Presentation by The Honorable Bill Donegan, CFA Orange County Property Appraiser January 30, 2007...

Presentation by

The Honorable Bill Donegan, CFAOrange County Property Appraiser

January 30, 2007

Notes on:Property Tax Reform

Before we start.

Notes on:Property Tax Reform

This Morning’s Topics

Property Tax Overview Property Tax Reform Efforts The 4 Property Values & Factors

Considered Save Our Homes Benefit Calculation Save Our Homes Portability Proposed Legislation and Analysis

Property Tax Overview

Property Tax Overview

The Office of the Property Appraiser is created and established by the Constitution of the State of Florida[Article VIII, Section 1(d)].

Elected Constitutional Officer.

Responsible directly to the people. Promotes accountability and transparency to the ad valorem tax roll process.

Property Appraiser Responsibilities Place a fair and equitable Just Market Value on all

Real and Tangible Personal Property for ad valorem taxation.

Administer all exemptions authorized by Florida Law.

Prepare and submit to the State Department of Revenue an annual assessment roll which complies with Constitution and State mandate standards.

Administer the TRIM notices.

Maintain the County Base Map.

2006 Final Tax Roll Statistics 407,954 Real Property Parcels

270,339 Residential 62,089 Condominium & Timeshare 12,918 Commercial and Industrial 47,937 Vacant 1,988 Agricultural 63,344 Tangible Personal Property Accounts

Total Just Value: $127.8 Billion Total Taxable Value: $92.3 Billion Just Market Value Increased $26 Billion, or 25.6% over 2005

Taxable Value Increased $17 Billion, or 22.6% over 2005

New construction added over $3.5 Billion in taxable value

Property Tax Reform Efforts

Property Tax Reform Efforts

The Property Tax Reform Committee

Formed June 2006 by Executive Order 06-141

Purpose:

Statewide Meetings:

Committee Reports: Initial: December 15, 2006 Mid-term: March 1, 2007 Final: December 1, 2007

Property Tax Reform Committee Preliminary Recommendation:

Areas of Continued Review

Assess Business Property Based on Current Use Only,

instead of “Highest and Best Use”

Highest and Best Use The most Reasonable and Probable

use to which the property can be expected to be put in the immediate future.

Must be legally permissible Proper Land Use and Zoning

Physically possible Financially feasible Maximum productivity


Areas of Continued Review (cont.) Cap Tax Revenue Growth for Individual Local

Governments

Cap Tax Growth for Individual Properties

Full or Partial Replacement of the Property Tax with Other Forms of Taxation

Assess Properties Using a “Moving Average”

Simplify the “Truth In Millage” Notice

Increase the Homestead Exemption

Save Our Homes Portability

Phase-out of Save Our Homes tax preference


Areas of Continued Review (cont.) Partial year Assessment of Improvements to Real

Property

Agricultural Use Classification Improvements Recapture Set a minimum period of time for property to be in AG

use.

Protecting SOH Benefit When Property is Taken Through Eminent Domain

Protecting SOH Benefit During Frequent Relocations due to Military Service

The 4 Property Values

and

Factors Considered


Sale Price

Just Market Value

Assessed Value

Taxable Value


Sale Price

The price a property sold for as recorded in the public records.

Often includes items other than the real property.


Just Market Value

The Fair Market Value of the property

The most probable price in an open market

Typically, 85% of Sale Price Reduced for items such as closing cost /

recording fees

Determined annually by the Property Appraiser


Assessed Value

For properties with no limitations: Assessed Value equals Just Market Value

Otherwise

Assessed Value = Just Market Value (Less) any Limitations and Special Use

Classification such as “Save Our Homes” or Agricultural Classification.


