Tax savings for homeowners under a proposed bill in the Florida Legislature could lead to some tough decisions at the local level.
St. Johns County Administrator Michael Wanchick said a bill that would increase the state’s homestead exemption by an additional $25,000 would further constrain future county budgets at a time when it’s already difficult to keep up demands posed by rapid growth and development.
According to the U.S. Census Bureau, the county has added 45,000 residents since 2010 for a total population of 235,000 (as of July 2016). In 2000, the population was about 125,000.
With the influx of people comes added demand for services like fire and police, health care, road maintenance and more. But the amount of tax revenue has failed to keep up with the rate of growth as property values have fluctuated and state laws have changed.
In 2010, the county collected about $95 million in ad valorem tax revenue. In 2016 with many more residents, the ad valorem tax collection was about $97 million.
With more people and stagnant revenue, Wanchick says it’s going to be difficult or impossible to maintain the current level of service. The additional homestead exemption will only make the situation more difficult, he said.
“This year, with all the growth that’s occurring, the new ad valorem growth in the general fund is estimated to be less than 9 percent, so that’s about $9 million,” Wanchick said. “This proposed legislation’s estimated by our office of management and budget to be in the neighborhood of a $10 million annual impact.
“So in effect, you’d be wiping out an entire year’s ad valorem growth in one piece of legislation.”
Previous tax reform efforts by the Legislature have resulted in the loss of about $31 million in revenue per year in St. Johns County since 2008, according to a statement from county administration.
Finding enough revenue to pay for growth has been a constant problem in St. Johns County. Since the previous tax reform went into effect, county administration estimates that the county is left with $27 million per year of backlogged road improvements.
“One of the dynamics that we’re suffering from is the county as a whole grew very rapidly in the late ’90s and early 2000s, and we’re getting into many of those facilities that were built … they’re all getting to the point in their life cycles where they require maintenance and maintenance requires dollars,” Wanchick said.
The issue of revenue has become so concerning that county voters approved an increase of 0.5 percent to the sales tax just for the school district, which has struggled to keep up with the influx of students. The proposed homestead exemption bill would not apply to school millage.
Counties all over Florida are facing the same dilemma of potential revenue loss should the bill — HB 7105 and its companion SB 1774 — become law.
A story earlier this month from the Miami Herald said Miami-Dade anticipates a loss of $76 million in property taxes, and Broward County predicts a loss of $40 million if the bill passes. The statewide impact is estimated at $750 million.
The Herald also pointed out that the bill would protect the state’s 29 poorest counties from losing any more property tax revenue. That means only the 38 richest counties, including St. Johns, would lose the revenue.
County Commission Chair Jimmy Johns said that’s one of the main reasons the Commission decided to ask Wanchick to draft a letter of opposition to the proposal.
While St. Johns County homeowners would get the benefit of the tax break, the local government would lose the tax revenue while other counties would see no effect.
“It’s not an equal benefit to all taxpayers across the state,” Johns said. “It’s not equitable.”
Rep. Cyndi Stevenson, who represents most of St. Johns County, said she was concerned about the bill when it first came forward but has softened her stance recently.
“The point from the leadership on that bill was that the price of a basic home, whether you’re somebody starting out or a senior, is that the price of a home has gone way up and the value of the homestead exemption is not commensurate,” Stevenson said. “And so we have an affordability issue. And this is one way to help with that.”
With or without the new law, the county budget is going to tight this year, Johns and Wanchick said.
Wanchick said there has been enough money in the past to “tread water” with regard to keeping up the level of services. But the increase in population coupled with flat revenue growth is leading to some difficult choices.
“We’re growing at a rate of about 10,000 new residents a year, and those residents want the same services that existing residents want,” Wanchick said. “We’re down to: Is there some revenue increase that’s acceptable to the community that means maintaining our level of services or is it more important that we reduce taxes but they’ll be a commensurate reduction in services?
“I think this year you’re going to see that play out more than in years past.”
There are options for the Commission if their constituents tell them that services are more important. The millage rate could be increased, the sales tax could be raised another 0.5 percent, the gas tax could be raised or the “bed tax” could get an increase. There are also other miscellaneous fees that could be increased, such as beach parking.
“If we needed to raise revenue, we could do that,” Wanchick said. “That’s not necessarily our preference, but on the same token, citizens are not coming forward asking us to cut their services.”