beyond either formula should require voter approval or a supermajority vote of the local government entity. I would caution, however, that we need to provide for some flexibility, a relief valve if you will. It is important that local government not be so hamstrung that future residents or businesses will not be able to relocate simply because the government entity doesn’t have the funds necessary for future infrastructure needs. At the same time, we must be vigilant that local government not be allowed to threaten public safety dollars simply to try and make their case for future revenue growth without looking at their growing bureaucracies and regulatory schemes. There must be a balance.
Thank you Mr. Chairman for the opportunity to make these remarks."
