Newsletter: August 2008 Newsletter

Amendment 5 another big decisions for Florida voters.

The debate over Amendment 5, the tax tradeoff that would cut an estimated twenty-five percent from property tax bills, i.e. education funding, in exchange for a sales tax increase.

The Florida Association of Realtors® announced the creation of Give Me 5 for Florida's Future campaign and backed it up with $1 million to help pass the amendment that would balance out the property tax cut with at least a one cent sales tax increase, elimination of some of the 246 sales tax exemptions currently found in state law and most likely further cuts to the state budget.

The announcement came just weeks after Florida Senator Mike Haridopolos (R-Melbourne) announced the creation of "Protect Florida's Future" a coalition against the amendment that includes AARP, the Florida Hospital Association, the Florida Education Association, the Florida School Board Association, the National Federation of Independent Businesses and the Florida Farm Bureau.

Florida TaxWatch is in opposition to the amendment noting that the while the amendment allows the Florida Legislature to make up the difference in school funding, there is no way to know exactly how much funding will be needed. Thus, a one cent sales tax increase will not be enough of an increase to satisfy the "hold education harmless" provision a few years down the road. Amendment 5 will divide the coalition of low tax advocacy groups. As with most property tax debates, everyone agrees that taxes should be lower while funding for education is held harmless, the problem is how to get there.

Max Planck Society gets grant from Palm Beach County

The Palm Beach County Commission approved a plan to give the Max Planck Society of Germany almost $87 million to set up an institute near Scripps Florida in Jupiter on July 22nd 2008. The Munich, Germany-based Max Planck will build a 100,000-square-foot bio-imaging facility just west of Scripps in Jupiter Abacoa.

The Palm Beach County Commission approved the contract July 22nd. Max Planck will get $39.4 million from the county this year, $15.6 million in 2011, $13.1 million in 2013, $13.4 million in 2015 and $5.3 million in 2017. All of the grant money is being financed through revenue bonds. The state of Florida came to an agreement in March with Max Planck for $94 million, and has disbursed $10 million from Florida's Innovation Incentive Fund. The addition of Max Planck will create 135 high-wage jobs at the bio-imaging center. The commission approved one charge to the proposal. Max Planck would have committed 3 percent of the royalties it receives every year from the medicines it develops to educational programs in Palm Beach County from 2018 to 2038.

Max Planck President Peter Gruss said he doubted there would be any significant royalties from its Florida operation while it's just getting started, building a permanent laboratory and hiring its first scientists. Max Planck has only two people in Florida and doesn't expect to begin meeting with architectural firms until after it completes another agreement with the county and Florida Atlantic University to sublease 6 acres of land south of Scripps Florida. Max Planck won't start hiring scientists until the end of the year or early next year, when it moves into temporary quarters being vacated by Scripps at the Florida Atlantic University campus.

Florida ranks high in business climate.

Florida’s weather isn’t the only climate that’s among the best in the nation. The state’s business climate also is also doing well.  Florida just ranked fourth-best in the nation, according to a study by marketing company Development Counselors International. Florida tied for fourth with Tennessee, and trailed only Texas, North Carolina and Georgia. Executives usually cited three factors for their choices: a strong labor market, low operating costs and a pro-business climate.

In contrast for the third consecutive year, California was viewed as the state with the least-favorable business climate. New York, Michigan, New Jersey and Massachusetts rounded out the bottom five. DCI stated its survey was sent to a random selection of 3,591 U.S. companies with annual revenue of at least $25 million. The study is conducted every three years.

Market changing housing bill signed this week.

President Bush signed a massive housing bill intended to provide mortgage relief for 400,000 struggling U.S. homeowners and stabilize financial markets. The bill is regarded as the most significant housing legislation in decades!
H.R. 3221, the “Housing and Economic Recovery Act of 2008,” includes the following provisions:

GSE Reform – includes a strong independent regulator, and permanent conforming loan limits up to the greater of $417,000 or 115% local area median home price, capped at $625,500. The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).
 
