This is Part III of a continuing Palmetto Bay educational series. Part I provided the initial background, clarifying that Palmetto Bay runs on much more than just the annual property tax/ Part I focused on one of the additional sources of revenue: FPL's franchise fees. Part II evaluated the cost of the tax and impact upon having to compensation for the loss, should that occur. Palmetto Bay has significant capacity to adjust the municipal property tax millage rate to compensate. 2.2387! A cessation of collecting the FPL franchise fee (tax) paid by electrical service consumers hits governments hardest that are near or at their maximum millage allowable (the 10 mill cap).
So now, here in Part III, I am simply going to discuss who is better or worse off if Palmetto Bay does not enter into a Franchise Fee agreement with FPL. Note there are many ways to view the impacts to many different categories of property owners/taxpayers. I offer a few examples that immediately came to mind.
Note: You may agree or disagree in all or part of my assessments.
BIG, BIG winners: Tax exempt properties: Any and all property owners who are exempt from payment of property taxes such as schools, hospitals, Houses of Worship, Charity owned properties. They may not d\pay property taxes directly, but they do pay franchise fees through their electric bills which may be substantial in comparison to average homeowners. These tax exempt properties get closer to being truly “tax exempt” as they presently do pay taxes to the local government(s) in the form of “FPL Franchise Fee.” This is the one classification of property owners who do NOT realize a shifting of tax burden from their electric bill to the property tax roll.
Homeowners: A franchise fee is not deductible from Federal Taxes, but municipal property taxes are. So, by moving the tax from their electric bill back to the homeowner's municipal property tax bill, they gain the deduction while “lowering” the cost of their monthly electric bill (not the cost of electricity, but losing a 3-6% “fee”).
Seniors: Those who are on fixed income save the franchise fees off their electric bills while having greater protections from rising property tax burdens through property tax exemptions.
Owners of taxable properties, commercial or residential, including Homeowners: A greater local tax burden is shifted onto them as 501(c)3's that are exempt no longer pay their municipal tax through the franchise fee, therefore the pool of tax payers shouldering the tax burden is reduced – increasing the burden on those left to cover the revenue/expense needs of the local government.
Homeowners: Who use the Standard Deduction on their Federal Income Tax, not filing an itemized return - they cannot deduct the increase in the property taxes, but then again, they did not deduct prior taxes either and could not deduct the franchise fee.
Users of alternative energy: Property owners, residential or commercial, who have reduced their electric bills due to investing in solar or other means of increasing energy efficiency will lose the savings of a reduced franchise fee cost formerly realized through a reduced electric bill due to the shifting of the increased burden over to their property tax bill.
Investors in alternative energy: Loss of incentive of savings. 3 - 6% is, after all, 3 – 6%. This may represent a ‘tipping point’ in deciding whether to invest in alternative energy.
Commercial property owners: The electric service bill (including the franchise fee) is deductible to the extent allowed by law – as are the property taxes paid.
Renters: would they save more in reduced electric bills over the increased cost of rents that may occur if the local government increases the property tax millage rate, which is also passed on to the renters?
Other interesting points (or not):
Conservation: you can control your electric useage through smart innovations or simply frugal living. This provides some control over the 3-6% by electric services users. This is lost should the tax be shifted to property tax bills.
DISCLAIMER: This information is provided in order to debate an important policy issue – a tax collected by FPL through electric service bills. No blog post, including this series, should be construed as providing tax or legal advice. You should consult your own licensed attorney or accountant on any legal or tax issue.