FINANCE TAXATION

FINANCE&TAXATION.DOC 5/16/2003 3:24 PM FINANCE & TAXATION Finance & Taxation: Ad Valorem Tax Higgs v. Good, 813 So. 2d 178 (Fla. Dist. App. 3d 2002) Property owners who fail to submit income, expense, and other financial data by a deadline established by the county property appraiser may not submit that data at a later date in an administrative or judicial challenge to the property-tax assessment. FACTS Monroe County Property Appraiser Ervin Higgs requested income and expense data from commercial-property owners for use during his office’s annual property revaluation. Property owner Lloyd Good did not submit the information before the established deadline. Later, after Good received notice of the value that the property appraiser placed on his property, he submitted his income information and challenged the assessment, arguing that the income and expense data derived from his property did not support the appraiser’s valuation. The circuit court set aside the appraiser’s valuation and held that Higgs had “failed to properly consider the untimely submitted income data.” Higgs, 813 So. 2d at 179. On appeal, the Third District Court of Appeal reversed and reinstated the property appraiser’s valuation. DISCUSSION Florida Statutes requires county property appraisers to consider eight factors, including the income derived from property, when they reassess property each year. Fla. Stat. § 193.011 (2001). Florida Statutes also permits the property appraiser to request financial records necessary for the proper determination of assessed values, including income and expense information. Id. § 195.027(3). Property appraisers generally develop annual assessments from January through June each FINANCE&TAXATION.DOC 5/16/2003 3:24 PM 606 Stetson Law Review [Vol. XXXII year so that the annual property-value roll can be submitted to the Florida Department of Revenue (DOR) by July 1, the statutory deadline. Then in August, following DOR approval of the roll, the appraiser mails a notice to each property owner detailing assessed value, millage rates, and proposed taxes. To date, there has been no compelling incentive for property owners to reply to a county property appraiser’s request for income and expense information. Many taxpayers decline to provide the data until after they receive their notice of proposed taxes. Then, those owners who believe their property has been overvalued often attempt to use their income and expense information during administrative hearings before the county’s Value Adjustment Board or as evidence in a circuit-court action to justify a reduction in the original assessment. On the other hand, owners who fail to provide income information and who realize that their property has been undervalued, simply accept the under valuation. In its reversal of the circuit court, the Third District recognized that “[i]t is inappropriate for a taxpayer to conceal an ace-in-the-hole for subsequent play against” a property appraiser who has attempted to consider income as one of the factors used to arrive at assessed value. Higgs, 813 So. 2d at 179. SIGNIFICANCE In Higgs, the Third District has given teeth to the statute that permits county property appraisers to ask taxpayers for income, expense, and other financial data relevant to the annual reassessment of property. In the past, property owners had little incentive to comply with an appraiser’s request for information because the statutes do not include a penalty provision for owners who fail to comply. Here, the court clearly has established that an owner who wishes for the appraiser to consider financial information about his or her property must provide that information when it is requested and not after the owner evaluates his or her new assessment. The decision should aid property appraisers in the orderly preparation of assessment rolls because it encourages property owners to provide income information while property values are being prepared rather than when they are challenged. Of course, appraisers should not assume that this case relieves them of their responsibility to consider the income approach to value. Rather, this case reinforces the precedent set forth in Palm Corporation v. FINANCE&TAXATION.DOC 5/16/2003 3:24 PM 2003] Recent Developments 607 Homer, 261 So. 2d 822, 823 (Fla. 1972). Palm Corporation established that an appraiser could consider general income information, gleaned from other sources, when he developed an income-approach valuation on a property for which no income data had been submitted. • RESEARCH REFERENCE Eugene McQuillin, The