Pre-Special Session Maneuvering in Tallahassee
Legislature Prepares for Special Session on Insurance
January 15, 2007 - Its Here! A long-awaited Special Session convened in Tallahassee to either tackle the runaway property insurance crisis or stage a frustrating exercise in futility fraught with politically useful sound bites. On January 9th, a joint proclamation was released by Governor Charlie Crist, Senate President Ken Pruitt and House Speaker Marco Rubio announcing that the 7 days from January 16th to January 22nd would be devoted to 4 issues.
|NEW GOVERNOR CHARLIE CRIST|
- Legislation to reduce current property insurance premiums in this state.
- Legislation to reduce the future rate of growth in property insurance premiums in this state.
- Legislation to improve the availability and stability of property insurance in this state.
- Legislation relating to building codes in the State of Florida.
The legislature passed up a chance to start work on this critical issue in December. The Florida Property and Casualty Insurance Reform Committee, empanelled by former Governor Bush last June, finalized a 230 page report on November 15th. Although Bush asked the legislature to consider the Committee’s recommendations in a December Special Session, Pruitt and Rubio, in deference to Governor-elect Crist, decided to wait for his official installation as the State’s chief executive in January. To be fair, Statehouse Representative Ellyn Bogdanoff said that it made sense to delay the undertaking until recently elected Representatives and Senators acclimated to their new environment in Tallahassee and had a chance to familiarize themselves with the issues surrounding skyrocketing property insurance premiums.
|NEW SENATE PRESIDENT|
While acceding to a January Special Session, new Speaker Rubio wanted to get a jump on the problem. He convened a 3-day bipartisan Property Insurance Conference on December 4th wherein more than one hundred Statehouse Representatives took turns addressing what was repeatedly termed “the greatest threat to the State’s economy.” The conference was available to the computer literate public on the internet. During the conference, topics considered included the “Science of Storms”, “How We Got Here”, “Economics of Insurance”, “Reinsurance”, “Mitigation”, “Citizens Insurance” and “Insurance Capitol Build-up”.
|NEW HOUSE SPEAKER|
In a surprising move, on January 11th, Rubio requested that the 5 main Hurricane Modeling firms to release hurricane loss projects models for review by the House. Reinsurers drastically raised costs to carriers who passed them through to the insurance buying public. While they gave several reasons for their gargantuan increases, central to their rationale was the data received from these modeling firms predicting unremitting annual catastrophes. Questioning the soundness of their data in view of the hurricane-free past year, it appears that reinsurers are “overreacting”.
Cutting to the chase, Rubio said, “There is a great deal of uncertainty about these models and whether they are being used to unjustifiably raise insurance rates. I am pleased that all five organizations have agreed to work with us on making sure that Floridians are receiving a fair deal.” In response, Risk Management Solutions of Newark, CA, Eqecat Inc. of Oakland, CA, Applied Research Associates of Raleigh, NC, AIR Worldwide of Boston and the Florida Office of Insurance Regulation were all asked to release copies of their hurricane loss projection models and the underlying assumptions contained in those models to the House for review. A working group of experts will thoroughly review the models for accuracy and scrutinize the model’s assumptions.
|SPEAKER MARCO RUBIO PRESIDES AS CLERK|
OPENS JANUARY 16th SPECIAL SESSION
While Rubio was pushing the House to make progress, Pruitt’s Senate also developed some pre-session work product. The Senate Banking and Insurance Committee released a 153-page Hurricane Preparedness and Property Insurance bill. Since it isn’t as yet published, it lacks a bill number. A summary of the bill aspects that impact associations are as follows:
The bill would rescind the approved rate filing that took effect on January 1, 2007, and requires Citizens (Citizens Property insurance Corporation) to provide refunds to persons who have paid this new rate. The bill also freezes rates at the December 31, 2006, level for the remainder of 2007;
The bill deletes the provision that makes non-homestead policyholders ineligible for coverage by Citizens effective March 1, 2007 unless coverage is rejected by at least three surplus lines insurers (unregulated rates and forms) and 1 authorized insurer;
The bill delays until 2008 the requirement that Citizens impose up to a 10% of premium assessment on all non-homestead policyholders if a deficit occurs;
Delays until 2008 the requirement that Citizens impose a 10% renewal surcharge on all Citizens policyholders (including non-homestead) after a deficit if the first 10% surcharge on non-homestead policyholders is not sufficient;
Requires insurers to offer policyholders the option to exclude windstorm coverage subject to a signed rejection by all names policyholders on a form approved by OIR (Office of Insurance Regulation) with specified disclosures (condominium associations are still required by statute to carry windstorm coverage). Eliminates the maximum allowable deductibles but retains requirement for insurers to offer 2%, 5% and 10% deductibles;
Authorizes Citizens to write multi-peril policies (as well as wind-only policies) in the areas eligible for coverage in the High Risk Account;
Broadens the current authority of condominium associations to form a self-insurance fund by including other homeowner associations and eliminating the requirement that the group be formed for purposes other than insurance;
Authorizes the OIR to waive or lower the deposit requirement for reinsurers licensed in other countries. This is extremely important since there are currently only two reinsurers in the State that write policies for the commercial/residential category in which common property falls;
Offers insurers significant additional FHCF (Florida Hurricane Catastrophe Fund) dollars; and
The bill deletes the requirement that rates for Citizens be noncompetitive and no lower than the top 20 insurers but retains the requirement that a property is ineligible for coverage if an offer of coverage is received from an authorized insurer at approved rates.
Many of the provisions contained in the bill were also considered in the Reform Committee’s recommendations and addressed by Statehouse participants in Rubio’s Property Insurance Conference. These preliminary efforts are intended to help coalesce the various approaches to the problem into a viable answer. A substantial part of any legislative package will include provisions designed to undo some of the damage anticipated by the passage of Senate Bill 1980 last year. While it remains to be seen whether the legislature is able to rebuild an effective insurance strategy and hit the Special Session’s four designated targets, it appears that they are taking the threat to the State’s economy more seriously than during the past few years.
|LT. GOVERNOR TONI JENNINGS HEADS|
PROPERTY INSURANCE REFORM COMMITTEE
Rubio’s pre-session conference and calling for the modeling companies to demonstrate that their prognostications aren’t little more than voodoo intimates that he doesn’t intend to allow the industry to “regulate itself” into unprecedented windfall profits at our expense while our representatives quizzically scratch their heads.
District 25 Senator Jeffrey Atwater sits on the Senate Banking and Insurance Committee Chaired by Senator Bill Posey and Vice Chaired by Senator Ted Deutch - the Senate Committee that fired this year’s first volley at the problem. His substantial background in banking and insurance should underwrite his commitment to resolving the crisis for his Galt Mile constituents. Many of last year’s legislative efforts excluded common interest ownership structures. At several meetings with GMCA officials, Atwater stated that people living in associations would be beneficiaries of any legislation improving the insurance climate.
|SENATOR JEFFREY ATWATER|
District 91 Statehouse Representative Ellyn Setnor Bogdanoff also has a significant insurance background. The new House Republican whip made a similar commitment to Galt Mile constituents. Following last years session, she started collecting input from constituents about their insurance concerns and invited their ideas and opinions for a legislative resolution. As the input rolled in, she compiled it into an outline intended for use as a basis for legislation. The outline was continuously updated and sent to those constituents participating in her email outreach program. Not surprisingly, it contains many of the same concepts developed by Governor Bush’s “Blue Ribbon” committee and those expressed during the 3-day House Conference. However, her offering was created months earlier. In meetings with GMCA officials and the Advisory Board, she likewise committed to insure that common interest ownership housing would be included in any legislative offering.
|Representative Ellyn Bogdanoff|
While the average premium increase for property owners across the state is a whopping 47%, Galt Mile homeowners are facing 250% to 350% premium hikes. If the average homeowner is in a bind, Galt Mile homeowners are being molested and forced from their homes. The silver lining is that our voices in both legislative houses have committed to using their special expertise in the insurance field to either contribute to a legislative return to insurance sanity or help refine a grass roots solution currently being developed for association members. We, and they, should have a better idea of the legislature’s intention following the Special Session. More to come...
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The Big Show
Special Session on Insurance in Tallahassee
January 28, 2007 - A gun loaded with political pink slips pointed at their heads, State officials in Tallahassee spent the week of January 16th trying to find a cure for the toxic shock syndrome afflicting Florida homeowners. It took a new Governor, a new Statehouse Speaker (with a new majority whip), a new Senate President, a new Chief Financial Officer, a last gasp mandate from Florida property owners and the imminent prospect of the State slipping into an irreversible economic coma for Tallahassee to signal a “code blue” and page “Dr. Allcome”. The State’s third consecutive Special Session was the charm. After spending 3 years hoping that the insurance crisis would clear up like an inconvenient rash, the denizens of our State Capitol performed emergency surgery on a festering malignancy threatening Florida’s fiscal future. Like a marriage between the royal progeny of warring medieval clans, the insurance crisis also forced bipartisan cooperation usually reserved for national catastrophes.
As expected, the Special Session didn’t cure the insurance crisis. However, it hit all 4 issues enumerated in the January 9th joint proclamation by Governor Charlie Crist, Senate President Ken Pruitt and House Speaker Marco Rubio. It produced legislation to reduce current property insurance premiums, reduce their future rate of growth, improve the availability and stability of property insurance and plug holes in the State’s building code. The amount of temporary palpable relief offered by the legislation depends upon where you live, who your carrier is, the vulnerability of your domicile and how its ownership is structured. While anticipated regulatory changes for Citizens (Citizens Property insurance Corporation) and the overall insurance industry will hopefully excise some of the premium fat, most of the projected savings result from postponing and rearranging public payouts. On January 1, 2008 or upon confronting a serious “event”, many of the public wounds dressed by this compromise will be reopened.
|SPEAKER MARCO RUBIO, GOV CHARLIE CRIST, SEN BILL POSEY, LT.|
GV JEFF KOTTKAMP, SEN PRES KEN PRUITT AND SEN JEFF ATWATER
The eleventh hour overhaul impacts several areas critical to ratepayers - 1) cost reduction, 2) mitigation, 3) consumer protections and options, 4) new insurance company requirements and 5) market incentives. This is how it breaks down:
The cost savings come from postponed/eliminated increases, statutory streamlining and making cheaper money available to carriers who must then pass through the savings.
- Private insurers must pass on all of the savings realized from increased access to Florida Hurricane Catastrophe Fund’s (FHCF or CAT Fund) below-market reinsurance rates. The expected average rate savings of 25% (for those using private carriers - 38%, State Farm - 14%, Citizens - 3%) disappears when this reinsurance availability expires after two years.
- The legislation foresees a 10% reduction in Citizens premiums from the sale of incremental multi-peril policies once the existing “windstorm only” limitation in high-risk areas is removed.
- Elimination of the statutory requirement that its rates be the highest and of the private reinsurance costs factored into its rate filings, along with changes made to the way Citizens manages its risks, pays for its capital and calculates its expenses purports additional rate cuts of 5% to 15%.
- Elimination of the 21% increase due in January and the 56% rate increase scheduled for March represents an immediate savings to every policy holder.
The bill provides greater access to disaster recovery resources and offers savings proportional to lower risk resulting from mitigation and building code strengthening.
- The plan uses $100 million in new federal money from the Florida Small Cities Community Development Block Grant Program Fund to supplement the $250 million in the My Safe Florida Home program that provides subsidized home inspections and matching construction grants for single-family homeowners.
- An objective grading system will be used by carriers to evaluate hurricane mitigation measures when determining rates. Trained authorized wind mitigation inspectors will ascertain and confirm the effectiveness of these measures and customers can channel the savings into either lowering premiums or deductibles.
- Non-insured homeowners will join insured homeowners in qualifying for $5,000 home-strengthening matching grants.
- Home-strengthening matching funds will be made available for repairs to existing structures that are prerequisite to the installation of mitigation measures.
The bill provides a host of consumer options to insurance buying property owners that directly impact premium costs and deductibles.
- With the approval of any mortgage and/or lien holders and a written statement demonstrating an understanding of risk and intent, consumers may exclude windstorm coverage from their policies, increase deductibles and/or not cover the contents of their home to lower premiums.
- Allow homeowners to choose quarterly and semi-annual installment plans to pay the premium, subject to OIR approval.
- Allow insurance companies to provide discounts to policyholders who obtain multiple lines of coverage through the same insurance company
- Require an Insurance Consumer Advocate to provide an annual report card on insurance companies, including information on complaints and payment timeliness. The report will use a letter grade under guidelines set by the Financial Services Commission.
A list of new insurance company requirements was designed to make carriers more responsive and elicit an accurate picture of consumer rights and obligations.
An insurance company’s CEO or CFO and actuary must sign an oath confirming the veracity of representations made in their rate filings.
|INSURANCE REFORM DEMONSTRATION|
- Require insurance companies to evaluate the hurricane-security of a structure rather than the date of construction when determining risk.
- Suspend until December 31, 2008 the “use and file” procedure for rate increases, disallowing the practice of charging customers increased rates prior to receiving approval.
- As of January 1, 2008, any insurance company that writes homeowners policies in other states and writes auto insurance in Florida must also sell homeowners insurance in Florida, unless already provided through an affiliate.
- Require insurance companies to issue payment or denial of claims within 90 days following a storm.
- Companies that take over policies from Citizens can increase rates up to 25 percent, but those policyholders can decide to stay in Citizens if they prefer.
To promote rate restraint by competitive pressures, the only self-sustaining market incentive, the bill removes regulatory barriers to risk pooling among similar entities, to self-insurance for multi-family dwellings, to the collateral requirement for non-U.S. insurance companies.
- Allow risk pooling of “like” entities, such as hospitals, municipalities, condominium associations, and not-for-profit corporations.
- Loosen restrictions on multi-family dwellings, condominium associations, and other such entities that self-insure (cooperatives, neighborhood, community & civic associations, common interest domiciles).
- Limit insurance requirements in the Condominium Act to “residential condominiums.” Also specify that “adequate insurance” for a group of at least three communities operating as residential condominiums, cooperatives, homeowners’ associations, or timeshares must be adequate to cover a 250-year PML (total projected loss) windstorm event.
- To better fill the reinsurance “gap”, allow foreign reinsurance companies the same market access as domestic reinsurance companies provided they meet Florida’s regulatory standards.
The wide-ranging 167-page compromise package containing the above summarized provisions was largely developed during the session’s final weekend. In a 116 to 2 vote, it was adopted by the Statehouse at 5:15 PM on Monday afternoon (January 22nd). It was passed in the Senate at 5:29 PM by a 40 to 0 vote. Since half of Citizens’ roughly 1.3 million policyholders live in Broward, Palm Beach and Miami-Dade counties, every South Florida politician was on board.
|NEW GOVERNOR CHARLIE CRIST|
The only meaningful immediate rate relief in the plan relies heavily on the doubling of FHCF (CAT Fund) reinsurance availability and a litany of mind-bending concessions from Citizens Insurance. At the onset of the Special Session, despite the flood of “do-or-die” sound bites by every legislator in the State, battle lines were being drawn based on risk - not partisan ideology. While the original work product included scores of untested provisions aimed at enticing the commercial insurance industry back into the State, relieving the unprecedented burden carried by Citizens, enacting consumer options/protections and otherwise tweaking regulatory excesses, it foretold little immediate rate relief. Minority House leader Dan Gelber (D - Miami) explained the problem.
|REPRESENTATIVE DAN GELBER|
Since lower risk inland property owners are mostly covered by commercial carriers, their representatives oppose increasing their constituents’ exposure to the heavy statewide assessments used to bail out Citizens when a big hurricane hits anywhere in the state. They actively sought to keep Citizens off the table. However, Governor Crist’s Administration vociferously backed a provision universally supported by South Florida representatives designed to bring substantial relief to customers of Citizens. With a potential veto looming over the toothless package, several South Florida legislators stepped up to the plate.
|SENATOR JEFFREY ATWATER|
Senator Jeffrey Atwater, who represents the Galt Mile, approached Senate President Ken Pruitt to elicit the green light to beef up immediate rate relief for his Broward and Palm Beach constituency, the majority of whom are covered by Citizens. He said, “I asked Ken, ‘Do I have authority to go back to the table, to start writing up some new ideas?’” Atwater described Pruitt’s answer, “He said, ‘Go!’” Atwater said that he then met with Citizens officials and asked, “What can we offer?” He described what happened next, “They must not have gotten any sleep. They came back with a memo at 8 a.m. the next day [Friday].” Although Senate President Pruitt and Statehouse Speaker Rubio supported Atwater’s expansion of Citizens to provide the rate relief sought by the District 25 Senator and the Governor, when Crist suggested a further expansion to accommodate disenchanted private carrier customers seeking a switch to Citizens, Rubio objected. As a Citizens customer, Rubio described the State’s insurer of last resort as “the worst insurance company in the state.”
|SENATOR STEVE GELLER|
While Atwater delivered the Citizens rate rollbacks desperately needed to relieve the fiscal strain on his constituents, Representative Jack Seiler, (D-Wilton Manors), and State Senator Steve Geller, (D-Hallandale Beach) strategized an expansion of the State’s CAT Fund (FHCF) to provide low cost reinsurance to carriers who pass the savings through to customers. Despite Geller’s status as the Senate Democratic leader and Seiler’s reputation as a talented moderate realist, their address on the other side of the aisle nearly buried what eventually became the other great source of immediate relief. Charlie Crist serendipitously overheard Seiler describing their concept to the Governor’s chief of staff George LeMieux when Crist exclaimed, “I like it. I like it. Let’s do it. That’s going to help the people, right?”
House Majority whip Ellyn Bogdanoff, the Galt Mile’s voice in the Statehouse, also made significant contributions to the agreement. Large tracts of the 167 page overhaul were her handiwork. Collecting input from constituents during the past year that she compiled into legislative work product, Bogdanoff outlined many of the technical improvements contained in the bill months ago. A Citizens customer - like Speaker Rubio - she summarized her disappointment with the State’s insurance carrier, “For too long now, Floridians covered by Citizens have been paying too much premium for too little service.” The Special Session afforded her the opportunity to present a comprehensive package that was melded into the overall legislation.
What does all this mean to Galt Mile association homeowners? The vast majority of relief portended in this bill goes to single family homeowners covered by private carriers (averaging 21.8% — according to legislative analysts). At the end of the day, the relief for condos covered by Citizens may amount to an 8% break on the heels of a 300% increase. If not for Senator Atwater, we wouldn’t have even gotten that!
In exchange for the 8% discount, we've all become "co-signers" - guaranteeing to pay for Citizens’ future indebtedness. Under the conditions of this "rescue", a major storm could not only wipe out the CAT fund but also force residents to pay steep yearly assessments on home, auto and other insurance policies to make up for it. In essence, we’ve put up all of our other insurance policies as collateral. In the event of storm damage, any benefits paid might more accurately be characterized as loans. Since Tallahassee may actually be a suburb of the Twilight Zone, if we want a solution, it appears that we must first create one!
More to come...
Special Session Links
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Atwater on Special Session
Our Senator Explains Some of the Changes to the Florida Insurance Environment
February 2, 2007 - Facing an army of angry property owners suffering from crushing insurance costs, Governor Charlie Crist’s new Administration and the new legislative leadership in Tallahassee convened a special session on property insurance on January 16th. Despite the pre-Election Day blizzard of campaign chatter promising relief for homeowners and significant progress toward re-establishing a competitive insurance environment, the highly publicized session quickly deteriorated into a regional tug-of-war. The powerful central and northern Florida politicians whose inland constituency is largely covered by commercial carriers opposed exposing their voters to the additional heavy assessments that Citizens charges to offset their payouts after a storm. Since a majority of South Floridians have been funneled into Citizens, only a reorganization of the State’s insurance company could loosen their rate squeeze. With two days left, the deadlocked session offered South Florida homeowners nothing. For the third year, Tallahassee would again prove impotent.
|ANGRY HOMEOWNERS PROTEST AGAINST RUNAWAY RATES|
Like Gary Cooper in High Noon, Senator Jeffrey Atwater refused to succumb to overwhelming odds. Rather than allow the session to become another exercise in futility, he sought to break the standoff. He elicited permission from Senate President Ken Pruitt to bring Citizens back to the table and wrangle some concessions. Drawing on his considerable experience as a Bank President with extraordinary insurance credentials, Atwater made the parties listen to reason. Realizing that it would take years before his constituents would benefit from the session's legislative changes, Atwater negotiated a postponement of the huge rate hikes that would immediately lambast his Broward and Palm Beach neighbors. Responding to the widespread confusion surrounding the objectives achieved during the Special Session, Senator Atwater sent his take on the final bill to his Galt Mile constituency. Read On!
|GALT MILE'S TALLAHASSEE VOICES|
SENATOR JEFFREY "Jeff" ATWATER &
REPRESENTATIVE ELLYN BOGDANOFF
Good News for Property Owners
As a result of the Florida Legislature’s special session on property insurance reform, some very good things happened for the state’s beleaguered property owners – especially the folks covered by Citizens Property Insurance.
|SENATOR JEFFREY ATWATER|
Believe me, I understand. Two of my neighbors – a couple who have lived in their modest home for nearly 40 years – were forced to go without insurance because a private insurer, as Florida law encouraged, took over their Citizens windstorm policy and tried to raise the premium by more than 145 percent. I can’t tell you how deeply that disturbed me. I vowed that after our January special session no Floridian ever again would be forced to gamble on the roof over their head. Thankfully, a majority of the Legislature agreed.
Here’s how the reform works if you are a Citizens policy holder: No longer can an insurance company force you out of your Citizens policy. You now have a say in the matter. You can choose to stay with Citizens, accept a take out offer, or shop around for a better premium. And, frankly, electing to stay with Citizens could be the better move. Why? Because the company is no longer a “last resort” insurer. It can now operate more competitively by writing multi-peril policies in high-risk areas such as ours. Gone are those controversial wind-zone boundaries that have split Palm Beach and Broward Counties down the middle; all commercial and residential property owners – whether on the coast or inland – will be able to buy coverage for windstorms and other perils from Citizens Property Insurance. As a result, Citizens policy holders will see true relief from their skyrocketing premiums.
Also, lawmakers rescinded the Citizens Property Insurance rate increase of 21% from earlier this year and required the company to give you a rebate if you already paid the higher rate. We also eliminated another 56% rate hike request that was scheduled to begin March 1.
|SEN STEVEN GELLER, REP JACK SEILER, GOV CHARLIE CRIST HOUSE|
SPEAKER MARCO RUBIO, SEN JEFFREY ATWATER AND REP JOE
GIBBONS VISIT WITH CONSTITUENTS SUFFERING FROM RATE SHOCK
CHARLIE AND BECKY ISIMINGER (FAR LEFT)
If your windstorm coverage is written by a private company, these new reforms will provide rate relief by way of lower reinsurance costs. We expanded the successful Hurricane Catastrophe Fund to make more stable, inexpensive reinsurance – that’s back-up coverage – available to these companies. The new law requires insurance companies to pass on its savings from using the Catastrophe Fund directly to policyholders. The additional reinsurance coverage will encourage private insurers to make new insurance available at these affordable rates.
Additionally, we have begun reducing the cost of future hurricanes by accelerating funding for retrofitting existing homes with such protections as hurricane shutters. Insurers now will have to offer you a reduction in your deductibles if you take wind mitigation measures.
Finally, our reform eliminates what’s known as “cherry-picking,” a practice insurers were using in Florida only, to sell safe, profitable policies such as auto coverage, but not property insurance – even though they offer property coverage in other states. This wasn’t fair to Floridians. Outlawing this practice will help ensure that homeowners insurance is more available to our residents.
You might be wondering how quickly these savings will be reflected in your insurance bills. As far as I am concerned, that relief cannot come soon enough! Fortunately, for private policy holders you should begin to see reductions as early as June and July. If you are a Citizens policy holder, by March 1, your rates will be lowered back to what you were paying in December of 2006 and refund checks will begin to arrive to those policy holders who have already paid the higher rates. By April, Citizens hopes to have their rates lowered even further as a result of the recent changes made by the legislature. Citizens will provide refunds for those changes as well!