FHA Reform – includes permanent FHA loan limits at the greater of $271,050 or 115% of local area median home price, capped at $625,500; streamlined processing for FHA condos; reforms to the HECM program, and reforms to the FHA manufactured housing program. The down payment requirement on FHA loans will go up to 3.5% (from 3%). The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).
 
Homebuyer Tax Credit - a $7500 tax credit that would be available for any qualified purchase between April 8, 2008 and June 30, 2009. The credit is repayable over 15 years (making it, in effect, an interest free loan).
 
FHA Foreclosure Rescue – development of a refinance program for homebuyers with problematic subprime loans. Lenders would write down qualified mortgages to 85% of the current appraised value and qualified borrowers would get a new FHA 30-year fixed mortgage at 90% of appraised value. Borrowers would have to share 50% of all future appreciation with FHA. The loan limit for this program is $550,440 nationwide. Program is effective on October 1, 2008.
 
Seller-funded Down payment Assistance Programs – codifies existing FHA proposal to prohibit the use of down payment assistance programs funded by those who have a financial interest in the sale; does not prohibit other assistance programs provided by nonprofits funded by other sources, churches, employers, or family members. This prohibition does not go into effect until October 1, 2008.
 
VA loan limits – temporarily increases the VA home loan guarantee loan limits to the same level as the Economic Stimulus limits through December 31, 2008.
 
Risk-based Pricing – puts a moratorium on FHA using risk-based pricing for one year. This provision is effective from October 1, 2008 through September 30, 2009.
 
GSE Stabilization – includes language proposed by the Treasury Department to authorize Treasury to make loans to and buy stock from the GSEs to make sure that Freddie Mac and Fannie Mae could not fail.
 
Mortgage Revenue Bond Authority – authorizes $10 billion in mortgage revenue bonds for refinancing subprime mortgages.
 
National Affordable Housing Trust Fund – Develops a Trust Fund funded by a percentage of profits from the GSEs. In its first years, the Trust Fund would cover costs of any defaulted loans in FHA foreclosure program. In out years, the Trust Fund would be used for the development of affordable housing.
 
CDBG Funding – Provides $4 billion in neighborhood revitalization funds for communities to purchase foreclosed homes.
 
LIHTC – Modernizes the Low Income Housing Tax Credit program to make it more efficient.
 
Loan Originator Requirements – Strengthens the existing state-run nationwide mortgage originator licensing and registration system (and requires a parallel HUD system for states that fail to participate). Federal bank regulators will establish a parallel registration system for FDIC-insured banks. The purpose is to prevent fraud and require minimum licensing and education requirements. The bill exempts those who only perform real estate brokerage activities and are licensed or registered by a state, unless they are compensated by a lender, mortgage broker, or other loan originator.

First time homebuyers tax credit now in effect under the Housing and Economic Recovery Act of 2008

Feature: Amount of Credit, Ten percent of cost of home, not to exceed $7500. Feature: Eligible Property, Any single family residence (including condos, co-ops) that will be used as a principal residence. Feature:  Refundable, Yes. Reduces income tax liability for the year of purchase. Claimed on tax return for that tax year.  Feature:  Income Limit, Yes. Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). Phases out above those caps ($95,000 and $170,000, respectively). Feature:  First-time Homebuyer Only, Yes. Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase. Feature:  Recapture, Yes. Portion (6.67 % of credit) to be repaid each year for 15 years. If home sold before 15 years, then remainder of credit recaptured on sale. Impact on District of Columbia Homebuyer Credit, Feature:  Impact on District of Columbia Homebuyer Credit. Effective Date, Purchases on or after April 9, 2008. Feature: Termination, July 1, 2009. Feature:  Interaction with Alternative Minimum Tax, Can be used against AMT, so credit will not throw individual into AMT.