TAX NEWS - JUNE 2010

Florida Tax: Lee County's taxable property value drops 15 percent

Local governments face tough choice: raise taxes or cuts

by Brian Liberatore, 02 June 2010 -- The county, its cities and fire districts will have to raise tax rates or cut millions from next year's budgets after another drop in property values.

New assessments from the county's property appraiser released Tuesday show the taxable value of county property dropping to $54.9 billion in 2009 — down 15 percent from the year before and almost 40 percent from four years ago during the height of real estate market. The numbers will be used to calculate local governments' 2010-11 budgets.

The values are only estimates, but it's unusual for the final numbers due July 1 to vary much.

The drop is worse than many had expected. Lee's countywide value hasn't been this low since 2005, when the region had about 100,000 fewer people and had been hit by Hurricane Charley a year earlier.

Wilkinson is blaming a comatose commercial property market and negligible new construction for the decline. Although the value of residential property is stabilizing, he said, commercial property continues to decline.

"Commercial," Wilkinson said, "always follows residential."

The county saw only $600,000 in new construction between 2008 and '09 — one-tenth the $6.2 million amount from 2006.

Values in Fort Myers, which has a high concentration of commercial property, dropped almost 18 percent. The city last month expected a 10 percent drop. That means unless the city raises its tax rate by 22 percent, it will have to trim a dime from every dollar spent.

"Reality is hitting home," said Fort Myers Mayor Randy Henderson.

The city is looking at shorter work weeks, staff furloughs and possibly layoffs, Henderson said.

Lee County has cut expenses and frozen pay this year in anticipation of the drop, Commissioner Ray Judah said. The county, however, is still spending more than it is bringing in.

To balance the budget and lower taxes, the commission this year agreed to use $60 million of a $278 million reserve pool built up during the boom years. The latest drop in values — barring a tax rate increase — means the county will have to pull as much as $94 million from reserves next year to patch its budget.

"I guess one thing we have to consider is that our tax base is approaching 2004/2005 levels, but our (tax) rate is (21 percent) lower than it was in 2004/2005," said assistant county manager Pete Winton. "That's something that cannot continue indefinitely. At some point your tax rate and revenue lose any kind of nexus with what it costs to provide services."

Cape Coral must shave 10 percent from its operating budget, but it doesn't have the reserves to tap into. Most of Cape Coral's council and its mayor ran on promises to lower the tax rate. To make that happen, they will have to cut at least $13 million from a $127 million operating budget.

"I think it's all on the table," said Cape Coral Mayor John Sullivan. "... I was afraid it would turn up to be more, and it did."

The story was equally bleak for Lee's 17 fire districts, whose tax bases dropped an average 15 percent.

The decline, though deep, is better than last year when values countywide dropped 24.8 percent.

Southwest Florida, however, is still among the worst in the state. Property values in Collier County dropped 12 percent and Charlotte County lost 8 percent compared.

"Lee County led the charge in escalating values," Wilkinson said, "so it makes sense that our decline is greater."