Orange County Florida Audit Forum Dealing with Property Tax Reform - PowerPoint PPT Presentation

Orange County Florida Audit Forum Dealing with Property Tax Reform and Economic Challenges in Florida Presentation by: Randy Singh, Manager, Orange County OMB August 8, 2008

OUTLI NE • Background • Property Tax Reform • Econom ic Pressures • Budget Challenges • Sum m ary

OUTLI NE • Background • Property Tax Reform • Econom ic Pressures • Budget Challenges • Sum m ary

ORANGE COUNTY STATS • 5 th Largest County in Florida • 4 .4 3 4 7 Countyw ide Millage Rate • 6 0 0 + Funds • Population = 1 ,0 7 9 ,5 2 4 • First in tourist developm ent tax collections • Second in sales tax collections • Largest Restaurant

BACKGROUND ( Sum m ary) Orange County has an annual budget of $ 3 .4 billion. I n dollar term s, about the sam e size as Berm uda, The Baham as, Fiji, or Greenland

BACKGROUND Our biggest taxpayer accounts for about 6 % of total taxable value... Countyw ide: ~ $ 1 0 8 B

BACKGROUND about the sam e as the next 1 0 put together.

OUTLI NE • Background • Property Tax Reform • Econom ic Pressures • Budget Challenges • Sum m ary

Property Tax Reform Back in the “Good Old Days” • Counties, Cities, and School Boards set their ow n m illage rates, up to a 1 0 m ill cap. • The State required that tax increases be properly advertised and adopted. • Debt issued against property tax had to be approved by a referendum . • “Taxable value” w as generally the assessed value.

Property Tax Reform • 1 9 3 4 - Hom estead Exem ption • 1 9 9 2 – Save Our Hom es • 2 0 0 7 – Millage Lim itations • Jan. 2 0 0 8 – Am endm ent 1 • Nov. 2 0 0 8 – Am endm ent 5

Property Tax Reform Frequently Used Term s • Market Value/ Sale Price – The value of your property on the open market • Just Value – The market value less cost of sales (~ 15% ) • Assessed Value – The value of your property before exemptions are deducted (JV-CD) • Capped Difference ( SOH savings not taxed) - Just Value less Assessed Value • Exem ptions – Includes the homestead exemption, Widow/ Widower, and disability • Taxable Value – The Assessed Value minus any applicable exemptions

Property Tax Reform • 1 9 3 4 - Hom estead Exem ption • 1 9 9 2 – Save Our Hom es • 2 0 0 7 – Legislative Action • Jan. 2 0 0 8 – Am endm ent 1 • Nov. 2 0 0 8 – Am endm ent 5

Hom estead Exem ption • Created in 1 9 3 4 @ $ 5 K during Great Depression • 1 9 8 2 increased to $ 2 5 K • 1 9 9 8 additional $ 2 5 K to low incom e seniors 6 5 + years • 2 0 0 8 Am endm ent 1 increased by $ 2 5 K for hom e value greater than $ 5 0 K

Property Tax Reform • 1 9 3 4 - Hom estead Exem ption • 1 9 9 2 – Save Our Hom es • 2 0 0 7 – Millage Lim itations • Jan. 2 0 0 8 – Am endm ent 1 • Nov. 2 0 0 8 – Am endm ent 5

Save Our Hom es • I n the 1 9 9 0 ’s, Floridians w ere w orried that rapidly increasing real estate values w ould cause taxes to increase too quickly for fixed incom e residents. • 1 9 9 2 – “SOH” Constitutional Am endm ent passed. – Lim its the increase in assessm ent to 3 % or CPI , w hichever is less. – W ent into effect in 1 9 9 5 . – Created a w hole new set of problem s.

Save Our Hom es Taxpayers Also Voiced Com plaints. 1 . A new hom e buyer m ight be paying tw ice the total taxes as the long-tim e hom eow ner next door in a bigger house. 2 . I f you had ow ned your hom e for m any years, selling your house and m oving to a sm aller hom e m ight cause a big increase in your taxes. 3 . SOH favors higher priced hom es. 150,000 140,000 Market Value 4 . Even w hen the 130,000 m arket value 120,000 goes dow n, your assessed value 110,000 Assessed Value can continue to 100,000 clim b. 90,000 Year 1 Year 2 Year 3 Year 4

Save Our Hom es • Statew ide Value Rem oved From Tax Rolls: • $ 2 5 K Hom estead Exem ption and SOH Differential 5 5 0 $513 Billion 5 0 0 4 5 0 4 0 0 3 5 0 $ Billions 3 0 0 2 5 0 2 0 0 1 5 0 1 0 0 5 0 0 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 Fiscal Year Ending Homestead Exemption Save Our Homes Differential

Property Tax Reform • 1 9 9 2 – Save Our Hom es • 2 0 0 7 – Millage Lim itations • Jan. 2 0 0 8 – Am endm ent 1 • Nov. 2 0 0 8 – Am endm ent 5

2 0 0 7 Millage Lim itations FY 0 8 I m pact Pressure for even m ore tax reform . – Local governm ent w as called “w asteful and inefficient.” – Citizens felt their taxes w ere too high, and their local governm ents w ere unresponsive. • The 2 0 0 7 Florida Legislature heard those com plaints… • And sw ung into action to answ er the call.