These are just a few of the highlights from the special session on property insurance. I consider it a solid beginning, but expect more during the 2007 Legislative Session. The property insurance crisis is the single greatest threat to the economy of our state. It began when eight hurricanes battered us and insurance companies paid $36 billion in claims in 2004 and 2005. Even more frightening, weather forecasters have told us this period of increased hurricane activity could last another 10 to 20 years. We in the Legislature have more work to do. We know it and you deserve it. We will continue to apply ourselves to this task!
|STATEHOUSE SGT-AT-ARMS ERNEST SUMNER AND SENATE|
SGT-AT-ARMS DONALD SEVERANCE DROP THEIR HANDKERCHIEFS
TO SIGNAL 'SINE DIE' - THE END OF THE SPECIAL SESSION
For more information on this legislation and how it may affect you please contact my office in Palm Beach County at (561) 625-5101 or in Broward at (954) 847-3518. You can also send me an email at firstname.lastname@example.org.
Senator Jeffrey Atwater
As the dust settles over the next six months, Galt Mile association members will learn the actual extent and imminence of the relief they can expect from Atwater’s gambit. Homeowners covered by private carriers will have to wait until the summer before actualizing any benefit from the Special Session.
Citizens was created as an insurer of last resort. Operating under the assumption that any entity having to rely on Citizens was doing something wrong, statutes were designed to punish their clients. Laws mandating that their rates be kept artificially onerous were created to "encourage" clients to find any commercial alternative. Often, that meant fixing some neglected building component or installing some reasonable threat mitigation. Citizens would grudgingly accept this high-risk insurance riffraff with the understanding that they do whatever was necessary to attract a commercial carrier. To drive home the point, Citizens was saddled with statutory requirements that they be the most expensive, least responsive carrier in the State. By making the "Citizens" experience adequately repulsive, property owners would be properly motivated to achieve and maintain commercial eligibility.
Suddenly, the insurance environment changed and South Florida’s sole remaining admitted carrier (QBE) explained to customers that because nervous reinsurers were cutting their ante by a whopping 75%, they could only afford to cover new buildings. Inhabitants of structures more than a few years old (a majority of South Florida homeowners) were shunned and indiscriminately dumped into Citizens. Although its new clientele weren't insurance outcasts rejected from the commercial market because of some construction deficiency or maintenance indiscretion, they faced the same punitive fiscal measures that Citizens affords all their customers.
Whether Florida homeowners were victims of a meteorological twist of fate, an insidious industry strategy to do away with rate regulation or bureaucratic ineptitude in Tallahassee, buildings that were eminently insurable a few years ago were abandonned through no fault of their own. No purpose would be served by beating them into submission with punitive rate hikes. Atwater realized that Citizens’ mandate needed to change. Instead of continuing as a last resort with a statutory strategy of severely discouraging continued participation, he envisioned its transition into a viable, efficient, competitive company offering a full line of insurance products. If Atwater’s perception of Citizens as a full service profit center is actualized, it could provide the missing competitive ingredient required to attract commercial carriers back to the State. It would also provide a model for other States facing similar dilemmas.
|ATWATER WELCOMES GALT MILE VISITORS TO TALLAHASSEE|
Whether the session work product will provide meaningful relief to Galt Mile associations remains to be seen. However, were it not for Jeffrey Atwater’s final push to morph Citizens into a full service insurance vehicle instead of a repository for rejects, it is likely that the session would have been the third in three years to be characterized by unrelenting failure.
More to come...
To contact the Senator, Click Here. To read the actual Conference Committee Amendment for HB 1A, Click Here!
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Representative Ellyn Bogdanoff, District 91
February 6, 2007 - District 91 Statehouse Representative Ellyn Setnor Bogdanoff, the Galt Mile Community’s voice in the Florida Statehouse, fulfilled a commitment to constituents during the mid-January Special Session in Tallahassee. Last year, she promised that if Tallahassee didn’t address the insurance crisis, she would recast it as her top priority. THEY DIDN’T. SHE DID. Appointed to the important position of “Majority Whip” by incoming House Speaker Marco Rubio, Ellyn orchestrated the December pre-session House Insurance Conference during which scores of Representatives took the opportunity to educate themselves about the issue. At a November lunch meeting, Ellyn said, “Newly elected Representatives must acclimate to the Capitol and familiarize themselves with the issues. To get the most out of the Special Session, every legislator must be fully conversant with every aspect of the problem.” Not surprisingly, a majority of the provisions agreed to at the Special Session were first thoroughly reviewed during the three-day House Insurance Conference. Also, much of the content ultimately included in the Special Session’s surviving legislation was taken from bills co-sponsored by Ms. Bogdanoff.
|Representative Ellyn Bogdanoff|
As is her practice, she kept constituents apprised of events as they unfolded. The following message summarizes Ellyn’s take on the legislature’s recent performance.
“Over the past few months, I have talked with many of you and I heard the same concern: our community is slowly eroding under the twin threats of property insurance and taxes.
We are past the point of half-measures and band-aids. That is why in January, the Legislature convened for a special session on insurance reform. As the Majority Whip, my office was charged with putting together a bipartisan conference in December to prepare for the special session and study Florida’s property insurance market. Over 100 members of the House, Republicans and Democrats, participated and presented their ideas for reform.
It was a challenging week, but the results of our efforts in the Special Session will provide meaningful and responsible rate relief to all Floridians. Although there are many components to the bill, I wanted to highlight a few.
- First, after speaking with our neighbors who live in condominiums and co-ops, I made it my priority to remove regulatory barriers to risk pooling and self-insurance for multi-family dwellings.
- Second, we expanded the Florida Catastrophe Fund, which will stimulate the private market and reduce rates.
- Third, we substantially reduced rates for those who have no other market but Citizens Insurance Corporation by rolling back the rates to the 2006 levels and providing additional reductions.
- Fourth, we committed to support the efforts of those homeowners who choose to mitigate damage by hardening their homes, and directed state regulators to establish a home grading system so homeowners will know what credits to expect.
- Fifth, we created greater transparency in the premium notices, and
- Last, we advised companies that sell homeowner’s insurance in another state and choose to write in Florida that they will no longer be allowed to sell auto only. They will be required to sell homeowner’s insurance as well (cherry picking).
For a comprehensive review of the insurance reforms, please email or call my office and I will send you a copy of the Whip’s Brief, which summarizes the new law.
We will continue to work on insurance issues in the 2007 Regular Session with an eye on long-term reform.
Next, we will tackle the property tax issue, and I can assure you that any changes will be broad and reduce the burden to both homeowners and businesses. I will keep you posted on this issue and many others that we will address in the 2007 Legislative Session. Please do not hesitate to call my office at (954) 762-3757. Our office hours are 9 am to 5 pm, Monday through Friday, and I am always available by email. If you would like me to add you to my email list and receive weekly updates from the Capitol, please let me know by emailing me at Ellyn.Bogdanoff@myfloridahouse.gov or by calling our office.
Thank you again for allowing me to serve you.”
P.S. - On Monday, February 12th, the Legislature will host two Public Hearings on Property Tax Reform. From 9:00 AM to 12:00 noon at the Duncan Theatre of the Lake Worth Campus of Palm Beach Community College, (4200 Congress Avenue, Lake Worth) and from 6:00 PM to 9:00 PM at Bailey Hall on the Broward Community College Central Campus (3501 SW Davie Road, Davie). Legislators will be on hand to listen to your thoughts on this issue. For more information, call Representative Ellyn Setnor Bogdanoff at 954-762-3757 or CLICK HERE to email.
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Atwater, Bogdanoff & Teel Solicit Galt Association Input
Explore Insurance & Property Tax Relief
March 17, 2007 - On Thursday, March 1st, Senator Jeffrey Atwater, Representative Ellyn Bogdanoff and Commissioner Christine Teel hosted a meeting at the Beach Community Center. Inviting civic and Association leaders from the member co-ops and condos of the Galt Mile Community Association, they solicited “grass roots” input about issues threatening to undermine Florida’s economic viability and its popularity as a place to live. Laying the groundwork for the initial topic, Senator Atwater pointed out that for the first time, Florida emigration exceeded immigration - more people were leaving than moving to the State! Both of our State Legislators agreed that the underlying reasons for this untenable situation are skyrocketing property insurance costs and an unsustainable property tax formula.
|GALT MILE LAWMAKERS REPRESENTATIVE ELLYN|
BOGDANOFF AND SENATOR JEFFREY ATWATER
Senator Atwater explained the obstacles he had to overcome during the recent Special Legislative Session on Property Insurance prior to being afforded the opportunity to alter the traditional Citizens formula and refocus its mission. Having received the “go ahead” from Governor Charlie Crist and Senate President Ken Pruitt, Atwater spearheaded a reconfiguration of Citizen’s business model, transforming it from a repository for the commercially uninsurable into a full service competitive company featuring a viable profit center. The “windstorm only” limitation in high risk areas (such as everything east of I-95 in Broward County) was rescinded, allowing Citizens to market the more profitable multi-peril policies to windstorm customers. They zapped the 21% increase imposed in early January and eliminated another 56% increase scheduled for March 1st. Customers satisfied with rates lowered by these and many other changes, are no longer subject to being dumped upon having been accepted by a commercial carrier. They can remain with Citizens or accept an alternative offer. Legislators also loosened the purse strings of the Florida Hurricane Catastrophe Fund, making available more low-cost reinsurance dollars to carriers that must pass the savings to rate-payers.
|SPEAKER MARCO RUBIO, GOV CHARLIE CRIST, SEN BILL POSEY, LT.|
GV JEFF KOTTKAMP, SEN PRES KEN PRUITT AND SEN JEFF ATWATER
The Senator described how the State’s various constituencies reacted to these changes being implemented. Citizens has historically been funded by assessments to all insured property owners. Lawmakers from central and northern counties, in which single family homes primarily covered by private carriers must to pick up their share of any shortfall following a costly storm, fought to keep their constituents exposure to a minimum. During the past two special sessions, this impregnable voting bloc thwarted any attempt to put Citizens on the table. Clarifying that continued adherence to this formula meant sacrificing South Florida, Atwater was able to marshal the necessary state-wide political will to alter Citizens’ mandate.
Representative Bogdanoff confirmed the importance of opening the CAT fund coffers. Carriers have identified a dearth of reinsurance dollars as the 600 pound gorilla of premium increases. She also described the importance to Condominiums and Cooperatives of simplifying requirements for the establishment of private self insurance risk pools. Given the existence of 18,000 Condominium Associations statewide, a huge percentage of the current burden on Citizens will be relieved by the prospect of much lower rates and faster benefit response times in self-directed funds. The legislation was passed to give Associations in communities like the Galt Mile neighborhood a viable alternative to the sky-high premiums currently commanded by Citizens.
The lawmakers acknowledged the need for these alternatives given the squeeze on Associations by the huge rate hike passed by Citizens last May. The new legislation passed during the special session froze those high rates for a full year. While they won’t be increased, Associations renewing policies through May 1st will suffer these unprecedented premium costs. Simply freezing the 250% - 300% rate jumps relieves none of that fiscal burden, although the special session’s legislative output should help unit owners with their individual policies issued from commercial carriers – if they can find one.
|SENATOR JEFFREY ATWATER|
At this juncture, several representatives from cooperatives, including Dr. Robert Drews from Caribé, Dennis Anderson from Coral Ridge Towers and Ralph Hamaker from Coral Ridge Towers South, loosed a uniform complaint. “Why does so much association legislation in Tallahassee neglect cooperatives?” asked Anderson. As Edgewater Arms’ Sam Montross and Carol Blanchard nodded in agreement, Anderson protested elephant size loopholes in their constitutional guarantees of equal protection under the law. They were assured by Representative Bogdanoff that cooperatives were specifically included in the new legislation, allowing their participation in such a vehicle.
Senator Atwater then nominated property taxes as being the primary cause for flight from Florida. Driving home the severity of the problem, he said, “In August of 2005, some 7000 single family homes were on the market. This past August, that number more than quadrupled to 31,000.” Having distributed fact sheets, Representative Bogdanoff and Senator Atwater reviewed some disquieting inequities in our tax system.
|TAX LEVIES VS. POPULATION AND INCOME GROWTH RATES|
During the ten years from 1996 to 2006, the Florida population increased by 25%, personal income increased by 86% and Florida property taxes increased by 148%. During the same period, County taxes increased by 155%, school taxes by 122% and municipal taxes by a whopping 193%. Ellyn Bogdanoff noted that there is no rational relationship between the cost of operating government and the property values upon which tax assessments are based. The new majority Statehouse whip, she has been instrumental in compiling some alternative mechanisms that might be considered more equitable.
The two state officials first ran through a list of possible adjustments to the existing system, considering their positive and negative consequences.
Governor Charlie Crist has openly supported a doubling of the Homestead Exemption from $25,000 to $50,000, restoring its savings impact to approximately 1980 level. On the down side, statewide property tax rolls would shrink by 6.6% and small counties with many lower-valued properties would get clobbered.
|NEW GOVERNOR CHARLIE CRIST|
SUPPORTS DOUBLING HOMESTEAD
By allowing homeowners to carry forward their “Save our Homes” benefit, a veritable flood of transactions will ensue. Homeowners threatened with overwhelming tax consequences triggered by the loss of their cumulative “Save our Homes” protection will no longer be trapped in their present circumstances. By making “Save our Homes” either fully or partially portable, people can adjust their residence options to their current needs. However, it would exacerbate the already huge assessment inequities between longtime residents and both newly and non-homesteaded properties. Insofar as this further insulates Homesteaded property owners from local government budget decisions, it will commensurately increase tax liability for non-homesteaded property owners.
Protection similar to that afforded Homesteaded property owners by the “Save our Homes” constitutional amendment could be provided to non-homesteaded properties. Capping their increases at perhaps 10% would serve to insulate non-homesteaded properties from surges in property values as were recently experienced. Since these value spikes are unusual, this would have little long term impact on overall property assessments. Of course, new businesses still taxed at “just value” would face a competitive disadvantage during periods of accelerated appreciation.
“Save our Homes” benefits could also be extended to all Real Property, completely eliminating the greatest distinction between the protections available to property owners. While helping to level the field for Homesteaded and non-Homesteaded property owners, newly obtained property would still be subject to “just value” assessments. Since overall assessment needs remain the same, leveling the field would shift a relatively larger burden to Homesteaded properties.
Capping all property tax growth by statute is regularly considered. It would deflate the effect of property value swings. However, two adverse consequences lower its value as a potential resolution. It would thwart local governments from responding to local needs and emergencies. It could also encourage a greater reliance on fees and targeted assessments.
Senator Atwater clarified “the heart of the problem.” Half of Fort Lauderdale’s residents enjoy homestead protection. Since assessments are a zero-sum mechanism, whatever tax burden is relieved on the other half will be borne by the homesteaded properties. What will induce half the population to support a divestiture of some or all of their protection?
|SEN. JEFF ATWATER ADDRESSES ASSOCIATION LEADERS|
When the “Save our Homes” amendment was enacted in 1992, the notion of rewarding Florida resident-homeowners with special protection by shifting some of the tax burden to those whose primary allegiance lies elsewhere and commercial enterprises received overwhelming support. Little consideration was accorded to the ever-widening gap between the two ownership classifications. This year, those differences have reached a critical mass, threatening the fiscal health of the entire state. The increase projected in Fort Lauderdale’s proposed municipal budget will be fully assessed to non-homesteaded properties while homesteaded properties will actually realize a small decrease. Half the population is footing the bill for everyone. Businesses and other non-homesteaded property owners are no longer urgently pleading for relief, they are leaving. This is not an anecdotal red flag - but a statistical reality. This threat, in and of itself, will not be adequate to elicit enough support to make a sweeping change to the tax formula. Knowing that they would have to pay for the relief needed by their non-homesteaded neighbors, what would it take to win the support of homesteaded property owners? As put by Senator Atwater, “We must find the right sweetener.”
Former Acting Fort Lauderdale City Manager Alan Silva interjected, citing a fatal disconnect in the budget process. Having performed municipal CPR when called upon to prevent a threatened fiscal collapse during the Fort Lauderdale Budget Crisis, Silva has first-hand experience with a systemic dogma. He said, “The people providing input about which services are needed are never the ones that have to foot the bill.” Commissioners are often pressured to campaign for expensive services by groups and/or residents with little or no liability for their costs. He suggested that the taxpayers be given greater direct input into the budget process.
|FORMER ACTING FT LAUDERDALE|
CITY MANAGER ALAN SILVA
Representative Bogdanoff repeated another disconnect that she alluded to earlier, one questioning the rationale for the entire system. The taxes needed to finance the cost of government have no relation to the property values upon which they are currently based. Residents asked our Legislators if taxes could be based on some formula other than fluctuating property values. Ellyn Bogdanoff explained, “The Florida Constitution authorizes local property taxes and limits the legislature’s authority to make changes.” She listed some of the obstacles to replacing the current system with a sales tax. If increased to replace property tax revenues, a State sales tax would more than double, making it the nation’s highest - by far. Of course, businesses would have to pay even more than they do under the existing property tax system. Since the current hotel tax is already almost twice the existing sales tax, more than doubling the sales tax would devastate tourism. Local governments would lose any fiscal input or control in a system wholly dependant on a State tax. Without thousands of variances or adjustments for anomalies such as retailers in border areas, they would be disproportionately impacted. A straight-up swap-out doesn’t seem viable.
|REP. ELLYN BOGDANOFF|
Representative Bogdanoff said that several proposals for property tax relief were being considered in the Statehouse. She described an attempt to provide statutory relief, “It requires local governments to immediately and meaningfully reduce property tax rates and caps future growth in property tax revenues.” A proposal for Constitutional reform “replaces homestead property taxes with sales tax and establishes revenue caps for both state and local government.” The problems normally attributable to these alternatives are addressed in some legislative options by utilizing surgical rollbacks to achieve equity.
The statutory option requires an immediate reduction in millage rates for all local taxing authorities except school districts and voter-approved millage rates. Property tax rates would be rolled back to the 2000-2001 Fiscal Year and then rolled forward to a revised FY 2007-2008 rate, factoring in population increases and inflation. Future local revenue growth is linked to increases in population and inflation - not property values. Requiring a supermajority vote of the governing authority to exceed the revenue cap should discourage potential abuse. This option could provide immediate tax relief averaging 19% savings ($433 for homestead property and $3,353 for commercial property) on all property owners’ next tax bill.
|SENATOR JEFFREY ATWATER &|
REPRESENTATIVE ELLYN BOGDANOFF
The Constitutional option - implementation of a state sales tax - eliminates all property taxes on homestead property (average savings of $2,283), replacing the lost revenues with a dedicated 2.5% new sales tax. It requires all local entities (including school districts) to limit future growth to population increases and inflation. Exceeding the cap would require a unanimous vote of the governing authority. After embedding the new statutory provisions for rate roll-back in the State Constitution, we could roll back state revenues to the 2000-2001 Fiscal Year and then roll them forward to a new FY 2007-2008 rate, factoring in population increases and inflation. Future state revenue growth is linked to increases in population and inflation. A 2/3 vote of each house would permit a one-year lift of the state revenue cap to address emergencies.
Rolling back revenue levels and bringing them forward again affected only by population growth and inflation will eliminate the huge windfall valuation anomalies responsible for our present sky-high rates. Senator Atwater volunteered “I support the direction taken in the House proposals. We could possibly pass some version of the statutory resolution. For the Constitutional solution to be realized, you would have to agree! Only you can enact a constitutional amendment.”
|FT LAUD COMMISSIONER|
As time ran out, Senator Atwater, Representative Bogdanoff and Commissioner Teel thanked participants for allowing them to remain on point. Allotting a segment for each problem and focusing undivided attention towards its resolution allowed for a significantly deeper exploration of the issues. Our Legislators requested the opportunity to repeat this format again in the future – to follow through on these painful dilemmas and consider other challenges facing the thousands of Association members living in the Galt Mile neighborhood. The participants universally agreed as the legislators excused themselves, exclaiming that it was time for them “to get to work.”
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Anti-Condo Senate Bill SB 714
March 28, 2007 - Senator Gary Siplin filed Senate Bill 714 (SB 714) on January 23, 2007. In its third legislative incarnation in three years, the bill purports to protect people from losing their homes over insignificant debts. That doesn’t accurately describe the effects of the bill. It is a license to steal. It allows homeowners to legally take up to $2,499 out of their neighbor’s pockets - indefinitely. A similar bill was defeated in California a few years back. Governor Schwarzenegger explained his reason for vetoing the legislation, “This bill makes sweeping changes to the laws that govern Common Interest Developments (CID) and the foreclosure process for failure to pay delinquent homeowners assessments. While the intent of this legislation is laudable and intended to protect homeowners from being foreclosed upon for small sums of delinquent assessments, this bill is overly broad and could negatively impact all homeowners living in CIDs. This bill could unfairly result in increased assessments for other homeowners who pay their assessments in a timely manner and may delay the transfer of real property in CIDs due to the lien procedures set forth in the bill.” That’s putting it mildly.
Foreclosure should always be a means of last resort to collect a debt. Since people’s homes are often their most significant asset, the prospect of losing one’s home over a trivial debt is tragic. Foreclosures and liens are tools to enforce the payment of a debt. In the case of Common Interest Developments such as Condominium Associations, they are the only legal tools available. If you fail to make your car payments, it gets repossessed. Miss a few FP&L bills and the refrigerator becomes a storage chest. If you stiff Bellsouth, your telephone becomes “static art”. Ordinarily, if you don’t pay for services, the services stop... except in Condominiums. To level the risk of depending on many “roommates”, Associations are afforded the right to lien or foreclose on “roommates” that don’t kick in their fair share of the common expenses. When condo owners don’t pay their fair share, the burden falls to all the other owners.
|SENATOR GARY SIPLIN|
The vast majority of condo owners pay their assessments on time. Of the few who pay late, most pay after the first notice. The extreme minority that remains delinquent falls into two categories - those homeowners undergoing some financial crisis and those that simply refuse to pay. In either case, the resulting shortfall is shifted to the delinquent’s neighbors. Although some can afford the unexpected expense, many on fixed incomes cannot. Condo finance is a zero sum game, if some pay less, others must pay more. The effective result of unpaid assessments is the appropriation of other people’s money without asking their permission - commonly characterized as stealing. The Association must pay its bills and employees whether or not the individual owners pay theirs. To minimize this unfortunate aspect of common interest ownership, owners protect one another by agreeing to place liens and/or foreclose when assessments aren’t paid. This is their only legal remedy.
SB 714’s language is self-explanatory, “A lien foreclosure action or an action to recover a money judgment brought as a result of unpaid condominium association assessments may be brought only in those instances in which the amount in question equals or exceeds $2,500. The association is not entitled to recover attorney’s fees incurred in either a lien foreclosure action or an action to recover a money judgment for unpaid assessments. No foreclosure judgment may be entered until at least 180 days after the association gives written notice to the unit owner of its intention to foreclose its lien to collect the unpaid assessments.”
Since any collection action would be precluded by statute, unpaid assessments amounting to less than $2,500 could be “appropriated” with impunity. The monthly maintenance assessments for thousands of Florida Associations run from $30 to $100. The delinquent’s neighbors will have to “carry” the deadbeat for years before they are permitted to enact a recovery.
For instance, if an Association’s monthly assessment is $30, the other owners would have to pay the scofflaw’s bills for almost seven years without any prospect of relief. After the seven years, they must continue to pay for another six months after notice is given. Once the seven and a half years pass, they must pay an attorney to foreclose on the lien. They are not permitted to recover the attorney’s fees. If the association members can’t afford to finance the legal expense of foreclosing on the lien the delinquent is permitted to continue living off his neighbors - forever.
