A recent Florida Trend article discusses many of the property tax changes currently being considered by the Florida legislature.

(click logo for link to article)

While many businesses might look at the potential overhaul of the Florida property tax system as impacting only homestead properties, the reality may end up being alarmingly different. Most of the proposed resolutions – which would need to go to the electorate to approve via referendum in November – eliminate or dramatically reduce property taxes for those who own and occupy their homes. But they also prevent a local government from reducing funding for law enforcement or, potentially first responders. In many cities, this would leave a hole of hundreds of millions of dollars for local governments to plug without any guidance from the state on how to do address the shortfall.

The concern arises because Florida law severely restricts how a local government can raise money. This leaves three main avenues most see as a viable alternative to property tax revenue:

• State controlled funding. State controlled funding. Other states that have reduced property taxes have looked to sales taxes or tourism-related taxes to make up lost revenue. Because this is levied on the state level, local governments would be reliant on the legislature to provide funding for local services.
• Special assessments. This is a type of tax that local governments can institute to address discrete issues, but it is less flexible than property taxes and not currently well-suited for ongoing participation by the electorate.
• Increasing the millage. As homestead properties generate just over half of total property tax revenue, local governments could essentially double the current millage rate for non-homestead properties – i.e., commercial and industrial properties. Most agree such dramatic tax increases would be passed along to the end users of the property, including renters.

But perhaps the biggest concern for businesses is that without any guidance, many local governments could approach the issue differently – resulting in a patchwork of different tax treatments across the state. From the investor standpoint – that is probably not ideal.