Analysis of Property Tax Reduction and Diluting Home Rule
At a special session June 1 -3, 2026, the Florida legislature made it clear by a vote 75-26 in the House and 30-9 in the Senate that it intended to eliminate property taxes in Florida over time. The first reductions kick in for the 2027-2028 fiscal year – a year from now. The Florida Legislature and the governor have made it clear that they not only want to reduce property taxes but eliminate them altogether. Perhaps the most significant tax reduction ever. Florida’s Homestead elimination plan is considered by some to be the most ambitious tax reduction in history.
Such a tax break has a basic appeal, but what are the consequences? The new law would reshape the fiscal foundation of Florida’s cities and counties. Citizens will have an opportunity to make their voices heard regarding property tax reduction on the November 3rd ballot, Amendment 3, a constitutional amendment. It takes 60% of the votes to turn the State plan into law.
Discussion of Real Estate Taxes
In 2024 property taxes accounted for approximately 72-75% of local government tax revenue. The highest per capita rate is New Jersey at $3,912 per capita and 2.49% of median home value. The lowest rate is Alabama at $659 and 0.38% respectively. Florida’s per capita rate is $1,654 and per cent of home value of 0.83%.
No single alternative revenue source can substitute for property tax. The most common replacement is sales tax which is regressive, varies from year to year, and is often already near a cap. Every alternative like sales taxes, local income taxes, state transfers or federal grants has specific deficiencies, they tend to be more regressive and/or more volatile sources which cause unintended knock-on effects
The national average home value increased from $329,000 in 2020 to $412,000 in 2024, roughly 20%, making property tax a political hot potato. Many residents, especially seniors find themselves asset rich but income restrained. Home owners are also being hit with rising insurance premiums and utility costs, compounding the problem.
Results of Property Tax Cuts
All cities spend more on Public Safety (police and fire) than they take in in property tax, thereby requiring cities to cross subsidize from other revenue sources such as sales taxes, fees, or transfer revenues. A substantial cut in property tax means Public Safety will require a larger cut of total tax revenues since public safety levels are mandated by law, making budget cuts difficult. Revenue shortfalls are compensated by reducing other services such as parks.
Real world examples show that large scale property tax cuts consistently produce fiscal chaos. Unexpected consequences include bond rating downgrading. And of course, service cuts. Phased implementation and state revenue replacement are two ways to provide relief to homeowners without drastic reduction in municipal fiscal capacity. Some states have adopted a “circuit breaker” program which caps a homeowner’s tax liability to a fixed percentage of household income, generally 3 to 6%.
Benefits from Tax Reductions
FL’s median home value has increased over 40% since 2020. Increased home value particularly impacts long-term home owners, senior citizens and retirees, and low-income families. With no state income tax and no homestead property tax, Florida will be able to extend unmatched tax environment to residents and families.
Lower city taxes can attract business, competing against nearby communities, by launching a sort of “beggar thy neighbor” strategy that could result in a race-to-the-bottom.
By reducing funds available, cities are required to prioritize “core services”, lower property taxes prevent back door revenue diversification to support social programs such as environment, housing, and culture.
However, property tax reductions can actually foster residential development by lowering costs, increasing housing turnover, and improved affordability.
Constraining revenue in theory forces local governments to innovate and eliminate waste. Unfortunately, this approach generally takes time to produce results and/or forces cities to cut services, often at the expense of those citizens most in need of support.
Case Against Drastic Property Tax Reduction – Fiscal Realities
Property taxes are the only stable, locally controlled revenue source for cities and counties. Property taxes are the kind of steady revenue stream required for bond credit worthiness. Looking at history, there are times when tax reductions have been exceeded by the increased interest rates generated by a lower bond rating. A bond rating lowered from Aa2 to Aa3 on a $200 million 20-year bond (such as Delray’s water plant) translates to millions of dollars in additional interest expense.
Renters receive no benefit from homestead exemptions but face higher rents when landlords pass along costs of higher taxes due to increased millage rate on commercial properties to fill funding gaps.