Legal fees for lien foreclosures often surpass the value of the delinquencies - sometimes exceeding the value of the unit. The right to foreclose offers no remedy if the non-recoverable cost of foreclosure exceeds the value of the unit. If the other owners decide to spring for the legal fees anyway, a manipulative deadbeat need only limit his debt to $2,499.99 to stave off foreclosure. He can continually owe that amount without risk of being subjected to enforcement actions. Associations will have to pay tens of thousands of dollars to stop each deadbeat from deliberately stealing from the other residents. Even when the delinquent wearies of this abuse and hits the road, the 180-day notification requirement will place the Association squarely at the end of the lien line. The mortgage holder and every debtor listed in a bankruptcy proceeding will take precedence over the Association’s standing.
The bottom line: If this bill passes, no Association could ever be made “whole”. It deliberately and irrationally punishes every other homeowner living in the Condo Association, who must either absorb the delinquent’s debt or pay irretrievable legal expenses to enforce collection. The bill doesn’t protect the unfortunate victims of irresponsible foreclosures by applying reasonable guidelines. It prevents an Association from collecting assessments... any assessments. As such, it victimizes every owner except the delinquent. All scofflaws must do to escape their debt is to NOT PAY IT! In effect, the first $2,500 assessed by an Association would be a plea to make a voluntary contribution, payable at the member’s discretion. Incomprehensibly, the bill further punishes the residents who pay their assessments on time by forcing them to pay the cost of collecting from those who don’t! It is impossible to cite another example of a lienholder that cannot collect attorney’s fees when enforcing its lien.
Siplin is also playing a constitutional shell game. Current law states, “The association may bring an action in its name to foreclose a lien for assessments in the manner a mortgage of real property is foreclosed and may also bring an action to recover a money judgment for the unpaid assessments without waiving any claim of lien.” By eliminating an Association’s right to foreclose and their right to act to collect money damages in amounts less than $2,500, Senator Siplin is removing every remedy available to an Association to collect a debt. The Constitution demands that every right have a viable remedy. By definition, a right without a remedy is, in fact, not a right. By removing the Association’s only collection remedy, the Senator is depriving the Association of its right to collect a debt. Since Senator Siplin is an attorney, it is reasonable to assume that this consequence is not unintended.
A well-known banker illustrated a more insidious ramification of the legislation. The mortgage application process includes an inquiry to the condo association about its outstanding receivables. If an Association’s balance sheet demonstrates substantial uncollected and/or uncollectible funds, lenders will classify the collateral as insufficient to secure their investment. The mortgage will be declined. The banker predicts that the bill would portend the end of Florida’s condo mortgage market. Only purchasers flush with cash could participate. Given the likelihood for abuse by this bill, the impending fiscal “train wreck” would exclude condominiums from mainstream financing.
SB 714 is patently absurd. While protecting homeowners from whimsical foreclosures is laudable, force feeding their debts to their neighbors is hardly a viable solution. An attorney formerly of the Miami Public Defender’s Office remarked, “Siplin must know that you can’t stop foreclosures by declaring a permanent legislative debt holiday.” Siplin has repeatedly stated, “There are a lot of condos not only in South Florida but throughout the state. This will bring relief to the whole state.” While mischaracterizing his bill as legislative altruism, he neglects to explain that his bill doesn’t expunge the debt; it functionally transfers it to the other owners! The “relief” that the Senator provides to the delinquent becomes everyone else’s burden. In a meeting with condo owners last year, Senator Jeffrey Atwater stated, “A bill designed to protect deadbeats to the detriment of everyone else is clearly unworkable.” The voice of reason!
At the end of the day, there is still no viable legislative solution to the issue. While no responsible association should opt to institute foreclosure proceedings to collect a trivial debt, simply making all assessments uncollectible sweeps the problem under the rug. Some associations have appointed special appellate committees charged with verifying the need to foreclose any unit. The committee is empowered to evaluate the circumstances surrounding the debt and, when appropriate, recommend alternatives to foreclosure. The committee can approve payment plans that enable the homeowner to address arrears or postpone action upon confirmation of impending alternative financing. The Association is made whole, the homeowner avoids incremental legal fees and foreclosures on liens against trivial debts never see the light of day. Unless a homeowner’s financial problems are so severe that no accommodation could address the debt, everybody wins.
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Representative Bogdanoff’s Tallahassee Update
Representative Ellyn Bogdanoff, District 91
April 4, 2007 - Ellyn Setnor Bogdanoff, the Galt Mile Community’s District 91 Statehouse Representative, updated constituents in late March about the status of legislation moving through the House and Senate. Wearing two hats, she must balance her duties as Majority Whip with her responsibility as our voice in Tallahassee. Tackling windstorm insurance and runaway property taxes affords her the opportunity to simultaneously fulfill both obligations. Since edifying Civic and Association leaders about nascent legislation earmarked to ameliorate these dilemmas at a grass roots “research” meeting with Senator Jeffrey Atwater earlier in March, statutory property tax legislation has been advancing through the House. Subsequent committee modifications to the property tax bill HB 7001, referenced in her “Whip’s Highlights”, extends special protection to fiscally constrained counties, hospital districts, and Children’s Services Councils (School Districts are already exempted in the original bill). These new exemptions reduce the overall tax reduction by about $326 million from the original $5.8 billion tax reduction for a new total reduction of $5.5 billion.
In addition to property tax reform, Representative Bogdanoff touches on bills affecting Cable industry customers and Public Records Exemption legislation designed to thwart Identity Theft. Read on:
“We have been off to a very hectic start and have tackled some major issues. The year began with insurance during Special Session and we are now on to property taxes. I have attached the Whip’s Highlights so you can see the changes made to the property tax bill that passed out of committee this week. However, we are committed to broader reform and hope that we can do even more.
Although we know the statutory fix we just passed will provide immediate relief, the Constitutional changes that we are proposing are where the real reform takes place. I encourage you to visit www.nomorepropertytax.com and let me know what you think. This is a great website that will likely answer your questions and also outlines the plan. I sent many of you the original brief but there have been some proposed changes that we are still working through. Mainly, we are looking at rolling back to 03-04 instead of 01-02 under the Constitutional proposal as well as eliminating some, if not all of the tangible personal property on business. We are also prepared to deal with the appraisal issue regarding the current “highest and best” use versus “current use.” We sure could use your voice in the fight.
|BOGDANOFF FROM STATEHOUSE|
Let’s see, we also passed out of Policy and Budget, the repeal of the Communications Service Tax and a bill that creates greater competition in the cable market. I guess you can say we had a very “taxpayer friendly” week. All measures will head to the House floor soon.
I wrote an op-ed this week on the Public Records Exemption bills that seem to be controversial, at least where the newspapers are concerned. It is attached it if you are interested. I believe it is important to protect our private information, and there is a balance between open government and making our citizens' private information available for sale or pubic consumption. The bill needs work, but I strongly believe the intent is on point.
I was on the radio with Jim Defede Friday morning at 8, spent 9 hours in a committee meeting and then headed home for my friend’s birthday party. I hope to get in an hour of tennis today, the weather is incredible.
I’ll be heading back Sunday to prepare for another crazy week. Broward Days begins on Monday and I’m looking forward to seeing many of you in town. Well, off to do some errands and finish the pile my Legislative Staff left me. Please keep the emails coming and let me know what you think of the property tax proposal. Stay well,
Until next time,”
HB 567 (and sister bill SB 980 in the Senate) embodies a repeal of the Communications Service Tax. A “bill that creates greater competition in the cable market”, HB 529, is encountering expected serious opposition by the Cable industry. The Florida Cable Telecommunications Association (FCTA) has launched a full tilt media blitz enlisting television viewers to complain to their legislators about the bill’s potential to foment local service discrimination. While consumer advocates support opening the Cable market to additional players, they disparage the legislation's vulnerability to potential abuse. Among the regulations stripped away in the bill are provisions that deter cherry picking.
|FCTA LIKES MONOPOLY|
The Public Records Exemption bills are responsive to the 16,000 Floridians victimized by identity theft last year. In her op-ed piece, Representative Bogdanoff describes the bills as follows. “House Bill 1117 will protect seniors from those who target them for identity theft. House Bill 1213 requires strict privacy guidelines for personal identifying information, such as social security numbers and addresses, and mandates that the highest level of confidentiality be given to this sensitive information, even if the information is collected legally. Also known as an “opt-in” requirement, this bill would require banks, hospitals, online service providers, and other services that require our private information to ask our permission before obtaining our personal data. House Bill 1211 (and Senate counterpart SB 2268) makes it a misdemeanor to distribute personal information about a person without his or her permission.” News organizations whose journalists rely on the collection of personal information are expressing concern about the legislation’s potential for interfering with their ability to investigate and follow up on sources and leads. The bills test the balance between personal privacy and “Freedom of Information” access.
A House-backed Constitutional Amendment designed to eliminate all property taxes for many homeowners but raise the sales tax by 2.5 cents has run into some serious problems. Critics claim that the $9.2 billion sales-tax increase would mostly benefit wealthy homeowners while shifting more of the tax burden onto businesses, renters, snowbirds and all other nonhomestead-property owners. Representative Jack Seiler, a moderate Democrat from Wilton Manors, said that 13 percent of the total tax savings would inure to 1.5 percent of the wealthiest homeowners in the state. Businesses that would still pay property taxes would also have to pay the increased sales tax - targeting them for double taxation.
The plan requires that a separate referendum be held in each of Florida’s 67 counties and school districts to decide whether to adopt exchanging their property tax for a sales tax hike. Depending upon the results of their individual votes, property tax and sales tax rates could vary substantially in neighboring counties, creating a fiscal crazy quilt. Residents would be predisposed to live in sales tax counties and shop in property tax counties. The issue fueled a serious conflict between House Republicans and local governments across the state. Since the Senate has demonstrated little ostensible support for the plan, uncommitted House members are prospectively nervous about being perceived as supportive of increasing the sales tax in what may be a futile effort.
As such, it is unlikely that this proposal will see the light of day unless House Republicans invite input from across the aisle. Without additional support, the measure will fall short of the 75% approval needed to call the necessary special election. A bi-partisan product would also soften some of the Senate recalcitrance to support the House-backed Constitutional resolution to property tax inequities.
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Representative Bogdanoff’s April Newsletter
Representative Ellyn Bogdanoff, District 91
April 12, 2007 - In her April Newsletter, Ellyn Setnor Bogdanoff explains that among her duties as Majority Whip is the responsibility for educating her peers in the Florida Statehouse about important policy issues. With half the session remaining, she discusses the legislature’s intention to cap spending, cut taxes, adequately fund reserves and reform the tax system that currently threatens to undermine the State’s economy. Representative Bogdanoff also eagerly anticipates the passage of an Anti-Bullying bill, an objective for which she has served on the front lines during the past two years. Read on:
“We are halfway through session and continue to work on the critical issues facing our community: insurance and property taxes. As the Majority Whip my office is charged with educating the members of the Florida House of Representatives on the important policy issues affecting Floridians. Our website can be accessed at www.myfloridahouse.gov through a link to the Whip’s Office and on the right side of the House webpage.
Cap Spending and Lower Taxes
The House has drafted a very bold and creative plan for tax reform and we continue to build support throughout the state. On April 17th there will be a rally in Tallahassee, organized by a number of grassroots organizations that support our efforts to cut and cap local government spending.
The House also proposes the complete elimination of the Homestead property tax. The Homestead property tax has aided in creating tax shifts and inequities in taxation, and has locked our neighbors into their homes. We anticipate that the Senate will unveil their plan soon, and we intend on building a consensus to fix our broken tax system. We hope to vote on both the statutory and constitutional plans in a couple of weeks. It is a complex topic, and I encourage you will take the time to read about the House proposal and provide your feedback.
Saving for the Future
This is a tight budget year, but we managed to increase funding for schools and will maintain services throughout the state. While the House believes that we need to place an additional $1 billion in reserves, the Senate provides for $1 billion more in spending for economic development and transportation needs. I strongly believe that unless we successfully solve the property tax crisis, our economy will continue to slow down. Without the $1 billion in reserves, we will be forced to make cuts in vital programs. Voting on the budget is scheduled for the week of April 9th, and we anticipate budget conference meetings will begin around April 19th. Stay tuned.
More to Come
In addition to decreasing local spending and saving families from paying property tax on their homesteads, we are working on several other issues that affect the daily lives of Floridians. We hope to provide additional competition in the cable market. We have rewritten the Sunshine State Standards for education for our students to compete on the same level as other students worldwide. We anticipate passing anti-bullying legislation, an issue that I have fought to pass for over two years that will address the growing problem of safety in our schools and on the internet.
With a short 60-day session, there is so much left to do. I try to make it back to the district each week, but as we enter the last stretch of Session, I will likely spend more time in Tallahassee. We are working long hours, virtually 7 days a week. Your ideas have been invaluable to solving the challenges our state faces, and your perspective continues to shape our agenda. Please stay in touch and email me anytime at Ellyn@ellynbogdanoff.com. Thank you for your continued support and for allowing me to serve as your representative in the Florida House.
All the best,”
Florida House of Representatives – District 91
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Atwater Summarizes Home Stretch
SENATE PASSES TAX RELIEF, PROTECTS FLORIDIANS
May 7, 2007 - Senator Jeffrey Atwater did it again. Last year he sponsored a veritable encyclopedia of legislation. It ranged from healthcare to housing to tax relief. As if in competition with his own milestone, his 2007 output included 31 bills sponsored and another 20 that he co-sponsored. At a March meeting in the Beach Community Center, he told a hall filled with association and civic leaders that runaway property taxes were primarily responsible for Florida’s ominous decline in popularity as a residence market. Confirming that 2006 marked the first year that more people left than moved into the State, Atwater identified an unsustainable property tax formula and skyrocketing property insurance costs as fatal threats to Florida’s economy.
|SENATOR JEFFREY ATWATER|
In early March, the only tax reform legislation filed in the State Capitol were Statehouse products. As a rule, Senators postpone committing to legislation until they face a vote - in a review committee or on the Senate floor. Co-hosting the meeting with District 91 Statehouse Representative Ellyn Bogdanoff, Senator Atwater proclaimed his support for a statutory property tax fix and a proposal for constitutional reform moving through the House. Since then, the House reforms were matched by comparable, although less radical, legislation filed in the Senate.
As the session enters into its late April final stages, our Senator applauds the Senate’s successfully creating its own plan for property tax reform (SB 1020). He also supports legislation protective of armed forces personnel exploited by profiteering merchandisers (SB 116). Atwater describes the importance of new internet crime legislation (SB 1004) that enjoys the support of Attorney General Bill McCollum. It adds 50 more investigators to his 6 person cybercrimes unit and expands the disclosure requirement for sexual predators to include screen names and e-mail addresses. Atwater summarizes the House and Senate objective to create a State budget during the session’s final weeks. Read on...
Property Tax Relief for Every Floridian
This week the Florida Senate unanimously passed its plan for property tax relief. Everyone benefits under our plan: long-time homeowners, first-time buyers, affordable housing residents, business owners, and those for whom Florida is a second home.
In recent years, spikes in local government revenues have cut into the budgets of Florida families. Our plan halts those unpredictable and unsustainable spikes and ensures that such increases will not happen again.
Floridians deserve to know how their tax dollars are used. Taxpayers will be able to track spending and hold local officials accountable, as local governments will be required to post revenues and expenditures online.
Tax policy is complex, and forming it can be a difficult process. However, the results of the Senate plan are simple: every Florida property owner wins.
Protection for Military Men and Women
Florida is home to many past and present members of the U.S. Armed Forces. These men and women deserve tremendous gratitude.
Senate Bill 116, passed unanimously this week, protects servicemen and women from the unauthorized use of their names and likenesses. While most Floridians deeply respect our military, there are those who unscrupulously create merchandise with the names of fallen heroes in order to turn a profit. SB 116 ensures that the name, picture, or image of a service member of the United States armed forces will not be exploited to advertise goods or services, or to solicit a business enterprise.
Every day, brave men and women sacrifice greatly to protect our freedom. Protecting their privacy and reputations is the least we can do in return.
Stopping Sex Offenders
The Legislature this week unanimously approved a bill giving Florida the nation’s strongest penalties for sexual predators who victimize children on the web. The bill, a priority of Attorney General Bill McCollum, increases Florida’s cybercrimes unit, a team of investigators who specialize in snaring Internet predators, from six employees to 56.
|ATTORNEY GENERAL BILL MCCOLLUM WITH SPONSORS|
SEN. NANCY ARGENZIANO AND REP. DAVID RIVERA
The legislation gives greater penalties for chatting with a child online and then meeting them for sexual purposes, and for having or sharing child pornography online. It also forces sex offenders to provide their screen names and e-mail addresses to law enforcement authorities, who can then provide the information to social networking websites (such as Myspace.com) frequented by children.
Families should be able to use the Internet in safety. The Florida Legislature is proud of this bill and will continue to fight sexual predators on the Internet and on the streets.
A Note from Senator Jeff Atwater
With two weeks left in the 2007 Legislative Session, the Senate and House of Representatives have begun holding fconference meetings to form a budget for the 2007-08 fiscal year. Senate President Ken Pruitt and Speaker of the House Marco Rubio have designated conferees to represent their chambers during this process. These designates will meet to examine each component of the budget, seeking to forge a bill that protects and meets the needs of all Floridians. As the countdown to the end of Session begins, the Senate is committed to passing a sound, responsible budget.
Senator Jeffrey Atwater
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Property Tax Reform on Life Support
Lawmakers to get Second Bite at Apple
May 11, 2007 - House Speaker Marco Rubio, R-West Miami, announced on May 2nd that the Property Tax issue will be suspended until considered at a special session scheduled for June 12 - 22, 2007. Governor Charlie Crist, Senate President Ken Pruitt and Speaker Rubio decided that there was inadequate time remaining in the regular session to fully explore the issues surrounding the Chinese menu of legislative alternatives. They will attempt to negotiate a compromise between the House and Senate versions of property tax reform.
It’s not surprising that another opportunity is required to merge the critical aspects of the House and Senate Bills. The Statehouse plan is actually contained in two bills (HB 7001 and HJR 7089). Originally filed on March 7th, HB 7001 is a statutory property tax fix that requires an immediate reduction in millage rates for all local taxing authorities except school districts, “fiscally constrained counties,” hospital districts, and children’s services councils. Property tax rates would be rolled back to the 2000-2001 Fiscal Year and then rolled forward to a revised FY 2007-2008 rate, factoring in population increases and inflation. Future local revenue growth is linked to increases in population and inflation - not property values. Requiring a supermajority vote of the governing authority to exceed the revenue cap should discourage potential abuse. This option could provide immediate tax relief averaging 19% savings ($433 for homestead property and $3,353 for commercial property) on all property owners’ next tax bill.
|HOUSE AND SENATE SERGEANTS-AT-ARMS SIGNAL SINE DIE|
Since the session’s inception, the House leadership supported the creation of what they called “short-term” and “long-term” property tax reform. The statutory changes contained in HB 7001 can be implemented immediately. The “long-term” solution requires the passage of a constitutional amendment. On March 28th, a House Joint Resolution (HJR 7089) was filed that embodied the fundamental changes to Florida’s constitution required to make its tax reform elements permanent.
|SEN. ALEX VILLALOBOS WELCOMES SINE DIE|
HJR 7089 rolls back property tax rates to 2003-2004 instead of 2001-2002 before rolling them forward to a revised FY 2007-2008 rate, factoring in population increases and inflation. School districts, fiscally constrained counties, hospital districts, and children’s services councils will be required to adjust future growth to changes in population and inflation - which can only be exceeded by a unanimous vote of its governing body. A tangible personal property exemption of $25,000 earmarked for businesses would save $180 million at current tax rates. The Joint Resolution grants the Legislature broader authority to create statutory programs that will somehow (????) deliver relief to rental properties.
The resolution also aspires to eliminate all property taxes on homestead property (average savings of $2,283) by replacing the lost revenues with a combination of optional and required dedicated sales tax increases. A mandated statewide 1% sales tax increase will replace the required local effort (RLE) school board tax. By local county referendum, voters may choose to further reduce homestead property taxes by replacing the discretionary millage for school boards with a ½ cent sales tax and replacing all remaining property tax levies (i.e., county/city, special districts, Municipal Service Taxing Units, etc.) with a 1 cent sales tax. Inasmuch, sales tax increases would range from 1% to 2.5% depending on the local outcome of each county vote. If the provisions of the Joint Resolution are agreed upon, a comparable constitutional amendment will be placed on the November ballot for approval by the electorate.
|GOVERNOR CHARLIE CRIST THANKS LEGISLATORS|
The statutory reforms proposed in HB 7001 unanimously passed muster in the Statehouse on April 18th (118 YEAS vs. 0 NAYS) and an amended version saw similar unanimous approval in the Senate on April 19th (38 YEAS vs. 0 NAYS). As expected, the House refused to accept the Senate’s amended product, and requested formation of a Conference Committee to address legislative discrepancies.
Simultaneously, HJR 7089 passed the House stigmatized by party line disagreements on April 18th (78 YEAS vs. 40 NAYS - 1 MISSED). Critics claim that the $9.2 billion sales-tax increase would mostly benefit wealthy homeowners while shifting more of the tax burden onto businesses, renters, snowbirds and all other non-homestead property owners. Representative Jack Seiler, a local centrist Democrat, demonstrated that 13 percent of the total tax savings would benefit 1.5 percent of the wealthiest homeowners in the state. Businesses that would still pay property taxes would also have to pay the increased sales tax - targeting them for double taxation. Not surprisingly, Democratic alternatives and amendments hit brick walls.
|REP. JOHN SEILER AND SPEAKER MARCO RUBIO DISCUSS|
PLAN PITFALLS WITH COMMITTEE CHAIR RAY SANSOM
Depending upon the results of the 67 county and school district referendums wherein local voters will decide whether to adopt exchanging their property tax for a sales tax hike, property tax and sales tax rates will vary substantially in neighboring counties. House Democrats complained that if Florida was randomly gerrymandered into sales tax and property tax counties, residents would be predisposed to live in sales tax counties and shop in property tax counties. If shoppers move their dollars to neighboring counties with a 1.5% lower sales tax, revenues expected from swapping property tax income for the 2.5% sales tax increase will never materialize and county vendors will collectively hit the skids. Despite the House controversy, when the Senate passed an amended version of the House Joint Resolution on April 19th by a vote of 39 YEAS vs. 0 NAYS and asked the House to concur with the amended version, the House declined. With both House bills in trouble, the House and Senate leadership agreed to create a Conference Committee. House appointees included Representatives Cannon (Chair), Altman, Attkisson, Bogdanoff, Brown, Cusack, Flores, Garcia, Gelber, Grant, Lopez-Cantera, Murzin, Scionti, Seiler and Weatherford. Senate conferees included Senators Haridopolos (Chair), Deutch, Atwater, Geller, Storms, Webster and Carlton.
|GALT MILE CONFEREES BOGDANOFF & ATWATER|
Facing impending omission from the property tax reform sweepstakes, the Senate unveiled its property tax plan in the Finance and Tax Committee on Friday, April 13th (SB 1020), quickly engrossing the product by April 19th. The Senate plan rolls back property tax rates to 2005 – 2006 Fiscal Year (factoring in population and income growth) and freezes rates for one year. In 2008, property tax revenues for cities and counties will be capped and in 2009, grow commensurate with population and income. A $25,000 tangible personal property exemption for businesses would completely exempt 75% of its beneficiaries and partially exempt the balance. The plan seeks to double the Homestead Exemption for first-time homebuyers until Save our Homes affords them “significant levels of savings” (????). Rental properties will be assessed based on rent collected as opposed to market value. A limited portability plan allows Florida Homeowners to keep their “Save our Homes” benefit upon moving to another residence. However, the taxable value of the new residence will experience a 10% per year increase until “normal Save our Homes benefit is reached” (????). Senate plan enthusiasts characterize the expected savings as $11 billion over 5 years.
