Florida’s down-means-up property tax rule baffling homeowners

Property Taxes

September 16, 2008
Author: Bill Kaczor (Associated Press Writer).

TALLAHASSEE, Fla. (AP) – Sept. 12, 2008 – Michael McKenna was baffled by his property tax assessment this year.

The market value of his Longwood home fell by nearly $52,000, yet its taxable value increased by 3 percent – about $4,000.

“It just doesn’t make sense,” McKenna said.

He’s among more than a million primary homeowners across Florida who’ve been scratching their heads over the state’s down-means-up “recapture” rule that’s been raising their property taxes.

The rule has been on the books since 1995 but had no noticeable effect until the state’s real estate market collapsed.

That effect would have been even greater if voters had not passed a tax-cutting amendment to the state’s constitution in January. The recapture rule is eating into Amendment 1’s estimated average savings of $240 a year for homeowners if not wiping them out altogether.

In an e-mail to the proposal’s chief promoter, Gov. Charlie Crist, McKenna wrote that his “net tax savings will amount to a staggering $78.”

“I thought, ‘What’s all the big hoopla about a tax break?’ “ McKenna said in an interview. “Nothing’s changed.”

Not yet, but lawmakers are expected to take up legislation to repeal the recapture rule next year.

“This was a tax increase that the Legislature really hadn’t voted for or against,” said Rep. Nick Thompson, R-Fort Myers. “The whole idea of the recapture rule is taxing people at a time when they can least afford it.”

Senate Finance and Tax Chairman Mike Haridopolos, R-Indialantic, called the rule “silly.”

Thompson and Sen. Mike Bennett, R-Bradenton, sponsored similar repeals this year but they never got a floor vote in either chamber. That’s because Senate leaders put a clamp on further property tax relief. They said they first wanted to see what effect Amendment 1 would have.

The recapture rule stems from a quirk in the Save Our Homes Amendment voters adopted in 1992. The amendment limits annual assessment increases for primary homes to no more than the increase in the Consumer Price Index or 3 percent, whichever is lower.

Save Our Homes, though, doesn’t say what happens if market values should drop; so then-Gov. Lawton Chiles and the Florida Cabinet adopted the recapture rule to cover that situation.

It requires an assessment to increase according to the amendment’s criteria no matter if a home’s market value goes up, down or stays the same.

The only limit is that an assessment cannot exceed a home’s market value. That’s unlikely because market prices have gone up over the long haul much more than assessments have increased thanks to the Save Our Homes cap.

As a result, the rule was seldom applied and largely forgotten until last year when Florida’s housing market crashed.

The bills Thompson and Bennett are planning would reduce an assessment by the same percentage that home’s market value falls. If that value remains unchanged, so would the assessment.

Those changes, though, would exacerbate inequities between homesteads and other types of property such as businesses and second homes, said Dominic Calabro, president of Florida TaxWatch, a budget watchdog group.

Until Amendment 1 passed there had been no cap on assessment increases for non-homestead properties. They now get a 10 percent annual limit, but that’s expected to offer relatively little tax relief because values seldom go up that much in one year.

Calabro also questioned whether the Legislature can repeal the recapture rule without passing another constitutional amendment. That would take 60 percent approval at the polls and likely wouldn’t go into effect until after the 2010 election.

A legislative staff analysis of Thompson’s bill cited no legal bar to passing it, but at least one lawmaker plans to introduce a constitutional amendment to repeal the rule.

In 1995, Broward County’s then-property appraiser William Markham challenged the recapture rule at administrative hearing before the Cabinet passed it.

Administrative Law Judge Donald Alexander approved it as an appropriate way to apply the Save Our Homes Amendment when property values go down. He also rejected Markham’s alternate proposal, which would have left assessments unchanged if values declined or stay unchanged.

Save Our Homes says no such thing, Alexander wrote, adding he had to go by its “plain language.”

Even if lawmakers repeal the rule at their next regular session in March, that won’t affect current tax bills.

It’ll also be a moot issue – until the next housing bust – if the market recovers as predicted in late 2009 or early 2010, again driving up home values.

“I’m furious,” said Edna Mattos, a Hernado homeowner affected by the recapture rule. “Next year may be too late.”