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Property-tax relief: Are slots the answer?

TALLAHASSEE, Fla. – April 30, 2007 – In the midst of the impasse over cutting property taxes, the state Senate may be ready to let Floridians gamble their way to property-tax relief.

A proposal to permit slot machines at parimutuels all over the state sailed out of the Senate on Friday, 34-5, with promises of up to $2 billion for state coffers. And talk of higher tax revenue from Broward’s new Vegas-style slots has dominated debate surrounding looser regulations for Broward’s casinos.

So far, the notion of using gambling revenues to replace property taxes hasn’t gotten much traction in the traditionally gambling-hesitant House, with Speaker Marco Rubio and his top lieutenants stiffly opposed to the notion. But, as the end of the legislative session nears, some legislators think gambling dollars belong in the mix as a logical piece to a property-tax compromise.

“I’m not saying it’s going to happen, but as we get down to the wire, $2 billion a year may be the way we make up the difference between us,” said Senate Democratic Leader Steve Geller of Cooper City.

Under the Senate bill, all of the 25 parimutuel facilities in the state – four horse tracks, 16 dog tracks and six jai alai frontons – would be able to expand their gambling offerings by installing slot-machine look-alikes officially called video lottery terminals.

The machines look and play like the Vegas-style slots spinning in Broward’s new casinos. But they are Class II machines, in which players bet against one another and not the house, resulting in lower payouts.

No laughing matter

Initially, the idea of turning to one-armed bandits as a property-tax solution was treated as a joke. When Rep. Julio Robaina, a Miami Republican, presented his idea for Vegas-style gaming referendums in all 67 counties, members of the House Business Regulation Committee smirked, while others covered their mouths to hide their laughter.

But in a tough property-tax fight, more people have been willing to at least put the idea on the table in the last days of session.

Proposals to loosen casino regulations at Broward’s four parimutuels have moved to the House and Senate floors with few fireworks, a change of luck in a state that has seen its share of anti-gaming battles.

On Friday, the Senate voted 29-9 to approve Geller’s bill to add 500 machines at each of Broward’s four parimutuels, allow the casinos to remain open more than 12 hours a day and permit ATMs in the facility as long as they remain off the casino floor.

The House also discussed a similar proposal by Rep. Jack Seiler, a Wilton Manors Democrat, which is set for a final vote next week.

For some legislators, their votes have been strictly about dollars and cents.

When members of the Senate Regulated Industries Committee toured Broward’s casinos last month, they spent most of the weekend visit praising the millions flowing to the state from the new slots.

And throughout most Senate discussions, there has been almost no discussion about the effects of gambling expansion.

‘The only kind of debate we had was, ‘How much does it raise? And where is the money going to?’ “ said Sen. Jim King, a Jacksonville Republican.

The smooth operations and financial windfalls at the two Broward parimutuels that opened last year also have helped gambling proponents raise the stakes.

But using gambling revenue as a property tax solution might still be a long shot.

Prospects in house

There are still plenty of House members who are opposed to the idea of expanding gambling. Some lawmakers have argued that adding gaming at all existing parimutuels could create more problems than it solves by promoting compulsive gambling or tarnishing the state’s family-friendly tourist image.

“I think it would be a huge mistake,” said Rep. Juan Zapata, a Miami Republican. “I don’t think people should rely on gaming to pay for taxes. It’s a dangerous path.”

And as legislators in both chambers have pointed out, voters statewide have shot down gambling expansion in the past. And promises of property tax relief might not be enough to sway anti-gaming voters.

“When we allowed slots in this state, it wasn’t because the Legislature allowed them,” said Rep. Carlos Lopez-Cantera, a Miami Republican. “It was because the voters wanted them.”

Copyright © 2007 The Miami Herald, Breanne Gilpatrick. Distributed by McClatchy-Tribune Business News. Miami Herald staff writer Mary Ellen Klas contributed to this report.

Impact fees: Too high for market?

TAVARES, Fla. – April 30, 2007 – Faced with a meltdown in the housing market, Lake builders have launched an aggressive campaign aimed at persuading county commissioners to say “no” to dramatic increases in impact fees.

The fees are charged against new construction, helping the county keep up with demands of growth on roads, schools, fire stations, libraries and parks.

But builders are fighting significant increases proposed for school- and transportation-impact fees, which combined could add $20,000 to the price of most new single-family homes.

Builders say they’ve never been so alarmed.

“Lake County used to be an affordable-housing location for families,” said Jim Bible, president of the Lake County Home Builders Association. “Now people are being priced out of the market.”

The fear is that raising impact fees could further dampen a housing industry that is already in a “depression,” according to Don Magruder, vice president and general manager of Leesburg-based Ro-Mac Lumber & Supply Inc.