House and Senate leadership as well as Governor Crist were flirting with a political disaster. Unwilling to face apologizing to Florida voters for allowing the session to expire without a property tax fix, they announced a second bite at the apple next month. As of the May 4th Sine die, the bills technically died in the Conference Committee. From June 12th to June 22nd, the revived Conference Committee’s mission will be to somehow merge the three products. Since that means surgery, many of the well-publicized reforms will wind up on the cutting room floor. Strangely, the usual frantic nerve-crunching last minute attempts to button down scores of legislative loose ends were not in evidence as the session closed.
|PRUITT'S SYMBOLIC PROMISE TO GOV|
During a brief floor celebration for Cinco de Mayo, House Speaker Marco Rubio scanned members wearing sombreros and quipped, “It’s a bipartisan embarrassment. You know, as they say in Texas, all hat and no cattle.” Speaker Rubio’s refusal to budge from giving a mammoth $40 billion-plus tax cut primarily to resident homeowners and the Senate’s refusal to consider a sales tax hike chewed up the clock and enraged the Governor. Crist spent the entire session affirming the importance of “dropping property taxes like a rock”. In welcoming Governor Crist to the Capitol’s fourth floor, Senate President Ken Pruitt held up a rock with the word “Patience” written on it. The Senate has been unified in opposing any sales tax increase, arguing that it would shift the burden of supporting government from some of Florida’s wealthiest citizens to other taxpayers. Senators also objected to the House’s insistence that taxes be cut $1,200 a year for homesteaded properties, $750 for other residences and $3,300 for businesses. Senate spokespersons claim that the House Joint Resolution would cut so deep into municipal and county revenues that many local jurisdictions would be forced to slash vital services including police and fire-rescue.
|KEN PRUITT HOLDS "PATIENCE" ROCK AS PROMISE TO GOVERNOR|
It shouldn’t escape Galt Mile residents that Representatives Ellyn Bogdanoff and Jack Seiler are both seated on the Conference Committee. Filling out our legislative full house, Senator Jeffrey Atwater is also a conferee. While not always in accord, all three are keenly aware of their constituents’ desperate need for property tax reform – on both sides of the aisle. Hopefully, pride of authorship will take a back seat to the conferees’ political survival instincts, enabling a compromise capable of delivering immediate relief. Miami Herald political reporter Beth Reinhard leveled a decidedly pertinent rhetorical inquiry, “Who would have thought a room full of Republicans couldn’t figure how to cut taxes?”
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Condo & Coop Bills
Legislative Life & Death in Tallahassee
May 17, 2007 - Until a few years ago, Galt Mile residents demonstrated limited interest in what transpired during the annual Legislative sessions in Tallahassee. Issues preoccupying people living in common interest residences reflect the values of the general population, characterized by a large quiet center flanked by noisy extremes to the right and left. Inasmuch, the political proclivities of association homeowners were as statistically varied as those in society at large. Having chosen to live in a vertical community defined by rules created and enforced by the resident homeowners provided little impetus for political cohesion. This marked lack of “political identity”, instead of cloaking condo owners in protective anonymity, has ironically made them a target in Tallahassee. During the past few years, lawmakers have filed truckloads of legislation supposedly designed to address existing statutory shortcomings. However, more often than not, they were repositories for ill-conceived, contradictory and poorly drafted regulations suffering a fatal disconnect from their stated objectives.
The 2007 legislative session in our State Capitol was mercifully terminated on May 4th. Fortunately, a number of bills of benefit to Florida community associations were passed. Some good bills with questionable provisions were also sent to the Governor for his signature. Additionally, many bills that would have had negative impacts on community associations did not pass. To improve upon existing legislation, bills must be painstakingly researched and properly drafted. If they aren’t carefully constructed, their unintended consequences are often far worse than the problems for which the legislation was designed. The House of Representatives and the Senate each form specialized committees to review the bills. Unfortunately, our legislators haven’t time to familiarize themselves with all the bills they are charged with reviewing. Instead, they rely on you for that. With the exception of high profile legislation, lawmakers vote according to the wishes of their constituents. After watching legislators repeatedly mischaracterize bills as "empowering to condo owners", association members began reading the legislation for themselves. This year, thousands of homeowners took the time to send off emails and phone calls to lawmakers, proclaiming their support or opposition to the various legislative offerings. Following below are some bills impacting Condominiums and Cooperatives that were forwarded to the Governor for enactment. Each bill is followed by a brief summary of it’s anticipated effect.
|HOUSE AND SENATE SERGEANTS-AT-ARMS SIGNAL SINE DIE|
Association Bills on the Governor’s Desk
SB 314 sponsored by Senator Steven A. Geller is a condominium termination bill which enjoyed the strong support of the Real Property Section of the Florida Bar Association. A similar bill that unanimously passed the Legislature last session was vetoed by Governor Bush because he felt the threshold to terminate could be too easily attained. The Governor was troubled by the possibility of some developer "incentivizing" an unwarranted termination to secure a highly desirable site location burdened with an older structure. While a majority of the owners might be predisposed to jump at the quick buck, Bush expressed concern for fixed-income owners lacking resources adequate to relocate. Hearings were held around the state this summer to strike a balance between the property rights of condominium owners as a whole against the rights of a lone holdout opposed to the termination plan. Since the bill was modified to address those concerns, neither Governor Crist nor the DBPR opposes the bill. The bill provides a method of terminating condominiums in the event of: economic waste, disrepair of the property, and when continued operation of the condominium is made impossible by law or regulation.
|SENATOR STEVE GELLER|
In the event of economic waste, the percentage needed to terminate is the lesser of the lowest percentage of voting interests needed to amend the declaration or as provided in the Declaration for termination of condominiums. There are special provisions in this bill for the termination of timeshare units. Optional termination can be effectuated by 80% of the unit owners. Mortgagee consent is not required unless the plan of termination will result in less than full satisfaction of the mortgage lien. Having been passed in the House and Senate, this bill has gone to Governor Crist, who is expected to sign it into law.
HB 433 sponsored by Rep. Carl J. Domino was replaced by Senate counterpart SB 902 sponsored by Senator Dennis Jones, the Judiciary Committee and the Regulated Industries Committee. It contains language which would make it easier to amend condominium documents that are currently burdened with lender consent requirements. It addresses a host of provisions relevant to Homeowner Associations, such as extending MRTA reinstatement procedures to voluntary homeowners associations and contains revisions to the mediation procedure for HOAs. This bill also contains language which would allow a majority of owners in a homeowners association to petition the board to implement reserves as well as language restricting architectural control rights. On April 27th, it passed the Senate with 1 negative vote (35 YEAS to 1 NAY) and received unanimous assent in the House. On May 2nd, it was enrolled and sent to the Governor.
|REP. CARL J. DOMINO|
SB 1844 sponsored by Senator Jeremy Ring originally required attorneys handling collection matters for association clients to accept a 90-day payment plan for their attorney’s fees when pursuing a delinquent owner. It was ultimately amended with more reasonable language. The “3 month payment plan” language was replaced with an agreement to give owners more advance notice prior to a lien being recorded or a foreclosure action filed. It provides that a parcel owner is liable for all assessments on a parcel and is jointly and severally liable with the previous parcel owner for all unpaid assessments that came due up to the time of transfer of title; provides for the payment of interest and late fees on unpaid assessments; prioritizes the application of any payment received; prohibits the placement of a restrictive endorsement on the payment; requires written notice before a lien is filed against a parcel; provides the owner with 45 days to make payment for all amounts due; provides for the foreclosure of the lien, but not until 45 days after the parcel owner has been provided notice of the associations to foreclose; and permits an owner to make a qualifying offer one time during the pendency of a foreclosure action, in which case, the foreclosure action is stayed for a period not to exceed 60 days. Since it has the effect of making lenders jointly and severally liable for all past-due assessments on a home, it will drive the banker’s lobby crazy. Amended in April, it passed a full Senate vote on April 27th by 38 YEAS and 1 NAY and passed the House on May 2nd by a vote of 113 YEAS and 0 NAYS. After being enrolled, it was sent to the Governor.
|SENATOR JEREMY RING|
SB 1864 sponsored by Senator Bill Posey, after passing and being engrossed on May 2nd, was replaced by its sister bill in the House, HB 7057, sponsored by the Policy & Budget and Jobs & Entrepreneurship House Councils. It redesignates Fla. Comprehensive Hurricane Damage Mitigation Program as My Safe Florida Home Program; revises criteria & requirements for hurricane mitigation inspections; requires that residential structure located in wind-borne debris region have certain opening protections required under Florida Building Code in order to be eligible for coverage by Citizens Property Insurance Corp. Included in the bill language is “Effective January 1, 2009, a personal lines residential structure that is located in the "wind-borne debris region," as defined in s. 1609.2, International Building Code (2006), and that has an insured value on the structure of $750,000 or more is not eligible for coverage by the corporation unless the structure has opening protections as required under the Florida Building Code for a newly constructed residential structure in that area.” The bill awaits the Governor’s signature.
|SENATOR BILL POSEY|
Simply put, HB 7057 requires all residential buildings located in coastal area which have an insured value of $750,000 or more to have “opening protections” as required by the Florida Building Code for newly constructed residential structures or they will no longer be eligible for Citizens coverage. Please see the language below. Obviously, this will have a tremendous impact on coastal communities and others in “wind-borne debris regions” who do not currently have hurricane shutters, impact glass or other protections for apertures.
SB 2498 sponsored by Senator Rudy Garcia and Senator Bill Posey, revises certain reimbursement contract requirements; deletes expiration provision re obtaining coverage for liquidated insurers; revises provisions for determining eligibility for coverage under Citizens Property Insurance Corp.; creates Fla. Catastrophic Storm Risk Management Center at FSU; provides purposes & responsibilities of center; creates Citizens Property Insurance Corp. Mission Review Task Force; requires report, etc. This bill will have a positive impact on community associations by freezing the rates charged by Citizens Property Insurance Corporation until 2009. It was sent to the Governor’s desk for his signature.
|SENATOR RUDY GARCIA|
SB 396 sponsored by Senator Gwen Margolis, was replaced by similar House Bill, HB 7031 by Safety & Security Council and Representatives Mark Mahon; Kevin C. Ambler; Ellyn Setnor Bogdanoff; Luis R. Garcia Jr.; Audrey Gibson; Juan C. Zapata. It is a Condominium Conversion bill that primarily contends with certain conversion reserves and insurance fixes. This bill would require additional disclosures in contracts for the sale or lease of residential units and clarifies that the definition of condominium common expenses includes the costs of certain insurance or self insurance. The bill also requires notice for special assessments anticipated to address self insurance costs. This bill contains incremental “insurance fixes” that attempt to make commercial self-insurance funds more easily accessible to condominiums, cooperatives and homeowner associations. Having passed the House and Senate, House Bill 7031 is on the Governor’s desk.
|SENATOR GWEN MARGOLIS|
This Legislation is relevant to the Galt Ocean Mile Windstorm Self Insurance Trust. The tenets of HB 7031 (SB 396) include the following changes to current law:
Legislation Facilitates Self-Insurance Trust
- The Condominium (Chapter 718) and Cooperative (Chapter 719) Statutes have been modified: A Condo and Coop are unquestionably approved to purchase insurance in a Commercial Self Insurance fund. It is a “common expense” of an Association. It is considered “adequate insurance” for an Association under law.
- It allows for assessments of a Commercial Self Insurance Fund to be levied on the Association. It permits an association to pay the start up expenses of a Commercial Self Insurance fund.
- Association by-laws can no longer preclude participation in a Commercial Self Insurance Fund. Specific language inserted into Chapters 718 and 719 of the Florida Statutes unambiguously characterizes participation as legal. While GMCA emphatically recommends that associations solicit a legal opinion when investigating insurance alternatives, the new law relieves associations of having to rely solely on that legal opinion. In providing an unequivocal statutory basis for participation and assessment authorization, it also relieves condo Attorneys from having to qualify their opinions with conditional disclaimers.
- The Bill makes enabling changes to the statute governing the Florida Hurricane Catastrophe Fund (FHCF).
- It specifically names a Commercial Self Insurance Fund as an insurer authorized to participate in the FHCF.
- It also specifies that the Trust must use any Agent and can not discriminate among Agents.
- It also specifies that the Trust is assessable in both Citizens and FHCF. However, since the Galt Ocean Mile Windstorm Self Insurance Trust has the offset of 100% credit for premium written in the HRA, it will not have to pay the assessment for Citizens. (As an incentive for carriers to write coverage in High Risk Areas - HRAs - current law provides insurance carriers with an offset to assessments levied by Citizens equal to the percentage of policies written in High Risk Areas. In Broward County, the entire area located east of I-95 is designated as a High Risk Area. Since 100% of the structures covered by the Galt Ocean Mile Windstorm Self Insurance Trust are located within the HRA, the assessment offset is 100% - immunizing participants to Citizens assessments. Notwithstanding, the Trust will be liable for any FHCF assessments - like every other admitted carrier - since it enjoys full access to the Fund.)
- The Galt Ocean Mile Windstorm Self Insurance Trust will be the first Commercial Self Insurance Fund for windstorm in Florida under the new law.
Association Bills - D.O.A.
SB 348 sponsored by Senator M. Mandy Dawson would have prohibited associations from requiring a prospective buyer of a property to present evidence of any financial status or to make a monetary deposit to the association so long as such prospective buyer had been approved by a lending institution for financing to purchase the property. Had it passed, this bill would have impacted many communities that run background financial checks on potential purchasers to ensure that those purchasers can meet their monetary obligations once they become community residents. This bill had been static since filed and died on Sine Die (May 4, 2007).
|SENATOR M. MANDY DAWSON|
SB 714 sponsored by Senator Gary Siplin, would have functionally transferred any shortfall through delinquency to other owners. This bill would have prohibited associations from liening/foreclosing and/or pursuing a monetary judgment for amounts less than $2,500 and would have removed the association’s ability to recoup attorney’s fees and collection costs. Its passage would have made assessments optional. This bill had been static since filed and died on Sine Die (May 4, 2007).
|SENATOR GARY SIPLIN|
HB 1373 sponsored by Rep. Julio Robaina, was amended earlier in the session at its first committee stop. It was pared down from 221 pages to 80 pages. The regulations regarding homeowners’ associations were removed but some of the condominium and cooperative restrictions remained. A few good ideas got lost in a massive regulatory swamp threatening disjointed micromanagement. Rep. Robaina had solicited permission from House Speaker Marco Rubio to bypass the bill’s final committee stop and take it to the House floor for a vote. Its sister bill in the Senate, SB 2816, was pared down on April 16th in the Committee on Regulated Industries from 209 pages to 72 pages, the bulk of which affects condominiums and cooperatives. It was sent to the Committee on Judiciary. On April 30th, it was withdrawn from Judiciary, placed in the Committee on General Government Appropriations, withdrawn from General Government Appropriations and placed on Calendar. Despite these surreptitious machinations, neither bill made it to the floor.
|REP. JULIO ROBAINA|
HB 1365 sponsored by Rep. Joseph A. "Joe" Gibbons contained emergency powers language to assist boards dealing with community preparations pre-storm as well as dealing with post-storm reconstruction issues. It also sought to extend the period in which condominium common areas must be retrofitted with sprinkler systems from 2014 to 2020. While this bill suffered neglect due to Governor Bush having vetoed the retrofit deadline extension last year, we expect to see it again next year, at which time we will promote its support. This bill was stuck in the Safety & Security Council, dying there on May 4, 2007.
|REP. JOSEPH A. GIBBONS|
Clicking on the bill number will take you to the legislation’s House or Senate page. It indicates the bill history, including which committees were included in the vetting process. The Committee page contains a list of member-legislators. Clicking on the member’s name will take you to that legislator’s page.
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Sales Tax Holiday
May 30, 2007 - Governor Charlie Crist signed House Bill 211 into law on April 30th authorizing Florida’s third annual 12-day sales tax holiday for hurricane preparedness. Taking a cue from plan originator former Governor Bush, he characterized the Hurricane Preparedness Sales Tax Holiday as an important part of instilling a “culture of preparedness” in Florida. Governor Crist scheduled the tax break to coincide with National Hurricane Preparedness Week. “I urge all Floridians to take advantage of the Hurricane Preparedness Sales Tax Holiday so that every person is prepared for the possibility of a storm. We have learned from experience that prepared residents and communities are key to surviving and recovering from hurricanes or other natural disasters.” Governor Crist encouraged all Floridians to update their disaster plans and to use the tax holiday during the first 12 days of June as an opportunity to restock their disaster supply kits. “As public awareness of this tax holiday continues to grow, we are encouraging Florida retailers to prepare for even greater demand than last year. While we hope for a quiet hurricane season, the tax holiday will help give Floridians the opportunity to be prepared for any possibility.” said Governor Crist. Florida Retail Federation officials and representatives from Lowe’s, Home Depot, Publix and Winn Dixie attended the bill signing. The holiday is expected to save Floridians almost $25 million in sales taxes.
|Governor Charlie Crist|
List of Tax-Exempt Items
The following is a list of the specified items that will be tax free. If the sales price of a qualifying item exceeds the allowable threshold amount (listed below), the tax exemption will not apply and the total purchase price is subject to tax.
Qualifying items selling for $10 or less:
- Blue ice or those items sold as artificial ice
Qualifying items selling for $20 or less:
- Any portable self-powered light source
- Battery-powered flashlights
- Battery-powered lanterns
- Gas-powered lanterns (including propane, kerosene, lamp oil, or similar fuel)
- Tiki type torches
Qualifying items selling for $25 or less:
- Any gas or diesel fuel container (including LP gas containers and kerosene containers)
Qualifying items selling for $30 or less:
- Batteries, including rechargeable (listed sizes only)
- 6-volt (excluding automobile and boat batteries)
- 9-volt (excluding automobile and boat batteries)
- Coolers (food-storage; non-electrical)
- Ice chests (food-storage; non-electrical)
Qualifying items selling for $40 or less:
Qualifying items selling for $50 or less:
- Tarpaulins (tarps)
- Visqueen, plastic sheeting, plastic drop cloths, and other flexible waterproof sheeting
- Ground anchor systems
- Tie-down kits (items that are advertised or normally sold as a tie-down kit)
- Bungee cords
- Ratchet straps
Qualifying items selling for $60 or less:
Qualifying items selling for $75 or less:
- Radios (self-powered or battery-powered)
- Two-way radios (self-powered or battery-powered)
- Weather band radios (self-powered or battery-powered)
- Any carbon monoxide detectors
- Any package consisting of two or more of the previously listed qualifying hurricane-preparedness items
NOTE: Battery-powered or gas-powered light sources and qualifying portable self-powered radios will qualify for the exemption even though they may have electrical cords.
Qualifying items selling for $200 or less:
- Storm shutter devices (defined as materials and products specifically manufactured, rated, and marketed for the purpose of preventing window damage from storms)
Qualifying items selling for $1,000 or less:
- Portable generators that will be used to provide light, communications, or to preserve perishable food in the event of a power outage.
The Devil is in the Details
This special sales tax holiday DOES NOT apply to clothing, books, or school supplies. The sales tax exemption applies to each eligible item, regardless of the number of items sold on the same invoice to a customer. The exemption DOES NOT apply to the leasing of a qualified item. This exemption does not apply to sales of items within a theme park, entertainment complex, a public lodging establishment, or airports.
Articles that are normally sold as a unit may qualify for the tax exemption provided the individual items are specifically listed as tax exempt and the price of the package is $75 or less. When tax-exempt hurricane-preparedness items are sold together with items that are normally tax-exempt as a single set, unit, product, or package, and the package sells for $75 or less, the entire package qualifies for the exemption. When a package contains tax-exempt hurricane-preparedness items and it also contains taxable items that do not qualify for the hurricane-preparedness sales tax holiday, the full sales price of the package is subject to sales tax. The total price of items advertised as “buy one, get one free,” or “buy one, get one for a reduced price,” cannot be averaged together in order for both items to qualify for the exemption.
The sale of a gift certificate/card is not taxable. Eligible items purchased during the exemption period using a gift certificate/card will still qualify for the exemption, regardless of when the gift certificate/card was purchased. Eligible items purchased after the exemption period using a gift certificate/card are taxable even if the gift certificate/card was purchased during the exemption period. A gift certificate/card CANNOT be used to reduce the selling price of an item in order to qualify for the exemption.
When a customer purchases a qualifying item during the exemption period, then later exchanges the item for the same item, no tax will be due, even if the exchange is made after the exemption period. When a customer uses a store credit during the exemption period on qualified tax-exempt items, the purchase will be exempt from sales tax. When a customer uses a store credit issued during the exemption period and the tax-exempt period has expired, the appropriate sales tax will apply to the full sales price of the newly purchased item.
A customer who pays sales tax to a retailer on a qualifying item when no tax is due must secure a refund of the tax from the retailer and not from the Department of Revenue. When a customer returns a qualifying item during the period of June 1, 2007, through August 31, 2007, and wants a refund/credit for tax paid:
- The customer must produce a receipt or invoice showing tax was paid on the original purchase of the qualifying item, or
- The retailer must have sufficient documentation to show that tax was paid on the original purchase of the qualifying item.
Manufacturer’s coupons do not reduce the sales price of an item. Therefore, a manufacturer’s coupon cannot be used to reduce the selling price of a qualifying item in order for the item to qualify for the exemption. Store coupons and discounts do reduce the sales price of an item. Therefore, a store coupon or discount can be used to reduce the sales price of a qualifying item to the “allowable threshold amount” in order for the item to qualify for the tax exemption. Rebates occur after the sale and do not affect the sales price of an item purchased. Eligible items purchased during the exemption period using a rain check will qualify for the exemption regardless of when the rain check was issued. However, issuance of a rain check during the exemption period will not qualify an eligible item for the exemption if the item is actually purchased after the exemption period.
A layaway sale is a transaction in which merchandise is set aside for future delivery to a customer who makes a deposit, agrees to pay the balance of the purchase price over a period of time, and receives the merchandise at the end of the payment period. For purposes of this exemption, qualified items will be eligible for the exemption if a retailer and a customer enter into a contract for a layaway sale during the exemption period, the customer makes the usual deposit in accordance with the retailer’s layaway policy, and the merchandise is segregated from the retailer’s inventory. If the final payment on a layaway order is made and the merchandise is given to the customer during the exemption period, that sale of qualified items will be eligible for the exemption, even when the qualified items were placed on layaway before the exemption period.
Rental of any of the items specified in this publication does not qualify for an exemption. For purposes of this exemption, eligible items purchased by mail order (including transactions made over the Internet) will receive the exemption if the order is accepted by the mail-order company during the exemption period for immediate shipment. When the acceptance of the order by the mail-order company occurs during the exemption period, the exemption will apply even if delivery is made after the exemption period.
- An order is accepted by the mail-order company when the mail-order company has taken an action to fill the order for immediate shipment. Actions to fill an order include placing an “in-date” stamp on a mail-order or assigning an “order number” to a telephone order.
- An order is considered to be for immediate shipment when delayed shipment is not requested by the customer. An order is for immediate shipment notwithstanding that the shipment may be delayed because of a backlog of orders or because stock is currently unavailable to, or on back order by, the company.
Shipping and handling charges are included as part of the sales price of the eligible item, whether or not separately stated. If multiple items are shipped on a single invoice, to determine if any items qualify for the exemption, the shipping and handling charge must be proportionately allocated to each item ordered and identified separately on the invoice. Repairs to qualifying items do not qualify for the exemption.
To speak with a Department of Revenue representative, call Taxpayer Services, Monday through Friday, 8 a.m. to 7 p.m., ET, at 800-352-3671 or 850-488-6800. For a written reply to your tax questions, write: Taxpayer Services, Florida Department of Revenue, 1379 Blountstown Hwy, Tallahassee FL 32304-2716.
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Guarding the Golden Goose
Governmental Spin Doctors try to Tank Tax Reform
June 4, 2007 - The prospect of facing life without their annual tax banquet has prompted an organized opposition to Property Tax Reform comparable in size and scope to statewide mobilizations triggered by impending Category 5 hurricanes. The Florida Association of Counties (FAC), a sort of “trade organization” for local governments, has compiled a “how to” manual to help local officials derail any attempt to pluck the golden tax goose. It brazenly advocates demonstrating a seemingly disingenuous concern for constituents while utilizing fear tactics to keep the money spigot wide open. Aimed at Commissioners, Councilmen, Mayors and other municipal and county representatives, it certainly explains the sudden flurry of last-minute Town Hall meetings with nearly identical agendas, rhetoric and media releases.
