The May 2008 S%P Case-Schiller’s real estate index just released does not indicate that that Florida’s property values have bottomed if Miami is any indication of what is going on. The prices still pear about 30% above the long-term trend line.

Americans who bought property in Miami after end of 2004 which performed like this index have incurred losses at the current level. However Canadians who bought the equivalent to this index as far back as late-2001 have incurred losses at current level; the performance difference is due to the significant appreciation of the Canadian dollar. The following is a plot of the Case Schiller index in both U.S. $ and CAD between January 2000 and May 2008 and shows clearly this point (green line).

The Legal Front:

Ken Kania is continuing to do battle in Federal Court in his one man constitutional challenge. After his latest appeal was dismissed, he was successful in having it reinstated and I am waiting to hear from him on further progress in his self-represented case.

On the Lanning/Alabaman’s constitutional challenge class action in Florida Court, the last update I heard that the defenders’ attorneys filed a motion to dismiss early in July and a response was in preparation. (Added August 10, 2003: The attorneys’ website is at http://www.lyonsandfarrar.org/lyonsandfarrar/page.html )

On a somewhat tangentially related case that I mentioned in these blogs a few months ago, “the Supreme Court ruled that states may offer special tax breaks to residents for investing in municipal bonds issued by them and local governments in the state” as reported in “The Supreme Court and muni bonds” . Most observers were not surprised with the outcome, especially due to the disruption that would have been brought to an already shaky muni-bond market! Justice Sauter who wrote the majority opinion responded to dissenting judges’ view that the ruling will invite other protectionist laws with the comment that “overturning the tax exemptions now would upset the market in bonds“ in “Supreme Court upholds tax exemptions for municipal bonds” (Doesn’t sound like an argument based on legal merits of the case, but on the market impact if law was found unconstitutional.)

The NAFTA Chapter 11 approach, while it appears it may be viable, after a more thorough look the start-up costs would not make this a financially viable approach. Once one factors in the cost of the three judges, lawyers and other associated items, the total cost could be as high as $400-500K. Then there is the risk that the judges may reject a class action approach (which has not been attempted previously under NAFTA Chapter 11) or if they accept it, there may be a non-zero risk that they may not necessarily award (sufficient) damages. So the class action approach was not workable. The other approach is to find about 250-500 affected individuals who would prepared to spend about $1000-2000 each on the expectation of winning the case, to recover some of the excess taxes paid over the years and to add a nail in the Save-Our-Homes –Amendment’s coffin. (There has been a precedent where a multi-claimant approach was accepted by a NAFTA tribunal.) The reason that I say to recover “some” of the excess taxes is because under NAFTA one can only claim damages three years in arrears. Therefore we’d not only have to find 250-500 affected taxpayers, but they would have to be relatively high damages over three years (say in excess of $10K relative to average comparables and then weigh that by the probability of a successful outcome. While this may be still be a viable approach as a matter of principle, the bottom line is that this is a big mountain to climb and I am not confident that it financially/logistically workable. So at this point, NAFTA Chapter 11 is going on the back-burner unless somebody wants to step forward and run with it.

So the bottom line on the various Florida property-tax legal challenges is that the surviving cases are Ken Kania’s Challenge in Federal Court and Lanning/Alabamans’ class action. Stay tuned!

In the meantime the 2008 (hopefully lower) property assessments and preliminary tax rates are expected imminently, and we are waiting to hear how the counties and municipalities will deal with the resulting likely lower tax revues. Hopefully few will follow my municipality’s approach of raising tax rates, to compensate for additional $25K homestead exemptions given to homesteaders and lower property values and thus lower assessed taxable values.

Michael Grunwald’s “Is Florida the sunset state?”  in Time Magazine paints a pretty gloomy picture. It starts off with “Water Crisis Mortgage Fraud Political Dysfunction Algae Polluted Beaches Declining Crops Failing Public Schools Foreclosures. Greetings from Florida, where the winters are great!” In 2000, Florida attracted 19% of the nation’s migrating seniors; by 2006, it was only 13%. A very gloomy article and he doesn’t even mention the discriminatory treatment of out-of-state part-time resident property owners, which no doubt will make those considering buying think twice, even though the winters are indeed great!
A couple of Sun-Sentinel articles report that “Population drops in 26 of 31 Broward municipalities”  and “27 of 38 cities in Palm Beach County lost residents”  .

And finally, in a Dear Bird Talk letter by Paul Picher on p.6 Canadian Snowbird Association Magazine  , in a comment to my “An update to Florida snowbirds’ tax crisis”, writes that “the most glaring injustice occurs in counties where thousands of Florida’s well-to-do and wealthiest (homesteaders but in reality, still not resident snowbirds) are located. They shutter their condos and mansions before heading north….Unfortunately SOH encourages such fraudulent homesteading, while local or state governments do little to enforce rules…” (I’ve been ignoring the fraudulent homesteading, as I naively assumed that that’s a small percentage of the homesteaders, but perhaps that is too naïve after all.)

Oh well, what Florida could use is some good old-fashioned leadership to tell Floridians the real story. That may be too much to expect from current political leadership, but as things get worse hopefully Floridians will demand it. But…the winters are great!