Tuesday, September 2, 2008

Property Taxes - Florida versus California

I was reading the Wall Street Journal (Personal Finance, D8) this morning and came across some residential properties for sale in California. The sale price, description of the property and notable items were all listed in the recap. Also listed were the property taxes, the values of which grabbed my attention.

They were as follows:
Kenwood, CA. Sale Price - $2.45m, Taxes - $28,500
Healdsburg, CA Sale Price - $3.495 million, Taxes - $23,797
Napa, CA Sale Price - $8.5 million, Taxes - $85,000

The reason I found them to be so interesting was because, although I have always been told that California possesses some of the heaviest property taxes in the country, they seemed a bargain to me, living in Florida. For kicks and giggles, I compared them to similar valued properties in the county that I live, Hillsborough County, Florida. I ran the tax estimates using our county's tax estimating calculator (quite a nice feature, I might add) and the calculated values were as follows, respectively (MOL) : $50,000, $72,000 and $170,000. WOW! Roughly twice what our California brothers and sisters pay.

Now, in fairness, these California taxes will in all likelihood increase at the time of sale, so the comparison is not 100% fair, but all things considered it was still a fairly shocking exercise for me. While the commercial market is still holding up fairly well in Florida, the residential market is really in the dumps. Call me crazy, but could this be one of the reasons Florida's residential market is doing so poorly? The State has always marketed itself as an inexpensive alternative to its more glamorous competitor, California and at first glance is the State really "inexpensive?" Florida tax coiffures and property values have swelled in the last 10 years, along with local and state expenditures to match. In fact, growth in local government expenditures over the past 10 years has FAR outpaced population growth. Let's watch the people of the State of Florida now futilely try to take those revenues away from their government. The absurdity of relying so heavily on variable property taxes to support a relatively fixed budget could not be more apparent. In the end, the State's officials, as always, will do nothing until there is some sort of accompanying crisis. What is sad is the the State may already be in a crisis, an economic one as businesses and migrating retirees appear to be spurning the State in large numbers (across the State, population and economic growth numbers have been dramatically reduced downward for the near and medium terms).

I know this diatribe has nothing to do with Triple Net Investments, but I found it to be an interesting fact (indictment?) of Florida's stuck-in-the-mud economy.

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