The ever-expanding discrepancy between homesteaded and non-homesteaded tax burdens has widened to the extent that businesses and second-home buyers have removed Florida from their “A” lists. As the pool of non-homesteaded property owners available to pay the lion’s share of government costs decreases, homesteaded property owners will have to decide between picking up the slack or life without services. Inflamed by the real estate roller coaster that trebled property values (and taxes) overnight, our tax system has finally slammed the brakes on Statewide economic growth. Since the cost of government bears absolutely no relationship to property values, there’s no reason why the existing system can’t be overhauled to better serve the State and its taxpayers. Virtually everyone agrees that ignoring the crisis will not only freeze growth, it will precipitate an unprecedented exodus, further heightening the tax burden on those who remain. A historical first, 2006 saw more people leaving the state than moving here, an ominous consequence of our property tax and insurance dilemmas.
|TAX WINDFALL - THE GOLDEN GOOSE|
The Governor and the Legislature have promised to reform property taxes. While the legislature came up empty during the regular session, lawmakers plan to ratify a compromise among the various House and Senate offerings at a special session called for June 12th to June 22nd. The plans differ in how they balance the needs of local government with the needs of taxpayers. Inevitably, the final product will leave counties and municipalities with less money. Taxpayers assume that local government officials will strive to stretch the lower allocations by increasing efficiency and exercising greater discrimination when adjudicating spending priorities.
While publicly empathizing with the need to reform the tax system, many local officials are surreptitiously working to undermine the implementation of any tax reduction plan. The Florida Association of Counties has prepared a guide for local officials that details how to overturn any threatened reform. Some of their handiwork is evident in recent predictions by officials that tax reform will cut police and fire protection, close hospital doors and set civilization back a century. Officially entitled “A communications toolkit”, it’s an instruction manual for spinning opposition to any reduction in local resources. It unabashedly promotes inflaming fear and anger in local constituencies. It recommends that officials avoid expressing lost resources in terms of dollars, but in which roads won’t be built, which services won’t be provided and which people will lose their jobs. Of course, since these decisions are actually considered as part of a statutory budget process, prognostications of fire and crime laying waste to Florida cities are little more than creative speculations – as recommended in the playbook.
Under a section called “Tips for influencing local audiences on the property tax reform debate,” it advises, “In conducting local outreach, focus on Local media, county beat reporters, columnists and editorial boards; Local legislative delegation members; Other county officers who provide essential community services, such as sheriffs and heads of public health, transportation, housing, parks and libraries.” It also encourages enlisting “stakeholders, such as non-governmental agencies that rely on county support and recipients of county services.”
In a section sub-headed “Packaging Your Story”, the toolkit admonishes that “County Commissioners and their staffs cannot alone effectively shape this debate.” In recognizing the credibility gap facing Commissioners who predict a collapse of public services if tax windfall resources are reduced, the manual recommends that they “Enlist other elected county officials, such as your sheriff, to share the concern of how cuts could hurt your community.” Recruiting natural allies who also stand to lose access to your wallet, they suggest that reform opponents “Identify local programs and services provided by the county that could be endangered by the current legislative proposals, and ask recipients of those programs to join you in speaking out. Pay special attention to social services agencies or not-for-profit entities that could lose critical grants they depend on from county government.” Less well-publicized than the bogus threatened loss of Police and Fire protection is a tactic encouraging county officials to send young children home with notes threatening the loss of children’s programs if property taxes are reduced.
Again, program funding isn’t decided in the local government public information office at conferences called to formulate Town Hall meeting agendas. Budgets for municipal and county departments are created based upon the existing tax environment and are only amended if and when required by some definitive change to that environment. Until a tax reform plan is agreed to, passed favorably by the legislature, signed by the Governor and implemented, statements predicting service cutbacks or program dissolutions are baseless. As such, press releases and sound bites intimating crushing civic consequences to an as yet non-existent tax package are politically motivated attempts to manufacture public opinion, A.K.A. “spin”.
|LOCAL GOVERNMENT COST INDEX IN FLORIDA|
COMPARED TO THE CONSUMER PRICE INDEX 2000-2006
In explaining why officials should stick to addressing what they call “key messages”, they state, “If county officials use these messages repeatedly in various forums, they will be internalized by the listener and then repeated to others.” To clarify, they add, “Simply put, if county officials don’t frame the property tax debate using messages, the recipient (media, legislators, and general public) will listen to the myriad facts that we can offer and decide for themselves what the key message is.” FAC asserts that since the public cannot be trusted to evaluate the facts, they cannot be permitted to come to their own conclusions. As expressed in the toolkit, “In other words, key messages help us to proactively shape the debate and public’s understanding.” If the public isn’t effectively “spun”, some version of tax reform will pass.
Local governments seeking to torpedo any loss of revenues are swimming uphill. In framing the issue, they explain that “between 2001 and 2006, Florida’s counties saw a 68 percent growth statewide in property tax revenues. What happened to this money? About 34 percent of county spending was directly attributable to population growth and inflation (both rose 17 percent), and included required infrastructure improvements. The rest of the spending was concentrated in five large budget categories: law enforcement, corrections, general government, parks, and health and human services.” They readily admit that local governments have been swimming in excess tax revenues. According to their own statistics, 34% of the 68% increase offset population growth and inflation. The other 34% was gravy, “mad money” that they are inferring is somehow necessary for good government.
|SOUTHEAST FLORIDA ALLOCATION OF WINDFALL RESOURCES|
MOST EXTRA MONEY WENT FOR NON-SPECIFIC EXPENSES
Although their supposed concerns about the impending loss of local police and fire protection failed to resonate in the Legislature, they hope these scare tactics will have more credibility with the general public. To better gain the confidence of a supporter’s target audience, the toolkit stresses the importance of prefacing any “key messages” with the claim that they “support reasonable limits on property tax assessment increases.”
What exactly do they recommend? “While recognizing our citizens need property tax relief, we believe any major statewide changes to the property tax system should be considered by the Taxation and Budget Reform Commission – not rushed to voters as a special election ballot.” Recommending that the issue be relegated to a Tallahassee commission is tantamount to endorsing that it be frozen in bureaucratic limbo. The cynicism inherent in their playbook borders on the ridiculous.
Hoping to defuse support for legislative measures, some counties opted to cut their millage rates this year. However, since property valuations increased, trimming the millage rate didn’t preclude another tax hike. Notwithstanding, FAC paints these token steps as reasonable alternatives to any of the House and/or Senate plans. The FAC toolkit doesn’t just “Wag the Dog”, it wags the whole pound.
Since some of the filed plans suffer from overambitious tax cuts, inequitable benefit distribution, and place unfunded mandates on local government, the Legislative Conference Committee (The Joint Select Committee on Property Tax Relief and Reform) charged with actualizing tax reform during the June Special Session faces the difficult challenge of negotiating a viable balance. Despite the regular session controversies fomented by the bills’ embedded defects, doing nothing is the State’s “worst case scenario”. In early May, Goldman Sachs predicted that Florida is headed into a recession owing to our unstable real estate market. A property tax cut was prescribed to jumpstart our state’s economy. People need to know the real repercussions of each plan in order to weigh its drawbacks against a statewide economic collapse fueled by the current property tax inequities.
Upon learning about the “communications toolkit”, Governor Charlie Crist lambasted participating local officials during an address attended by 740 West Palm Beach residents. Characterizing their claims that cuts will mean layoffs for police and firefighters as untrue, the Governor also called the anti-tax cut campaign’s formulaic use of fear tactics “despicable”. Crist admonished, “Not one firefighter will be let off, not one police officer; and shame on the local governments who put that fear in you.” Addressing cases wherein officials arbitrarily threatened the loss of specific jobs, the Governor retorted, “They put the fear in the families of those people too, and that’s not right. Who are these people? Who does that?” Clarifying the process that local governments undergo prior to allocating resources, Governor Crist said, “What local governments will do is prioritize just like you do every day. You may have one less dog park. OK. But you will get the services you deserve and you’ll get your [tax] break.”
|GOVERNOR CHARLIE CRIST CALLS|
FEAR TACTICS “DESPICABLE”
Florida Statehouse Speaker Marco Rubio marginalized the overstated concerns of local officials by pointing out that property taxes grew twice as fast as personal income over the last five years in Florida. Focusing on the statistical inequity inherent in their argument, Rubio exclaimed, “It is hard to justify how government revenues have been able to grow at a 2-to-1 ratio over the people who have to pay it.” In a cynical repudiation of local officials’ attempts to paint any tax reduction as a deliberate blow to home rule, Rubio added, “This is not designed to be some sort of supreme sneak attack on local governments.”
Fearing any loss of revenues, FAC actively opposes adjusting taxes to population growth and inflation instead of fluctuating property values. A near-decade of windfall tax revenues harvested from a superheated property market has habituated a significant FAC core constituency to an embarrassment of riches. Since protecting that revenue stream is a central FAC objective, quashing the threat posed by tax reform has long been a top priority. Given FAC’s mission, their pursuit of a strategy contrary to the State’s best interests shouldn’t come as a surprise. However, creating a game plan to “shape the debate” supported by a “toolkit” packed with half truths useful only for manipulating public opinion is over the top. The local government officials that comprise their constituency have no corporate responsibility to shareholders; their primary obligation is to us. They “trade” on public credibility. By manufacturing just enough fear and confusion to forestall an acceptable compromise, they hope to relegate tax reform to a bureaucratic black hole – at the expense of those they are sworn to serve.
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Representative Bogdanoff’s June Newsletter
Representative Ellyn Bogdanoff, District 91
June 14, 2007 - District 91 Statehouse Representative Ellyn Setnor Bogdanoff's June Newsletter combines a brief legislative summary, a thank you note and a promise. Acknowledging indebtedness to her constituency for providing her with an opportunity to serve them, our Galt Mile voice in the Statehouse expresses pride in having participated in shaping the $72 billion State Budget - asserting that 75% of the $2 billion reduction was legislatively initiated and included increases of 5.1% for education and 2.5% for health care. She enumerates consumer friendly legislative efforts such as continuation of the Hurricane Preparedness and Back to School Sales Tax Holidays, legislation opening the way for competition in the cable television market, removing gift card expiration dates and laws that could make windstorm coverage through Citizens Insurance more affordable. Although disappointed with the legislature's failure to pass a critical property tax cut package, the Majority Whip is confident that the June Special Session will yield an effective compromise tax cut bill. Read on:
It is a privilege and an honor that you chose me to represent our neighborhoods in Tallahassee. During the recently completed 2007 Legislative Session, I believe we accomplished much that will benefit Floridians for years to come.
You sent me to Tallahassee to make tough decisions and lead by example, without sacrificing public safety, roads, and education. We approved a fiscally responsible budget of $71.95 billion and spent no non-recurring dollars on recurring expenses.
As a legislative body, we cut $1.5 billion out of the state budget while still increasing funding for Education by 5.1% and Health and Human Services by 2.5%. The Governor cut another $490 million out of the state budget before signing it, meaning the state cut $2 billion in funding this year while still providing an increase for education and health care.
Helping consumers was a major goal realized by the Legislature:
CABLE TV SAVINGS - There will be more cable television options and lower prices thanks to the Consumer Choice Act of 2007. The law ends monopolies on cable television, allowing new companies to compete for your home entertainment dollars.
GIFT CARD SAVINGS - Floridians will have an easier time spending an estimated $430 million in unused gift cards. A new law prohibits the expiration of the cards or any imposition of extra fees to use them.
HOME PROTECTION - A no-interest loan will be available under a new program to qualified homeowners who want to storm-proof their homes. Also, the rate for Citizens Property Insurance Corporation was frozen at their 2005 levels until 2009 making it easier for Floridians to receive property coverage.
The Legislature also invested in a safer Florida.
We approved 8,000 new prison beds along with a significant increase in money for the state courts. We expanded the state DNA database to help solve more crimes and earmarked money to address gang violence.
To promote a cleaner, greener Florida, we authorized $700 million for Florida Forever land purchases, Everglades Restoration and research into alternative and renewable fuels.
The most important job still needs to be done – cutting property taxes.
Like me, I know you were disappointed that there was no solution to fixing the broken tax system that is crippling economic growth in our state.
All was not lost during our debates. As House Majority Whip, I can assure you that the House effectively destroyed the arguments made by many that tax relief was not needed. The Legislature is now ready to provide you a real cut in property taxes and we will return to Tallahassee June 12, hopefully to finish the job.
It is a pleasure to serve the residents of Broward and Palm Beach Counties. I hope you will call me at 954-762-3757 or e-mail at Ellyn.Bogdanoff@myfloridahouse.gov anytime I can be of assistance.
With best regards,
Florida House of Representatives – District 91
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Senator Jeffrey Atwater’s Tax Update
Atwater Comments on Special Session
June 24, 2007 - District 25 Senator Jeffrey Atwater has long been an avid proponent of tax reform. In mid-March, the Senator organized a community meeting at the Beach Community Center with Representative Ellyn Setnor Bogdanoff and Fort Lauderdale City Commissioner Christine Teel to shed light on the factors surrounding property tax reform. Central to the rationale for the meeting was the disquieting fact that 2006 saw more people leaving the state than moving here. This was an ominous first time event. Following a contentious political melee in the Legislature, the Joint Select Committee on Property Tax Relief and Reform met in Special Session to generate some version of tax relief. The 2-part package was seriously trimmed in response to pleas of poverty by local governments across the State. The statutory component was diluted from its initial $56 billion in tax savings to a more modest $15.6 billion cut. Although the average savings portended for homeowners this year is estimated at about $150, the exact amount will depend on the recent assessment proclivities of the property owner’s local taxing authority. On January 29, 2008, the Florida electorate will decide the fate of the plan’s Constitutional alternative to the Save our Homes tax cap. Read on:
|SENATOR JEFFREY ATWATER|
After many months of traveling around the state, listening to your individual concerns at public workshops, it became clear that statewide the property tax system was a run-away train and property owners demanded relief. It was at that point that the State became actively involved. The people of Florida provided us the vital input that helped shape the reform package we passed last week. Fresh back from Tallahassee, I wanted to give you an update on the Special Session on Property Tax Reform.
This property tax relief package comes together in two parts: a change to state law, and a proposed constitutional amendment. The change to Florida law provides $15.6 billion in tax relief immediately, by requiring local governments to roll back this year’s property taxes to last year’s levels, with additional cuts of 3, 5, 7, or 9 % depending on the taxing performance of each local government over the last 5 years. Governments that have benefited from the largest tax increases will be required to enact the largest cuts, while governments with conservative spending will have conservative cuts. To ensure that Florida taxpayers will not face another property tax crisis, the bill limits growth in local governments’ property tax revenue to their level of population growth and the growth in personal income.
|GOVERNOR CRIST SIGNS PART ONE|
OF PROPERTY TAX BILL INTO LAW
If approved by the voters, the second part of the reform, the proposed constitutional amendment will provide further relief by substantially increasing the homestead exemption. Current homeowners will have the choice to retain their Save Our Homes benefit on their current home as long as they would like. Every step of the property tax reform process has been guided by the input of Floridians. Now the level of tax cuts will be determined by the vote of the taxpayers on January 29th, 2008. The decision is in your hands and I encourage you to vote.
As always, it is an honor and a privilege to represent you in Tallahassee. Please feel free to contact me if I can be of assistance to you or your family.
All the best,
Senator Jeffrey Atwater
Florida Senate – District 25
To contact Senator Atwater, call his office in Palm Beach County at (561) 625-5101 or in Broward at (954) 847-3518. You can also contact him using his Senate email address at email@example.com or his private email at firstname.lastname@example.org. Click Here to access all of Senator Jeff Atwater’s contact info on the GMCA Report Card page or Click Here to his Florida Senate web page.
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Wolf is Still at the Door!
Property Tax Fix Falls Short
July 4, 2007 - Prior to the 2007 Legislative session, lawmakers, economists, realtors, bankers and the Governor warned Florida residents about an impending disaster. The gross inequities inherent in the State’s primary taxing mechanism finally reached a critical mass. Aspiring to rescue Florida from a recession circling like a vulture, Governor Crist stumped the State, promising to drop taxes “like a rock”.
|GOVERNOR CHARLIE CRIST VOWS|
TO DROP TAXES “LIKE A ROCK”
A property tax cut is a straight-up trade-off – dollars for services. Local governments were reaping a windfall benefit from the State’s speculator-driven overheated real estate market. Since local officials found themselves with more money than they needed, they gave a little back, bankrolled a litany of special interest screwball programs and spent the rest (as required to justify future increases).
To cure the tax-driven economic deterioration, residents were prepared to sacrifice services. Infantile assertions that a tax cut would cost communities their police forces were spun by political interests (such as the Florida Association of Counties) that stood to benefit from an unimpeded tax cornucopia. Equally insipid were claims that the cuts would be limited to closing two dog parks on weekends and postponing the purchase of new artwork for the library. In reality, while few critical services would grind to a halt, residents would have to live without or pay out-of-pocket for certain services previously provided by the state.
Most residents were reconciled to the trade-off. Their motivation wasn’t limited to the popular prospect of having to pay less money to the government. When tax inequities threaten the economy, they threaten the value of our homes, the prospects for our businesses, the opportunities for our families - in essence - it casts a dark cloud over the future. Senator Jeffrey Atwater expressed an ominous admonition to a room filled with Galt Mile residents on March 15th, “2006 was the first year that more people left the State than moved here.” In May, Goldman Sachs economists warned that Florida’s unstable real estate market was precipitating a recession. A substantial tax cut was prescribed to “jump start” the stalled economy.
|GALT MILE LAWMAKERS REPRESENTATIVE ELLYN|
BOGDANOFF AND SENATOR JEFFREY ATWATER
During the 2007 legislative session, House Speaker Marco Rubio supported the passage of a $56 billion tax cut comprised of a statutory component (House Bill 7001) featuring seven-year rollbacks and a Constitutional amendment (House Joint Resolution 7089) swapping an incremental sales tax for our property tax. Concerned about being excluded from the tax cut sweepstakes while strenuously opposed to the House’s planned sales tax hike, Senate President Ken Pruitt anted up with a less ambitious $11 billion tax reduction (Senate Bill 1020). Details aside, the overwhelming public support for their stated intention to perform some emergency surgery aimed at salvaging Florida’s credibility as a thriving State resonated with every property owner. Unfortunately, it became clear that the devil was in the details.
As if following some genetically-driven ideological template, the legislators quickly reverted to form, fractionating into their respective partisan and political bio-niches. House Democrats coalesced around opposition to the regressive application of the Republican tax bills. After postponing the creation of a Senate entry until a few weeks before Sine Die, Senators from both sides of the aisle lamented the “excesses” inherent in the House statutory tax reform bill (HB 7001) and registered doubts about the Constitutional crazy quilt that would result from 67 individual county sales tax referendums (HJR 7089). As the regular session wound down, it became clear that the controversy would preclude any negotiated compromise. To fulfill promises to reform the tax system, the Legislative leadership and the Governor convened another special session from June 12th to June 22nd.
Lawmakers working on the Joint Select Committee on Property Tax Relief and Reform never stopped slugging their way to an agreement. By the time the special session opened on June 12th, most of the political horse trading was a fait accompli and three days later, legislators announced a deal. The final tax reform package is comprised of two components. The first part (House Bill 1B) was passed on June 14th and signed into law by Governor Crist on June 21st – a week later. The second part (Senate Joint Resolution 4-B) – a Constitutional amendment offering property owners the opportunity to exchange their “Save our Homes” tax cap for a Homestead Exemption on steroids – will only be enacted if blessed by the Florida electorate on January 29, 2008 (House Bill 5B).
|GOVERNOR CRIST SIGNS PART ONE|
OF PROPERTY TAX BILL INTO LAW
The overall package suffered severe shrinkage since first proposed at the onset of the regular session. The original amount of the tax cut included in HB 7001 and HJR 7089 was about $56 billion. As the House leadership attempted to accrue additional support for the legislation, the amount of relief started to slide. To accommodate fiscally constrained counties, underfunded educational programs and other special interests with political patronage, the cuts slipped to $53 billion. As the regular session wound down, compromise reform packages of $44 billion, $31 billion and an $11 billion Senate bill (SB 1020) were subsequently introduced.
The statutory component (HB 1B) of the legislation enacted on June 21st contains $15.6 billion in tax relief over a five year term. The actual amount each taxing authority must slice off its official TRIM notice varies according to its recent assessment proclivities. Cities, counties and special taxing districts will roll back assessments to 2006 levels and institute additional cuts of 3%, 5%, 7% or 9% - depending upon if and by how much they’d recently raised taxes. Local governments that unmercifully exploited the windfall taxing opportunities presented by recent skyrocketing valuations are facing 9% cuts while those that voluntarily reduced tax burdens face proportionately smaller reductions – jurisdictional tax chickens coming home to roost.
|GOVERNOR CRIST EXPLAINS PHASE 1 TAX CUTS TO PRESS|
For instance, Miami-Dade County and Palm Beach County governments are facing an additional 9 percent cut, Broward County will offer a 5 percent extra reduction and Monroe County only has to slice off an additional 3 percent. Some local municipalities are as follows: Miami, Hollywood, Hallandale, Wilton Manors (9%); Fort Lauderdale, Plantation, Boca Raton (7%); Sunrise, Coral Springs, Pompano Beach (5%); Sea Ranch Lakes, Opa-Locka, Hillsboro Beach (3%); Dania, Lauderdale-by-the-Sea, Southwest Ranches (0%). Authoritative estimates project this year’s phase 1 savings for the average homesteaded taxpayer at $174 (7%), non-homesteaded at $199 (7%) and commercial-industrial at $941 (6%).
|2007 - 2008 ADDITIONAL TAX CUT: PERCENTAGE REDUCTION FACTORS|
Future property tax assessment rates will be constrained by a cap adjusted to the growth of personal income. During the past 20 years, personal income has climbed at an average annual rate of 4.2%. If the rate that property value increases exceeds the rate that personal income grows, the local city or county will have to proportionately reduce its millage rate. While homeowners will have to wait until they receive their tax bill in November to know exactly where they stand, their August tax notice will reveal the final tax rates adopted by their local taxing authorities.
Consistent with most products “made in Tallahassee”, the cuts were perforated with elephant sized loopholes designed to allow cities and counties to sidestep both the immediate spending cuts and the cap on future assessments. Methodologies provided in the legislation to override the statutory caps include a supermajority or unanimous vote by the local governing board or a public referendum. Should local governments opt to violate the rollback provisions, they stand to forfeit $millions in State resources (primarily from the half-cent Sales Tax distributions). Additionally, property taxes charged by school districts, which ordinarily comprise roughly 30% to 40% of the average tax bill, are shielded from the effects of the rollback.
|REFORM PLAN PROPERTY TAX IMPACTS|
The second part of the package, a proposed Constitutional Amendment (SJR 4-B) with a potential for $8 billion in incremental savings, is riddled with controversy. Since the proposal includes alterations to the Save our Homes Constitutional Amendment and the Homestead Exemption, only a 60% approval by the Florida electorate can legally actualize the terms of the provision. At the heart of the legislation is a hyperactive Homestead Exemption.
|CURRENT PROPERTY TAX LEVIES COMPARED TO LEVIES BASED ON POPULATION|
& INCOME GROWTH CAPS AND MANDATORY HOMESTEAD TAX REFORM
If passed by voters during the January 29, 2008 primary elections (HB 5B), the Florida Constitution would be amended to create an expanded Homestead Exemption for Florida residents. For currently homesteaded homeowners, the new exemption will be made available as an optional alternative to their existing “Save our Homes” tax cap (the lower of the annual Consumer Price Index or 3%). The new homestead exemption would shield 75 percent of a home’s first $200,000 in taxable value - a maximum of $150,000 - from any tax consequence. It would also protect 15 percent of the next $300,000 - a maximum of another $45,000 - from any tax bite. The exemption totals to a maximum of $195,000 for houses worth $500,000 or more. Although every dollar in valuation above $500,000 will be fully taxable this year, the $500,000 threshold would automatically grow each year by the same percent that population (new construction) and personal income increases. The minimum homestead exemption afforded by the new Amendment is $50,000. Low-income seniors (above 65) will also be eligible for at least a $100,000 exemption and an additional $50,000 worth of exemptions offered by cities and counties. The Constitutional Amendment grants the legislature authority to provide for the assessment of property used for affordable housing or waterfront property used for commercial fishing, water-dependent activities or public access to water at less than fair market value. It also authorizes the legislature to create a $25,000 Tangible Personal Property Exemption.