Taxable Value

Equals Assessed Value Less Exemptions

Homestead $25,000 Limited Income Seniors – up to $25,000 Widows / Widowers $500 Service Connected Disability $5,000 Total and Permanent Disability – Full

Exemption

8 Factors Consideredin Deriving Just Valuation

Present Cash Value of the Property The Highest and Best Use of the Property Location of the Property Quantity or Size of the Property Cost of the property and the present

replacement cost of any improvements thereon Condition of the Property Income from the Property Net proceeds of the sale of the property, as

received by the seller, after deduction of usual and reasonable fees and cost

Here’s how the 4 Property Values come together

Sale Price (2004) $ 225,000

Just Market Value (2006) $ 325,000

Assessed Value $ 202,895 (lower due to SOH cap 3%)

(85% of sale price plus 3% per year)

Homestead Exemption $ -25,000

Taxable Value $ 177,895

Save Our Homes

Benefit Calculation

The “Save Our Homes” Benefit Calculation Sale Price (2004) $ 225,000


Assessed Value $ 202,895 Homestead Exemption $ -25,000


Just Market Value $ 325,000 (minus) Assessed Value - $ 202,895equals Save Our Homes Benefit $ 122,105

The homeowner does not pay taxes on the Save Our Homes Benefit.

Save Our Homes Portability

Save Our Homes Portability Portability The ability to transfer the benefit of the homestead

property assessment limitation (defined in FS 193.155) described as the dollar value difference between market value and assessed value, or a percentage thereof, from an existing homestead to a newly homesteaded property

So, what exactly is someone “porting” to a new house? They’re porting:

The “Save Our Homes Benefit” Also called: “Assessment Limitation” or “Capped

Difference” ______________________________

Sale Price (2004) $ 225,000


Assessed Value $ 202,895 Homestead Exemption - $ 25,000


Just Market Value $ 325,000 (minus) Assessed Value - $ 202,895equals Save Our Homes Benefit $ 122,105

The $ 122,105 is also the Portable Amount

“Save Our Homes Benefit” Example

Who might be impacted Positively by Portability of SOH? Purchaser moving to higher priced property

Purchaser downsizing

Existing owners relocating within the state

Realtors/Builders/Mortgage & Insurance Brokers

State Economy - Portability could allow many persons the ability to move within the state thus increasing sales and benefiting businesses such as to foster growth in the state economy.

Others impacted by Portability of SOH?

Property Appraiser – Administratively

Taxing Authorities – Decreased tax revenues ??? Revenue Neutral?

Out of state buyers – Receive no benefit

First time buyers – Receive no benefit

Important Numbers to Remember

The following chart illustrates that

82.23% of all homesteaded properties in Orange County

have a Just Market Value between

$1,000 & $299,999.

Orange County’s 2006 Median Just Market Value

$192,146

$1,000-$299,999 169,390 82.23% $175,068 $58,889 33.64%

$300,000-$699,999 32,818 15.93% $404,636 $120,323 29.74% $700,000-$999,999 2,235 1.08% $816,531 $213,981 26.21%

$1,000,000 + 1,558 0.76% $1,584,116 $397,951 25% Totals 206,001 100%

Homesteaded Residential Property Just Market Value & Capped Difference Analysis For All Homestead Properties Just Mkt. Range Count % of Total Avg. Mkt. Avg. Cap Diff. Avg. Savings

* Figures based on 2006 Preliminary Tax Roll data

The “% of Savings” is determined by

Avg. Capped Diff / Avg. Market Value

Thus, homeowners whose “Just Market Value” is from $1,000 to $299,999 not only represent 82.23% of all

homestead properties but derive the greatest savings from SOH at 33.64%

…dispelling the myth that only the most wealthy benefit from Save Our Homes

Analysis Conclusion

A Recommended Homestead Portability

Formula

“The County Median Just Market Value Formula”

County Median Just Market Value Formula

When establishing a new homesteadin the State of Florida,

Owner can transfer:“Their Save Our Homes Benefit”

Up to The amount of the Prior Year

“Median Just Market Value” for the county of relocation

The Assessed Value of the newly established homestead MUST equal or exceed the Assessed Value of the newly established homestead’s prior year assessment.

Important Number to Remember

Orange County’s 2006 Median Just Market Value

$192,146

County Median Just Market Value Formula EXAMPLE Purchase Price $ 600,000 Just Market Value of New Homestead

(-15% for cost of sale) $ 510,000

Less: “Save Our Homes Benefit” (up to prior year Median Just Market value of

$192,146) $ 122,105 Assessed Value $ 387,895 Less: Homestead Exemption $ -25,000 Taxable Value $ 362,895

Est. Tax Dollar Amount $ 7,258 (as opposed to $ 9,700)

Tax Savings for Owner $ 2,442

This formula provides a benefit to the property owner with less impact to taxing authorities than all other proposed formulas.

