LTC 038-2007 Property Tax Reform Proposals
lb MIAMI BEACH
OFFICE OF THE CITY MANAGER
NO. LTC # 038-2007
RECEIVED
2001 FEB -9 AM II: 24
CITY CLERK'S OFFICE
LETTER TO COMMISSION
TO:
Mayor David Dermer and Members of the City Commission
Jorge M. Gonzalez, City Manager 0./' ~
February 8, 2007 (} 0
PROPERTY TAX REFORM PROPOSALS
FROM:
DATE:
SUBJECT:
The purpose of this LTC is to transmit to the Mayor and City Commission the attached
correspondence from the Florida League of Cities, regarding properly tax reform. As of
January 29, 2007, there have been more than 30 bills filed in the Legislature related to
properly tax, including proposals for portability, increases to the homestead exemption,
properly assessment methodology, extension of the 3% growth limitation to all properly, and
caps on local government revenues and expenditures. A summary list of legislation identified
by the City's lobbyists is attached.
The impact of a population/inflation growth limitation has potential negative consequences
for Miami Beach. The University of Florida conducts population estimates for revenue
sharing purposes. The UF estimate for Miami Beach showed a 1.49% decline in population
from 93,535 to 92,145. The September 2005-September 2006 percentage change in the
Consumer Price Index was 2.1 %. Had this proposal been in place for the current budget
year, (utilizing the UF estimate and Sept. 05-Sept. 06 CPI-U), the City's annual budget
growth would have been limited to 0.58% growth, reflecting the sum of inflation (2.1 %) and
population growth (-1.49%) for Miami Beach from 2005 to 2006.
A series of Legislative Public Hearings on Property Tax Reform are planned
throughout the State during February, including one on February 13th at Miami-Dade
Community College's Chapman Center, from 6-9 p.m. A public hearing will also take
place in Fort Lauderdale on February 12th.
T e of Pro osed Le islation
Increase the Homestead Exemption from
$25,000 to $50,000.
Portabili
Limiting expenditure levels to CPI and/or
population growth.
Extend 3% assessment growth cap to all
properly.
1m act on Cit of Miami Beach
Offset by decreasing the Homeowner's
Dividend.
Undetermined
Creates difficulty funding Current Service
Level (CSL) and eliminates potential for
enhancements. Requires millage reduction
that will have negative impact on City Center
CRA and South Pointe revenues.
Creates difficulty funding Current Service
Level (CSL) and eliminates potential for
enhancements without significant increases
in the operating and debt service millage
rates, which would impact homesteaded
ro e owners.
Letter to Commission - Property Tax Reform
February 8, 2007
Page 2 of 4
Below, please find the estimated impact that some of the various proposals would have had
on the current FY 2006/07 operating budget, had they been in place.
Double the Homestead Exemption and Portabilitv
An increase of the Homestead Exemption from $25,000 to $50,000 would have an
estimated impact of this increase is $2.88 million. This could be offset with a reduction of the
Homeowner's Dividend. As part of the City's 2007 State Legislative Agenda, approved by
the City Comission on January 17, 2007, the City is supporting this increase of the
Homestead Exemption, as well as the concept of portability.
Cap on Revenues/Expenditures/Budaet
Current Ooeratina Budaet
FY 2005/06 Adopted Budget
Maintain Current Service Level in 06/07
FY 2006/07 CSL Budget
Additional items:
Pension Restructure
Service Enhancements
Internal Service Fund Enhancements
Increase of Homeowner's Dividend
Absorbing part of W ASD fee impact
Structural Enhancements
Adopted FY 2006/07 Budget
$207,925,117
$16,940,264 (8.1% increase)
$224,865,381
$2,715,000
$3,652,111
$209,724
$1,630,880
$1,000,000
$3,600,000
$237,673,096
House Bill 363
House Bill 363 would allow an increase of two times CPI-U, equivalent to a 4.2% increase if
it had been applicable for FY 2006/07:
FY 2005/06 Adopted Budget $207,925,117
House Bill 193 Allowance $8,732,855
FY 2006/07 Maximum Budget $216,657,972
Unmet Current Service Level 05/06 $8,732,855
Total Undeliverable 06/07 Services $21,Q15,124 (9% of current operating budget)
This scenario would require a reduction of the operating millage from 7.2102 to 6.2861.
House Bill 193
House Bill 193 would allow an increase of the operating budget by the sum of the
percentage change in population (-1.48%) plus the CPI-U (2.1%), or a 0.58% increase if it
had been applicable to FY 2006/07:
FY 2005/06 Adopted Budget $207,925,117
House Bill 193 Allowance $1,276,505
FY 2006/07 Maximum Budget $209,201,622
Unmet Current Service Level 05/06 $15,565,430
Total Undeliverable 06/07 Services $28,471,474 (12% of current operating budget)
This scenario would require a reduction of the operating millage from 7.2102 to 5.9582.
Letter to Commission - Property Tax Reform
February B, 2007
Page 3 of 4
The intent of this scenario is to provide the ability for local governments to increase services
due to growth in the resident population. However, it makes no provision for increased
services in response to the service impacts of other types of development, thereby
penalizing more urban communities and vibrant tourist destinations.