The average cost of a new home in Lake is about $247,000, according to county officials. The median income for families is about $42,000.

Builders are concerned that the impact fees would price people out of the market and cause a ripple effect on the county’s economy, which depends heavily on construction-related jobs.

The association has launched an independent review of a study that suggests school-impact fees increase nearly 150 percent, from $7,055 to $17,513 for most single-family homes built. At that rate, Lake County could have highest school-impact fees in the state.

In February, the Lake County School Board voted unanimously to support the fee increases. But the decision rests with county commissioners, who also will decide on the transportation fees.

School-district staffers were scheduled to present the study on school-impact fees to commissioners April 17. However, the meeting was postponed and has not yet been rescheduled.

School Board Attorney Steve Johnson said the study is being revised to include school-capacity standards found in the county’s concurrency plan, a blueprint for how Lake will manage residential growth and curb campus crowding. The current study counts capacity differently, not counting the additional student space provided in schools with larger cafeterias.

Johnson said capacity is important because it determines how much money the school district will need to serve the student population. He said the revised study may lower the suggested increases.

“If you increase the capacity of the school, you’re going to lower what is needed for the current student body,” he said.

The home-builders association said it questions the accuracy of other parts of the study, conducted by Henderson, Young and Company, a consulting firm based in Redmond, Wash.

Recently, the home-builders group made a public-records request to the school district for the data used in the study. The association has hired a consultant and an attorney to review the documents, Bible said.

“At this point, we’re just gathering information and trying to determine if the numbers are correct,” said Bible, owner and vice president of Showcase Homes Inc. in Mount Dora.

The home builders also plan to check the study that led to the proposed transportation-impact fee increases – recommended by another consultant, Tindale-Oliver & Associates Inc., based in Tampa – that could hike the rate for single-family homes from the $2,583 maximum charged today to $11,392.

Magruder said the county has seen a downturn in the housing market since last year. The construction industry is a top employer in Lake, behind government, education and heath services.

But the bottom has fallen out of the housing market. There has been a nearly 50 percent drop in residential building permits in unincorporated Lake since 2004. The decline prompted the county this month to lay off 12 employees and two paid interns in its building department.

Ro-Mac also has been hard hit. Magruder said the company was forced during the past year to lay off more than 200 of 505 employees.

“This is not affecting the rich and the famous,” Magruder said. “This is affecting just regular people.”

He suggested replacing impact fees with a fee on real-estate transactions. That way, the costs of growth could be spread among existing homes, not just new construction, Magruder said.

County Commissioner Jennifer Hill said affordable housing has long been an issue for Lake County. She questioned why home builders are so concerned about it now.

“Where were they when property values were skyrocketing?” Hill asked. “Property was being flipped all over the place. Homes were being sold and resold as much as three times a year.”

Hill said various factors influence the housing market, not just impact fees.

Commissioner Linda Stewart said the increases are needed, given that the county is behind on a host of school and road projects.

“I don’t blame them [home builders] one bit for double-checking the study, but they’re going to find that impact fees are a necessity and they need to be raised,” said Stewart, adding that the county must also have an affordable-housing component in the fee system.

Copyright © 2007 The Orlando Sentinel, Fla., Nin-Hai Tseng. Distributed by McClatchy-Tribune Business News.

Impact fees: Too high for market?

TAVARES, Fla. – April 30, 2007 – Faced with a meltdown in the housing market, Lake builders have launched an aggressive campaign aimed at persuading county commissioners to say “no” to dramatic increases in impact fees.

The fees are charged against new construction, helping the county keep up with demands of growth on roads, schools, fire stations, libraries and parks.

But builders are fighting significant increases proposed for school- and transportation-impact fees, which combined could add $20,000 to the price of most new single-family homes.

Builders say they’ve never been so alarmed.

“Lake County used to be an affordable-housing location for families,” said Jim Bible, president of the Lake County Home Builders Association. “Now people are being priced out of the market.”

The fear is that raising impact fees could further dampen a housing industry that is already in a “depression,” according to Don Magruder, vice president and general manager of Leesburg-based Ro-Mac Lumber & Supply Inc.

The average cost of a new home in Lake is about $247,000, according to county officials. The median income for families is about $42,000.

Builders are concerned that the impact fees would price people out of the market and cause a ripple effect on the county’s economy, which depends heavily on construction-related jobs.

The association has launched an independent review of a study that suggests school-impact fees increase nearly 150 percent, from $7,055 to $17,513 for most single-family homes built. At that rate, Lake County could have highest school-impact fees in the state.