Law of Municipal Corporations vol. 16, § 44.117 (Dennis Jensen & Gail A. O’Gradney eds., 3d rev. ed., CBC 1994). Pamela M. Dubov, Adjunct Professor Finance & Taxation: Ad Valorem Tax Markham v. Broward County, 825 So. 2d 472 (Fla. Dist. App. 4th 2002) Counties are political subdivisions of the State and do not lose their immunity from taxation when county property is leased for nongovernmental purposes or when the county is a charter county as defined in Article VIII, Section 1 of the Florida Constitution. FACTS The Broward County Property Appraiser placed property owned by Broward County and leased to a for-profit entity on the tax roll and argued that the property was not immune from taxation. The appraiser contended first that the Legislature waived a county’s immunity from taxation when it enacted Florida Statutes Section 196.001 (1993), which pertains to ad valorem tax exemptions. Second, the Appraiser argued that Broward County lost the immunity from taxation afforded to the State’s political subdivisions because it was a charter county. IMMUNITY VERSUS EXEMPTION FROM AD VALOREM TAXATION The Florida Supreme Court clarified in Canaveral Port Authority v. Department of Revenue, 690 So. 2d 1226 (Fla. 1996), that the Florida Constitution provides counties with immunity from ad valorem taxation because counties are political FINANCE&TAXATION.DOC 5/16/2003 3:24 PM 608 Stetson Law Review [Vol. XXXII subdivisions of the State. This constitutional immunity differs from statutory exemptions. An exemption from taxation can exist only when the taxing authority has the power to tax. The constitution withholds from taxing authorities the power to tax property owned by governmental entities that are recognized as political subdivisions of the State. Thus, county-owned property is immune rather than exempt from taxation. The distinction is critical to the analysis of the ad valorem tax status of leased county property as distinguished from the status of leased municipal property. When municipalities lease property to nongovernmental lessees, property appraisers must analyze the purpose for which such property will be used to determine whether the leased property qualifies for the governmental property-tax exemption. Fla. Stat. § 196.199(2)(a)–(c) (2002). When property is used for literary, scientific, charitable, or religious purposes, it qualifies for ad valorem tax exemption. When property is not leased for one of those four purposes, however, it must be used for a municipal, governmental, or public purpose. Public, municipal, and governmental purposes are defined in Florida Statutes Section 196.012(6). This statute has been the subject of much judicial interpretation and legislative attempts to expand the definition of public purpose to include such things as fixed-seat stadiums and sports arenas. Courts have struck down the interpretations as improper attempts to provide exemptions, which are not constitutionally authorized. Sebring Airport Auth. v. McIntyre, 783 So. 2d 238 (Fla. 2001). Essentially, if leased municipal property is used for proprietary purposes or for purposes that ordinarily would not be funded through allocation of public funds, then the property is taxable. CHARTER VERSUS NONCHARTER COUNTIES The Broward County Property Appraiser also argued that the County property lost its immunity by virtue of the fact that the County was a charter county. Charter counties often perform many municipal functions because Article VIII, Section 1(g) of the Florida Constitution grants to charter counties “all powers of local self-government.” Thus, both cities and charter counties may, for example, provide fire services, construct government buildings, build and maintain roads, and enact zoning ordinances and building codes. Thus, in State ex rel. Volusia County v. Dickinson, 269 So. 2d 9, 10 (Fla. 1972), the Florida Supreme FINANCE&TAXATION.DOC 5/16/2003 3:24 PM 2003] Recent Developments 609 Court, in dicta, likened charter counties to municipalities. Dickinson, however, dealt with the power of a charter county to levy a cigarette tax in unincorporated areas of the county rather than an ad valorem tax exemption and did not negate the immunity from taxation enjoyed by counties — charter and noncharter alike. CONCLUSION Counties and municipalities do not share the same ad valorem tax status because the Florida Constitution defines counties as political subdivisions of the State, whereas municipalities are created by general or special law. Fla. Const. art. VIII, §§ 1–2. The fact that counties are immune from taxation while cities must