Florida property-tax revolt leaves cities facing painful cuts
Florida voters delivered one of the nation’s most far-reaching property-tax cuts in years, handing homeowners relief from soaring costs while threatening to blow holes in local government budgets that pay for everything from police to roads.
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The state constitutional amendment, championed by outgoing Republican Governor Ron DeSantis, passed with 62% support despite warnings from law enforcement and local officials about potentially devastating cuts to public services. Beginning Jan. 1, it will reduce taxes on primary residences, eventually exempting the first $250,000 of a home’s value from most property taxes by 2028, up from $50,000 today.
The cuts could help ease pressure from the rising cost of housing and insurance premiums as well as gas and grocery bills in Florida, which has no state income tax. But critics warn the savings for homeowners could come at a
“It won’t be a tax shift, it’s a reduction and I’ll work with the legislature to provide a pool of funding to issue grants to local governments for core needs,” DeSantis said at a press conference on Wednesday in Tallahassee.
The tax cuts will hit hard in rural cities and counties, where many or most homes are valued around $250,000 or less. There’s also no clear picture of what happens to law enforcement, which gets a huge portion of its funding from property taxes, prompting some to liken the measure to “defunding the police.”
In anticipation of the bill passing, local governments have already floated ideas for other ways to raise funds. That includes increasing tax rates to offset the losses, or implementing fees for things like fire departments, libraries and parks.
Meanwhile, Florida realtors are hoping the measure will sweeten the deal for out-of-state buyers considering a move to low-tax states. The Florida Association of Realtors was the measure’s largest backer, pouring $20 million into a political action committee to convince voters to pass it.
“It’s adding more kerosene to the fire,” said Christopher Wands, a Miami-based real estate broker with Douglas Elliman. Florida residents as of Dec. 31 will qualify for the expanded tax break, while newcomers to the state will have to wait five years to benefit. Wands said he expects a rush in the final weeks of the year of people hoping to qualify.
“Until we see how the implementation shapes up, it’s hard to say how it’ll affect cities and counties,” he said. “There’s an obvious elephant in the room that you can’t not have police departments and essential public services.”
Jeff Brandes, a former Republican state senator who has been a vocal critic of the amendment, said that DeSantis, who is in his final weeks of his two terms in the governor’s office, “doesn’t have to eat his own cooking.” Republican Byron Donalds, who won the race on Tuesday to succeed DeSantis, supported the measure.
The amendment will reduce revenue for city and county operations and that could impact credit ratings over the medium to long term, warned S&P Global Ratings analysts in a Wednesday note.
“The full impact of Amendment 3 will take several years to manifest, but issuers with weaker credit quality that are already struggling to maintain budgetary balance might feel this pressure sooner,” wrote analysts led by Jane Ridley, a managing director at S&P.
Investors in Florida’s state and local debt are taking a wait-and-see approach, noting that the changes phase in over time, allowing for local governments to adjust.
If they don’t, “other fees or taxes will have to be put in place to replace the lost revenue,” said Wendy Casetta, a managing director at Baird.