In February, the Lake County School Board voted unanimously to support the fee increases. But the decision rests with county commissioners, who also will decide on the transportation fees.

School-district staffers were scheduled to present the study on school-impact fees to commissioners April 17. However, the meeting was postponed and has not yet been rescheduled.

School Board Attorney Steve Johnson said the study is being revised to include school-capacity standards found in the county’s concurrency plan, a blueprint for how Lake will manage residential growth and curb campus crowding. The current study counts capacity differently, not counting the additional student space provided in schools with larger cafeterias.

Johnson said capacity is important because it determines how much money the school district will need to serve the student population. He said the revised study may lower the suggested increases.

“If you increase the capacity of the school, you’re going to lower what is needed for the current student body,” he said.

The home-builders association said it questions the accuracy of other parts of the study, conducted by Henderson, Young and Company, a consulting firm based in Redmond, Wash.

Recently, the home-builders group made a public-records request to the school district for the data used in the study. The association has hired a consultant and an attorney to review the documents, Bible said.

“At this point, we’re just gathering information and trying to determine if the numbers are correct,” said Bible, owner and vice president of Showcase Homes Inc. in Mount Dora.

The home builders also plan to check the study that led to the proposed transportation-impact fee increases – recommended by another consultant, Tindale-Oliver & Associates Inc., based in Tampa – that could hike the rate for single-family homes from the $2,583 maximum charged today to $11,392.

Magruder said the county has seen a downturn in the housing market since last year. The construction industry is a top employer in Lake, behind government, education and heath services.

But the bottom has fallen out of the housing market. There has been a nearly 50 percent drop in residential building permits in unincorporated Lake since 2004. The decline prompted the county this month to lay off 12 employees and two paid interns in its building department.

Ro-Mac also has been hard hit. Magruder said the company was forced during the past year to lay off more than 200 of 505 employees.

“This is not affecting the rich and the famous,” Magruder said. “This is affecting just regular people.”

He suggested replacing impact fees with a fee on real-estate transactions. That way, the costs of growth could be spread among existing homes, not just new construction, Magruder said.

County Commissioner Jennifer Hill said affordable housing has long been an issue for Lake County. She questioned why home builders are so concerned about it now.

“Where were they when property values were skyrocketing?” Hill asked. “Property was being flipped all over the place. Homes were being sold and resold as much as three times a year.”

Hill said various factors influence the housing market, not just impact fees.

Commissioner Linda Stewart said the increases are needed, given that the county is behind on a host of school and road projects.

“I don’t blame them [home builders] one bit for double-checking the study, but they’re going to find that impact fees are a necessity and they need to be raised,” said Stewart, adding that the county must also have an affordable-housing component in the fee system.

Copyright © 2007 The Orlando Sentinel, Fla., Nin-Hai Tseng. Distributed by McClatchy-Tribune Business News.

As ‘subprime’ rates shoot up, owners despair

ORLANDO, Fla. – April 30, 2007 – Twanda Thompson doesn’t want to lose her home. But unless she can solve her mortgage woes, she and her four children may have to start looking for an apartment.

Like many would-be homeowners with below-average or poor credit, the Orlando woman took out a “subprime” mortgage during the housing boom to buy a place she really couldn’t afford.

Now her adjustable-rate mortgage is three months away from a boost in interest that will increase her monthly payment 30 percent. More increases lie ahead – and she already is delinquent on her loan.

“I’ve been on an emotional roller coaster,” said Thompson, a 34-year-old insurance agent. “It’s just very stressful. I’ve worked so hard to get this far, to have a home and raise my children. To lose ground now is not acceptable to me.”

As the nation’s housing markets continue to slump, the subprime-mortgage business is suffering a meltdown.

Many lenders flung open their doors to subprime borrowers during the five-year housing boom, looking to capture more of the market for such mortgages, which come with higher-than-normal interest rates.

Lured by artificially low “teaser” rates, people flocked to these lenders, hoping to fulfill the American dream of owning a home. But as the temporary discounts expire, reality is setting in, and mortgage delinquencies and foreclosures are spiking among the country’s subprime borrowers.

As of February, more than one in every seven mortgages in the U.S. was a subprime mortgage. And more than 4 percent of those subprime loans were in foreclosure that month – more than four times the foreclosure rate of conventional mortgages.

This is, of course, traumatic for the borrowers, many of whom are low- to moderate-income minorities living paycheck to paycheck. Studies indicate that black and Hispanic borrowers are two to four times more likely than non-Hispanic whites to wind up with a subprime mortgage.

Defaults could hurt prices

But if the problem continues to escalate, the ill effects could spread. Subprime defaults could spill huge numbers of “bargain” homes onto the resale market, dragging down neighborhood home prices and stifling residential construction.