qualify for exemption creates a distinct advantage for counties and their lessees when counties lease property to for-profit entities to be used for proprietary purposes. Thus, county-owned stadiums, golf courses, and industrial developments generate no property-tax revenue, and county landlords are able to negotiate lease terms that eliminate ad valorem taxation as an issue. Cities, on the other hand, must negotiate leases to include provisions concerning ad valorem taxes. The inequity inherent in current ad valorem tax law is causing several cities to consider transferring municipal property to the county government so that high-valued property, like sports venues, can be removed from the tax rolls. The Sebring Court provided that the Florida Legislature could not create exemptions for proprietary uses of municipal property. The only solution to this tax-status dichotomy appears to be an amendment to the Florida Constitution. Such an amendment could result in more equal treatment of cities and counties when they act as landlords for their for-profit tenants. RESEARCH REFERENCES • Eugene McQuillin, The Law of Municipal Corporations vol. 16, § 44.59.10 (Dennis Jensen & Gail A. O’Gradney eds., 3d rev. ed., CBC 1994 & Supp. 2002). • 50 Fla. Jur. 2d Taxation § 101 (1999). • 51A Fla. Jur. 2d Taxation § 1401 (1999 & Supp. 2003). Pamela M. Dubov, Adjunct Professor FINANCE&TAXATION.DOC 5/16/2003 3:24 PM 610 Stetson Law Review [Vol. XXXII Finance & Taxation: Bond Financing Panama City Beach Community Redevelopment Agency v. State, 831 So. 2d 662 (Fla. 2002) When the validity of a redevelopment revenue bond turns on whether property is a “blighted area” under the Community Redevelopment Act, open and undeveloped property may qualify as “blighted” because a municipal legislative finding that the undeveloped property is “blighted” should be accorded great deference in a bond-validation proceeding. Also, a recent change in the statutory definition of “blighted area,” which did not affect this case, will impact future bond-validation proceedings in which the “blighted” character of property is at issue. FACTS AND PROCEDURAL HISTORY The City of Panama City Beach commenced an aggressive redevelopment of property near the heart of the City’s beach front. The City owned two parcels of open, undeveloped land that were separated by privately owned undeveloped land. To join, consolidate, and improve its beach-area land, the City acquired the private parcel and created the Panama City Beach Community Redevelopment Agency. The Agency created a redevelopment plan, contracted with a private developer to improve the land, and entered into an agreement with a local Community Development District to issue revenue bonds to finance the project. When the City created the Agency in 2000, it made a legislative finding that the redevelopment area was “blighted” as defined by the Community Redevelopment Act of 1969, Florida Statutes Section 163.340(8) (2000). Panama City Beach, 831 So. 2d at 663–664. Without such a finding, the City would have had no authority to move ahead with its plans for redevelopment revenue bonds. In 2001, the parties sought validation of the bonds in circuit court, as required by statute. Although the validity of the bonds was not challenged, the circuit court declared the bonds to be invalid because the purpose of the bonds did not comport with the purpose of the Community Redevelopment Act. The bonds at issue were intended to finance improvement of undeveloped land. The Community Redevelopment Act, by contrast, was intended to facilitate the rehabilitation of previously built-upon property that FINANCE&TAXATION.DOC 5/16/2003 3:24 PM 2003] Recent Developments 611 had fallen into disrepair. Undeveloped property, as a matter of common sense, could not qualify for redevelopment under the Act because, as the circuit court exclaimed, “It has never been developed!” Id. at 664. Although the circuit court recognized that language in the statute could support the finding that undeveloped property was “blighted area” for the purpose of bond issuance, the circuit court refused to “extract a few words from the Act” without regard to “the obvious purpose of the Act.” Id. The Act’s express purpose was to combat the “growing menace” of slums and blighted areas and their effect on “the spread of crime and disease,” imposing “social and economic liabilities,” and “onerous burdens” on public resources. Fla. Stat. § 163.355(1) (2001). Because the circuit court could not reasonably reconcile new development of undeveloped property with the Act’s purpose, it