I attended the City of Lakeland budget hearing last night. Fairly uneventful, though long. Like most budget hearings, it drew sparse attendance from citizens without a vested funding interest. (Full disclosure: The Downtown Lakeland Partnership, which employs my wife, is hoping to receive a few thousand dollars to support First Friday. But that is not why she and I attended. We were just curious. Really.)
The citizens who did attend were generally angry, which is typical. They complained about spending, spending, spending while chastising city government for trying to cut costs by going to automated, once-per-week garbage collection. Big government is the government that doesn’t pick up your garbage.
One particularly outraged fellow showed up with his property tax bill, which he claimed showed a significant increase in his Lakeland city property tax bill — about $50 if I remember correctly.
How could this be, he spluttered, noting that his property value had plunged. And he suggested the city put out longer lasting flowers and fine people whose dogs crap on sidewalks so that he could avoid any tax increase.
Anyway, putting aside the poop maids we might hire to enforce the doggy do collection ordinance, I want to briefly address why his taxes may have gone up while his home value went down. (I never saw his bill, so I can’t comment on specifics.)
It starts with understanding that your home has two values: the market value, an estimate of what you could sell it for at any given time; and taxable value, the amount that Property Appraiser Marsha Faux’s office establishes as its value for tax purposes. Property tax rates, known as millage rates, are applied against taxable values.
In virtually every case, taxable value is much less than market value. Because of the truly stupid “Save our Homes” property tax rule, a house you declare as your homestead can only increase in taxable value 3 percent each year until you sell it. At that point, the Property Appraiser will forcefully stick it to the new owner.
What does this mean in the real world?
Say I bought a house for $150,000 in 2000. My taxable value would probably be around $100,000. (I think it’s supposed to be 85 percent of market value, but for a long time, before Faux took over, Polk was notorious for its lowball taxable values.)
As we all know, the mid 2000s saw Florida’s second great Land Boom/bubble (the first was in the 1920s and crashed in 1926). So while the $150,000 market value probably zoomed to $350,000 or more by 2007, the taxable value was limited to 3 percent per year. I don’t have a calculator handy, but I think that $100,000 tax value would have reached about $130,000 when the market value reached $350,000. That’s a rather enormous undertaxing of a valuable asset.
Now that the market value has collapsed to say, $250,000, the taxable value still has a long way to go at 3 percent a year to reach parity with the market value. That’s why many of us can expect to pay more in property taxes despite the fact that our market value has greatly diminished.
The fact is, the Save Our Homes law, which the public loves, allowed property owners a free ride on the ever increasing value of their homes — typically the most valuable asset for any family. If you sold at the right time, you made out like a freaking bandit. If you didn’t, like most of us, you get the pleasure of making up the still huge gap between tax value and market value, and we have no one to blame but ourselves.