Portability in the Metro AreaOrange County: $192,146

Osceola County: Median Just Market Value $157,000 +/-

Seminole County: Median Just Market Value $204,000 +/-

Lake County: Median Just Market Value $138,000 +/-

Polk County: Median Just Market Value $117,000 +/-

Brevard County: Median Just Market Value $187,000 +/-

Volusia County: Median Just Market Value $173,000 +/-

Benefits of County Median Just Market Value Formula Simple Formula – easy to understand.

Provides a fair “Portability” benefit. Tied to the market of each county.

Allows 98% of homeowners in Orange County to transfer ALL of their current Save Our Homes Benefit.

Doesn’t allow for “super wealthy” with an extremely large Portable Value in one county to import that value into another, perhaps smaller, county.

Revenue neutral

The following examples present issues and scenarios which could impact the

implementation of portability

Issues Which Could Impact Portability Implementation

Will portability apply only to the purchase of another

home? (most language related to portability thus far has referred to purchasepurchase or or newnew)

What if someone already owns a second home and they want to make it their new homestead?

Will portability be a “use it or lose it” within a specified time period or will the timeframe be indefinite?

If someone is building a new home and construction delays occur taking them beyond a time limitation, will they lose the benefit of portability?


If a husband and wife were granted homestead exemption on their home, they get divorced and both want to use portability for their subsequent homes, how would this be handled?

Is it a 50/50 split? Would it be negotiated and agreed amounts stipulated in the

divorce papers? What if one stays in the existing home and the other buys a new

one, how is the capped difference allocated? How could any of these scenarios be monitored or administered?


What if two single people own separate homes…

they sell their respective homes and buy a home together, whether they get married or not? Do they each bring a portable amount to the new home? Should there be limitations on the amount? Do they get the greater of the two amounts or lesser of the two

amounts?

If there are multiple owners on a homestead property, they sell and move to their respective new homes – who gets the portable amount? Many counties have no idea who filed for the exemption originally – the

original application may no longer exist


What if a property owner uses portability and it is later determined they were not eligible for the homestead exemption received in the prior county and a lien is filed.

How will the property owner or property appraiser (in the new county) be notified and the portability revoked?


If portability were already in effect, what would be the impact on Orange County over the past 3

years?

PORTABILITY IMPACT

•TAX YEAR 2006 (based on 2005 home sales)

• Total Homestead Apps taken in Orange County 27,534• Total Apps with HX from another FL County 2,739• Total Apps with a prior Orange County HX 12,782• Total # of applicants that may have benefited from portability 15,521 (56%)

PORTABILITY IMPACT

•TAX YEAR 2005 (based on 2004 home sales)

• Total Homestead Apps taken in Orange County 27,738•Total Apps with HX from another FL County 2,583• Total Apps with a prior Orange County HX 11,597• Total # of applicants that may have benefited from portability 14,180 (51%)• TAX YEAR 2004 (based on 2003 home sales)

• Total Homestead Apps taken in Orange County 26,524•Total Apps with HX from another FL County 2,440• Total Apps with a prior Orange County HX 12,138• Total # of applicants that may have benefited from portability 14,578 (55%)

PORTABILITY IMPACT

Maximum Tax Dollar ImpactShould Everyone Eligible

“Port” the Maximum $ 192,146

$ 56.7 Million

Average # of applicants that may have benefited from portability during prior three years: 14,759

x (192,146 x 20 mills) x $3,843

= $56,718,837

Proposed Legislation and Analysis

Proposed Legislation and Analysis

HJR 23

HJR 75

SB 220

SJR 452 & SB 454

SB 532 & SJR 534

HJR 23 Summary

SPONSOR: Carl J. Domino, Republican, District 83, Palm Beach

Provides for Portability of the Full Save Our Homes Benefit with the purchase of a home in 12 months.

Points to Note: Applies only to new purchase

12 month limitation

Difference in new homestead’s just value and assessed value can not exceed the difference of prior homesteads just and assessed values.