declared the redevelopment revenue bonds invalid. The City appealed directly to the Florida Supreme Court under its constitutional mandatory jurisdiction to review orders on bond validation. The Court reversed the order invalidating the bonds, holding that the circuit court substituted its own judgment for that of the local government, whose legislative findings should be disturbed only if they are “clearly erroneous.” Panama City Beach, 831 So. 2d at 669. DISCUSSION The sole question before the Court was whether the City had the authority to issue revenue bonds under the Community Redevelopment Act. The question turned on whether the City’s legislative finding that the undeveloped area within the redevelopment plan was a “blighted area” as defined by the Act. Although the circuit court order invalidating the bond validation was supposed to have arrived at the Supreme Court with a presumption of correctness, the Court, nevertheless, engaged in a searching examination of the facts on which the order’s legal conclusions were based, emphasizing that a circuit court must be highly deferential to municipal legislative findings and declarations of purpose. Id. at 664–665. The authority under which a municipality may issue any type of bond must be granted by statute. In the case of the Community Redevelopment Act, revenue bonds are part of a larger scheme in which municipalities create redevelopment agencies, declare redevelopment areas, finance redevelopment projects, and repay the bonds by revenue generated by the FINANCE&TAXATION.DOC 5/16/2003 3:24 PM 612 Stetson Law Review [Vol. XXXII completed projects. The bonds must finance “community redevelopment” to eliminate and prevent “the development of slums and blight.” Fla. Stat. §§ 163.385(1)(a), 163.340(9) (2001). A “blighted area” is defined by Section 163.340(8) of the Act, subsections (a) and (b). Subsection (a) contemplated “blight” as affecting previously-developed property, in which “deteriorated or deteriorating structures and conditions” have led to economic distress or danger to life or property. Fla. Stat. § 163.340(8) (2001). Subsection (a) provided a menu of eight factors, including, for example, unsanitary conditions and excessive tax delinquency. A finding of one factor would satisfy the definition of “blight.” Subsection (b), however, did not require previously developed property or deteriorating structures; rather, it focused on defective or inadequate street layout, parking facilities, roadways, bridges, or public transportation facilities “either at present or following proposed construction.” Id. The Supreme Court emphasized the phrase “either at present or following proposed construction,” by which the legislature’s contemplation of future construction implied the inclusion of undeveloped property. The Court also emphasized the disjunctive feature of the definition: “blight” was met by one of the eight factors under subsection (a), or by the defective transportationrelated infrastructure of subsection (b), without the requirement of existing structures. Panama City Beach, 831 So. 2d at 666. The Court quoted at length the City’s evidence that the undeveloped land was “blighted.” In its meeting of 2000, the City Council considered specific evidence of the lack of a transportation system, poor traffic and safety conditions, parking constraints, inadequate street layout, and physical and economic degradation. The evidence was based upon expert testimony and the personal knowledge of City Council members. The City attorney closely tailored the presentation of evidence to the statutory definition of “blight,” as distinguished from “slum,” and the Court was satisfied that the City Council understood the statute and the import of the evidence. Id. at 667–668. The Court emphasized evidence of defective transportationrelated infrastructure, which can support a finding of “blight” under subsection (b). This emphasis signaled, perhaps, the Court’s sense that even if evidence was weak under subsection (a), the statutory definition of “blight” was easily met under subsection (b). While the Court cautioned that the City “cannot simply label FINANCE&TAXATION.DOC 5/16/2003 3:24 PM 2003] Recent Developments 613 an area ‘blighted’ and make it so,” it found that there was a wealth of competent and substantial evidence in the legislative record for the City’s findings to pass the minimal threshold of not being clearly erroneous. Id. at 669. Thus, the circuit court erred by not validating the revenue bonds. SIGNIFICANCE Panama City Beach instructs circuit courts not to secondguess