The impact of these two scenarios on the City Center CRA and South Pointe revenues is
estimated as follows:
Current HB 363 HB 193
CITY CENTER
City Payment $18,569,009 $16,183,100 $15,344,633
County Payment $15,027,346 $13,101,356 $12,417,954
Total Pavment $33.596.355 $29.290.456 $27.762.587
Reduction -12.8% or -$4,305,899 -17.4% or -$5,833,768
SOUTH POINTE
City Payment $19,493,389 $16,995,006 $16,108,500
County Payment $15,775,418 $13,753,552 $13,036,129
Total Payment $35.268.807 $30.748.557 $29.144.629
Reduction -12.8% or -$4,520,250 -17.4% or-$6,124,178
At this time, the proposed legislation that caps the growth of local government operating
budgets states that this limitation may be overcome by a finding of necessity due to
emergency or critical need approved by a super majority vote of the governing body.
APplication of the 3% assessment arowth to all property. rather than homesteaded
property
2005/06 Total Taxable Value
2005 New Construction
2006/07 Total Taxable Value
Homestead Only
$17,450,000,000
$786,000,000
$22,740,000,000
$163,959,948
$6,799,260
All Property
$17,450,000,000
$786,000,000
$18,759,500,000
$135,259,747
$5,609.091
Tax from operating Millage of 7.2102
Tax from debt service of .299
If applied to the current budget year, this proposal would have resulted in a 2006/07 budget
with $28,700,201 fewer dollars with which to provide services (representing 12% of the
current operating budget).
In order to maintain the revenues of $163,959,948 and meet debt requirements, the
operating millage would need to be increased to 8.7401 and the debt service millage to .362.
The impact on the average homestead properly would be a 21.2% increase in the City
portion of their properly tax. There would most likely be a similar increase to the County
portion of their tax bill as well.
Letter to Commission - Property Tax Reform
February 8, 2007
Page 4 of 4
Florida Leaaue of Cities and Florida Association of Counties
Below, please find a brief summary of the positions of the League of Cities and the
Association of Counties related to properly tax reform.
Florida Leaaue of Cities
. Establish a more simplified and informative truth-in-millage (TRIM) process
. Establish an equitable assessment system with uniform standards for all properly
based on the market value of the properly's current use
. Establish a statutory ceiling determined by the average assessment change in the
previous five years
. Authorize municipalities and counties to provide exemptions or changes to
properly tax assessment criteria (e.g., Save Our Homes, Save Our Seniors,
portability of exemptions, etc.) under specific circumstances
. Provide State financial assistance (in a revenue-neutral manner) if exemptions or
changes to properly tax assessment criteria are implemented Statewide
. Establish specific assessment criteria and standards for the taxation of very-low,
low, and moderate-income housing
. Authorize assessment of new construction on a partial-year basis
Florida Association of Counties
. Supports reasonable limits on the rate of properly tax assessment increases
. Opposes modifications to the properly tax structure that erode the existing tax
base
. Establish a $25,000 exemption for tangible personal properly taxes for
businesses
. Establish a ten percent (10%) cap for non-homestead and commercial properly
with revaluation upon change of ownership or use of properly
. Assess affordable rental housing based on the actual rental income of the
properly
. Assess commercial and recreational working waterfronts based upon the current
use of the properly by local option, and require upon discontinuance of such use,
taxes that would have been due on the highest and best use for the last three (3)
years become due
. Revise the truth-in-millage (TRIM) process to include better information
Additional Information
Additional information on properly tax related information, including proposed legislation and
media coverage may be found on the City's website. From the front page, there is a
Legislative Affairs link under the E-Government tab. The Legislative Affairs page includes a
link for Properly Tax, with links to additional information.
The Administration will continue to monitor and update you on this issue as the 2007
Session of the Florida Legislature approaches. In the meantime, if you have any questions
or comments, please do not hesitate to contact me.
JMGIKBlkc
Attachments (2)
c: Executive Staff
Kevin Crowder, Economic Development Division Director
Jose Cruz, Budget Officer
-
_.
IMMEDIATE ACTION REQUESTED!
Time Sensitive
TO: FLC Board of Directors
Key Officials
Advocacy Committee
Legislative Key Contacts
Local and Regional Leagues
FROM: John Charles Thomas, Director
Legislative and Public Affairs
DATE: January 26, 2007
RE: Action Needed Immediately on Property Tax Reform
The Florida Legislature is now focusing its efforts on passing significant property
tax reform that could have a significant impact on local government budgets.
Governor Charlie Crist and House Speaker Marco Rubio have expressed support for
passing a constitutional amendment that could go to the voters as early as this summer.
Some legislative proposals include capping local government expenditures andlor
revenues.
It is imperative that city officials contact their House and Senate members
immediately and let them know of your city's opposition to legislation that would cap
municipal expenditures or revenues, This is a complete assault on Home Rule and your
legislators need to know the impact this would have on your cities.
The Florida League of Cities supports comprehensive reform that would create a system
that is fair and equitable to all citizens in Florida.
Contact information for House and Senate members can be found at:
House of Representatives: www.mvfloridahouse.com
Senate: www.flsenate.Qov
Please contact me or Allison Payne at the League at (800) 342-8112 or e-mail:
apavne@flcities.com should you have any questions. Thank you.
Attachment
Florida League or Cities, Inc. . P.O. Box 1757' Tallahassee, FL 32302-1757' (850) 222-9684' Suncum 278-5331 . FAX (850) 222-3806
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