[Cl4] E4 // Fl(Cl) T&f

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Florida Constitutional Law

TAXATION & FINANCE

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[CL2] E4 // FL(CL) F12

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Taxation and Finance:

FINANCE (Generally)

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The state must be self-sufficient:

(1) It may NOT borrow for the purpose of maintaining ordinary operating expenses, but may generally borrow for capital improvements, such as buildings, bridges, roads, or airports.

(2) The state may borrow funds for a public purpose by using either RBonds or GOBonds.

(3) No money may be withdrawn from the treasury unless it was appropriated by law.

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Taxation and Finance: AD VALOREM TAXES (Generally)

LGs or the State may impose an AVT on:

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Ad Valorem Taxes are property taxes.

ONLY the LOCAL GOVERNMENTS may each impose an AVT up to the constitutional limit of 10 mills on REAL or TANGIBLE personal property.

ONLY the STATE (as opposed to local govts) may levy an AVT on INTANGIBLE property (notes, bonds, etc.), but the tax may not exceed 2 mills.

NO GOVT in FL may impose AVT on motor vehicles, boats, airplanes, trailers, trailer coaches, or mobile homes - but LICENSE FEES on these items ARE PERMISSIBLE.

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Taxation & Finance:

(4) Local Government entities that may impose an AVT on real or tangible personal property:

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1) Counties
2) Municipalities
3) School Districts
4) Special Districts

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Taxation & Finance:

MILLAGE RATE ("Mills")

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Millage rate ("MILLS") is the formula for determining property taxation.

1 MILL = $1 per $1,000 of value _times(x)_ the # of mills authorized by that govt entity.

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Taxation
Improper Double taxation

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Improper double taxation
• Where the county taxes residences of municipalities for services
rendered by the county exclusively for the benefit of the property of
residents in unincorporated areas

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Taxation and Finance: AD VALOREM TAXES

AVT Tax Exemptions:

Property Owned & Used by Municipality for Municipal or Public Purposes

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Local Governments have exclusive constitutional authority to tax the value of real and tangible property.

Property OWNED by and USED exclusively for MUNICIPAL / PUBLIC PURPOSE is *EXEMPT* from taxation (AVT).

However, the AVT exemption CANNOT be be applied to a property owned by a municipality and LEASED to PROFIT-MAKING venture.

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Taxation & Finance - AVT Exemptions:

New Business or Expanding Existing Business

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By ORDINANCE and REFERENDUM, a County or Municipality may grant an AVT exemption to NEW businesses and EXPANDING EXISTING businesses.

• This NB/EB AVT Exemption" only applies to:
(a) IMPROVEMENTS made to REAL property to EXPAND an EXISTING Business; and
(b) TANGIBLE personal property of a NEW Business or related to the expansion of an EXISTING Business.
- It DOES NOT apply to REAL PROPERTY.

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Taxation & Finance: HOMESTEAD

Homestead Property Tax Consequences and Exemptions

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The FLC provides that property must be assessed at a JUST VALUATION (FMV) at the best and highest use for the immediate future.

A person who owns title to real property and maintains a permanent residence on the property is entitled to a HOMESTEAD EXEMPTION of up to $50K ($25K for the first $25K in assessed valuation, and for all levies other than school district levies; $25K for the assessed valuation between $50K and $75K).

The exemption is subtracted from the value of the property before the millage formula is applied.

Honorably discharged veterans who: (i) Are at least 65 yrs-old; (ii) Have a permanent, combat related disability; and (iii) Resided in FL when they entered the military are entitled to a discount on the AVT otherwise owed on a homestead property equal to the percentage of the veteran's disability.

In addition, a county may provide for a reduction in the assessed value of the homestead property to offset an increase in value resulting from modification of the home to provide living quarters for the homeowner's parent or grandparent who is at least 62 yrs-old.

A county or a municipality may grant an addition homestead tax exemption, not exceeding $50K, to persons 65 or older whose HH income does not exceed $20K

A county or a municipality may grant historic preservation AVT exemptions to owners of historic properties.

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Taxation & Finance:

Homestead AVT Exemption

Assessments to Homestead Property

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➢ Increase to assessments of homestead property are capped annually at the lower of 3% or the percent of change in the CPI.

➢ In any year that the homestead is sold or otherwise changes ownership, the property must be reassessed at a just value.

• However, a person who received a homestead exemption and established a new homestead, is entitled to have the new homestead assessed at less than just value-- the assessment depends on the value of the new homestead in comparison to the just value of the prior homestead. *

The state will not be able to collect property taxes on the property. Only local governments may levy ad valorem (property) taxes on real estate.

