Ford Supports Hurricane Damage Valuation Adjustments

Insurance threatens tax base

By Wayne T. Price, Florida Today, August 10, 2006

Skyrocketing insurance costs for income-producing properties in Brevard County could erode the county's tax base by $1.5 billion next year, Brevard County Property Appraiser Jim Ford warned Wednesday.

That, in turn, could force local taxing authorities to raise what's known as "millage rates" to maintain current revenue levels to pay for services, Ford said, effectively increasing taxes for thousands of residential property owners.

Under Ford's scenario, owners of commercial property who pay more for property insurance will make less of a profit on their revenue-generating property ventures. Many of them then would challenge their current tax assessments, arguing their property is worth less because it is making less of a profit for them.

"Something needs to be done to prevent the erosion of the tax base," said Ford, who predicted the taxable value would drop by about 4 percent.

Ford's prognosis is the latest dire assessment resulting from increases in property insurance costs in Brevard and throughout Florida.

Many residential property owners already face increases of thousands of dollars for insurance coverage following the active and devastating 2004 and 2005 hurricane seasons. Also, insurers continue to drop customers from their rolls to reduce their liability if a major storm occurs.

Businesses, facing much larger insurance rate increases than residential properties, also are feeling the pain, with some questioning whether they can continue with plans to grow or purchase property here, or even afford to remain in Florida because of skyrocketing insurance costs.

Brian Lightle, president of Melbourne-based Brian Lightle Commercial Real Estate, said he personally knows of some commercial real estate deals -- including at least two in Brevard -- that fell through because of escalating insurance costs.

"People are dropping transactions because of that expense," Lightle said. "There is no positive aspect to this at all."

Closer look

Ford said his office analyzed a sampling of 34 income-generating properties to study the effects rising insurance rates would have. There are about 10,000 such properties in Brevard.

One example used was Titusville's Dairy Plaza, owned by Sarah Vandagriff of Ormond Beach. Dairy Plaza's tenants include a Winn-Dixie supermarker supermarket, a Curves for Women fitness outlet, a Movie Gallery movie-rental shop and a Dollar Store.

Vandagriff said her previous policy with Allstate cost $18,000 a year until the company stopped covering commercial property. A surplus lines company stepped in, then canceled her policy a few weeks ago.

Now, the only quote Vandagriff's agent can find -- from Lloyd's of London -- is for $122,000, she said.

Ford's office estimated that Dairy Plaza's annual net operating income would drop from $498,787 to $394,787 as a result of increased insurance expenses.

That would result in a corresponding reduction of nearly 21 percent in value of the property -- from $4.16 million to $3.29 million, he said.

Vandagriff said Ford's estimates are correct.

She predicts commercial property owners like herself soon will flood county assessors' offices in many parts of Florida to challenge the assessments and get them lowered because officials aren't taking into account the impact of rising insurance has on their properties' taxable value.

"There are a lot of us," Vandagriff said. "Every shopping center owner, every apartment complex."

Research needed

Not all area municipal budget officials were sure of Ford's scenario, or seemed altogether comfortable with what he is saying.

"We're going to have to look at this more in-depth," said Ed Mack, finance director for the city of Cocoa. "I need to do some research on it."

Regardless of what ultimately happens with taxes next year because of insurance rates, businesses are feeling the squeeze from higher costs, and it's generating pessimism.

Matt Longmire, owner of All Star Printing in Indian Harbour Beach, said he is having a hard time finding insurance for his small-business property.

His fear is that many other companies, facing astronomical insurance rates and policy cancellations, will be forced to leave Florida.

"To me, it really does not look good for this county, and I don't see it getting any better," Longmire said.

Contact Price at 242-3658 or wprice@flatoday.net.