Every currently homesteaded Florida homeowner protected by the “Save our Homes” tax cap will have to decide whether their existing protection or the new super-Homestead Exemption will afford greater savings. As a rule, owners of more expensive properties and properties protected by the cap for several years will do better with the existing “Save our Homes” protection while owners of new properties and properties with more modest valuations will save more by claiming the new hyper-Homestead. About half of the homesteaded Florida residents eligible for “Save our Homes” protection are expected to decline the hyper-Homestead alternative. While unable to enlist the political support necessary to force residents to forgo their Save our Homes tax caps in favor of the giant Homestead Exemption, Republican legislators are satisfied that attrition will erase the inequities derived of the amendment quickly enough. Following the immutable one-time decision made by each eligible homesteaded property owner, the rolls of “Save our Homes” shielded properties will be reduced by every participating homeowner’s death and/or relocation.
In the three days during which the terms of the new Amendment were negotiated, lawmakers made numerous adjustments aimed at making the concept more palatable to some of its detractors. The original overall tax reduction for both parts of the package was $31.6 billion. The package’s Republican supporters made 2 sizable peace offerings to the legislation’s opponents. By protecting some Fire-Rescue districts from suffering reductions and permitting homeowners to optionally retain their current “Save our Homes” caps, more than $7 billion in tax cuts evaporated. The Amendment also carries significantly problematic educational baggage. While school funding will be unaffected by the statutory reductions, lawmakers confirm that under the Constitutional Amendment, school districts are treated like any other local government. Since only that portion of a home’s value not protected by the super-sized exemption would be taxable, the Constitutional Amendment could cost schools statewide an estimated $3.5 billion over four years.
These and other issues were grudgingly agreed to as a partial compromise during the intense three-day negotiation. As evidenced by a party-line vote, Democrats initially unanimously opposed the amendment and planned to pressure participants into postponing the vote from the scheduled January Primaries until Election Day of 2008 - ten months later. Confident that voters wouldn’t approve the controversial measure because of its debilitating impact on education; Democratic plans to delay the vote were considered unnecessary and abandoned. When questioned about the amendment’s adverse impact on schools, Republicans could only respond with assurances that “money for schools would be found in future years because the state Constitution states that education is of ‘paramount’ importance.” Senate Finance and Tax Committee chair Mike Haridopolos pledged to properly fund schools “by any means necessary.” The Melbourne Republican said “people will have to trust the Legislature to continue its education spending increases.” Given Florida’s low graduation rate and low education spending compared to other states, Democrats, teachers and school officials put little stock in what could easily be construed as politically motivated promises.
House Democratic Leader Dan Gelber of Miami Beach, after recommending that Democrats vote for the compromise, expressed concern about being perceived as obstructionists. In fact, despite a nearly unanimous Democratic vote for the tax cuts (117 YEAS vs 1 NAY), Republican Representative Adam Hasner of Delray Beach still accused Democrats of trying to sabotage tax reform. While confirming support for the statutory reforms, Gelber registered unqualified opposition to the Constitutional amendment. Gelber stated, “This thing is going to fail and when it does these will be the adults in the room who craft something that’s thoughtful and a better choice,” referring to the Taxation and Budget Reform Commission - a dedicated blue-ribbon panel appointed by Governor Charlie Crist, Statehouse Speaker Marco Rubio and Senate President Ken Pruitt.
|REPRESENTATIVE DAN GELBER SHOWS|
HOW AMENDMENT HURTS SCHOOLS
Another obstacle the amendment must circumvent was initiated by the Republican-led 2006 Legislature. When the Florida electorate recently approved Constitutional Amendments strongly opposed by the Legislature’s Republican leadership, such as class size reductions and bans on indoor smoking, they engineered a stiffening of approval criteria. The threshold for amending the Constitution was increased to 60%. The original Save our Homes amendment passed in 1992 by a slim 53% majority. Ironically, the new amendment may fall victim to the newly toughened amendment process.
Proponents of more comprehensive yet less controversial tax reform are coalescing around possible alternatives that are less vulnerable to criticisms about impacts to education and critical services. Most importantly, any tax reform strategy needs adequate mass for an economic jump-start to subvert the prospect of a devastating recession. Economists point out that while the phase one statutory cuts provide universal relief because it lowers the tax rate, non-homesteaded properties, including businesses, receive little help from the amendment since it only shrinks the tax base. Since the non-homesteaded half of Florida’s homeowners has little incentive to support the amendment and half of the homesteaded homeowners will likely opt to pass up participating in the new exemption, the amendment’s support base is only about 25% of voting homeowners. This statistic represents the single greatest weakness in its prospects for passage.
Former Republican Statehouse Speaker Alan Bense, chairman of the Taxation and Budget Reform Commission, has expressed his intention to formulate an alternative plan in the event that the amendment fails on January 29th. A few days after Governor Crist signed the phase one bill on June 21st, Bense exclaimed, “My instincts tell me to go ahead and pursue other alternatives so that on January 29th we’re not caught flat-footed and have to just start up brand new.”
|STATEHOUSE SPEAKER MARCO RUBIO NAMES|
ALAN BENSE TAX COMMISSION CHAIRMAN
The Taxation and Budget Reform Commission is a constitutionally created panel of 25 voting members and four non-voting legislators. Imbued with a broad mandate to assess the State’s existing budgeting needs and recommend the best possible fiscal recipe for addressing them, it is empowered to place constitutional amendments relating to taxes and budgets directly on the November 2008 ballot. Recommendations could include asking voters to eliminate sales tax exemptions, the imposition of an income tax or approval of a more equitable property-tax. Of the blend of business, union and government leaders comprising the panel, nine are appointed by the Senate President (including 2 non-voting Senators), nine by the Statehouse Speaker (including 2 non-voting Representatives) and eleven by the Governor.
|CHAIRMAN ALAN BENSE|
Of the current 25 voting members, 21 are Republicans and 4 are Democrats. South Florida is represented by Jacintha Mathis, Republican from Delray Beach and a real estate and bond attorney; Alan Levine, Republican from Fort Lauderdale, president of the North Broward Hospital District and former secretary of the Agency for Health Care Administration and chief Medicaid advisor to Bush; Carlos Lacasa, Republican from Miami, a lawyer and former state representative; Roberto “Bobby” Martinez, Republican from Coral Gables, a shareholder in the Colson Hicks Edison law firm who has served on the transition teams of Crist and Bush; and James “Jim” A. Scott, Republican from Fort Lauderdale, an attorney and founding partner of the Tripp, Scott Law Firm in Fort Lauderdale, a former state Senate president, former chairman of the Taxation Committee for the 1998 Constitutional Revision Commission and former Broward County District 4 Commissioner. Ironically, Committee member and Lee County property appraiser Kenneth Wilkinson authored the Save Our Homes amendment 16 years ago.
|FORMER BROWARD COUNTY|
COMMISSIONER JIM SCOTT
Bense suggested that panel participants might be better positioned than elected legislators to make tough decisions free of political considerations. Clarifying the Commission’s flexible mission limits, Bense said, “I don’t think there’s anything we can’t do. The challenge is narrowing the scope of our work.” Senators and Representatives searching for a balanced system could be hobbled by the need to compromise for political expediency. Bense commented, “I’m very cognizant of the fact that elected folks should frankly have more power than appointed folks, especially as it relates to taxes. But part of the job of the commission is to make some of the decisions that politically can’t be made.”
If the amendment goes south, the majority of its detractors will realize their stated preference, that the Taxation and Budget Reform Commission be provided the opportunity to tackle the problem. Despite having the support of a Governor with a 70% approval rating and the critical need to jolt the economy, the numbers don’t look good for the amendment’s passage. Having a viable alternative waiting in the wings is preferable to sending the same cast of characters back into session. One definition of insanity is predicated on expecting a different outcome from repeating the same actions. This has special significance in Tallahassee.
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Representative Bogdanoff’s July Newsletter
Representative Ellyn Bogdanoff, District 91
July 17, 2007 - Since the session closed in May, District 91 Statehouse Representative Ellyn Setnor Bogdanoff has shed light on relevant legislative accomplishments. In June, the Majority Whip discussed a law promoting Cable Television competition, no-interest storm mitigation loans, a law prohibiting the expiration of gift cards, prison bed and DNA database expansion, and her expectations for property tax reform. Her July Newsletter explains the advantages of moving the date of the Florida Presidential Primary to January 29th, environmental bills designed to abate pollutants, develop alternative fuels, purchase more endangered land, Everglades restoration and beach renourishment. Representative Bogdanoff also expresses pride over her role in drafting a State Budget with a $1 billion + reserve, protection for the state’s Triple A bond rating and extensions of the June and August Sales Tax Holidays worth roughly $80 million to taxpayers. Read on:
“It’s my pleasure to be able share with you a few of the many important developments that occurred this past legislative session in Tallahassee, which are not only significant to our community, but the entire state of Florida. This month I have highlighted three issues: the Presidential Primary, the Environment, and the Budget.
ELECTION PRESIDENTIAL PRIMARY
For the first time in decades, Florida has a big say on who will be running for president next year. By the time you and your neighbors cast ballots in previous presidential primaries, the decision had been made. Front runners were so far in the lead that Florida’s voters in the March presidential primary had little influence over the outcome of the race. As a result, primary candidates ignored the issues of our state. The legislature thought Florida’s voters, residents of the nation’s fourth biggest state, should have a more significant role in presidential primaries. They moved the primary’s date to January 29th, insuring that now Floridians will have a voice in picking the nominees of each party.
Preserving Florida for our grandchildren continues to be a commitment of the Legislature. A new law will lessen the impact of new power plants on the environment. It encourages new plants to use high-tech methods that produce less harmful pollutants. A comprehensive energy package approved by the Legislature promotes research and development of alternative fuels and requires all government buildings to meet the nationally recognized environmentally sensitive building standards. More than $500 million was approved to continue the nation’s largest program for the purchase of endangered land and for Everglades restoration.
To sustain our beaches, more than $30 million was earmarked for beach renourishment projects. To keep the ocean clean, research into red tide and harmful algae blooms was funded. This year, the Legislature moved to further protect Lake Okeechobee, a source of water for Southeast Florida, by extending the Save Our Everglades Trust Fund to 2020. Lawmakers realize that none of newly enacted environmental protection will matter if Floridians do not have water to drink.
As the Majority Whip, I had a role drafting this year’s Florida State Budget. I’m pleased to report that the budget funds needed programs, yet remains fiscally responsible. The budget prudently keeps over $1 billion in reserve. If our economy slows, we are hit by a major hurricane or other unforeseen incident, that rainy day fund will be there to help. The money in reserve protects our state’s Triple A bond rating – the best possible. A high bond rating saves you money because it keeps the interest rates lower on state bonds that are used to build highways, bridges and other improvements. Once again we are returning some of your tax money to you. We renewed the August back-to-school and June hurricane supplies tax holidays. Taxpayers like you will save an estimated $80 million in sales tax. The sales tax holiday is a real achievement and is consistent with a guiding principal of my public service -- that it is your money, not ours.
It is a pleasure to serve the residents of District 91. I hope you will call me (954) 762-3757 or e-mail at email@example.com anytime I can be of assistance.
All the best,”
Florida House of Representatives – District 91
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Representative Bogdanoff’s October Newsletter
Representative Ellyn Bogdanoff, District 91
October 20, 2007 - Following a paper thin victory during her third attempt to embark on a career in public service, District 91 Statehouse Representative Ellyn Setnor Bogdanoff has risen through the legislative ranks with unprecedented expedience. Versatile networking skills, a relentless work ethic, a policy of eliciting feedback from opponents as well as supporters and a background rooted in strong legal and fiscal experience quickly attracted the attention of the House leadership and the Governor. Named Majority Whip by House Speaker Marco Rubio in her sophomore term, Ellyn's expanded responsibilities include educating herself and her peers about virtually every important issue undertaken by the legislature. These duties were incremental to her active solicitation of input from constituents.
Her historical commitment to fiscal responsibility provides the framework for her October Newsletter. She describes an effort to contain deficit spending based on soliciting agency proposals for budgetary cost-cutting. She asserts that living within our means is sustainable while spending one time monies or raiding the state’s reserves to pay for today’s recurring expenses will mortgage our fiscal future. Although painful, our Representative assures constituents that the belt tightening will not undermine adequate funding for healthcare or education.
“With the current economic challenges and Floridians having less money to spend, the state’s tax revenues are not meeting projections.
We don’t have a downturn in our state economy because government isn’t spending enough. The problem is that people have less to spend because government is already taking more than they can afford. In order to maintain the state’s balanced budget and remain fiscally responsible, state government agencies must do exactly what we have asked from local governments: live within your means and don’t spend more than Floridians can afford.
|GOV. CRIST SEEKS TO BALANCE BOOKS|
That is why every state agency submitted a proposal to cut expenses by 10 percent and the Governor released his own plan to reduce state government spending by more than $1 billion. The Florida Legislature also engaged in a meaningful analysis of government services and programs and as a result, has provided a thoughtful, targeted approach to reducing the state budget.
Members of both parties worked together to formulate plans to address the shortfalls. Each Council Chair consulted with their members regarding the proposed spending reductions:
Healthcare spending reductions were achieved by maximizing efficiency and avoiding direct service cuts to Floridians who depend on the state for medical services.
No matter how many times you hear it- it’s just not true. K-12 Education is not being cut. Under our fiscally responsible proposal, our schools and students will receive more funding this year than they did last year, and K-12 per student education funding will increase by more than 5% over last year’s funding. I also believe that it’s not just how much you spend, but how you spend it.
Failure to reduce spending now simply grows our budget deficit in future years. Spending one time monies or raiding the state’s reserves to pay for today’s recurring expenses is a short term fix that is as fiscally irresponsible as someone paying a mortgage they can no longer afford with their credit card – it just postpones the inevitable and makes the situation worse.
Living within your means does not mean looking for other sources of revenues to extract from Floridians. Raising taxes, raiding the long-term savings safety net, or betting on gambling in an effort to keep government spending growing, is no way to strengthen Florida’s economy for the future.
If Floridians have less to spend, then government must spend less too. Our children, families and seniors deserve a sustainable, responsible budget.
Please feel free to call me at (954) 762-3757 with any questions or concerns you may have, or I can always be reached by email: firstname.lastname@example.org. As always, thank you for the privilege of allowing me to serve as your State Representative in the Florida House.
All the best,”
Florida House of Representatives – District 91
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Rubio Credits Bogdanoff with No-Fault Rescue
House Majority Whip Tackles Special Session Afterthought
November 1, 2007 - In early September, Legislative leaders and the Governor set about making plans to establish a general framework for reducing state spending. On September 28th, Florida Senate President Ken Pruitt and Statehouse Speaker Marco Rubio issued a Joint Proclamation announcing a 10 day Special Legislative Session beginning on Wednesday, October 3, and ending on Friday, October 12, 2007.
|SENATE PRESIDENT KEN PRUITT, GOVERNOR CHARLIE|
CRIST AND STATEHOUSE SPEAKER MARCO RUBIO
Special Session C was convened for the sole and exclusive purpose of considering: legislation making adjustments to fiscal year 2007-2008 appropriations; legislation providing for the redirection of trust fund revenues and balances to the General Revenue Fund; legislation making adjustments to user fees; legislation to conform Florida law to such adjustments and redirections; and legislation narrowing the definition of “municipality of special financial concern” created by Section 8 of Chapter 2007-321, Laws of Florida. This agenda was designed to deliver emergency reconsideration of a $1.1 billion budget deficit.
On the same day, Speaker Rubio sent another correspondence to Governor Crist. He drew the Governor’s attention to two other critical issues facing deadlines – property taxes and mandatory auto insurance.
While a statewide vote to amend the Florida Constitution was scheduled for January 29, 2008 to supposedly lower property taxes, the ballot language had been tossed out by a North Florida judge who decided that it was confusing and misleading. Since amendment ballot preparations require three months notice, lawmakers had until October 29th to reword and/or tweak the Amendment. Without bi-partisan support in both Legislative Houses and the Governor’s blessing, its prospects were bleak. The House and Senate had until the end of October to work out their differences and author property tax reform ballot language capable of eliciting the broad support needed to pass.
|SPEAKER RUBIO OPENS SPECIAL SESSION C|
Secondly, Florida’s Motor Vehicle No-Fault Law, and with it the requirement to maintain personal injury protection (PIP) benefits, expired on October 1, 2007. The No-Fault Law developed into a bureaucratic nightmare, rife with opportunity for abuse and fraud. Since mushrooming legal and medical costs became unsustainable, it was euthanized with the expectation that lawmakers would create an effective successor during the regular session. When well funded lobbies representing the insurance industry and the Trial Lawyers turned up the heat, the anesthetized Legislature dozed off. Replacement legislation was shelved!
Rubio stated that since the two issues weren’t included in the Special Session agenda, without the Governor’s “leadership” in organizing relevant legislative CPR, property tax reform and a functional framework for personal injury No-Fault benefits would fade to black. Setting the stage for another Special Session, Rubio expounded that the shuttle diplomacy practiced by the House Majority Whip in search of the No-Fault Holy Grail was extremely productive. He informed the Governor, “In the House, Majority Whip Ellyn Bogdanoff has worked tirelessly to craft sensible and comprehensive anti-fraud legislation. With my full confidence, she has conducted lengthy and inclusive deliberations between the House and Senate, your office, various stakeholders, and legislators from both sides of the aisle, which ultimately yielded substantive compromise legislation.”
|REP ELLYN BOGDANOFF EXPLAINS|
NO-FAULT BILL TO STATEHOUSE PEERS
On October 1st, the Governor issued a proclamation incorporating the fruit of Bogdanoff’s handiwork into the Special Session agenda. In framing his expectations for an acceptable No-Fault law, Governor Crist said, “Reenactment of Florida’s Motor Vehicle No-Fault Law with reforms designed to lower costs and eliminate fraud and abuse such as: minimum qualifications for care providers, a uniform claims process, a fee schedule to help control medical costs, increased enforcement authority and increased funding to crack down on fraud, and litigation reform aimed at streamlining the claims process and reducing legal costs, will serve the best interests of the people.”
|GOVERNOR CHARLIE CRIST ADDS|
NO-FAULT TO SESSION C AGENDA
Crist wasn’t alone in supporting a fraud-free No-Fault renewal. Florida Chief Financial Officer Alex Sink indicated that if the legislature divested the existing law of its predisposition for abuse, renewing No-Fault protections would serve the public interest. CFO Sink notified Crist, Pruitt and Rubio, “In absence of the No-Fault Law, Florida will require motorists to purchase insurance that covers damages to others’ property, but fails to require this same financial protection for innocent Floridians injured in an accident. This means that Florida law will protect cars, but not people. Floridians injured in an automobile accident through no fault of their own may have to pay for their own medical treatment or face the prospects of taking legal action (and a prolonged resolution) to cover their medical bills. Nearly every state in the nation requires some medical benefits insurance coverage, and failing to mandate this insurance protection is not in the best interest of Floridians.”
|CFO ALEX SINK FAVORS|
FRAUD-FREE NO-FAULT RENEWAL
One day before the October 12th Special Session conclusion, Senate President Ken Pruitt and Statehouse Speaker Marco Rubio issued another Joint Proclamation announcing that 10 minutes after “sine die” (the end) of Special Session C, another Special Session undertaking Property Tax Reform (Special Session D) would run until October 29, 2007.
|SENATE CONSIDERS NO-FAULT IN SPECIAL SESSION C|
Representative Bogdanoff’s legislative No-Fault progeny, House Bill 13C (HB 13C), included $10,000 in coverage for 80% of medical expenses including ambulance, hospital, surgical, and clinic care; 60% of lost wages; 100% of replacement services; and $5,000 in death benefits. It deters fraud by limiting reimbursement only to reputable and qualified care providers and creating a fee schedule to control costs. Ancillary legislation she drafted to protect proprietary insurance data, House Bill 15C (HB 15C), was simultaneously filed and passed.
|REP BOGDANOFF DETAILS NO-FAULT BILL TO|
LOCAL MEDIA FROM HER TALLAHASSEE OFFICE
To ensure the medical adequacy of utilized health care services, they must be ordered, provided, and/or prescribed by licensed M.D.’s, D.O.’s, chiropractors, and dentists. In addition to these providers, payments can be made to Hospitals, physician assistants, ambulatory surgical centers, ambulance services, facilities owned by M.D’s, D.O.’s, chiropractors, dentists, other health care clinics that meet rigorous standards for specific accreditation or other limited criteria.
Bogdanoff’s bill deters unsubstantiated overcharging by linking costs to verifiable standards. Fees are limited to usual and customary charges for physician and dentist services rendered in a hospital, 75% of the usual and customary charges of emergency services and care provided by a hospital and 200% of services provided by Medicare (no less than 2007 schedule). It further uses existing Medicare and Workers’ Compensation guidelines for reimbursement of other eligible services, supplies and care.
Her bill imbues the Attorney General with added legal muscle, specifying that capricious denials of meritorious claims by insurance companies constitute an unfair trade practice subject to penalty under the Insurance Code. To enhance efficiency, the bill allows consolidation of similar claims and electronic transfer of information with the express consent of all parties. Once a demand letter is filed, insurance companies only get an additional 15 days to verify validity of claims. To fund a proactive legal deterrent against filing capricious or inflated claims, $2 million has been earmarked for grants to state prosecutors in metropolitan areas, including Palm Beach and Broward Counties.
In contrast with the regular session political infighting that thwarted the creation of any replacement for the expiring no-fault PIP, the bill whizzed through the House (105 - 4) and Senate (37 - 0). Governor Crist wasted no time, signing the bill into law on the last day of Special Session C – October 12th. The controversy engineered by the insurance industry was fueled primarily through an industry-funded political action committee, “Floridians for Lower Insurance Costs”. After writing letters to policyholders promising to lower auto insurance premiums if the mandatory PIP coverage was eliminated, auto insurers sponsored a battalion of lobbyists to undermine any attempted political compromise among lawmakers.
|GOV CHARLIE CRIST SIGNS NO-FAULT BILL INTO LAW|
REP ELLYN BOGDANOFF AND SEN BILL POSEY LOOK ON
Upon learning about lawmakers’ intentions to revive a reformed No-Fault bill, PAC spokeswoman Allison North Jones blamed the measure on special interests and threatened, “Any reenactment of no-fault will not only result in the reversal of those savings for drivers, but potentially higher auto insurance rates imposed by lawmakers.” Senate Banking and Insurance Chair Bill Posey quickly answered her “inflammatory and derogatory remarks about lawmakers’ decisions to keep PIP, and your allegations that lawmakers are catering to ‘special interests’.” He then revealed that the lower rates promised by the insurance companies and their lobbyists was apparently nothing more than “industry spin.” He expanded on his response, writing, “Fact is, you represent the biggest spending special interest of them all! You may not have been at the Banking & insurance Committee when I offered to tear up the proposed bill if the industry would provide a written guarantee rates would be reduced for more than just one year. Unfortunately, the industry’s response was negative, saying ‘of course we can't do that.’ Thank you again for taking the time to write.”
Intimating that unscrupulous medical providers and ethically challenged lawyers represented an irresolvable obstacle to Florida’s no-fault personal-injury protection, industry PAC spokeswoman Allison North Jones said, “It’s a horrible consumer bill. When you get down to the nuts and bolts, it’s insufficient reforms of a system that needed major reforms.” The lobbying organization also contended that most of the State’s licensed drivers already have health insurance coverage, rendering the bill’s central requirement redundant. Jones exclaimed that the legislation “amounts to little more than a massive driving tax by forcing drivers to continue purchasing a duplicative medical payments coverage many do not want or need.” Hospital spokespersons contested the validity of this objection, offering statistics demonstrating that more than 40% of auto accident victims don’t have health insurance.