municipal legislative findings in bond validation proceedings, nor to engage independent construction of the legislature’s intent in bond-authorizing statutes. Rather, circuit courts should accord great deference to municipalities if their findings are not clearly erroneous. An amendment to the Community Redevelopment Act, enacted during the pendency of the appeal, did not affect the outcome of the case or its instruction to circuit courts, but it will impact future bond validation proceedings in which the “blighted” character of undeveloped land is at issue. On July 1, 2002, after the parties presented their arguments, but before the Supreme Court issued its decision, the Legislature changed the definition of “blighted area” under Section 163.340(8). The change will affect future bond validation in two ways. First, the new definition appears to make it more difficult for undeveloped land to qualify as “blighted.” Second, the new definition provides a mechanism by which bond issuing authorities can make a finding of “blight” virtually unassailable. The new definition provides two methods by which “blight” is defined. The first method requires a finding of two factors from a menu of fourteen factors of “blight.” These fourteen factors combine and expand the factors listed in the former subsections (a) and (b). They include old factors such as unsanitary conditions and faulty lot layout, and new factors such as falling property values and increased vacancy rates. Many new factors contemplate that the blighted property is already developed: for example, falling lease rates per square foot of office or commercial space. Fla. Stat. § 163.340(8) (2002). Importantly, the rewording of the old subsection (b), dealing with defective transportationrelated infrastructure, eliminates the phrase, “either at present or following proposed construction.” Id. The Panama City Beach Court had based part of its rationale for including undeveloped property in the definition of “blighted” on this language. Because this language was eliminated, and because now at FINANCE&TAXATION.DOC 5/16/2003 3:24 PM 614 Stetson Law Review [Vol. XXXII least two statutory factors — not one — must be legislatively determined, it may be more difficult for undeveloped land to qualify as “blighted” to withstand a bond validation challenge. If, however, a municipality tailors its legislative findings to the statutory language and supports them with specific facts, as Panama City Beach did, the municipality’s findings will be entitled to deference by the circuit court in a bond validation proceeding, and the bonds likely will be declared valid. The new definition provides a second method by which a municipality can make its legislative finding of “blight” virtually unassailable. If only one of the fourteen factors is present, and if the bond-issuing authorities agree that the area is “blighted,” then the statutory definition of “blight” is met. Id. This provision relaxes the requirements for legislative findings through agreement of the parties, and gives a statutory sanction to a finding of “blight.” Any municipality, contemplating issuing redevelopment revenue bonds under the Community Redevelopment Act, would be wise to secure an agreement under the new section 163.340(8) to add confidence to its legislative findings of “blight.” RESEARCH REFERENCES • Eugene McQuillin, The Law of Municipal Corporations vol. 15, §§ 43.11, 43.131 (Beth A. Buday & Donna M. Poczatek eds., 3d rev. ed., CBC 19954 Supp. 2002). • 12A Fla. Jur. Counties and Municipal Corporations § 111 (1998 & Supp. 2003). Christopher J. Kaiser Finance & Taxation: Non-Ad Valorem Tax City of Miami v. McGrath, 824 So. 2d 143 (Fla. 2002) A statute that authorizes the imposition of a non-ad valorem parking tax, but that limits its applicability to those municipalities with a specific population on a particular date, is based on an arbitrary classification scheme, and therefore constitutes an unconstitutional special law. FINANCE&TAXATION.DOC 5/16/2003 3:24 PM 2003] Recent Developments 615 FACTS Under Florida Statutes Section 218.503(5) (1999), the Florida Legislature authorized certain qualifying municipalities to impose a parking tax on the sale, lease, or rental of public parking spaces. To qualify under this Statute, a municipality must have had a population in excess of 300,000 by April 1, 1999, and have declared a state of financial emergency within the last two fiscal years. Fla. Stat. § 218.503(5). Shortly after the enactment of this Statute, the City of Miami, a qualified municipality, passed an ordinance levying a