[* i.e., Buyer will not be entitled to retain the Seller's low AV property taxes currently in effect for the property, but Buyer will be able to "carryover" to some extent his current homestead assessment.]

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Taxation and Finance:

REVENUE BONDS

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REVENUE BONDS are NOT BACKED by the taxing power of the issuing government.

They are payable solely from funds derived from sources OTHER THAN tax revenues, rents or fees paid from state tax revenues.

A Revenue Bond issue must be for a PUBLIC PURPOSE.

The FLC does NOT require a REFERENDUM for a Revenue Bond issue.

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Taxation and Finance:

GENERAL OBLIGATION BONDS

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General Obligation Bonds are secured by pledge of the revenue derived from the taxation power of the issuing government entity (i.e., GOBs are backed by the taxing power of the issuing govt entity).

Local governments may issue these bonds to finance and refinance capital projects. However, APPROVAL by REFERENDUM vote is required if bonds:
(a) PAYABLE from AVTs; AND
(b) MATURE > 12-Mo. after issuance.

➢ GOBs are issued by the state or its subdivisions in order to finance capital projects for a public purpose. GOBs pledge the FFC of the issuer to use the general taxing power to raise funds to repay the loan. Because the taxing power of the state is being used, there must be authority to issue the bonds = Approval by voters is required.
• STATE - May issue GOBs to finance or refinance capital projects. Only issued after a vote of the electors.
• LOCAL - May issue GOBs to finance or refinance capital projects. Bonds that mature more than 12 mo. after issuance are allowed only w/ approval by vote of the electors.
[Exception to vote requirement: GOBs financing pollu. control, prop. acqu. for st./loc. rds & bridges, water proj., sch. constru., do not require vote.]

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Validation of Bonds

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➢Validation of Bonds:

• Before any bond must be validated before it can be sold by any governmental entity.

• Validated = Obtain judicial approval.

• Bond validation proceedings take place in circuit courts

• Appeals go directly to the SC as a matter of right.

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Taxation & FINANCE: Bonds

REVENUE
Bonds

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(1) Revenue bonds may be issued for any valid public purpose. Whether a state or county can issue revenue bonds depends on whether the project serves a public purpose (i.e., It must be a capital project, such as an airport, civic center, stadium, etc.). Modern case law holds that providing for a forum for various community activities and sporting events is a public purpose.
(2) Revenue bonds designate and limit the source of funds from which repayment is made. Revenue is generated from the project itself, payable from revenue sources other than ad valorem taxation. Revenue Bonds must be payable solely from revenue derived from the sale, operation, or lease of the project. State or county's full faith and credit is not pledged.

The constitution does not require a referendum for a revenue bond issue.

• STATE: Purpose must be approved by the legislature (except for scholarship, loans, housing and conservation).

• LOCAL: Must be for a valid municipal or public purpose (e.g., providing a place for recreational activities would be a valid public purpose). In addition the city must comply with all statutory procedures concerning the issuing of revenue bonds.No approval from the electorate required.

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Taxation and Finance: Fees (Generally)

ASSESSMENT OF FEES

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LOCAL governments may SUPPLEMENT REVENUE through the assessment of fees against users of government facilities. As FEES are NOT TAXES, there need NOT be state enabling legislation.

However, Fees have RESTRICTIONS as to AMOUNT and USE:
(1) AMOUNT of the fee must be PEGGED to the PER CAPITA COST of the facility; AND (2) the USE of the fee $ Must be APPLIED to the FACILITY.

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Taxation & Finance: Fees

IMPACT Fees

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➢ IMPACT fees are designed to make new development pay for the infrastructure associated w/ growth or development.

• Apply the DUAL RATIONAL BASIS TEST - There must be:

(i) A reasonable relationship between the growth and need for services; and

(ii) A reasonable relationship between the spending and the increased growth

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Taxation & Finance: Fees

REGULATORY Fees

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➢ The imposition of the REGULATORY Fee must:

(1) Fall within "municipal purposes" and

(2) The amount of a fee must bear a reasonable relationship to the cost of the thing being regulated (i.e., can charge more fees than what is necessary).

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Special Assessments

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➢ Fees: SPECIAL Assessments

• Apply the SPECIAL BENEFIT TEST - There must be:

(i) A logical relationship between the services provide and benefits to the property; and

(ii) It must be properly apportioned among the benefitted properties