Sales taxes are volatile because they are dependent on consumer spending. They are also regressive, impacting lower income residents disproportionately. Florida Microsimulation Findings conducted by the Florida League of Cities demonstrated that a 38% loss in ad valorem revenue (property taxes) resulted in a 14% drop in the general fund indicating that millage rates must nearly double if service levels are to be maintained.
Savings can be generated by deferring infrastructure maintenance. However, infrastructure maintenance of roads, parks, water and sewer systems compounds over time and kicks ever increasing, compounded expenses down the road for a younger generation to pay. The expense to restore the Delray golf course is a good example where delay caused the cost to restore the golf course from approximately $10 million to nearly $30 million.
In 2025 Indiana capped local rates using homeowner credits but then had to respond to revenue shortfalls with fiscal gymnastics and one time gap fillers. Wyoming enacted cuts but didn’t provide backfill funding, meaning local government had to find sources to fund the reduced revenue.
Parks, cultural programs, housing assistance, community services, libraries, and senior services are generally the first programs to be reduced but, as a relatively small portion of the budget, do not make up for the shortfall. If a city’s quality of life is reduced, it risks out migration of wealthy, mobile residents and businesses.
Other items to consider are the fact that debt service cannot be reduced and the legislation as drafted provides no backfill provision. Many municipal experts believe a backfill replacement mechanism is required for a successful property tax reduction.
Impact on Delray – according to Delray staff
The findings from staff analysis include:
1. Loss of $7 -12 million in revenue in fiscal 2027-28 and further losses in 2028-2029 when exemption rises to $250,000
2. Property taxes make up more than half of the General Fund so the impact of reduction in ad valorem taxes produces significant structural issues
3. The proposed reduction would require 6% cut to all departments in Delray, 17% if police and fire are protected
4. Proposed consideration of park fees, library card fees, service fees, higher millage, and Municipal Service Taxing Unit (MSTU) for beach erosion, street paving, and parks
5. Voluntary payment in lieu of taxes (PILOT) to support city services
The basic question is whether delayed, non-essential hiring, deferring lower-priority capital purchases, automating municipal functions, consolidating administrative costs, slowing down capital projects, and reducing overtime and discretionary funding can in combination make up for the approximately $12 million in lost revenue.
Examples of Taxes Reinstated and Examples of Concern Over Amendment 3
Public records and news coverage show the following cities reduced or froze property taxes and only later realized cuts were unsustainable. These cities include Des Moines Iowa, Detroit Michigan, Brookhaven Georgia, and Pittsburgh Pennsylvania.
The following South Florida cities have publicly warned about tax reduction impacts: Parkland, Fort Lauderdale, Hollywood, Pembroke Pines, Coral Springs, Miramar, Davie, Sunrise, Weston, Boca Raton, West Palm Beach, Miami, and Miami Beach.
The Florida League of Cities, Florida Association of Counties, and Florida’s Sheriffs Association strongly argued against the cuts specified in the legislation. Smaller counties argued against the legislation because they would be more impacted than large cities; the impacts could be existential.
If a tax reduction is implemented and then rescinded --- the damage takes as much as 10 years to recover. Experience shows that it takes 3 to 7 years of displacement effects to become apparent through service quality deterioration such as potholes and vehicle maintenance costs.
Detroit is a good example, almost going bankrupt. Cities which reduced property taxes, froze millage rates or offered tax abatements which then found them unsustainable include Colorado Springs, Denver, Wichita, Detroit, Columbus, Nashville, Ogden, Seattle and Spokane.
Amendment 3 and Implementation Legislation
In this fall’s election, a positive vote of 60% of voters is required to approve the constitutional amendment. The legislation has the beguiling title of Save Our Homes from Excessive Property Taxes. And will increase the Homestead exemption from $50 K to $250K over two years. In addition, the non-homestead assessment cap per year would be reduced from 10% to 5%. The state wide reductions could add up to $12 billion.
The legislation accompanying Amendment 3 places local government in a “constitutional straight jacket”, further reducing home rule, and nearly eliminating local government flexibility to manage its budgeting and operations. Tax reduction doesn’t apply to school district property taxes which make up approximately 50% of ad valorem taxes.