parking tax on cityowned property. Patrick McGrath III filed a lawsuit challenging the constitutionality of the city ordinance and Florida Statutes Section 218.503(5). Specifically, McGrath argued that Florida Statutes Section 218.503(5) violated the Florida Constitution because it represented a special law that impermissibly authorized the imposition of a non-ad valorem tax. The circuit court granted summary judgment for the City and upheld the constitutionality of the ordinance and Florida Statutes Section 218.503(5). On appeal, however, the Third District Court of Appeal reversed the circuit court’s decision and held that Florida Statutes Section 218.503(5) was an unconstitutional special law. McGrath appealed, and the Florida Supreme Court affirmed the Third District’s decision. ANALYSIS The Florida Constitution identifies taxes that the State may levy and those left to local government. Fla. Const. art. VII, §§ 1(a), 9(a). For instance, the State may not impose an ad valorem tax on real estate or tangible personal property. However, all other taxes are strictly preempted to the State, unless provided by general law. This position is reiterated in Article VII, Section 9(a) of the Florida Constitution, which provides that local governments may be authorized to impose non-ad valorem taxes only by general law. Therefore, the central issue before the Court was whether Florida Statutes Section 218.503(5), which authorized the imposition of a municipal-parking tax, a non-ad valorem tax, constituted a valid general law or an unconstitutional special law. A general law is “[a] law [that] operates universally throughout the state, or uniformly upon subjects as they may exist throughout the state, or uniformly within [a] permissible FINANCE&TAXATION.DOC 5/16/2003 3:24 PM 616 Stetson Law Review [Vol. XXXII classification[ ].” State ex rel. Landis v. Harris, 163 So. 237 (Fla. 1934). Consequently, a law that imposes an arbitrary classification is not a valid general law. Special laws, on the other hand, are created to operate only upon particular persons or a particular class of persons when the classification impermissible would be as a general law. Therefore, the Court addressed whether the classification set forth in Florida Statutes Section 218.503(5), which required a population of more than 300,000 by April 1, 1999, was arbitrary, and thus impermissible. Generally, arbitrary classifications are those that bear no reasonable relation to the purpose of the statute. The Florida Supreme Court has routinely invalidated statutes applying only to cities with specific populations, on particular dates. According to the Court, these restrictive statutes apply only to a closed class of cities, and based on their date restrictions, cannot ever apply to another city in the future. Following this rationale, the Court held that the population and date restrictions contained in Florida Statutes Section 218.503(5) effectively limited the Statute’s application to three specific municipalities. Furthermore, no other municipality could ever come within this Statute’s purview in the future, even if its population grew above 300,000. This result is essentially no different than if the Statute had merely mentioned the three qualifying municipalities by name, except in that situation, the Statute clearly would have constituted an impermissible special law. Based on the foregoing, the Court held that the classification scheme utilized in Florida Statutes Section 218.503(5), which effectively closed the class of qualified members and precluded any future entry into the class, constituted an arbitrary population classification that had no reasonable relation to the purpose of the Statute. Consequently, the Court concluded that Florida Statutes Section 218.503(5) was unconstitutional because it constituted a special law, and as such, could not be used by the Legislature to authorize the imposition of a non-ad valorem tax. SIGNIFICANCE As originally enacted in 1999, Florida Statutes Section 218.503(5)(a) stated, “the governing authority of any municipality with a resident population of 300,000 or more on April 1, 1999, . . . may impose a discretionary per-vehicle surcharge.” The McGrath Court held that the fixed-date limitation provided in FINANCE&TAXATION.DOC 5/16/2003 3:24 PM 2003] Recent Developments 617 this Statute impermissibly closed the class of municipalities to which this Statute could apply. However, in 2001, the Florida Legislature amended Florida Statutes Section 218.503(5)(a). Most importantly, the Statute now provides, “[a]ny municipality having