More than 1.15 million subprime borrowers across the country are already in serious trouble with their loans, according to the latest estimates from First American LoanPeformance, a San Francisco mortgage-data business.

The foreclosure rate for subprimes nationwide nearly doubled between February 2006 and February 2007, First American calculates, while the severe-delinquency rate (the percentage of loans with payments at least 60 days late) jumped more than 60 percent in the same 12-month period.

In Florida, nearly 93,000 subprime-loan homeowners were in the lurch as of February, according to First American. And during the previous year, the state’s subprime-foreclosure rate tripled, while its delinquency rate shot up 72 percent.

Florida is more exposed to the problem than the U.S. as a whole: Nearly 20 percent of all mortgages in the state were subprime as of the end of January versus 15.3 percent nationwide. But so far, Florida’s subprime-delinquency rate (10.2 percent) is lower than the national average (12.2 percent).

Central Florida’s subprime problems have generally been less acute than even the state’s, though the region has not been immune. Brevard and Volusia counties, for example, have some of the highest foreclosure and delinquency rates among Florida metropolitan areas.

Warning signs locally

Even Metro Orlando’s subprime foreclosure and delinquency rates, still among the lowest in Florida, have spiked in the past year. The foreclosure rate in the metro area (Orange, Seminole, Osceola and Lake counties) almost tripled to 2.8 percent, while the delinquency rate more than doubled to 8.5 percent.

Local experts say turnover in homes financed with subprime loans may already be contributing to the region’s housing slowdown. The inventory of homes for sale through the Orlando Regional Realtor Association, for example, has nearly doubled since January 2006, while the year-over-year change in median price for homes sold through the Realtors has dwindled from a 24 percent increase in January 2006 to zero as of this March.

“You have to look at the two different sides of the coin,” said William Weaver, a real-estate professor at the University of Central Florida. “The problem is a lot worse now than in the past, and it is likely to get even worse.

“But we are still better off than many places in the country,” he added. “We still have historically high employment rates and a robust economy that are surely going to help us get through this over the next couple of years.”

The subprime-foreclosure rate could approach 20 percent, even in Central Florida, according to a study by the Center for Responsible Lending, a research and advocacy group in Durham, N.C.

In part that’s because so many subprime lenders have collapsed this year, making it harder for financially strapped subprime borrowers to find someone willing to refinance burdensome loans with adjustable rates.

“That part of the market has come to a screeching halt,” Weaver said. “And when these mortgages adjust, they are going to adjust with a vengeance. That’s going to put a lot of families in very perilous financial circumstances.”

Many minorities are especially at risk, housing advocates say, because historically they have been saddled with a disproportionate share of the country’s higher-cost, subprime mortgages.

For example, a recent study by Fair Finance Watch, a New York advocacy group, concluded that black borrowers in the New York metropolitan area were 4.4 times more likely to wind up with subprime rates than comparable white borrowers. The same study found that Hispanics were nearly 2.4 times more likely than non-Hispanic whites to pay subprime rates.

There’s a glimmer of hope for those in trouble, in that the problems roiling the subprime market have drawn the attention of banking regulators, members of Congress and mortgage-industry leaders.

Earlier this month, mortgage-finance giants Freddie Mac and Fannie Mae said they were developing new programs to help stem the tide of subprime-loan defaults. Freddie Mac said it also would buy as much as $20 billion worth of subprime mortgages to help support refinancing for subprime borrowers.

It’s not clear whether such programs will arrive in time to help homeowners such as Twanda Thompson, the Orlando insurance agent behind on her subprime mortgage.

“Right now, I just need an affordable mortgage, and I’m looking for some kind of solution,” she said. “I’ve been through a lot of turbulence, but I know I need to keep going forward, to set an example for my kids.”

Solutions exist

There are options for people in Thompson’s situation, according to Cora Fulmore, a mortgage counselor in Winter Garden and director of Metro Orlando’s “Don’t Borrow Trouble” financial-literacy program.

Loan modifications and refinancings are out there, though it takes extra effort to find them these days, said Fulmore, who is helping Thompson.

“We’re trying to get her out of this nightmare, and believe me, it is a nightmare,” Fulmore said.

Homeowners facing similar problems may contact the “Don’t Borrow Trouble” program at 407-654-3378 or NeighborWorks America, a Washington-based nonprofit housing-advocacy group, at nw.org. They can also contact the Homeowners Preservation Foundation at 1-888-995-4673.

“We need to let people know there are some options before they step out and do something that makes things worse,” Fulmore said.

Copyright © 2007 The Orlando Sentinel, Fla., Richard Burnett. Distributed by McClatchy-Tribune Business News.