The legislation limits cities to spending property tax revenues to 7 constitutionally enumerated categories (public safety, education, infrastructure, natural resources- flood control, bonds and debt services, employee retirement services, general operations and administration). Funding libraries, parks, economic development, cultural arts, housing assistance, community redevelopment, environmental programs, social services are disallowed. It also limits future property tax assessments on businesses. And cities are required to conduct annual budget cutting exercises of up to 10%
This dramatic attack on local sovereignty is best explained in an editorial by Jeff Brandes, President of the nonpartisan Florida Policy Project. “Power, not taxes, is what this debate is really about. There is a difference between cutting taxes and changing who controls government.
For more than half a century, Florida has embraced home rule. Now imagine counties and cities that can no longer fund themselves. Imagine local officials traveling to Tallahassee not to seek a grant for a new project, but to keep deputies on patrol, firefighters in stations, and ambulances on the road.”
Quotes from Palm Beach County Officials
Palm Beach County Administrator Joseph Abruzzo has recently explained the challenge of operating the county at full service without hundreds of millions of lost tax dollars. “This property tax initiative will change county government, local government, as you know it,” he said. “You will be back, very upset, that things are lacking. What’s on the ballot may save us, including me, personal money, but it’s not going to benefit services, roads.”
County Property Appraiser Dorothy Jacks has warned that some smaller cities might not survive the hit. Jacks warned county commissioners about how the cuts could particularly impact smaller municipalities — so much so they could face dissolution. “It’s a shame that (local) government is the government that is being targeted.”
Jacks said, “The important point is it’s not an elimination of property tax if you’re still going to pay school tax. This was sold as an elimination of property tax. And in fact, you’ll still continue to pay school tax, which for most people is the largest millage rate you pay amongst all the millages.”
Alternative Revenue Sources
Each alternative revenue source has its drawbacks but could make up the revenue loss
1. Local Earnings Taxes – progressive taxation but probably not politically viable
2. Increased sales taxes – already at a high level and its regressive
3. User Fees and Special Assessments - fees for water (and sewer) disproportionally impact low-income families
4. Federal funding and grants – not a stable source and Feds are already reducing grants and funding
5. Tourism and hospitality fees – negative impact on local businesses, reputational risk
6. Land Value Tax – too similar to income tax
7. Extended placement schedule for fire truck, police vehicles, and park and road maintenance – causes greater costs over time
How to Protect Homes Better
Amendment 3 and the supporting legislation are like taking an axe to the tax issue when a scalpel is called for. Multiple actions could cushion the blow:
1. Local autonomy safeguards – allow communities to override state provisions
2. State revenue replacement – implement a plan to substitute revenue losses with state revenue 3. Phase implementation over 5 or more years – gives local entities time to find and implement alternatives
4. Start reducing expenditures now to prepare for the initial impact in 27-28 budget
5. Address assessment inequities rather than blanket tax rate cuts
6. Implement tax deferral programs for qualified homeowners until sale of property or estate settlement
7. Conduct full cost analysis and simulation now to model what new tax provisions will require in service cuts, increased automation, increased state revenue replacement, and raised the millage rate
8. Income based targeting; relief proportional to demonstrated need – probably not politically palatable
9. Increase broader source of local revenue such as creative expansion of fees, land value tax or even local income tax
Closing Note
Real estate tax reduction is politically popular and even fiscally necessary for specific populations but it is not a free lunch, free of unwanted consequences. History is clear: large scale property tax cuts without adequate, permanent replacement revenue results in a reduction in quality of life over time.
Maybe voters on November 3rd could indicate to their elected representatives that they should go back to the drawing board and address the tax reduction issue by drafting a better plan.
Hopefully this overly long note will be useful as you consider your vote. Whatever your choice is, be sure to vote on November 3rd. It’s important.
Latest News: A judge in Leon County has just ruled that the language on the Amendment 3 ballot is “biased, inaccurate and misleading” and so ruled that it must be written before the November election. The judge stated that the Title (Save our Homes, etc.) was more of a political slogan than a description of the amendment. He correctly stated that the amendment does not guarantee a lowering of all tax bills because special assessments and raised millage rates would likely offset any savings. And he objected to the fact that the amendment is not clear about how it drastically reduces Home Rule by shifting authority from municipalities to the state.
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