New assessed value MUST equal or exceed that of prior homestead. Does not allow for a scenario where owner could apply portability

and end up paying less in taxes than on previous homestead.

HJR 75 Summary

SPONSOR: Bob Allen, Republican, District 32, parts of Orange & Brevard

Caps Assessed Value of ALL Real Property at 3% maximum.

Points of Note: Provides the same protection to all vacant, commercial, and non-

homestead property owners that Homesteads currently enjoy.

Over time, will create taxable value inequities between similar properties such as:

Vacant Land Rental Property Commercial / Professional Property

Impact to County / City / Taxing Authorities Total lost tax dollars of $296.5 Million had this been in effect

for 05-06.

HJR 75SCENARIO OF ACTUAL 2005 TO 2006 VS. ONLY 3% INCREASE (CAP) ON ALL ASSESSED VALUE 2005 TO 2006

ORANGE COUNTY REAL PROPERTY ONLY

ACTUALS 2005 2006JUST VALUE $91,650,055,897 $117,214,168,280

ASSESSED VALUE $82,424,143,466 $99,722,391,940EXEMPT $14,436,992,880 $15,156,325,924LIS $120,714,340 $110,647,565TAXABLE VALUE $67,866,436,246 $84,455,418,451 % CHANGE 24.44%

2005 TAX DOLLARS $1,357,328,724.922006 TAX DOLLARS $1,689,108,369.02

ADDITIONAL TAX DOLLARS COLLECTED IN 2006 $331,779,644.10

WITH 3% CAP IN ASSESSED VALUE2005 2006

JUST VALUE $91,650,055,897 $117,214,168,280ASSESSED VALUE $82,424,143,466 $84,896,867,770 (+3% INCREASE)EXEMPT $14,436,992,880 $15,156,325,924LIS $120,714,340 $110,647,565TAXABLE VALUE $67,866,436,246 $69,629,894,281 % CHANGE 2.6%

2005 TAX DOLLARS $1,357,328,724.922006 TAX DOLLARS $1,392,597,885.62

TAX DOLLARS THAT WOULD HAVE BEEN COLLECTED WITH 3% CAP $35,269,160.70

RESULTSADDITIONAL TAX DOLLARS COLLECTED IN 2006 $331,779,644.10

(minus) TAX DOLLARS THAT WOULD HAVE BEEN COLLECTED WITH 3% CAP $35,269,160.70equals LOST TAX DOLLARS HAD 3% (CAP) AFFECTED ALL REAL PROPERTY $296,510,483.40

SB 220 Summary

SPONSOR: Senator Evelyn J. Lynn, Republican, District 7, Parts of Clay, Marion, Putnam, Volusia

Provides that a local government may not participate in receiving revenues from the local government half-cent sales tax in a given year if the government levies a millage rate in excess of a rate specified as:

The rolled-back rate, adjusted by the percentage change in the CPI, plus 3 percentage points.

Points of Note: Limits revenue to county and cities but does not protect non-

homesteaded, vacant and commercial properties from increasing Assessed and Taxable Values.

Impact to County Millage: Total lost tax dollars to Orange County of $39.8 Million had

this been in effect for 05-06.

SB 220SCENARIO OF 2005 TO 2006 VALUES AND TAX REVENUE BASED ON MILLAGE ROLLBACK, CPI, PLUS 3% AS PER SB 220

ORANGE COUNTY REAL PROPERTY ONLY

ACTUALS 2005 2006JUST VALUE $91,650,055,897 $117,214,168,280

ASSESSED VALUE $82,424,143,466 $99,722,391,940EXEMPT $14,436,992,880 $15,156,325,924LIS $120,714,340 $110,647,565TAXABLE VALUE $67,866,436,246 $84,455,418,451 % CHANGE 24.44%

2005 TAX DOLLARS (5.1639 MILLS) $350,455,490.132006 TAX DOLLARS (5.1639 MILLS) $436,119,335.34


ROLLED-BACK RATE FORMULA 2005 2006JUST VALUE $91,650,055,897 $117,214,168,280ASSESSED VALUE $82,424,143,466 $99,722,391,940EXEMPT $14,436,992,880 $15,156,325,924LIS $120,714,340 $110,647,565TAXABLE VALUE $67,866,436,246 $84,455,418,451 % CHANGE 24.44%

