A bill Florida Gov. Ron DeSantis signed Wednesday that restricts local government increases in property tax yields will burden local governments, particularly if voters approve an expanded property tax exemptions referendum in November.
"We think this might have the effect of putting a financial noose around the neck of many Florida municipalities that depend on property taxes for funding various projects," said John Mousseau, executive vice president and chief investment officer at Cumberland Advisors.
"What kind of educational effort there will be on the referendum will be important," Mousseau said. "An increase in the property tax homestead exemption — many voters will look at this as being asked if they would simply like more money."
Local governments vary in circumstances. "But in our opinion the [voting] thresholds themselves will have a halting effect on many infrastructure projects that are needed," Mousseau said. "And under all of this, it will be done with one financial hand tied behind the back."
"Local governments have continued to grow their budgets by resorting to scare tactics like threatening cuts to essential services," said Florida Chief Financial Officer Blaise Ingoglia said. "This pivotal piece of legislation pulls the curtain back on local government's wasteful spending so that Floridians are better equipped to hold their local officials accountable."
The law revises how local governments calculate the "roll-back" property tax rate they can adopt when voting with a simple majority. The roll back rate could be adjusted for growth in per-capita personal income. That adjustment has been eliminated.
The roll back rate allows a community to collect the same amount of property tax revenue as the previous fiscal year.
The law also says local governments that want to increase millage rates to a yield to 110% of the rolled-back rate, require a 2/3 majority vote, and to move it above 110% requires a unanimous vote, or 75%, depending on the size of the panel.
In the meantime, passage of a November referendum would
Homestead property exemptions apply to the first $25,000 of assessed value, with a second $25,000 exemption, which doesn't apply to school district taxes.
The measure would index the exemptions to the annual consumer price index. School taxes would be exempt from the changes. Those who move to Florida after Jan. 1, 2027, would need to be state residents for five years before qualifying for the exemption.
The amendment would also reduce the cap on annual increases for non-homestead properties to 5% from 10%.
Charles Chapman, legislative advocate for Florida League of Cities, in a letter in early June to Florida Republican Sen. Bryan Avila spoke of what were then bills for increasing property tax exemptions and restrictions on the growth of property tax yields. "Overhauling Florida's tax system should be approached carefully and transparently — not rushed. Pursuing reform of this magnitude without understanding the fiscal consequences, guaranteeing replacement revenue, or preserving local budget flexibility risks the very services and infrastructure that make Florida's communities safe, attractive and economically competitive."
"Florida cities have hundreds of millions of dollars in outstanding bonds that are legally required to be repaid using non-ad valorem revenues (not property taxes)," Chapman said. "Limiting the use of property tax revenue r
