By SEAN R. PARKER and OWENS T. PARKER
The Florida Legislature recently proposed a constitutional amendment that would increase the homestead exemption from its current level of $50,000 to $150,000 in 2027 and ultimately to $250,000 in 2028, if 60 percent of Florida voters approve it this fall. It also proposes to reduce the maximum annual assessment increase on non-homestead properties from 10 percent to five percent, and limits what municipalities can spend property tax revenue on, without any meaningful mechanism to compensate municipal budgets.
A study commissioned by the Florida League of Cities analyzed the fiscal impact of a variety of exemption reforms, including the proposed $250,000 assessed value exemption, and the findings paint a grim picture for future municipal budgets if the amendment passes. The researchers found that property taxes account for roughly 41 percent of general fund revenue statewide, and the proposed exemption would eliminate just under 25 percent of property tax revenue, decreasing municipal general funds by approximately eight percent on average.
Hypothetically, if a municipality were to attempt to compensate for the lost revenue exclusively by increasing millage rates, it would need to increase rates an average of 46 percent just to break even. That proposition is untenable particularly because it would unreasonably shift the burden to commercial property owners and non-homestead properties. The report concluded that these losses would most impact smaller municipalities — creating service inequities among municipalities and reducing service quality as they will likely be forced to use less reliable revenue sources or outright reduce funding.
The City of Bartow serves as a prime example of the type of municipality that would be put under the most strain by the proposed changes. The city’s current budget includes approximately $9.1 million in ad valorem property tax revenue, but an estimated $3.3 million, over a third of the current property tax revenue, would be lost by the time the exemption would take full effect in 2028.
If Bartow wanted to offset its lost revenue solely through its property taxes, its current millage rate of roughly 6.1 would jump to 8.9, assuming the city would only need to increase the rate by the average amount among municipalities. These millage rates are capped at 10 by statute, so depending on a municipality’s present millage rates, increasing them to compensate for the lost revenue may be literally impossible, and they would be forced to rely on other less stable taxes, such as sales taxes, to make up the difference.
In reality, Bartow and other similarly situated municipal governments will need to reduce services to balance the budget. In the context of a local government already running a lean and efficient operation, cutting funding in any operating area may have significantly detrimental effects over the long term. Imagine a wastewater treatment plant being forced to run with less staff, needing to make hard decisions about operational maintenance schedules, deferring improvements or stretching the life of critical equipment to avoid costs. Imagine stormwater systems not being serviced as often, roads and sidewalks being pushed to the outer boundaries of resurfacing and repair. Imagine needing to make tough decisions about the right amount of money to be held in reserve and hoping and praying that your city doesn’t feel the impact of a major hurricane.
The budgetary restrictions also happen to coincide with the increase in sovereign immunity caps from the recently signed HB 145 and the proposed reduction of municipal water and sewer fees for recipients outside municipal boundaries in SB 1724. Also, the language in HB 1595, signed in 2023, allows budget reductions over five percent for municipal law enforcement agencies to be more easily challenged. Each of these endeavors by the state legislature reduces revenue, increases expenditures, or does both in some manner, exacerbating the difficulties that municipalities would face as they try to fund their various public services, including the provision of utilities.
The proposed amendment’s impact on specific utility services will vary by municipality and it is difficult to determine without a particularized fiscal study. However, if the amendment passes, the reality for municipalities across the state is that they will have less money to fund the same, if not growing, demand for public services and will be more constrained in how they can spend it. Consequently, municipalities will either need to replace the lost revenue by raising taxes (likely untenable) to maintain current service levels or be forced to make cuts (far more likely outcome) to critical services in the face of growing demand as people continue to move into the state.
Another interesting nuance of the proposed amendment is that it would also require future residents to reside in the state for five years before qualifying for the new exemption threshold. This could theoretically mitigate some revenue losses, but the requirement likely violates the 14th Amendment Privileges and Immunities Clause. The United States Supreme Court held in Saenz v. Roe that durational residency requirements implicate the right to travel and must survive strict scrutiny to be permissible. Consequently, a federal constitutional challenge to that portion of the proposed amendment would have a high likelihood of success, negating any possible mitigating effect on lost revenue if the provision is struck down as unconstitutional.
Sean R. Parker is City Attorney of Bartow and is Partner at Boswell & Dunlap, LLP in Bartow
Owens T. Parker is a rising 3L student at Stetson University College of Law