a resident population of 300,000 or more on or after April 1, 1999, . . . may impose a discretionary per-vehicle surcharge.” The Legislature effectively created an open class of municipalities that may now qualify for treatment under Florida Statutes Section 218.503(5). As it now stands, municipalities attaining a population in excess of 300,000 may satisfy the Statute, even though they do not reach the required population level by April 1, 1999. The McGrath Court failed to address the effect this amendment would have had on the parties, opting instead to remand the case. Nevertheless, based on the Court’s reasoning in McGrath, the Court likely will find that the Statute, as amended, constitutes a valid general law because it no longer closes the class of municipalities that may come within the Statute’s reach. RESEARCH REFERENCES • Eugene McQuillin, The Law of Municipal Corporations vol. 2, §§ 4.44–4.48 (Dennis Jensen & Gail A. O’Gradney eds., 3d rev. ed., CBC 1996). Dustin Duell Deese Finance & Taxation: Special Assessment City of North Lauderdale v. SMM Properties, Incorporated, 825 So. 2d 343 (Fla. 2002) Unlike fire-suppression and first-medical-response services, emergency medical services do not provide a special benefit to property and therefore cannot be funded by special assessments. FACTS AND PROCEDURAL POSTURE The City of North Lauderdale adopted an ordinance authorizing the levy of a special assessment to fund integrated fire-suppression, first-medical-response, and emergency medical services (EMS). Property owners (Owners) objected to the imposition of the EMS portion of the assessment and argued that FINANCE&TAXATION.DOC 5/16/2003 3:24 PM 618 Stetson Law Review [Vol. XXXII their properties were not specially benefited by EMS. The circuit court ruled that, as a matter of law, the City’s legislative determination that EMS specially benefited the affected property was valid, and granted partial summary judgment to the City. The Fourth District Court of Appeal disagreed and certified the following question, as a matter of great public importance, to the Florida Supreme Court. DO EMERGENCY MEDICAL SERVICES PROVIDE A SPECIAL BENEFIT TO PROPERTY? CAN A FIRE RESCUE PROGRAM FUNDED BY A SPECIAL ASSESSMENT USE ITS EQUIPMENT AND PERSONNEL TO PROVIDE EMERGENCY MEDICAL SERVICES FOR ACCIDENTS AND ILLNESSES UNDER LAKE COUNTY V. WATER OAK MANAGEMENT CORP., 695 SO. 2D 667 (FLA. 1997)? SMM Properties, Inc., 825 So. 2d at 344. ANALYSIS Taxes and special assessments are similar in that they both serve as funding mechanisms used by local governments to support a wide variety of programs and services. They are not, however, interchangeable. Property taxes are levied for the general benefit of the community as a whole, while special assessments must pass more specific legal standards to be found valid. Florida courts follow a well-established two-pronged test when evaluating the propriety of special assessments. First, the services funded by the assessment must provide a special benefit to the affected property. Second, the amount of the assessment must be properly apportioned among the group of properties to be assessed. Sarasota County v. Sarasota Church of Christ, 667 So. 2d 180, 184 (Fla. 1995). In addition, courts traditionally defer to an assessing authority’s legislative determination that a special assessment confers special benefits to the assessed property. City of Boca Raton v. St., 595 So. 2d 25, 30 (Fla. 1992). Here, the Owners did not challenge the apportionment of the assessment. In Lake County, the Court permitted a special assessment for integrated fire services; however, in the instant case, the Court distinguished the facts and concluded that the Lake County special assessment provided only fire-suppression and firstresponse-medical aid, and did not include EMS. The Court was not willing to extend the rationale of Lake County to include EMS FINANCE&TAXATION.DOC 5/16/2003 3:24 PM 2003] Recent Developments 619 within the group of services that special assessments may fund. As to the deference normally afforded legislative findings of a special benefit to property, the Court was not persuaded that the City’s ordinance sufficiently supported its general finding that the affected property received special benefits by EMS. Thus, the Court concluded that the City offered no substantial, competent evidence to support its finding of a special benefit. CONCLUSION In SMM Properties, the Florida Supreme Court seems to have slowed the past decade’s permissive jurisprudence concerning special assessments. In Lake County, Sarasota