FYI...

This may give an insight into what the future holds for us in
California after Prop. 13 is modified.

Your thoughts?

TMT

Monday, Jun. 29, 2009
Florida's Property Taxes Go Wacky in Housing Slump
By Tim Padgett

In Palm Beach County, Fla., buyers who find fire-sale bargains at
foreclosed home auctions — picking up, say, $400,000 houses for
$100,000 or less — are also realizing they're required in many cases
to pay the same property taxes, as if the homes were still valued at
$400,000.

In Miami-Dade County to the south, where one in four homeowners are 30
days or more behind in their mortgage payments, residents are bracing
for what Mayor Carlos Alvarez says could be an imminent property tax
hike to fill an almost $400 million budget hole — a move that veteran
Miami realtors like Alex Shay insist would set recovery back. "It's
out of line," says Shay, who recently took Alvarez to task on his
Miami Real Estate blog. "A lot of people here are barely holding on to
their properties, using credit card advances to pay escrow, and the
county wants them to take another hit?" (See pictures of Miami:
Paradise Lost.)

Welcome to Florida, the land of no income taxes — and killer property
taxes. Whether it's a nightmare for someone who just purchased a
Florida foreclosure, or a tax hike that proves the last straw for some
struggling homeowner, it's bad news for the individual, and
increasingly for the state. It's also a painful reminder of the
halcyon days when Florida's economy could lazily rely on soaring real
estate prices — and related taxes — to pour ever more money into
government coffers. Now, local governments say they're broke, thanks
to the housing bust, and many are trying to maintain the lofty
property tax rates levied during the housing boom, or even increase
them, — even though that could exacerbate the housing bust.

Truth is, a dysfunctional property tax system has been haunting
Florida, if not many other states, far longer than the recession has.
Over the past generation, Florida's explosive but fecklessly managed
growth drove up real estate values, and therefore property taxes,
beyond the reach of more and more families. In the 1990s the state
adopted a "homestead" measure which, when homeowners become eligible
for it, caps their assessed property value increases at 3% a year
(part-time residents don't qualify). But when houses are sold, a far
higher base assessment usually applies, creating absurd situations in
which neighbors with similar properties pay wildly disparate taxes.
And during the boom, in expensive markets like South Florida,
homeowners who had yet to qualify for the cap often saw their property
levies double over just a few years — a big reason half of all South
Floridians in a 2007 Zogby International poll said they were
considering moving out of the state. (See pictures of Americans in
their homes.)

But lately the situation has gone from bad to, well, perverse. "One of
the frustrating paradoxes of the recession is falling real estate
markets and rising property taxes," says Kurt Wenner, research
director at Florida Tax Watch in Tallahassee. A 2008 state reform, as
well as another set to go into effect next year, have reduced some of
Florida's property tax burden by making the cap more generous and
accessible to more residents. But because of arcane provisions in the
homestead law, government appraisers can tell a homeowner that
although his house's current market value may be as depressed as a
Florida sinkhole, its taxable value is still high or rising. More
important, many of the state's county and local governments are
raising their millage rates (the rate per thousand dollars of assessed
value that determines the property tax bill) to make up for budget
shortfalls.

One element of confusion, if not contention, is the tax bill due on
dramatically discounted homes bought at foreclosure auctions. Those
purchases, which represent about 40% of new home purchases in Florida
now, are driving any home-sale revival the U.S. is seeing (even if
they also help drive down surrounding home prices). But in many if not
most cases, people buying foreclosed homes have budgets "that can
afford the taxes on a $100,000 house but not necessarily a $400,000
house," notes Brian Paul, CEO of the Realtors Association of the Palm
Beaches. Of course, Palm Beach County executives take a different
view. "Introducing foreclosure into the [property appraisal] equation
may be an interesting idea," says John Thomas, director of residential
appraisal at the Palm Beach County Appraiser's Office, but "people
should remember that property assessments are made based on the
surrounding neighborhood more than a specific house."

Of course, homeowners can appeal to their county's value adjustment
boards to negotiate lower assessments. And real estate experts like
Paul say onerous tax bills aren't proving too large a hindrance to
foreclosed-home purchases. The bigger concern is that during the boom,
many local governments spent their revenue windfalls like sailors,
which makes taxpayers less sympathetic to their budget whining. Mayor
Alvarez insisted this month that "it's almost impossible that we can
achieve an acceptable budget" without a property-tax increase. But
because Miami-Dade residents saw so much official profligacy during
the housing bubble — county commissioners were famous for having cops
chauffeur them around town, costing hundreds of thousands of dollars
in police overtime — Alvarez's suggestion is being met instead by
calls to further streamline the county's bloated bureaucracy.