2005 TAX DOLLARS (5.1639 MILLS) $350,455,490.132006 TAX DOLLARS (4.6917 MILLS) $396,239,486.75


RESULTSADDITIONAL TAX DOLLARS COLLECTED IN 2006 $85,663,845.21

(minus) TAX DOLLARS THAT WOULD HAVE BEEN COLLECTED WITH ROLLED-BACK FORMULA $45,783,996.62equals REDUCTION IN TAX DOLLARS $39,879,848.59

COLLECTED (County Millage Only)

SJR 452 & SB 454 Summary

SPONSOR: (452) Senator Mandy M. Dawson, Democrat, Dist. 29, Parts of Broward and Palm Beach

(454) Senator Evelyn J. Lynn, Republican, Dist. 7, Parts of Clay, Marion, Putnam, Volusia

Both provide for increasing the Homestead Exemption to $ 50,000

Points of Note:

Impact: See Next Slide

50K HOMESTEAD ANALYSIS2006 CERTIFIED TAX ROLL

NUMBER OF HX'S ON ROLL WITH ZERO % of TOTAL TOTAL TAXABLE VALUE TAXES TAXING AUTHORITY TOTAL HX'S TAXABLE AFTER 2ND HX HOMESTEADS OFF ROLL DUE TO 2ND HX LOST MILLAGE

ORANGE COUNTY GENERAL 207,237 8,089 4% $5,055,367,274 $55,286,508 10.9362

APOPKA 8,795 188 2% $218,244,826 $2,042,401 9.3583

BELLE ISLE 2,000 4 0% $49,984,604 $474,774 9.4984

EATONVILLE 329 113 34% $7,266,781 $90,838 12.5004

EDGEWOOD 705 53 8% $17,056,685 $182,969 10.7271

MAITLAND 3,632 86 2% $90,104,823 $852,743 9.4639

OAKLAND 586 25 4% $14,414,961 $151,658 10.5209

OCOEE 7,666 102 1% $190,548,962 $1,970,924 10.3434

ORLANDO 35,115 1,995 6% $863,751,801 $10,150,379 11.7515

WINDERMERE 689 0 0% $17,225,000 $171,068 9.9314

WINTER GARDEN 5,636 298 5% $138,270,811 $1,368,936 9.9004

WINTER PARK 7,297 156 2% $181,008,967 $1,856,048 10.2539

MILLAGES DO NOT INCLUDE WATER MANAGEMENT DISTRICT OR SCHOOL BOARD MILLAGE

SB 532 Summary

SPONSOR: Senator Michael S. Bennett, Republican, District 21, Parts of Charlotte, DeSoto, Lee, Manatee, Sarasota

Provides that the governing body of a county or municipality may levy a surtax on documents taxed under s.201.02 at a rate not exceeding 25 cents on each $100 of the consideration for the execution, assignment, transfer, or conveyance of real property or interest therein. (Does not apply to a deed pursuant to an action for dissolution of marriage)

Points of Note: Restricts how proceeds are to be pledged.

Restricts impact fees if such surtax is imposed.

Requires Grantor (Seller) of the property to pay the surtax. Thus, makes the cost associated with selling a property more expensive for the seller – will decrease incentive to sell.

SJR 534 Summary

SPONSOR: Senator Michael S. Bennett, Republican, District 21, Parts of Charlotte, DeSoto, Lee, Manatee, Sarasota

Provides, as a local option, Portability of the Full Save Our Homes Benefit to another property within the same county and within 12 months.

Provides, as a local option, a cap on all non-homesteaded real property not to exceed the lesser of: 5 percent or, the percent change in CPI.

Provides for an increase of the Homestead Exemption to $50,000 – provided that the first $25,000 of assessed value is taxable and the next $50,000 is exempt.

Points of Note: Will require the poorest 1,173 of Orange County’s homeowners, who

currently pay no ad valorem tax due to an assessed value below 25K, to begin paying approximately $500 annually.

Thank You

Gracias

Honorable Bill Donegan, CFA

Orange County Property Appraiser

Presentation by The Honorable Bill Donegan, CFA Orange County Property Appraiser January 30, 2007...

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