Church of Christ, and other 1990s cases, the Court allowed special assessments for purposes such as fire protection and garbage disposal — services that earlier had been denied funding through special-assessment levies. Here, the Court distinguished services to individuals who may own property from services that benefit the property itself. While one can argue about the appropriate place to draw the line in making this distinction, the SMM Properties Court has demonstrated that legislative determinations of special benefits to property must be based on reasonable criteria. This decision should serve as a warning to local governments planning to expand the use of special assessments. Special assessments and property taxes are not the same, and each should be employed in the proper context, based on the benefits of the programs funded through their use. RESEARCH REFERENCES • 12A Fla. Jur. 2d Counties and Municipal Corporations § 310 (1998 & Supp. 2003). Pamela M. Dubov, Adjunct Professor Finance & Taxation: Tax Deeds Lambert v. Bazzel, 273 B.R. 663 (Bankr. N.D. Fla. 2002) A clerk of court may not issue a tax deed for property that is part of a bankruptcy estate even when the property owner fails to pay ad valorem property taxes and the tax collector sells a tax FINANCE&TAXATION.DOC 5/16/2003 3:24 PM 620 Stetson Law Review [Vol. XXXII certificate before the property owner files a bankruptcy petition. Tax deeds that transfer property held in a bankruptcy estate are void and do not result in a transfer of a property interest. FACTS John and Connie Lambert failed to pay their 1997 ad valorem property taxes. The county tax collector consequently sold a tax certificate for the delinquency in May 1998. On August 6, 1999, the Lamberts filed a Chapter 7 bankruptcy petition. The party who obtained the tax certificate applied for a tax deed in May 2000; however, the party failed to timely redeem the tax certificate. The tax collector certified the nonredemption to the clerk of court who then sold the property in November 2000 through a tax deed auction. The Chapter 7 trustee sought to invalidate the recently auctioned tax deed because its issuance violated the automatic stay, which existed once the Lamberts filed the Chapter 7 petition. Although the litigants stipulated to the facts in this case, they disagreed about the effect of a bankruptcy petition that is filed after the date of a tax delinquency and the issuance of a tax certificate. The tax collector asserted that the issuance of the tax deed was merely the last in a series of statutorily defined events that began with the tax delinquency, which occurred before the bankruptcy petition filing. She contended that the property transfer effectively began in 1998 when the taxes became delinquent. The bankruptcy petition, therefore, had no bearing upon the recently issued tax deed. EFFECT OF FILING A BANKRUPTCY PETITION When a debtor files a bankruptcy petition, all of the debtor’s property — including all legal and equitable interests in property — become part of the bankruptcy estate. Thus, when the Lamberts filed the Chapter 7 petition, whatever interest they held in the property upon which delinquent taxes were owed effectively transferred to the bankruptcy estate. 11 U.S.C § 541(a)(1) (2000). EFFECT OF A PROPERTY-TAX DELINQUENCY ON INTERESTS IN REAL PROPERTY Property owners do not lose vested interests in real property when they fail to pay ad valorem property taxes. This principle holds true even when the tax collector issues tax certificates for FINANCE&TAXATION.DOC 5/16/2003 3:24 PM 2003] Recent Developments 621 the delinquent taxes following procedures set forth in Chapter 197 of the Florida Statutes. Tax certificates are evidence of statutory liens; however, they do not transfer title to the property. Title transfers only when the clerk of circuit court issues a tax deed. ANALYSIS The Lamberts did not lose their interest in the property when the tax collector sold the tax certificate. Rather, the statutory lien, evidenced by the tax certificate, merely encumbered the Lambert property. Consequently, when the Lamberts filed their bankruptcy petition, their interest became part of the bankruptcy estate. The bankruptcy trustee was entitled to notice of a pending tax deed sale under provisions of Florida Statutes Sections 197.502 and 197.522 (2000). RESEARCH REFERENCES • Eugene McQuillin, The Law of Municipal Corporations vol. 16, §§ 44.52, 44.163 (Dennis Jensen & Gail A. O’Gradney eds., 3d rev. ed., CBC 1994). • 52 Fla. Jur. 2d Taxation § 1691 (1999). Pamela. M. Dubov, Adjunct Professor