Economic Impact on Florida of Amendment

1

• Economic Impact on Florida of Amendment 5 -
• Eliminating State Required School Property Tax
  and Replacing with Equivalent State Revenues to
  Fund Education
• August 2, 2008
• Hank Fishkind, Ph.D.
• Brian Martin, Associate
• Fishkind Associates, Inc.
• 12051 Corporate Boulevard
• Orlando, Florida 32817
• 407-382-3256 or Fishkind.com

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Basic ProgramSwap School Property Tax for Sales
Tax

• Eliminate property tax set as the required local
  effort (RLE) for all school districts
• Cuts property taxes by about 8 Billion
• Gets rid of State Property Tax
• Local discretionary capital millages not
  affected
• Replace the 8 Billion in revenue with higher
  sales tax revenues from
• Increase the sales tax rate by 1 cent
• Repeal some sales tax exemptions
• Maintain exemptions for food, prescription drugs,
  health services, residential rent, electricity,
  and heating fuel
• Repeal exemptions not in public interest
• Tax some items that are currently excluded
• Look at other revenue sources

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27 Average Statewide Property Tax Savings
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Economic Impact of Shifting 8 Billion in
Property Taxes to Sales Taxes

• Lower property taxes result in
• Increased disposal income for owner occupied
  dwelling units
• Increased net operating income for all rental and
  income producing property
• Increased value of all property in Florida
  increasing wealth
• Higher investment in Florida real estate boost
  to housing and non residential
• Property Tax is 2nd largest expense for
  businesses
• Increases in spending based on higher wealth
  levels
• Increased migration to Florida
• Higher sales taxes result in
• Higher prices for existing and for newly taxed
  items
• Possible lower demand for existing and for newly
  taxed items depending on elasticity of the item.
• Net Economic Impact depends upon the balance of
  the positive and negative effects.

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Summary of Economic Impacts from Swap (Dollars
in B 2007)
10.0 Billion of Economic Output over 5-Years
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Residential Construction Impacts - Year 5
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Amendment 5 Creates Wealth

• How does Amendment 5 create wealth?
• All income producing properties are valued using
  net operating income and a cap rate that depends
  upon land use type risk
• Example of valuing a grocery anchored shopping
  center
• NOI 2,000,000
• Cap Rate 10
• Value of the Center 20,000,000 (NOI/Cap
  Rate)
• What happens to the shopping center if the swap
  is enacted?
• Property taxes fall by 4.5 mills (4.5/1,000) or
  45,000
• At a 10 Cap Rate the shopping centers value
  increased 450,000
• Portion is passed to tenants making them more
  profitable

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Instant Wealth Created by Amendment 5

• All Florida property becomes more valuable at a
  lower property tax rate
• Eliminating 8 Billion in property taxes creates
  approximately 80 Billion in increased values and
  higher wealth for property owners
• Benefits of wealth creation lower property
  taxes
• Stimulates construction of commercial property
  since it is now more valuable to own
• Creates jobs and incomes
• Stimulates spending in Florida
• Lower property taxes result in higher levels of
  population growth
• Lower property taxes stimulate residential
  housing starts

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Amendment 5 Property Tax Savings By County
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Residential Household Effect

• If the taxable value of a persons house is
  200,000, they could spend up to 86,717 on
  taxable items before losing money on a 1-Cent tax
  increase.

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Amendment 5 Conclusions

• Swapping 8 Billion in Real Estate Taxes for 8
  Billion in Sales Taxes will be beneficial for
  Floridas Economy and Citizens
• Program increases wealth
• Program increases economic growth
• Program stimulates investment in Florida