Oh yeah? Well assess this, pal!
Because of expected lower property values on January 01, 2007, the magic date that assessments are pegged to, the assessed base in Venice will be lower by around 7%, but homesteaders (full-time residents with reduced property tax rates due to the Homestead Exemption) are now assessed so far below their market value that their assessed value will continue to go up at the COLA (cost of living adjustment) of 2.5%.
The assessed value changes, though, are only half of the story.
The other half involves how the millage rates on the assessed values are figured so that the city and the county can support their budgets. The city income from property taxes has been going up at 15% per year for the last several years despite the fact that the city has consistently touted that city taxes have been going down because the millage rate has been reduced time and time again over the past ten years.
To be fair, the millage rate as assessed by the city really has been going down -- at only a fraction of the rate of the simultaneous rise in value of property assessments. Thus the city claims that they have been reducing taxes while still taking in more money than City Manager Marty Black can spend. If you look at the annual financial report of the city, it praises the growth of a pot of money called "unrestricted funds." These seem to be cubby holes that money has been stuffed into, and from which expenditures can be controlled by the city manager.
Schrdinger's bureaucrat
The end result of the upcoming collapse in assessed values, along with the city's appetite for a 15% per year growth in this income stream, will mean a big increase in millage and/or some big reductions in expenses. As pointed out above, homesteaders assessed values will go up, and they will likely take a double hit. At one of the salary meetings, City Councilman John Simmonds remarked that a tax increase to pay for higher salaries wouldn't affect him because he was homesteaded. In fact, because of the decrease in market values for everyone, any city expenditure increase will impact homesteaders more.
Black sees this problem brewing. So do most of the politicians in the county and the state. With the present rules for property taxes, homesteaders are going to take it on the chin this year. Non-homesteaders may even get a break in actual dollars paid, this depending on the size of the drop in their assessed value. As luck would have it for the politicians, it is homesteaders who will vote in November. They are all trying to make their own lemonade out of this approaching lemon.
So Black is setting the stage to avoid being the fall guy for some real dollar tax increases for the voters this fall and/or some significant reductions in city expenses.
He's in a pretty tight box.
And the hits just keep on coming
Again, make no mistake: if this all comes down, the double hit will be taken by homesteaders.
The reason for hit #1 is that almost all homesteaders are being assessed today at far below the true market value of their properties. This is because there is a COLA cap on annual increases in their assessments. It's a great deal for homesteaders, especially in the last 3-4 years as the market value has risen much faster than the COLA.
As the true market value drops, homesteaders will not see the drop because their assessment is already far below the market value. Until their COLA capped assessment brings them up to the market value, they will continue to get an increase in assessed value, which is estimated at 2.5% for 2007.
The reason for hit #2 is that the city has been accustomed to a 15% annual increase in income from property taxes over the last 3-4 years. Black has been able to do this while reducing the millage because of the great increase in property assessments, but the big hunk of the increase has been paid by non-homesteaders and by businesses. Their assessments have gone up with the market. In 2007, with the market value falling by around 15%, their assessments will fall and the dollars they pay in taxes will fall.
As a result of all of this, the city might get 10% less in property taxes at the same millage as 2006. The city is programmed (with raises, new projects, and so on) to spend 10% more in 2007. It will be necessary to raise the millage as well as to tighten the belt. This could mean the layoffs that Black is so edgy about.
Whatever happens, just smile and pretend it was good
In any case, homesteaders will get a 2.5% increase in taxes due to COLA, and I am projecting a minimum of a 5% increase in millage just to make the city's budget. Thus, homesteaders could easily wind up paying 7.5% more in actual dollars than they did in 2006.
The non-homesteader will see a drop in his assessed value coupled with the general 5% increase in millage. As a result, non-homesteaders could wind up paying up to 10% less to the city for 2007 property taxes than they paid in 2006.
The city, on the other hand, will anger the homesteaders who actually vote, and this will likely all fall into place just in time for November's elections.
That is why all politicians are looking for a way out of this real estate tax bust box. The scheme in Tallahassee to just eliminate property taxes for homesteaders is unbelievable, but definitely a solution to the possible voter anger in November when the proverbial stuff will hit the fan. Homesteading was a great idea as long as Florida had a real estate boom but as the prices fall, it has local governments in a panic.
Earl Quandt is a retired resident of Venice and a board member of the Venice Neighborhood Coalition.