2 0 0 7 Millage Lim itations FY 0 8 I m pact “Maxim um Millage” - F.S. 2 0 0 .1 8 5 • Capped tax rates for counties, cities and special districts. • Rolled back fiscal year 2 0 0 7 -0 8 taxes to FY 2 0 0 6 -0 7 level, – Minus an additional percentage cut ( 3 % , 5 % , 7 % or 9 % ) based on prior tax perform ance – Plus an adjustm ent for new construction. • Cut taxes by roughly $ 1 .5 billion statew ide.

2 0 0 7 Millage Lim itations FY 0 8 I m pact “Rolled Back Rate” – F.S. 2 0 0 .0 6 5 – The m illage rate levy that w ould generate the sam e am ount of tax proceeds as the prior year after excluding new construction and neutralizing the im pact of CRA paym ents – This rate is used to determ ine advertising requirem ents

2 0 0 7 Millage Lim itations FY 0 8 I m pact Orange County $ 1 2 0 m illion less in property taxes

2 0 0 7 Millage Lim itations FY 0 9 I m pact “Method of Fixing Millage” - F.S. 2 0 0 .0 6 5 • Fiscal Year 2 0 0 8 -0 9 and thereafter – Maxim um m illage rate equal to the “rolled-back rate” plus personal incom e grow th

2 0 0 7 Millage Lim itations FY 0 9 I m pact • Form DR 4 8 7 V • Form w as added to record nam es and votes of each m em ber ( of the Board or Council) • For FY 2 0 0 9 , vote record w ill have to be com pleted for all jurisdictions.

2 0 0 7 Millage Lim itations Steps to be taken if DOR indicates Non- Com pliance • Repeat the advertisem ent and public hearing process. • “The previous notice… determ ined to be in violation of the law …” • Any excess taxes collected m ust be held in trust by Tax Collector. • Excess m ay be used only to reduce taxes next year.

2 0 0 7 Millage Lim itations • Penalty if still in non-Com pliance • Governm ents that don’t com ply w ith statutory requirem ents, and fail to rem edy the non- com pliance, lose their ½ cent sales tax revenue sharing from the state for a 1 2 m onth period.

2 0 0 7 Millage Lim itations The “Rolled Back Rate” made simple. (Orange, Countywide only.)

2 0 0 7 Millage Lim itations Maximum Millage Made Simple (Orange, Countywide, Majority vote only.)

Millage Lim itations (cont.) Maxim um Millage for FY 2 0 0 9 � Majority Vote – Rolled Back rate, adjusted for Am endm ent One, plus 4 .1 5 % ( the per capita personal incom e change) � 2 / 3 vote = 1 1 0 % of RBR, plus 4 .1 5 % , adjustm ent for Am endm ent One � Unanim ous ( 3 / 4 if 9 or m ore) or referendum = up to 1 0 m il cap

Property Tax Reform • 1 9 9 2 – Save Our Hom es • 2 0 0 7 – Legislative Action • Jan. 2 0 0 8 – Am endm ent 1 • Nov. 2 0 0 8 – Am endm ent 5

Am endm ent 1 Passed January 2 9 , 2 0 0 8 � Additional $ 2 5 ,0 0 0 hom estead exem ption for value above $ 5 0 ,0 0 0 ( Except School Tax ) � 1 0 % cap on non-hom estead ( Except School Tax ) � $ 2 5 ,0 0 0 tangible personal property tax exem ption � Save Our Hom es Portability

Am endm ent 1 Tax Cut ( $ in Millions) Added Tangible Portability Exempt. Exempt. Total Orange County $3.6 $32.3 $4.2 $40.0 Statewide $70.5 $569.1 $66.4 $706.0

Am endm ent 1 Portability • Difference betw een the Just Value and the Assessed Value – the Capped Difference • Am ount that is not taxed • Am ount that can be transferred to a new hom e 150,000 140,000 Market Value 130,000 120,000 110,000 Assessed Value 100,000 90,000 Year 1 Year 2 Year 3 Year 4

Am endm ent 1 Portability Details � Statew ide � Up to $ 5 0 0 ,0 0 0 can be transferred. � I f new hom e has a low er value, can transfer proportional benefit. � Must apply for portability.

Am endm ent 1 PORTABI LI TY EXAMPLE Purchased Price in 2 0 0 4 $ 2 3 5 ,0 0 0 Just Market Value in 2 0 0 4 2 0 0 ,0 0 0 (based on price less 15% ) Assessed Value = JMV 2 0 0 ,0 0 0 Hom estead Exem ption - 2 5 ,0 0 0 I nitial Taxable Value $ 1 7 5 ,0 0 0 2 0 0 7 Just Market Value $ 3 5 0 ,0 0 0 2 0 0 7 Assessed Value -2 1 2 ,0 0 0 ( 6 0 .5 7 % JMV) (assuming 3% cap applied) $ 1 3 8 ,0 0 0 Save Our Homes Benefit $ 138,000 is the Portable amount, worth about $2,484 in tax dollars saved (assuming about 18 mills total tax rate)