Tax the Builders (again)

Tax the Builders (again)

government watch by Jean Gruss | Editor/Lee-Collier

Lee and Collier elected officials mull new taxes on

builders even as the economy slows. Their mission is to fix the latest social crisis: lack of affordable housing.

Builders and developers are the favorite whipping boys of politicians.

The latest beating: Lee and Collier politicians are discussing a tax on commercial development such as offices, shops and warehouses to pay for affordable housing. This is the despite the fact that residential home prices are declining and the supply of rental homes is rising.

One of the few business-friendly politicians is sounding the alarm. "We can put Lee in a recession," warns Lee County Commissioner Tammy Hall.

Hall told a group of real estate executives recently that a moratorium on new construction may occur if taxes on new construction keep rising. "Ya'll, the wave is coming," she implored.

In particular, she says the power of community activists who want to block development has reached the point where they are swaying elected officials on even the most minor zoning cases. "These special-interest groups really work hard," Hall says. "We're not hearing from you; I'm only hearing from residents who are exasperated with growth."

Indeed, Lee County commissioners tripled the taxes on builders to help pay for roads starting Feb. 1. The tax increase was approved with little opposition from businesses and few challenged them at county commission meetings even though most builders say it likely will have a chilling effect on new construction.

"There has to be a better way than taxing those people who are creating jobs," says Kevin Fitzgerald, president of commercial real estate brokerage NAI Southwest Florida in Fort Myers who is a member of a special committee of the Real Estate Investment Society established to track the issue.

Fitzgerald also understands the municipal politics. He was a city councilman in Muscatine, Iowa, before moving to Florida.

Business organizations in Lee such as the Real Estate Investment Society, CCIM Southwest Florida and the Horizon Council are starting to discuss how to address issues such as affordable housing without taxing the same industries again.

Members of the Horizon Council recently confronted the county's consultants who suggested raising taxes to pay for affordable housing. The research by consulting firm Clarion Associates suggests that commercial development is responsible for the affordable-housing shortage to the tune of $7,036 to $36,633 per 1,000 square feet. "To really get at the problem, it's going to be necessary to find a dedicated source of funding," says consultant James Nicholas.

Steve Shimp, president of Owen-Ames-Kimball Company, a builder in Lee County, criticized the consultants for excluding any solution that would lower the tax burden on builders. "It's remarkably absent from that list," Shimp quipped.

Another board member, Ron Inge, suggested that the affordable-housing crisis may be dissipating as the residential real estate downturn continues. "What may have been a problem a year ago may not be as prevalent today," he says.

Indeed, advertisements in local newspapers in Lee County are touting discounts and new homes priced around $160,000, within the means of many households in places such as Cape Coral and Lehigh Acres.

Look south for solutions

Lee businesses may want to look south for some ideas. In Collier County, businesses fed up with rising taxes successfully fought back a proposal to tax commercial builders for affordable housing last year.

In addition to fighting off the tax, the Economic Development Council of Collier County has proposed alternatives in conjunction with the Urban Land Institute, a nonprofit organization that is at the forefront of land-use issues nationally.

It's a lesson that business groups in Lee County might want to heed. "You've got to be part of the process and be involved in the discussions," says Tammie Nemecek, president of the EDC.

Builders will find many of those suggestions sensible, including deferring impact-fee taxes, speeding up the permit process and allowing construction of more homes per acre than what is allowed now.

County commissioners agreed to work with the EDC, but their fight is hardly over. "It's a long-term issue," says Nemecek. "It never really goes away."

Faced with declining revenues because of the residential slowdown, Collier commissioners recently discussed increasing the taxes on builders by as much as 40% to cover the shortfall to pay for new roads. "They refuse to think that they're part of the problem," says Brenda Talbert, executive vice president of the Collier Building Industry Association.

Already, Collier has the highest impact fees in the state and one of the lengthiest permitting processes in the country, according to ULI. "We have to look at alternative sources of revenues," says Nemecek.

By this summer, the EDC hopes to have helped politicians craft an acceptable solution to affordable housing. "You have to have a plan now," Nemecek says.