Industry contentions that “forcing drivers to continue purchasing a duplicative medical payments coverage” is abusive to the consumer are somewhat disingenuous. Prior to the advent of No-Fault protection, insurance carriers regularly bundled P.I.P. into almost every standard auto coverage package, whether or not the applicant had health insurance. They would like to revive that lucrative market. Pre-No-Fault automobile accidents also kept battalions of attorneys busy determining liability for subrogation purposes. No-Fault successfully relieved much of this undue pressure on the courts until its unanticipated vulnerability to fraud and abuse became an easy target for exploitation.
Speaker Rubio applauded Representative Bogdanoff’s efforts, characterizing the legislation as “perhaps the most significant auto insurance reform in a long time in Florida.” Adding perspective to the Legislature’s accomplishment, he observed that significant political obstacles had to be overcome prior to passing an acceptable replacement for Florida’s expired No-Fault protections. In view of the negative industry rhetoric and threats that the legislation would increase insurance rates, he took a swipe at the lobbyists, “That’s easier said than done when a lot of people get paid a lot of money to keep things from happening.” Representative Bogdanoff’s Senate counterpart – Chairman Bill Posey of the Senate Banking and Insurance Committee – said at the bill signing, “The final score is: 17 million Florida drivers, 100; special interests, zero.”
|BANKING & INSURANCE CHAIR|
SENATOR BILL POSEY
Until the legislation takes effect on January 1, 2008, PIP is voluntary. Existing coverage as described in current policies will remain intact and unchanged until it comes up for renewal. However, anyone facing that renewal prior to January 1, 2008 needs to contact their agent or carrier to ascertain whether their protection is adequate. Department of Financial Services spokeswoman Tara Klimek explained that different auto insurance companies will have different rules for renewing customers’ policies before the new no-fault law takes effect on January 1st. She advised, “Customers with questions should call their agents or call the state’s insurance consumer hotline at 1-800-342-2762.”
If even one accident participant doesn’t have PIP coverage, liability may have to be determined in court prior to any reimbursement being approved. Klimek elaborated, “If you’re in an accident before January 1st and you have no-fault coverage but the other driver doesn’t, you could face a lawsuit.” Conversely, if everyone carries PIP, each victim is automatically covered by their own insurance. Since the changes in the new law are primarily anti-fraud provisions, Klimek assured policyholders that any transition should be relatively seamless, stating, “In the end ... many motorists will not notice a difference between the old and new [no-fault insurance law].”
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pecial eion D
Third Turn at the Tax Table
November 12, 2007 - The tax reform passed by the legislature in the second 2007 Special Session (Special Session B) was a disappointment to most Floridians. Governor Crist, Senate President Ken Pruitt and House Speaker Marco Rubio all initially acknowledged the critical need to stem an exodus of businesses and non-homesteaded property owners from the state. Lawmakers joined the Administration in promising to implement the tax relief necessary to preclude a devastating recession. After paying lip service to the public outcry for property tax reform, they spent the entire 2007 regular legislative session trimming the original $56 billion tax cut to a tepid $15.6 billion two-part “compromise”.
|SEN PRUITT HOLDS "PATIENCE" ROCK AS TAX CUT PLEDGE|
Following months of sound bytes and psychobabble, they failed to pass even token legislation during the regular session. Thoroughly embarrassed by the political deadlock, the Governor and the Legislative leadership called the first of two Special Sessions dedicated to passing Tax Reform (Special Session B). A two-pronged strategy featured a statutory resolution imposing mandatory tax reduction targets for municipalities and counties. It also proposed a constitutional amendment that would make available a supersized homestead exemption as a voluntary alternative to the existing Save Our Homes tax cap. Instead of targeting the relief to businesses and non-homesteaded property owners, the tax cuts were largely limited to homesteaded property owners. The statewide vote for the amendment was scheduled to coincide with the January 29th Presidential Primaries.
|WESTON MAYOR ERIC HERSH|
Weston Mayor Eric Hersh filed a lawsuit contending that because the amendment was poorly drafted, residents voting in favor of the relief would be unaware that they were also voting for the demise of their “Save Our Homes” protection. Disparaging the amendment’s construction, Chief Circuit Judge Charles A. Francis of Tallahassee tossed out the proposed amendment’s ballot language, calling it misleading and inaccurate. The ballot summary promised to protect homestead benefits under the existing Save Our Homes Amendment. Since the new measure actually phased out those benefits, the Judge properly ruled that the misleading language was unacceptable. Since 3 months minimum notice is required for the vote, lawmakers had until October 29th to agree on and draft an acceptable replacement for the original compromise package. After scheduling a Special Session to address a $1.1 billion budget deficit and the expiration of the State’s No-Fault law (Special Session C), another Special Session was called to reanimate the stricken tax reform amendment (Special Session D).
|MAYOR ERIC HERSH TAX AMENDMENT LAWSUIT|
Expressing concern about upsetting the delicate political underpinnings of the original compromise, Senate President Pruitt was reluctant to alter the tax plan built around doubling the $25,000 homestead exemption on everything but school taxes and giving first-time home buyers a discount. While admitting a preference for the Senate plan, Governor Crist expressed receptivity to elements of a more ambitious House Plan, stating, “I think we’re in a pretty good place. I think there’s some very, very good discussions going on.”
|CHIEF CIRCUIT JUDGE|
CHARLES A. FRANCIS
Governor Crist spent much of the past year insisting that a runaway property tax system was responsible for Florida’s economic woes. Only by implementing a significant tax cut and moderating the growing disparity between homesteaded and non-homesteaded tax burdens could the State fend off the darkening real estate recession. In stark contrast, the Senate plan ignored the State’s almost one million snowbirds. Aside from some consideration for working waterfront enterprises (tax cuts for waterfront properties engaged in financially modest recreational activities) and a $25,000 Tangible Personal Property exemption, it offered negligible help for businesses. In what appeared to be a reversal of his earlier prescription for the State’s recovery, the Governor had become inexplicably comfortable with a tax reform plan that sacrificed almost every one of his “critical” policy objectives.
Unlike Crist and Pruitt’s timid refusal to consider the more aggressive tax reform they initially promised to the Florida electorate, the House leadership sought to take the opportunity to make the tax cuts more relevant. They proposed offering a new tax exemption equal to 40 percent of a county’s median home value. By roughly adjusting the exemption to the property value, homeowners across the state would proportionately receive the same relief. For most South Florida homeowners, that would amount to an exemption in excess of $100,000 (Broward - $101,647, Palm Beach - $101,354, Dade - $106,894) in addition to the existing $25,000 Homestead Exemption. Low income seniors would receive an exemption equal to 100% of their county’s median home value. The plan provided for limitations on assessed values of properties used for affordable housing. More importantly, it placed a 5 percent annual assessment cap on businesses and other non-homesteaded properties, giving every property owner meaningful protection from overheated real estate market environments. The House and Senate plans both preserved the Save Our Homes protection for currently homesteaded property owners and both bodies agree that its benefits should be portable. However, the Senate plan provided for a maximum of $500,000 in transferable protection while the House plan doubled that maximum to $1 million. The average Broward homeowner stood to realize about $240 in tax savings from the Senate Plan and about $588 under the House package. Although the overall assessment impact of $11 billion was comparable to the Senate’s plan, the House plan targeted the tax benefits more effectively.
|HOUSE LEADERS DISCUSS HOUSE TAX PLAN|
Instead of judging the alternatives based on what’s best for the State and its property owners, the issue deteriorated into what Democratic Senate Minority Leader Stephen Geller called “a dispute, to a large degree, between the Republican Senate leadership and the Republican House leadership.” Despite his contention that both plans were too complicated, Geller described the controversy as, “The Senate leadership said, ‘We had a deal.’ And the House leadership is saying, ‘Yeah, but we came up with a better deal.’” Although he conceded that the House plan’s constructive elements warranted consideration, he opined that his Senate colleagues would be unwilling to risk departure from the original compromise.
|SENATE MINORITY LEADER STEVEN|
GELLER DESCRIBES CONFLICT
As a curious adjunct to the conflict, the actions undertaken by the Statehouse were unexpectedly out of character with its usual hard-line format earmarked by “winner take all” party politics. Aware that any proposed changes to the amendment would require overwhelming support for the Senate or the Governor to deem them worthy of consideration, House leaders built an unprecedented bi-partisan coalition bordering on unanimity. With the exception of a few Representatives catering to self-serving agendas, the House proposal enjoyed widespread bi-partisan support. Democratic Representative Jack Seiler explained the importance of demonstrating a united front, “If we come out with a product in the House that’s 118-2 or 115-5, it sends a message that, look, this is pretty good reform that we're united behind. We actually deliver the same in tax cuts [as the Senate’s plan], but we deliver it more efficiently.”
|REP. JACK SEILER EXPLAINS HOUSE UNITY|
House Majority Whip Rep. Ellyn Bogdanoff, one of the major architects for almost every Special Session Statehouse product, expressed confusion about the Senate’s hesitancy to consider the House improvements. She said, “Conceptually you can’t argue with what we’re doing. We’ve targeted tax cuts. We’re giving it to the people who need it the most.”
|REP. ELLYN BOGDANOFF UPDATES|
HOUSE PLAN FOR GOV. CRIST, RUBIO
House Majority Leader Rep. Adam Hasner tried to put the issue into perspective. Since their shared objective should be the creation of an amendment that Florida voters will want to pass; pleasing the Senate at the expense of disappointing the electorate is an exercise in futility. He clarified, “The House is working in a bipartisan fashion, and the ideas that have emerged are going to be meaningful and are going to have widespread support in the state. I don’t think it’s important to think about what’s going to pass in the Senate or not.”
|HOUSE MAJORITY LEADER|
REP. ADAM HASNER
Senate President Ken Pruitt functionally stonewalled any variation of the original compromise. On October 17th, a tenuous Senate coalition passed a $9.7 billion version of tax reform (over a 4 year term) essentially duplicative of the original compromise. Since an amendment must be found favorable by 60% of each chamber, the 26 – 11 Senate decision represented 2 votes more than the minimum required for passage. However, the Senate was four votes shy of the 75% passage requirement to win a place on the ballot. The predictive “near-miss” threatened by this soft support was central to Pruitt’s problem.
President Pruitt didn’t have enough votes to deliver the Senate. While publicly proclaiming their intention to pass legislation consistent with Crist’s stated objective to correct the statewide tax inequities, North and Central Florida Senators realized that they were well positioned to engage in some locally beneficial horse trading.
Instead of fractionating into partisan or ideological camps, Senators aligned themselves according to their constituents’ average property values. While a $50,000 homestead exemption is more than adequate for lawmakers representing counties where the median property value is $55,000, it is nearly invisible to taxpayers in South Florida counties where home values average 5 or 6 times that amount.
With the success or failure of tax reform hanging in the balance, every uncommitted Senator became a potentate with a price tag. When the Governor personally called on all 160 lawmakers to elicit their support, he came to grips with the depth of Pruitt’s predicament. Any divergence from the original package, despite its obvious shortcomings, would cost Charlie Crist – and Ken Pruitt – any chance of placing a proposed amendment on the January 29th ballot.
In our current zero-sum property tax system, whatever taxes homesteaded property owners are exempted from paying are borne by their non-homesteaded neighbors. Since the Save our Homes protection increasingly shifts the tax burden to unprotected property owners, their numbers shrink as the disparity grows, saddling those remaining with an even greater burden. In 2006, the burden reached a critical mass, driving businesses and snowbirds out of the State at an unprecedented rate. For the first time in Florida history, emigration outpaced immigration. The statewide public outcry for tax reform envisioned relief for every property owner, not an incremental shifting of even more of the burden to a shrinking population.
In an effort to preserve the huge tax windfalls to which they’d become acclimated, local governments expended significant resources to either overturn any reform that represented a threat to those revenues or to shield themselves from compliance. When the statutory tax reform was enacted, many local governments took advantage of legislative loopholes that allow local commissions and boards to waive adherence to their newly mandated tax reduction targets. While vehemently opposing any reduction in their net annual “take”, they had no problem with simply shifting the burden from one group to another.
This is at the heart of the Senate’s problem with the House plan. North and Central Florida Senators sought to relieve local jurisdictions from belt-tightening at the expense of those non-homesteaded taxpayers that are carrying the load for everyone. Once non-homesteaded property owners have even moderate protection, their local taxing authorities will have to make due with less money instead of simply squeezing more resources from their unprotected constituents. By limiting annual increases on non-homesteaded properties to 5% (as provisioned in the House plan), Florida cities and counties will collect $billions less in future revenues. Since the proposed $50,000 homestead exemption was more than adequate to resolve any local property tax issues for Senators from most North and Central Florida jurisdictions, they shunned the prospect of saddling their local allies with any reform components designed to provide equitable relief primarily to South Florida taxpayers.
Lawmakers are often confronted with having to decide between what’s best for their constituents (or a constituent) and what’s best for the State. In this case, however, the cost of the statewide recession will far outstrip any benefit derived of protecting the local cash cow. Unfortunately, since snowbirds don’t vote in Florida, their State officials are less sympathetic to the consequences of this reality.
Senators from South Florida did little to counter the overall collapse of support for meaningful tax reform in the Senate. Minority Leader Geller and Senator Ted Deutch (D-Boca Raton) characterized improvements to the tax plan as complications that would only confuse voters. They opposed provisions that targeted the benefits, contending that they would make the legislation “overloaded and impossible for the average person to understand.” Enigmatically, they seemed to advocate passing legislation that cleared the way to fixing the tax system instead of actually fixing it. As explained by Senator Deutch, “It took years for this lopsided tax system to evolve and it’s going to take more than just a week to fix it.” Other South Florida Senators were reluctant to support provisions that could potentially invite abuse. Senator Alex Diaz de la Portilla (R-Miami) cited the House provision to help “working waterfronts” as an example. Ostensibly offered to help struggling marinas lambasted by huge tax increases simply because of their highly desirable waterfront locations, Senator Diaz de la Portilla pointed out, “It could also apply to playgrounds for millionaires and yacht clubs. It’s not working waterfronts. It’s partying waterfronts.”
|SEN. DIAZ DE LA PORTILLA|
WHY HELP YACHT CLUBS?
Having failed to convince the powerful North and Central Florida Senate caucus and reluctant South Florida Senators that only significant statewide reforms would head off the recession, Crist and Pruitt circled the wagons. They spent the entire Special Session deflecting questions about why the final reform package ignored South Florida taxpayers and actually inflamed the disparity between taxpayer classes – a condition that they repeatedly held responsible for the crippling exodus. Another source of embarrassment was the Senate plan’s cost to schools of about $2.5 billion. With Pruitt’s credibility as Senate President and Crist’s 65% overall job approval rating at stake, every official statement was belabored with euphemisms about “sticking to their original agreement” and “doing what was doable.”
|CRIST AND PRUITT AGREE|
TO STICK WITH ORIGINAL PLAN
With the final decision about tax reform held hostage by a small group of Senators, Pruitt framed the legislature’s “doable” objective, “Should we proceed with a tax reform and reduction package, we believe it will be important to include the basic principles that were the foundation of the Special Session call. First, we must reduce property taxes for Floridians. Second, we must minimize any negative impact to education. Finally, we must craft a proposal that will be understood and accepted by Florida voters.” Resigned to sacrificing many of his initial objectives, Crist said, “Let’s not try to pursue perfection and lose the potential for progress. It’s important to realize whatever we conclude on Monday (the October 29th deadline) doesn’t mean it’s the end game. We need to try to move the ball down the field.”
Mounting public disappointment with Crist’s willingness to settle for token tax reforms and the Senate’s arrogant refusal to even consider improvements was creating an uncomfortable environment for the last week of the Special Session. To minimize the unpleasantness, the Senate President notified Senators on October 23rd that they should take a few days off. He indicated that he may or may not ask them to return on October 29th, the last day of “Special Session D” and the deadline for submitting acceptable ballot language for the January 29th vote. On Friday afternoon, October 26th, Pruitt and Rubio said that both bodies would be reconvened on Monday, October 29th. Without an eleventh hour compromise supported by 75% of each body, the amendment’s failure to make the ballot would create a public relations hornet’s nest. Governor Crist pointedly admonished legislators that “if the amendment didn’t make the ballot, they would be on the next ballot.”
|PRUITT AND RUBIO: RECONVENE AT DEADLINE|
Confused by the Senate’s refusal to even discuss the House alternative, Majority Whip Ellyn Bogdanoff said, “It sounds like there is an unwillingness for them to consider the components of our proposal. That is extremely disappointing.” Acknowledging that the Senate was in the catbird seat, she said that if the Senate rubber stamped its own plan, she didn’t know how the House would react. “What would we do? I have no clue yet.”
|REP BOGDANOFF QUESTIONS|
A last-minute meeting called by Governor Crist to promote cooperation was cancelled and replaced by an ad hoc press conference when he discovered that the Legislature was off through the weekend. Hoping to project a positive public outlook, he expressed confidence that a compromise would be forthcoming by the deadline.
|CRIST ABANDONED BY LEGISLATORS|
When the Senate returned on Monday, October 29th, it immediately jettisoned any special breaks for first-time home buyers, working waterfront properties, poor seniors or affordable housing units. It completely ignored the House proposal to establish a homestead exemption equal to 40 percent of the median home value in each county. The Senate plan seemingly doubled the $25,000 Homestead Exemption although the second $25,000 is inapplicable to school property taxes. Since the average school board assessment represents about 40% of the overall tax bite, only $15,000 of the $25,000 exemption is available to reduce property valuations. The net reduction is actually only $40,000. They provide businesses with a modest $25,000 exemption for Tangible Personal Property. The Senate plan also provides a watered-down version of the House plan’s 5% annual cap on non-homesteaded property tax increases. Since it is unlikely that future tax increases will ever exceed the 10% annual cap finally approved by the Senate for snowbirds and businesses, the “benefit” is little more than a theoretical “sop” for spin purposes.
The total tax reduction impact of the 4-part Senate plan over a five year period is $12.380 billion. The $25,000 additional Homestead Exemption (of which only $15,000 can actually be used) carries a five-year impact of $4.666 billion. The portability provision will cost state coffers $5,629 billion over five years. The $25 thousand exemption for Tangible Personal Property portends a five-year impact of $922 million. The 10% cap on non-homesteaded assessments is predicted to afford a statewide tax savings of $1.165 billion through 2013. Of the total $12.380 billion tax impact, $2.757 billion (more than 22%) comes out of school budgets.
|FINAL TAX REFORM PACKAGE IMPACT (SENATE PLAN)|
While the prospective amendment does nothing for snowbirds and little for businesses, its net benefit to South Florida homesteaded homeowners averages a paltry $220 in annual savings. When measured against the huge tax increases endured during the past few years, most South Florida homeowners consider the legislature’s tax reform to be a bad joke. The one benefit that will likely have some positive economic effect is the plan’s portability provision.
The amendment will allow permanent Florida residents to transfer the accrued “Save Our Homes” benefits – up to $500,000 – to another homesteaded property within two years of moving out of their previous home. The benefit would be retroactive, allowing permanent residents who moved in 2007 with expectations of applying for Homestead exemptions for their new homes on January 1, 2008 or January 1, 2009, to carry forward their accumulated tax protection. If the adjusted value of the new home exceeds the previous home’s value, the entire differential is transferable. However, if the new home’s value is less than the value of the previous homestead, the benefit is proportional to the new homestead’s actual value.
An unintended consequence of the 1992 “Save our Homes” amendment arose from its lack of portability. The protection currently only persists as long as the homestead claimant remains in the existing property. When the resident moves to a smaller, less expensive new home, since the property is assessed at market value, the tax bite is often trebled or quadrupled. Characterized as the “moving penalty”, this unforeseen ramification of the amendment has trapped literally thousands of Floridians who would have moved but for the attendant horrific tax punishment. Since the 1992 inception of Save Our Homes, a 16-year inventory of prospective home buyers seeking to move because of divorce, the empty nest syndrome, change of employment or school, marriage, growing family needs, and a dozen other motivations were financially frozen into homes that no longer suit their needs. Portability will release this huge stockpile of potential customers into the stagnant real estate market.
Another seemingly minor issue stems from concern about the constitutionality of portability. A few days earlier, the Governor assured homeowners that “if lawmakers agree on a tax reform plan, the First Amendment concerns about the Save Our Homes Amendment will not be an obstacle.” It has been suggested that the Save Our Homes tax cap may violate the Equal Protection Clause, the Commerce Clause and/or freedom of travel provisions in the U.S. Constitution since Florida’s tax policies benefit homestead owners to the detriment of non-homestead owners. In a similar equal protection challenge (Nordlinger v. Hahn), the US Supreme Court held that California’s system of giving primary home owners special tax benefits was constitutional. However, since the Commerce Clause prevents states from creating laws that discriminate against interstate commerce, the burden placed on Florida businesses and non-homestead residential property investments by Save Our Homes is constitutionally cloudy. The Amendment’s greatest vulnerability derives from how Florida’s tax policies impair “for those travelers who elect to become permanent residents, the right to be treated like other citizens of the State,” possibly violating the Constitutional right to travel.
Save Our Homes was already unsuccessfully contested before the First District Court of Appeals in 2000 (Reinish v. Clark) by out-of-state residents whose second homes in Florida were ineligible for the tax cap. This past August, Circuit Judge John C. Cooper (of the same 2nd Circuit Court as Chief Judge Charles A. Francis) ruled against some Alabama residents claiming that Save Our Homes violated the Constitution’s equal-protection and right-to-travel provisions. Constitutional experts agree that a pending appeal will fail. While the Amendment is sufficiently structured to withstand equal protection arguments, commerce or right to travel challenges could possibly open a Constitutional can of worms.
After passing their bare-bones package shortly after noon on October 29th by a 35 – 4 vote, the Senate sent it to a disgusted Statehouse. Immediately after they voted, the Senate disbanded, precluding any negotiation with the House. As Senators headed for the exits, they were questioned about the package. As one of the plan’s architects, Senate Majority Leader Dan Webster focused on the Senate plan’s only redeeming provision – portability. He said, “It is an economic booster. This allows people to move elsewhere. They can buy a bigger or better home, pay a little more in taxes, but not get hit with the whole load.” The vast majority of departing Senators expounded variations of Senate Minority Leader Steve Geller’s parting shot, “It was as good as we could have gotten.”
|SENATE MAJORITY LEADER|
For 6 hours, Statehouse Representatives on both sides of the aisle criticized the reform’s failure to address any of the underlying reasons for the economic downturn, the unnecessary $2.8 billion loss it portends for schools, and the Senate’s decision to hit and run, narrowing the House options to “take it or leave it.” At 5:42 PM, a House vote of 74 – 41 failed to break the 75% minimum required to place the amendment on the ballot.
|DISGUSTED STATEHOUSE REPS|
CRITICIZE SENATE REFORM
Although disappointed with the legislation and visibly angered by the Senate’s arrogance and inflexibility, Statehouse Speaker Marco Rubio pleaded with members to accept the skeletal amendment. While he wasn’t sold on the idea repeated by many Senators upon leaving that, “Its better than nothing,” Rubio acknowledged that the portability provision would provide a one-time boost to the ailing real estate market. Despite their overt frustration, House members grudgingly passed the Senate plan an hour later – at 6:54 PM – by a vote of 97 – 18.
|SPEAKER RUBIO: ITS BETTER THAN NOTHING|
On October 29th, the Senate Joint Resolution 2D (SJR 2D) was signed by the officers and filed with Secretary of State Kurt S. Browning for insertion into the January 29th ballot. Two linked bills that provide preliminary statutory housekeeping, Senate Bill 4D (SB 4D) and Senate Bill 6D (SB 6D), were signed by the officers and presented to the Governor on October 30th. The bills were finally enacted as Chapter No. 2007-338 after being signed by Governor Crist on the same day.
|SECRETARY OF STATE|
KURT S. BROWNING
Two local House members commented on the Senate bill. House Majority Whip Ellyn Bogdanoff exclaimed, “Obviously this is a far cry from what we passed, not anywhere what we want.” Representative Jack Seiler expressed a rationale shared by most of his Statehouse colleagues, “I do not want to wake up Tuesday morning and come back home to tell people we were not able to reach a deal. It would be a disaster for the current real estate recession we’re in.”
