Why Do People Bitch about Florida Property Taxes?

PALM COAST, Fla. – August 16, 2024 – People bitch about Florida property taxes during the public comment period of city council meetings or county commission meetings. They bitch about Florida property taxes when commenting on articles found on local online media outlets. They bitch about Florida property taxes at happy hour. And they bitch about Florida property taxes on social media. Some “one issue politicians” are running for office promising to fix a property tax problem they do not completely understand and unwittingly (or not) fuel (or pander to) the negative narrative.

The Power of Social Media

We learned the power of anonymity during the CB radio craze in the 1970s. Anonymous handles and transmission distance freed us from ever having to defend what we said face-to-face. We were exempt from meaningful challenges. Social media is the CB radio on steroids.

People bitch because they can. However, property taxes in Florida are very state-specific. Florida’s Homestead Exemption (and the many other exemptions from taxable property value that are associated with homesteading) are unique to the state. So too is the “Save Our Homes” (SOH) statute that caps the annual increase in a property’s assessed value. Florida successfully offloads as much of the government’s cost burden onto non-resident property owners, tourists, and recent arrivals via impact fees, sales tax, and skewed property taxes. The longer one lives in Florida, the more they benefit from Florida’s strategy.

More than unique, Florida’s statutes are complex. Even long-term Florida residents, including some politicians, struggle with the details. Those moving here from out of state are essentially foreign nationals. Without a guiding hand, they are blindsided and vulnerable. Most are not getting that guiding hand. They are not doing their homework either.

Here’s an example: Smith buys a house from Green on July 4th. Green is homesteaded and has accumulated $200,000 in cumulative SOH Protected Value. Taxes are prorated at closing based on Green’s projected tax bill. The November tax bill, paid by Smith, is based on Green’s January 1st tax status (exemptions and Protected Value).

The following January 1st, the tax status is reset to reflect Smith’s status. Smith may or may not qualify for homestead exemptions. If qualified for homesteading, Smith may transfer a prorated share of any Protected Value from his/her recently sold Florida home.

Here’s the rub. Suppose Smith is from another state or was not previously homesteaded in Florida. In that case, the Assessed Value and Taxable Value reset may amount to several thousand dollars in additional property taxes, and it won’t be until the following January 1st that Smith sees any SOH benefit. Many new Florida residents are caught off guard because they were not listening or they were not told about the state’s property tax statutes.

All homestead exemptions and SOH benefits associated with a property expire at the end of the year in which a property is sold. The seller can move a pro-rated share of their SOH-protected value to another Florida home (assuming it too qualifies for a homestead exemption), but for the sold home and its new owner, the clock is reset as of January 1 following the sale.

To learn more about homesteading and SOH, read: The Case for Florida’s Growth Is Incontrovertible

Property taxes are not the major funding source for Palm Coast. Property taxes comprise only about 10% of the total city revenue. Property taxes support only the General Fund. In fiscal year 2023, property taxes funded only $33,884,614 (64.2%) of Palm Coast’s General Fund’s $52,749,349 budget. The Half-cent sales tax, Communications tax, and State tax revenue sharing also support the General Fund.

Property taxes do NOT fund other Palm Coast budget categories. They are:

• Proprietary Funds – $173,401,548, which include water and wastewater utility, the utility capital fund, stormwater management, and solid waste.
• Capital Funds – $50,666,727, which includes capital projects and transportation
• Special Revenue Funds – $21,560,624, including American rescue plan emergency fund and street improvement fund.
• Internal Services Funds – $29,809,388, including fleet management, emergency communications, IT, facilities management, and employee health insurance.

Reference: Understanding Your City Budget 2023

Since pre-Covid, homesteaded property owners have seen the increase in the value of their home greatly outstrips any increase in property taxes. The following examples use 2020 as a starting point. Assessed values are established as of January 1 for the year. Covid did not become an issue until after January 1, 2020.

I randomly selected four Palm Coast single-family homes that were homesteaded prior to 2020. They represent four value levels. The Just Value is established on January 1 of each year at typically about 80% of full market value at that time. Real market value can go up or down throughout the following years. See what has happened since pre-Covid to each home’s Just Value, Assessed Value, Taxable Value, Protected Value, and City of Palm Coast property tax.

Property Taxes are Not the Issue

Four random but real examples of Palm Coast homes that were homesteaded prior to 2020. There are thousands more.

• 4-year property value increase = $535,736.00.
• 4-year city property tax decrease = -$17.06.

How can that be true?

When pleading against any property tax increase, retirees on fixed incomes are often used as foils. This is a strawman argument. Everyone is affected by inflation. We all suffer the same from higher prices for energy and food. And those prices, as well as government expenses, have risen dramatically in recent years. But there is one category where Florida has already softened the inflation blow for its permanent (homesteaded) residents: property taxes.

Florida is growing. It has always grown and will continue to grow. It will always have an above average percentage of retirees on fixed incomes. The inevitable rise in property taxes caused by rising real estate prices in the past was driving retirees out of their homes, so Florida enacted the Save Our Homes act in 1995. It capped increases in Assessed Value for homesteaded properties to the lesser of the CPI or 3%. In 2008, the act was amended to allow homesteaded residents to move within the state and take their protected value (portability) with them.

The resulting total tax savings to residents often amount to thousands of dollars when considering all taxing authorities (city, county, school, etc.). The above examples prove that the serial bitchers are running down the wrong rabbit hole, a tempest in a teapot, playing on peoples’ emotions rather than facts. Don Quixote, tippling at windmills.

The infrastructure dilemma

Roads, bridges, and canals deteriorate. So too do utilities, and stormwater drainage systems. And new residents bring increased traffic. Few existing residents believe that they should pay now for improvements that will benefit future residents, so we are perpetually stuck behind the curve. But as the four housing examples above show, we are already insisting that new residents pay higher property taxes. New construction impact fees are running about $21,000 for each Palm Coast single-family home. Homesteaded homes represent approximately 75% of all Palm Coast homes while non-homesteaded homes pay more than 37% of the city’s property tax.

There is another way to address the infrastructure issues that shifts a proportionate share of the costs to new residents by using bond money. The advantage of bonding is that the money is available now to pay for much needed infrastructure improvements, but bonds are paid off over time with minimal effect on property taxes spread across all residents, including new arrivals who will be paying a disproportional share of future property taxes because their Taxable Value will be above average.

The effect of property tax increases on homesteaded residents is already mitigated via homestead exemptions and SOH assessment caps, so quit your bitch’n. Focus instead on issues that have far greater impact like raising the city’s bonding limit and on revenue sources such as grants, or utility franchise fees (that draw from segments that do not pay property taxes).