If Real Estate Values Have Gone Down, Why Did My Taxes Go Up?

In Florida this is the time of year when property owners are notified of the amount of the real estate taxes to expect on the tax bill which will be sent the first of November.  This notice know as a TRIM or “Truth in Millage” notice.   In some cases, for the year of 2010 it is showing an increase in the real estate taxes, even though values have declined.

This increase is because of one of two possibilities.  Although the Market Value may have declined the “Assessed Value” (the amount used to calculate your taxes) increased because of the provisions Florida’s “Save or Homes” or Homestead Exemption legislation.  Homestead Exemption provides that the assessment for residential properties, with Homestead Exemption, cannot increase by more than 3% or the Cost of Living, whichever is less.  For the year of 2010 the Cost of Living increase is calculated at 2.7%.  Therefore, for residential “Homestead Exempt” properties the assessment increased by 2.7%, This can happen up until the Assessed Values and Market Values meet.  But under no circumstances can your Assessed Value exceed your Market Value.

The other possibility is that the Millage Rate increased more than the property’s value decreased.  Real estate taxes are calculated by multiplying the “Assessed Value” by the “Millage Rate”. The “Millage Rate” is based on the amount of money local government needs from real estate assessments divided by the total “Assessed Values.”  For example, if government needs $1,000,000 to operate and the total “Assessed Value” is $50,000,000 the millage rate is 20 mills or more simply 2.0% of “Assessed Value”.  If government needs $1,000,000 and the total “Assessed Value” declines to $45,000,000 then the Millage rate will increase to 22 mills or 2.2%.  Therefore, when “Assessed Values” decline and government needs remain the same the Millage rate will increase.  For properties in the City of Miami, the Millage rate from 2009 to 2010 increased by 14.27%.

For example, if your property is in the City of Miami, unless the “Assessed Value” decreased from 2009 to 2010 by more than 14.27% your real estate taxes will be the same or higher.  This increase in taxes is a result of the millage rate increase because of the decline in “Total Assessed Values” without a equal decline in the Governments budget for the year.

Although the “Millage Rate” for all classes and types of properties in a government area are the same, the limitation on the increase in assessments under “Homestead Exemption” does not apply to non-homestead properties, for those properties there is now a 10% increase cap for the portions of your tax bill that are paid to the City/County/Region, but the cap does not apply to the School Board portion of which for the Assessed Value always equals Market Value, and is taxed on that amount.

In reviewing the assessment for commercial properties of our tax appeal clients, we have found moderate increases in the assessments but with the increase in the millage rates the real estate taxes have increased.  For example, if your property is in the County and the “Assessed Value” remained the same, the increase in the “Millage Rate” of 8.6% means your real estate taxes are 8.6% greater.

What can you do to make sure you are only paying your fair share of real estate taxes?  If you believe your assessment is too high you can file an appeal petition or have us appeal on your behalf.  If you believe the millage rate is too high you should attend the City and County Budget Hearing Meeting to express your feelings and demand a reduction in government spending.  One solution I have suggested is that every government expenditure, every payment and every expense should be easily available for public review online.  Our government needs to be held accountable for how they spend our tax dollars.

By Tom Dixon