County scrambling to deal with expanded homestead exemption plan

The Florida Senate passed a measure Monday that could allow voters to expand the homestead exemption in 2018, frightening Palm Beach County officials, who say the move would cost them millions of dollars in property tax revenue.

In anticipation of the Senate’s passage of the joint resolution — the House of Representatives approved its version last week — Palm Beach County Commissioner Melissa McKinlay wrote a memo to her colleagues asking them to consider a half-cent sales tax increase whose proceeds would be used to help plug the gap left by the loss of property tax revenue.

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The sales tax in the county is now 7 percent. Increasing it by a half cent would raise it to 7.5 percent. But under McKinlay’s proposal, the county would reduce property taxes collected for fire rescue by the same amount as collected through the proposed sales tax increase.

Firefighters pushed that “tax swap” plan last year as a way to reduce reliance upon property tax revenue, but county officials worried voters would not agree to both the tax swap and a one-cent sales tax increase aimed at getting more money to repair roads, bridges, schools and county-owned buildings. The one-cent sales tax hike was approved by voters.

McKinlay says she now wants county staff to research the idea of the tax swap, which could be placed before voters in November 2018 — the same time the expanded homestead exemption could be on the ballot.

The “emergency services” tax swap idea is expected to be discussed when the County Commission meets on Tuesday.

“While I am concerned with the impacts this will have on all of our services, I am most concerned with the impacts to Palm Beach County Fire Rescue and the emergency services they provide,” McKinlay wrote to her fellow commissioners. “The overdose crisis we are facing in our county is already straining our limited resources and the proposed revenue losses associated with an additional homestead exemption will only exacerbate the situation.”

Assistant County Administrator Todd Bonlarron said the county, its cities and other taxing entities could lose a combined $62.7 million if the expanded homestead exemption is ultimately approved by voters. Estimates of the impact have shifted as the joint resolution, once thought to be on shaky ground, sprang back to life in the waning days of this year’s legislative session.

As is necessary for joint resolutions that would change the state constitution, the homestead exemption resolution (HJR 7105) cleared the three-fifths hurdle in the House and Senate. But because it was amended in the Senate, the House would have to pass it again before the session ends Friday, and 60 percent of voters then would have to approve before it goes into effect on Jan. 1, 2019.

The resolution calls for the homestead exemption to be expanded to $75,000 from $50,000 for homes worth at least $100,000.

County officials held out little hope Monday that the resolution won’t be placed before voters, and they weren’t hopeful about convincing voters to turn down an opportunity to reduce their property taxes.

“If the question is, ‘Do you want to cut your taxes?’, the default answer is ‘Oh, yeah!’” Bonlarron said.

“There is no way to beat this,” said Richard Radcliffe, executive director of the Palm Beach County League of Cities. “If I give you a chance to pay less money, there are not a lot of voters who are not going to vote for that.”

The proposed constitutional amendment gives state lawmakers an opportunity to say they’ve given voters a chance to cut their taxes, nectar for any politician.

For county and municipal officials, however, there is no sweetness in a Tallahassee-inspired property tax reduction. They say they face a difficult choice imposed upon them by state lawmakers: Raise local taxes to maintain current levels of service or cut those services.

“It makes a routine budget year very difficult,” Commissioner Steven Abrams said.

Commissioner Hal Valeche said he’d normally be happy about voters having a chance to reduce their property taxes.

“I’m a little bit torn,” Valeche said. “I’ve been in favor of lower taxes. But in this instance, I think what the Legislature has done is put an additional burden on local government.”

Local governmentofficials find it especially galling that, while state lawmakers are not limited in ways to reduce local revenue, local officials are limited by state law in setting property tax rates.

The county uses about half of its taxing authority, but some cities in the county — a group Radcliffe says includes Lake Park, Mangonia Park, Lake Worth and Lake Clark Shores among others — are at or close to their statutory taxing limits. Such cities may not have the option of raising property tax rates to make up for the property tax revenue loss and could, instead, be forced to cut services.

“It’s going to be horrible,” Radcliffe said. “This is not good.”

Backers of the resolution had a different view.

Sen. Tom Lee, a Republican home builder from Thonotosassa who sponsored the bill, said expanding the exemption could help people afford homes. Also, he said it could boost such things as documentary-stamp taxes, which stem from real-estate transactions.

“Making homes more affordable, we’re going to allow people to move from rental units back into homes,” Lee said. “And in doing so, it’s going to give us the ability to generate revenue for doc stamps, the tangible tax and a whole host of other things that go along with home ownership.”

The News Service of Florida contributed to this story.

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