Impact of New Tax Cut Plan On Central Florida Housing Market Debated
City and county officials across Lake County Wednesday blasted Gov. Charlie Crist’s massive tax-cut plan, saying they would have to either reduce services or raise taxes to make up for the loss in real estate tax revenue.
On Tuesday, Crist said he wants the Florida Legislature to call a special election so residents can decide whether the state’s $25,000 homestead exemption - a critical factor in the ability of many homeowners in the overheated Florida housing market to remain there - should double.
Voters also would decide whether or not the Save Our Homes property tax cap should become portable, allowing Florida homeowners to carry those savings with them when they move into new homes.
The governor also proposes expanding the Save Our Homes benefit to include businesses, second homes and houses owned by out-of-state residents.
That all sounds great to the prospective Florida mortgage applicant, but city and county leaders in Lake said that would mean a drastic reduction in revenues.
Lake County, for example, would have received about $12.2 million less in revenues from property taxes last year if the homestead exemption had been doubled.
“That’s a huge chunk of money. I don’t know how you cut that much money out of the budget without cutting services,” said County Commissioner Elaine Renick.
However, Lake County plans to collect significantly more tax dollars this fiscal year, mainly because of new home construction and rising property values across the Central Florida housing market. Working with an expected $26 million windfall, county commissioners in September approved a slight tax-rate decrease of 5 cents for each $1,000 of taxable value.
In Eustis, Jim Myers, the city’s finance director and interim city manager, said he understands residents want tax relief. But cities and counties rely heavily on property-tax revenues to fund police and fire departments and maintain streets and parks.
Eustis would have seen about $569,000 less in tax revenue last year if the exemption had been doubled. Myers called Crist’s proposals unfair because they don’t cost the state any money, but greatly affect local budgets.
“I don’t question that some people need some relief, but it always seems to be the level of government that more closely serves the people - like the cities and the counties - that bear the brunt. When someone gets on the phone and calls 911, they don’t expect us to respond any differently.”
In 1992, voters approved the Save Our Homes referendum limiting the growth of taxable value of a primary residence to 3 percent a year.
The constitutional amendment applies only to homesteaded properties - not second homes, businesses or rental properties - and homeowners lose the savings when they move to a new house, thus rapidly increasing the taxes they must bear along with already-high Florida home loan payments.
But longtime owners say the amendment traps them in their current homes because they can’t afford the substantially higher property taxes they would pay if they moved. So Crist proposes making the tax benefits portable, allowing homeowners to keep them when they move.
Mount Dora City Council member James Homich said that would hurt smaller cities in rural areas.
“We have a large influx of people from South Florida coming into Mount Dora. If they buy up a lot of property here, that would be a serious cut in our tax revenues,” he said. “The people that live here now will have to pay for it.”
Homich said the proposal also would encourage urban sprawl and not address the growing issue of affordable housing by making it easier for people to buy homes in outlying areas.
Lake County Commissioner Jennifer Hill urged lawmakers to examine the long-term impacts of the governor’s plan, particularly efforts to expand the Save Our Homes property-tax cap.
“With the portability aspect, would people start selling their houses?” Hill said. “Would that make the housing market go up again? And would that increase housing prices and thereby increase taxes?”