Not willing to believe Senate promises to “fix the $2.8 billion hit to education next year,” teachers union lobbyists immediately vowed to campaign against the amendment. Attempting to head off concerted opposition to the flawed reform, Governor Crist pleaded with Florida Education Association President Andy Ford to back off. The teachers’ union boss seems predisposed to elicit input from his members and potential allies before formulating a position. Education association spokesman Mark Pudlow said, “We need to talk with school boards, cities, counties, firefighters and see where everyone is and see if there is much in the way of a will to oppose it.”
|FEA PRESIDENT ANDY FORD|
In summary, a toothless tax reform plan will be the target of a high pressure spin campaign by the Governor. Pruitt will dispassionately agree with Administration’s cloudy assertion that this amendment will save the State’s economy. Although Rubio will likely not interfere with the sales pitch, he will probably decline to join the Governor in waxing poetic about their “Herculean achievement” that will save homesteaded homeowners about $18 per month – about a half tank of gas. Calling the final package “a small solution to a big problem,” Rubio said that he would probably participate in a separate citizen petition drive to put a more ambitious tax-cutting measure on the November 2008 ballot.
Shortly after securing a place for the amendment on the January 29th ballot, the Governor kicked off a promotional tour by scheduling news conferences in Jacksonville, Port St. Lucie and Orlando. He gave the Tallahassee press corps a taste of the campaign’s theme, explaining, “We’re going to campaign like the dickens to make sure people understand the truth about how good this will be for Florida families, which is a wonderful, wonderful thing,” Ultimately, the amendment’s passage will depend on how the statewide electorate responds to the Governor’s marketing campaign.
|GOVERNOR CRIST & PRUITT|
RELIEVED AFTER PASSAGE
Seriously conflicted South Florida homeowners are facing a mixed bag of voting motivations ranging from “complete disinterest” to “nothing to lose”. Business property owners will continue their daily soul searching about pressing on or packing it in. While business owners are disappointed, snowbirds are out for blood. After all, our legislators actually intensified their tax burden by increasing the homestead exemption. Since Snowbirds don’t vote, they are politically invisible. The $18/month savings for homesteaded property owners will cost our schools $2.5 billion. The only reason South Florida property owners have to support the amendment is to pass the portability provision.
The release of a sizable number of long-trapped property buyers is expected to shake up the stultified real estate industry. Realtor Association of Greater Fort Lauderdale CEO Richard Barkett explained, “This will help give them an incentive to trade up or down. We’re embracing the plan because it’s better than what we have now.” Since every prospective buyer generated by portability will also be selling their current property, the net effect should be nominal despite the heightened activity. However, a small fortune in transaction taxes will help local coffers. Sadly, no amount of transaction tax revenues and doc stamp sales will reverse the recession.
Think tank political scientists and government economists never held much hope for a legislative solution since lawmakers searching for a balanced system could be hobbled by the need to compromise for political expediency. They’ve persistently maintained that the constitutionally empowered Taxation and Budget Reform Commission is better equipped to deliver the permanent long-term reforms necessary to kick-start the economy and bring equity to the tax system. A few days after Governor Crist signed the statutory tax reform bill on June 21st; former Republican Statehouse Speaker Alan Bense – chairman of the Taxation and Budget Reform Commission – expressed his intention to formulate an alternative plan in the event that the legislature’s efforts were undermined by politics. Heading the dedicated blue-ribbon panel of business, union and government leaders appointed by Crist, Pruitt and Rubio, Bense exclaimed, “My instincts tell me to go ahead and pursue other alternatives so that on January 29th we’re not caught flat-footed and have to just start up brand new.”
|CHAIRMAN ALAN BENSE|
Imbued with a broad mandate to assess the State’s existing budgeting needs and recommend the best possible fiscal recipe for addressing them, the Commission is empowered to place constitutional amendments relating to taxes and budgets directly on the November 2008 ballot. Suggesting that panel participants might be better positioned than elected legislators to make tough decisions free of political considerations, Bense commented, “I’m very cognizant of the fact that elected folks should frankly have more power than appointed folks, especially as it relates to taxes. But part of the job of the commission is to make some of the decisions that politically can’t be made.” Clarifying the Commission’s flexible mission limits, Bense said, “I don’t think there’s anything we can’t do. The challenge is narrowing the scope of our work.” Recommendations could include asking voters to eliminate sales tax exemptions, the imposition of an income tax or approval of a more equitable property-tax.
As legislators were fleeing the State Capitol, the Commission met on November 1st to discuss Appropriations from Special Session 2007C and Property Tax Relief and Reform Legislation from Special Session 2007D. The Commission has been accruing input from statewide public hearings conducted during the past year. Preoccupied with non-homesteaded property owners neglected by the legislature, Commissioners agreed to formulate relief for new home buyers, businesses and second home owners. Repeatedly pummeled or ignored by politicians since they are a paper thin voting constituency, they should benefit from the significant business representation on the Commission. North Broward Hospital District President Alan Levine exemplified the attitude of his fellow commissioners, “We’re their last hope. Nothing has weighed more heavily on me than that.” Commissioner Nancy Riley, president of the Florida Association of Realtors, confirmed Levine’s sentiment, “I was hoping we wouldn’t have to take the bull by the horns. But people are looking at us to make a difference.”
Consistent with his primary responsibility – to achieve consensus – Chairman Bense made a conciliatory comment applauding the legislature’s decision to forgo trying to phase out the “Save Our Homes” protective tax cap. Anticipating that the Commission would follow suit, he said, “I’m afraid if you touch Save Our Homes, it will taint any possible ballot initiative.”
It appears that the Taxation and Budget Reform Commission is the last, and best, chance to get it right. If successful, they will plug the leak and rescue Floridians from a world of pain. They will also have saved some endangered political legacies. Time, as always, will tell.
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Rep. Bogdanoff’s November Newsletter
Representative Ellyn Bogdanoff, District 91
November 17, 2007 - District 91 Statehouse Representative Ellyn Setnor Bogdanoff has redefined the function of "Majority Whip" in the Florida House of Representatives. The Galt Mile's voice in the Statehouse has successfully blended representing the interests of her constituents with educating her Statehouse peers about every important legislative issue. To keep concerned constituents abreast of legislative affairs, she has expanded an email update that she organized shortly after winning her District 91 seat; sending newsletters all year instead of only during the legislative session. House Speaker Marco Rubio and Governor Charlie Crist have repeatedly characterized her as a dynamo, conceding a good deal of the credit for this year's legislative output to Ellyn's non-stop networking skills. As the session progressed, Ellyn's talent for achieving consensus was reflected in the growing number of broad bi-partisan efforts.
In her November Newsletter, she reviews the legislature's accomplishments, matching her early session expectations of legislating insurance relief and tax reform to the bills passed in 2007. She points to two examples of self insurance funds enabled by the legislative facilitation of association risk pooling. She neglected to mention that the Galt Mile Windstorm Self Insurance Fund is expected to be the third risk pool approved by the Office of Insurance Regulation. Speaker Rubio, Senate President Ken Pruitt, Chief Financial Officer Alex Sink and Governor Crist unilaterally credited Representative Bogdanoff and Senate Insurance Chair Bill Posey with rescuing Florida's No-Fault protection by drafting strong anti-fraud measures. Ellyn accurately describes the property tax reform passed by the legislature as a disappointment. A House plan to which she contributed heavily would have created an incremental exemption equal to 40% of a County's median home value, portending exemptions in Broward County of $101,647 plus the $25,000 Homestead or $126,647 total - more than triple the $40,000 total exemption forced by the Senate. The House plan also would have capped annual non-homesteaded tax increases at 5% instead of the functionally useless 10% demanded by the Senate. By the way - this is the report referred to by Ellyn Bogdanoff at the November 12th Presidents Council meeting.
|CRIST, RUBIO & ELLYN MAKE POLICY|
“When I wrote you in January, we discussed a framework for insurance rate relief and meaningful tax reform to re-energize our economy in order to return Florida to its role as a national economic leader.
I think we all understand the need and have worked hard to address the twin threats of property insurance and taxes, and help make Florida affordable again for homeowners, families and small businesses. While we did not get everything we wanted, I think we made some progress over the course of this year.
First, I am proud to announce that on November 1, the Office of Insurance Regulation (OIR) announced the approval for the operation of the state’s first Community Association Self Insurance Fund that is the culmination of our efforts to remove regulatory barriers to risk pooling and self-insurance for multi-family dwellings.
A self-insurance fund enables community associations to form groups for the purpose of acquiring property and wind insurance coverage, and provides an affordable, fiscally sound alternative to traditional insurance by allowing the fund to self-insure a portion of their risk.
Backed by the Florida Hurricane Catastrophe Fund and the private re-insurer Berkshire Hathaway, the fund being introduced, CAM Self-Insurance Fund, is the first of its kind in Florida and pledges a fixed-rate premium for the first three years at an average savings of 20 to 35 percent compared to current premium levels.
A non-profit corporation manages the fund while AON Risk Services of Florida will market it to Florida Community Associations.
One other fund, the Palm Beach Gardens Condo Self Insurance Fund, is awaiting approval from OIR and is expected to begin operations early next year.
Another part of the law that we passed in January required insurance companies to provide discounts or credits for construction features proven to reduce damage from hurricanes and for them to use a uniform mitigation verification inspection form when factoring those discounts for wind insurance. This was implemented early this summer and the neighbors I have spoken with report significant savings - an almost 50% premium reduction on their windstorm insurance in many instances - by simply providing an inspection report to their insurance company of what steps they have taken to harden their homes.
Furthermore, the Legislature approved a program, My Safe Florida Home, which allows everybody a free home inspection by a trained and qualified hurricane mitigation inspector. Some of the benefits of receiving a free hurricane inspection through our program are identifying the potential insurance savings available to you based on the current structure of your home, and how you can strengthen your home and reduce your overall potential for hurricane damage.
In order to offer free wind inspections, the program has partnered with four firms in our area that have been trained in mitigation techniques and each wind inspector is required to pass a background check.
You can apply online, or over the phone on the helpline at 1-866-513-6734.
From the spring regular session, all the way through the fall, the House reviewed and approved several broad, bi-partisan consensus property tax relief plans. The elements of the plans we passed were meaningful, balanced and returned some fairness and equity to Florida’s property tax system and our record demonstrates a continued commitment to providing greater relief.
The Senate rejected much of our work and sent us their final offer in the final hours of our last special session of 2007
Although the House was extremely disappointed in the outcome, there are some positive elements in this package - things that Floridians have told us they wanted:
Every homeowner will see a larger Homestead Exemption on their non-school taxes. This will result in savings for every homestead property owner in the state.
Full Portability: A universally agreed upon aspect of the plan. Almost every Florida homeowner will now be able to carry up to $500,000 of their current Save Our Homes savings with them to a new home. Floridians will no longer be trapped in their homes and will be able to afford to move again. This is a major step forward for Floridians.
Cap on Assessments for Non-Homesteaded Properties: Florida property owners who have seen their property assessments double and triple in a single year will now benefit from a cap on at least some of their property assessments for non-education taxes. A cap will bring some predictability and stability for non-homestead property owners and will allow them to make investments and hiring decisions knowing the cost of their tax bill with some certainty. While the House’s leadership proposed a much more aggressive cap, we are pleased that any cap made it into the final package.
The plan that you will have the opportunity to vote for on January 29 does not go nearly far enough. The people of Florida deserve more relief and I believe we missed a major opportunity to provide meaningful relief to all Floridians. These tax cuts are a small step toward getting Florida’s economy back on track.
But know that the House is not done. We will continue to fight for more reform throughout the next session and beyond. This is no easy task but we recognize the importance of this issue to our families and our state’s economy. Stay tuned…
Your constant feedback has been very helpful. I heard many great ideas from many of you and some were incorporated into the final tax package. Please continue communicating with me and members of the House and Senate on the issues important to you so that we can work together to improve our community.
Please do not hesitate to call my office at (954) 762-3757 if you would like a detailed policy brief on the plan that you will be voting on in January, or if would like assistance with any other state matter. Our office hours are 8:30 am to 5 pm, Monday through Friday, and I am always available by email. If you would like me to add you to my email list and receive weekly updates from the Capitol, please let me know by emailing me at email@example.com or by calling our office.
Once again, thank you for the continued honor and privilege to represent you in Tallahassee.
Until next time,”
Florida House of Representatives – District 91
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Rep. Bogdanoff’s December Newsletter
Representative Ellyn Bogdanoff, District 91
December 17, 2007 - * The state of Florida appeared to have reached an accommodation with the Seminole Indian tribe over whether they would be allowed to operate Las Vegas style slot machines (Class III) in their casinos. The Tribe had unsuccessfully tried to secure an agreement for years. After a Broward County referendum legalized the use of slot machines in the four pari-mutuel establishments within the County, the state was legally obliged to allow the Seminole gaming establishments to have the machines as well. However, Governor Jeb Bush fought them until he was no longer in office. If Bush had permitted them to have slot machines at their gaming locations before the Broward referendum, the state could have negotiated for a healthy portion of their proceeds. Once Broward opened the door to allowing slots, the state could no longer preclude the Seminoles from also installing the devices. Divested of the State’s former leverage, Governor Crist had to sweeten the pot in order to secure a piece of the tribe’s action. The tribe wanted to offer table games. On November 14, 2007, the makings of a deal were in place.
Pleased with their successful Seminole Hard Rock Hotel & Casino operations in Hollywood (near Miami and Fort Lauderdale) and Tampa, the Tribe bought Hard Rock International and other related entities from The Rank Group Plc for approximately $965 million. The deal gave the Seminoles ownership of 68 company-owned Hard Rock Cafe Restaurants and retail stores, including 44 in the United States, three in Canada, 17 throughout Europe, three in Australia and one in Puerto Rico. Additionally, the Tribe controls licensing or franchise agreements for another 56 restaurants and five hotels with locations in places such as Orlando and Chicago, plus Hard Rock Live performance venues. Hard Rock Cafe International is headquartered in Orlando. In addition to its two Seminole Hard Rock Hotels & Casinos, the Seminole Tribe owns and operates five more non-Hard Rock Florida casinos in Coconut Creek and Hollywood on the Southeast coast, in Immokalee near Naples, on the Brighton Reservation north of Lake Okeechobee and on the Big Cypress Reservation south of Lake Okeechobee. Since opening their first bingo hall in 1979, the Seminole Tribe has been widely credited with kick-starting the Indian Gaming movement.
Tired of waiting for the State’s permission to install the Class III slot machines used by the Broward pari-mutuels (Gulfstream Park: Thoroughbreds in Hallandale, Mardi Gras Gaming: Greyhounds in Hallandale, The Isle at Pompano Park: Harness Racing at Pompano Beach and Dania Jai-Alai: Jai-Alai at Dania Beach), the Seminoles filed a motion in federal court last January that accused the Florida legislature of utilizing delay tactics to circumvent the negotiation process and requested that the U.S. Department of Interior immediately approve their slot machines. Governor Crist asked for a delay in a letter to U.S. Secretary of the Interior Dirk Kempthorne, stating, “I would appreciate the opportunity to enter into discussions with the Tribe about this ongoing issue. I therefore request that the Department not take any action immediately in order to give the State an opportunity to enter into a process with the Tribe.” With the table stakes significantly heightened, the Governor and the Tribe entered into serious negotiations.
|U.S. SECRETARY OF THE|
INTERIOR DIRK KEMPTHORNE
However, legislators opposed to any deal have continuously belabored and delayed the negotiations. Lawmakers from jurisdictions with major recreational facilities (i.e. Disney World, Universal, etc.) opposed any expansion of Florida’s gaming venues (including the pari-mutuels) that could cut into their share of the tourist dollar. Concerned about the anticipated sharpened competition, the four Broward pari-mutuels (with permission to operate 6000 new Class III slot machines) also opposed the Tribe’s efforts to upgrade their slot machines. This created a new wrinkle for local legislators. The Broward electorate voted their support for pari-mutuel slot machines with the understanding that profits would fund education and offset any local costs for increased social services and public safety to accommodate the expected additional recreational traffic. Enhancement of the Tribe’s local operations would cut into those revenues. As such, any financial advantage expected from a deal with the Seminoles might be offset by the anticipated corresponding drain on the local share of pari-mutuel revenues. These contradictory incentives contributed to the Legislature’s seemingly schizophrenic behavior. To create a nationwide formula for the 360 Tribal gaming venues in the United States, Congress passed Indian Gaming Regulatory Act (IGRA), a statutory requirement that Indian Tribes be permitted to offer whatever the State allows to other gaming interests.
The understanding arrived at by the Tribe and the Governor would allow the Seminoles to offer Class III slot machines and table games such as blackjack and baccarat. Under the agreement, the tribe will phase in the conversion of its Class II, video-style slot machines, to Class III slot machines, which operate more quickly while rewarding players with higher prizes and the house with higher profits. The Seminoles committed to converting 75 percent of them within two years and all of them within five years or the state will receive payments “as if the conversion has been completed whether or not the tribe has fully executed its conversion.” The Tribe will pay the State of Florida $50 million upon the federal government’s approval of the compact. Guaranteed annual minimum payments to the State of Florida will be $100 million. Starting in the third year, the state will receive between 10 and 25 percent of the revenue on a sliding scale, depending on total revenue amounts. Upon signing a 25-year compact with Seminole Tribe of Florida Chairman Mitchell Cypress, Governor Crist commented that the federal government had indicated it would allow the tribe to operate the slot machines, even if the state and tribe did not come to an agreement for profit sharing or oversight.
|SEMINOLE TRIBAL COUNCIL CHAIRMAN MITCHELL|
CYPRESS AND GOVERNOR CRIST MAKE COMPACT
On November 8th, Statehouse Speaker Marco Rubio provided House members with a legal opinion by former House Speaker, University of Florida law school professor and member of Florida’s most recent Constitution Revision Commission Jon Mills that addressed the Legislature’s role in the process of entering into a gambling compact with the Seminole Tribe. In short, the opinion concludes that any final compact will not be valid unless it is approved by the Florida Legislature. Specifically, Mills gives a detailed legal treatise, explaining, “It is my opinion that the Legislature must either delegate authority to negotiate and enter the compact, or must itself ratify and implement any proposed gaming compact to avoid a violation of Florida’s constitutional separation of powers doctrine in Article II, Section 3, Florida Constitution.1 The argument that such a compact can be negotiated and implemented in Florida without legislative consent is not supported by Federal law, and it is directly contrary to Florida law.” Simultaneously, Speaker Rubio filed a Petition with the Supreme Court challenging the Governor's authority to finalize any agreement without legislative ratification. Crist decried Rubio’s assertion as disingenuous, stating that Rubio had two opportunities in the 2007 legislative session to pass a bill that would have mandated legislative approval. Rubio refused to consider House Bill 209, sponsored by freshman Democrat Rep. Jim Waldman from Coconut Creek, or Senate Bill 160, which passed the Senate 39-1 and was available for the House's consideration in the final days of the session.
|UF CONSTITUTIONAL LAW|
PROFESSOR JON MILLS
In her December Newsletter, District 91 Statehouse Representative Ellyn Setnor Bogdanoff (representing the Galt Mile), echoes concern about this issue - the threat to the State’s separation of powers. While admitting that the Governor is clearly empowered to act as the State’s primary negotiator, Representative Bogdanoff confirms that the Florida Constitution imbues the Legislature with policy-making responsibilities. By negotiating the details of the State’s deal with the Seminoles, Governor Crist assumed a legislative obligation. Our Statehouse Representative simplifies for constituents the basis for objecting to this separation-of-powers violation, insisting that it trashes the constitutional checks and balances that underwrite the government. If the Legislature isn’t afforded the opportunity to ratify the deal, the Governor will have successfully usurped a legislative power. By overlooking this jurisdictional gaffe and ignoring its impact on constitutional protocol, the Governor will have embarked on the infamous slippery slope. Whenever a branch of government infringes on another, if no objection is made and enforced, it serves as a de facto constitutional amendment. Of course, constitutional amendments are the public’s business. While the issues are certainly important, if the format consequently shreds the constitution, Ellyn contends that the price is too high. However, even if the Supreme Court is amenable to the Governor’s negotiations, our Statehouse Representative opines that the funds expected from gambling revenues will contribute little to curing the State’s budget deficit. For Ellyn’s current evaluation of the issue, Read On! - [editor]*
|RUBIO CLAIMS CRIST EXCEEDED AUTHORITY|
Many of you have called my office about a tribal-state compact that the Governor and the Seminole Tribe of Florida are negotiating to regulate Class III gambling on tribal lands in Florida. I would like to take this opportunity to provide you with a brief overview the State’s obligations and choices in this matter.
In spring 2005, Broward County voters authorized Las Vegas-style Class III slots at certain pari-mutuel gambling sites. This authorization triggered the Indian Gaming Regulatory Act (IGRA), a federal statute that requires Florida to negotiate with any Indian tribe wishing to offer identical Class III slots. Subsequently, the Seminole Tribe of Florida requested to enter into negotiations with the State.
The Florida Constitution does not set forth a process for entering into compacts like that which the IGRA requires. It seems clear that the Governor has the authority to negotiate with the Tribe as Florida’s chief executive. However, the Constitution vests the power to create state policy in the Legislature. It is the House’s position that he may not unilaterally exercise certain powers that the Florida Constitution expressly delegates to the Legislature.
Now that the Governor reached terms with the Seminole Tribe, there remains a question over ratification of the compact. The federal government has no authority to require Florida to allow illegal table games on tribal lands and the Legislature has a rightful role in deciding the state’s policy on gambling expansion. As a result, the House filed a Petition with the Supreme Court asking the Court to declare the compact invalid unless and until it is approved by the Legislature.
The question over whether to legalize table games is a policy issue, not a legal obligation. Federal law only requires Florida to negotiate over how to regulate Class III slot machines on tribal lands. Key policy questions related to the gambling compact include the number of slot machines allowed, the State’s share of slot revenue, and which state entity will have oversight over Class III Indian gambling. The IGRA does not require Florida to negotiate over allowing table games, which are currently illegal in Florida.
This debate is about more than the expansion of gambling. It is about protecting our system of checks and balances. Our constitution divides power to assure that no one person has too much power. The House made the decision to file the petition believing it is our obligation to protect the constitutional power of the Legislature.
|FED. & STATE CONSTITUTIONS SEPARATE THE 3 BRANCHES|
OF GOVERNMENT TO MAINTAIN CHECKS AND BALANCES
Most of our neighbors have the wrong impression that tax revenues from the expansion of gambling solve the current budget crunch. Even the most liberal forecasts of table game-driven revenue would be insufficient to offset Florida’s projected revenue shortfalls. Florida presently faces a budget shortfall of about $1.5 billion, with similar shortfalls projected in future years. Recent media reports have indicated the gambling compact may generate anywhere from $50-100 million per year, depending on the terms. Also, any new state revenue would correspond with increased demand for social services and public safety, while displacing economic and human resources for local businesses. Additionally, it is believed that the expansion will grossly impact our pari-mutuels and those businesses that service them, thereby reducing revenue to the state. So it is anticipated that the $50-100 million received by the compact will have a substantial offset when other revenues diminish as a result.
Oral arguments will be heard at the Supreme Court on January 30th and I will be there. This is a fascinating constitutional issue and one that will be an incredible learning experience regardless of the result.
I will keep you posted as this issue progresses. If you have any thoughts on the matter, I would love to hear from you. No doubt, gambling will be one of the major issues of the 2008 legislative session.
Thank you again for your support and for allowing me the privilege of serving as your representative in the Florida House.
Until next time,”
Florida House of Representatives – District 91
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