Posted on Sat, Sep. 11, 2010
As Dade, Broward market values plummet, tax bills still rise
AL DIAZ / MIAMI HERALD STAFF
Albert Jones, 81, and his wife Suzanne, 77, stand in front of their home in Pinecrest. The Joneses have lived in their home since the 1960s and could see a $1,000 tax increase this year even though property values have plunged.
Longtime South Florida homeowners likely will see their tax bills rise this year even as the value of their homes plummet -- while those who bought similar-sized homes during the housing bubble will almost certainly see their tax bills drop.
What's going on here?
It's called the Recapture Rule. And if it seems like unequal treatment, that's by design.
Longtime homeowners can think of it as payback for the years when their property taxes stayed low even as market values skyrocketed.
Newer homeowners can think of it as payback, too, for the high property taxes they paid on homes with inflated prices.
Tax assessors just think of it as an evening of accounts.
Here's what's going on:
In simplest terms, the tax you pay on your home is determined by two factors -- the assessed (taxable) value of the home; and the tax (or millage) rate set by local governments, such as counties, cities, school boards and hospital districts.
The assessed value is set at the time you buy your house, pegged roughly to the price you and others paid for a similar home in a similar neighborhood. In subsequent years, the taxable value is adjusted by the tax assessor.
TAX TABLES TURN
But since 1992, the Save Our Homes constitutional amendment has capped increases in the assessed value of a homesteaded property at the inflation rate or 3 percent, whichever is lower, regardless of whether market values rise or fall.
This year, taxable value can rise only 2.7 percent -- the inflation rate as calculated by the Florida Department of Revenue according to state law.
The idea, during bubble times, was to keep homeowners from being taxed out of their rapidly appreciating homes -- essentially taxing them at less than market value.
The law gave an advantage to those who bought before the housing bubble inflated (roughly from 2003 to 2007), while bubble-era buyers, who paid much more for their homes, received higher assessments as a result.
But in a post-bubble market, where home prices have fallen more than 40 percent, the tax tables have turned.
Now, the bubble-era buyers will almost certainly see their market value drop and their assessments follow suit.
Because the law states that the taxable value of a home cannot exceed the market value, the property appraiser must lower the assessment and, consequently, their tax bills.
Not so for most who bought before the run-up of prices starting around 2003. The assessed value of their homes is likely still below the market value, because Save Our Homes kept their assessments from rising more than 3 percent annually.
That means longtime homeowners will continue to see assessments rise until the assessed value equals the market value -- exactly as prescribed by the Recapture Rule, which was adopted in 1995 by the governor and Cabinet.
The little-noticed provision is ``a double-edged sword,'' said Dominic M. Calabro, president of the nonprofit and nonpartisan Florida TaxWatch research group.
In the current housing market, that sword is cutting longtime homeowners, who are being jolted by the seeming incongruity of rising assessments in a down-trend market.
``It was so effective in helping people not see their taxable value rise, it lulled them into artificially lower taxes,'' Calabro said.
WHO GETS ZINGED
How many South Florida homeowners were lulled into this false sense of security?
Hundreds of thousands.
The Miami-Dade Property Appraiser's Office estimates that 250,000 homeowners -- or more than half of the estimated 450,000 homesteaded properties -- will see increased assessments and, consequently, higher tax bills.
In Broward, the property appraiser's office estimates that 177,00 homeowners -- or about 42 percent of the estimated 417,000 homesteaded properties -- will see increases.
But wait, there's more.
Depending on where local governments set their millage rates, longtime homeowners may see even more tax increases.
They're called millage because the rate is multiplied by each $1,000 of a home's assessed value to determine the tax a homeowner pays.
So, if a city's millage rate is $5.68 and a home is assessed for tax purposes at $250,000 -- and a homeowner qualifies for the $50,000 homestead exemption -- that sets the city tax bill at $1,136.
County commissions, school boards, hospital districts and water management boards also tack on millage rates.
And nearly all government bodies are facing a budget crunch -- meaning they cannot generate the same revenue in 2010 as they did in 2009 using the same rate.
That's because the South Florida tax roll -- the sum total of taxable property -- has fallen 13.4 percent in Miami-Dade and 11.7 percent in Broward.
MOVING TARGET
Sagging tax rolls reflect lower home-sale prices, which depress assessments, and dropping commercial property values, which are not affected by Save Our Homes.
A lower tax roll means proportionally less revenue for a city, a county or a school board -- and the only way to make up the difference is to jack up the millage rate or drastically reduce spending.
Guess which choice most government bodies have proposed for 2010?
In Broward, nearly all -- except for the School Board -- have proposed to increase rates or keep the millage flat, though most will still collect less than they did in 2009, meaning they will have to reduce spending.
In Miami-Dade, most cities have proposed increasing the rates, with only Indian Creek reducing its rate. Eight Miami-Dade cities, including Hialeah, Homestead and Aventura, have proposed keeping their rates flat.
Still, when all proposed millages by local taxing authorities are added up, every city in Miami-Dade will see an increase in total millage, according to preliminary assumptions.
To be sure, the housing market is a moving target, and it's difficult to predict what will happen to the assessments of South Florida homeowners in 2011, which will be affected in part by home-sale prices this year.
Broward Property Appraiser Lori Parrish will not hazard a forecast.
``In my business,'' she said, ``I don't guess. It's sheer numbers.''
Mike Postell, a senior property appraiser supervisor for Miami-Dade, cautiously projects some improvement -- or at least a slowing of the slide.
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