Recapture Rule on Homestead PropertiesMar 22nd, 2011 | By Submitted | Category: Front Page
Leigh Barfield, Madison County Property Appraiser would like to make all homestead property owners aware that because of the Save Our Homes recapture rule they will face higher assessed values on their properties this year, even though they have faced overall declining market values.
For the past few years now, lawmakers are setting their sights on elimination of the recapture rule. The Save Our Homes (SOH) Amendment has previously protected homeowners when the market was increasing, but in current times of the declining market our office has had a challenge to explain why homestead property continue to increase.
Madison County has over 4,300 homestead parcels that enjoy the SOH benefits. In 2011 these homeowners will see a 1.5 percent increase in their assessed value.
In 1992, SOH Amendment was adopted. It protected homestead properties by capping their assessed values at the Consumer Price Index(CPI) or at three percent, whichever is lower. A few years ago a savings was found by homeowners with the skyrocketing property market.
But now that the market is showing some decline, the cap remains in effect, increasing each year and recapturing the saving benefit that homeowners have accumulated. The increases from this pool of value will increase each year until the assessed value reaches market (just) value.
Florida law requires the percentage increase determined each year, being 1.5% for 2011. Leigh would like to encourage property owners to contact their local legislators to express their opinion on this matter.
The efforts to change the rule have failed in the last few years, but now that the state has elected Governor Rick Scott who pledged to cut property taxes, there is speculation that some kind of reform will be passed this year.
Several bills have been filed currently. Senate Joint Resolution (SJR) 210, sponsored by Senator Mike Fasano seeks to amend the Florida Constitution to prohibit increases in the assessed value of homestead property if the fair market value of the property decreases. If approved by lawmakers, the bill would go before the Florida voters at the next general election or at an earlier special election specifically authorized for that purpose.
This proposal specifically states that “an assessment may not increase if the just value of the property is less than the just value of the property on the preceding January 1.”
Analysis by legislative committee states the financial impact if approved by the Legislature would require 60 percent voter approval and would not go into effect until January 1, 2013.
The committee noted that, “It has been argued that the recapture rule diminishes the existing inequity between property assessments over time. To the extent that this view is adopted, taxpayers may argue that the elimination of the recapture rule creates a stronger argument for an Equal Protection Clause violation. If this argument is made, the court would need to determine whether the components of this joint resolution are rationally related to a legitimate state interest.”
Under the rational basis test, according to the committee, “a court must uphold a state statute so long as the classification bears a rational relationship to a legitimate state interest.”
Per the committee, if voters were to approve the measure, the taxes of taxpayers whose homesteads have depreciated but who are still assessed at less than just value would be reduced.
“The joint resolution would redistribute the tax burden,” the committee found. “It may benefit a homestead property that has a “Save Our Homes” differential; however, non-homestead and recently established homestead property will pay a larger proportion of the cost of local services. To the extent that local governments do not raise millage rates, taxpayers may experience a reduction in government and education services due to any reductions in ad-valorem tax revenues”.
The committee further noted that, “When addressing similar legislation filed last year, the Revenue Estimating Conference determined that the fiscal impact on ad-valorem revenues, if the joint resolution was approved by the voters, would have been an $11 million reduction in 2011-12 and a $37 million recurring reduction for school purposes, and an $87 million recurring reduction for all levies.”
Also, based on the required newspaper publication of any amendment or revision in the 10th and again in the 6th week immediately preceding the week of the election, the committee reported that the Division of Elections within the Department of State estimated that “the full publication costs to advertise this constitutional amendment to be $190,733.58.” All four bills that lawmakers introduced last year to amend Florida’s Constitution to prohibit automatic increases in the assessed values of homestead properties if their fair market values decreased died in committees.
The little known and often misunderstood recapture rule instructs property appraisers to raise the assessed values of homestead homes up to the three-percent cap, even if the home values have stayed the same or decreased during a given year.
The anomaly virtually went unused and unnoticed until the onset of the 2007 recession, when property values plummeted. To their dismay, innumerable homeowners across the state suddenly found their property taxes going up, even as the market values of their properties remained static or plummeted. It was then the outcry for change began.
Proponents of the recapture rule argue that the rule is doing precisely what it was designed to do, and say it’s only fair that local governments recapture’ the savings that homestead homeowners accumulated during the economy’ booming years.
For citizens wanting to weigh in on the debate, Leigh encourages them to contact Senator Charles Dean at (850) 487-5017; Senator Bill Montford, (850) 487-5004; and Representative Leonard Bembry, (850) 973-5630.