Last summer, the Sarasota County Property Appraiser showed a decrease of almost 3 percent in total taxable value on Longboat Key from 2019-2020. In 2019, the total taxable value of Longboat Key property in the Sarasota County section of the key amounted to $4,310,961,756. In 2020, the total value fell according to the Sarasota Property Appraiser’s Office to $4,189,967,770.
This has caused consternation in Town Hall, which depends on property values to raise money through taxes for operations.
The Town hired a
consultant to seek an explanation and suggest remedies.
The consultant, John Tuccillo, has an undergraduate degree from Georgetown and a doctorate in economics from Cornell. He served as Chief Economist for the National Association of Realtors for 10 years, and has overseen the Florida Statewide System that compiles and analyzes indicators of the real estate market.
On Monday, Tuccillo will present his findings to the Town Commission. Longboat Key News obtained the report and in it Tuccillo addresses what the Town can do in budgeting to accommodate the drop in values as well as what prospects Longboat Key faces in the future. The major points of the report are as follows:
Despite recent trends, the real estate market in the North Port-Sarasota-Manatee Metropolitan Statistical Area (MSA) remains strong and continues to attract in-migrants.
The drop in valuation in the Town of Longboat Key can be attributed to three factors: The condominium housing stock in the Town of Longboat Key is the oldest of any major jurisdiction in Sarasota County; Infrastructure issues have significantly reduced the accessibility of the City of Sarasota from the Key; New construction on the mainland has reduced the attractiveness of Longboat Key.
While forecasting is always an iffy proposition, and none of these factors will go away, values in the future are expected to rise, with the strong possibility that this year is a one-off.
There is little the Town can do to address the factors driving valuation directly. Indirectly, there are four things the Town can consider in order to smooth out the annual valuation changes. It could consider using a two- or three-year planning cycle to smooth out variations in valuation, while still producing annual budgets. It can also increase the transparency of the permitting process, working more closely with the Sarasota County Property Appraiser’s Office to generate a deeper body of information and thus more accurate valuations. Third, it can use existing measures to help older complexes to remodel and renovate, so they are more competitive with newer condominium complexes.
Finally, the Town can continue to maintain and even enhance its Economic Uncertainty Fund, to even out cyclical changes in revenues and outlays.
Factors Affecting the Decline in the Taxable Value of the Longboat Key Condominium Market
In general, the Sarasota real estate market is demand driven. This is even more true for the high-end condominium market (i.e., the price range represented on Longboat Key). Wealthy homebuyers are willing to pay a price but are looking for quality and convenience. They have bought a second home or a retirement residence in Sarasota and want as much time as possible to enjoy the area. Based on that standard, Longboat Key is at a relative disadvantage compared with other parts of the area, particularly downtown Sarasota.
Older Housing Stock
The housing stock on Longboat Key is older than the stock in other parts of Sarasota County. Table 2 displays the actual and effective dates of construction for condominiums in various jurisdictions within the County. “Effective” here means last renovation or alteration. Only 1 percent of the condominiums in the Town of Longboat Key have been built since 2002. In most of the other jurisdictions, the year is 2017. For effective dates, the corresponding years are 2015 and 2018. Only Siesta Key comes close to having as old a housing stock. These numbers may seem insignificant, but the demand for high-end condominiums is largely a demand for new construction, so even small differences in the age of the housing stock can mean large changes in demand and thus valuation. A related issue is the level of reserves for some of the older condominium developments. In some cases, condominium associations have kept fees low, preferring one-time assessments for any major work. Buyers are aware of this and prefer developments whose reserves are adequately funded.
Longboat Key suffers from the problem of accessibility to the City of Sarasota. Longboat Key is by and large a self-contained community. It has all the services necessary to its residents and ample recreational and entertainment opportunities. For a long time, tourists and migrants attracted to the area identified Longboat Key as Sarasota. But the City of Sarasota remains a draw for those buying into the area today, particularly with its cultural amenities. Recently, infrastructure issues, particularly construction and road alteration at the mainland end of the causeway from the keys, have increased travel time and reduced accessibility to the City. In fact, the construction of the traffic circle at the intersection of US 41 and the John Ringling Causeway will likely exacerbate the problem for the next two years. These are unlikely to go away, although they will abate somewhat. For now, and into the foreseeable future, however, they are reducing the desirability of buying or renting in the Town of Longboat Key.
New construction is a strong competitor to condominiums in the Town of Longboat Key. Not only, as described above, is the housing stock in the Town of Longboat Key relatively old, there has been significant activity in the development of new high-end condominiums in the City of Sarasota. These are attractive to buyers because they are new, but also because they offer direct access to all the amenities of the City, a strong draw for younger and more active retirees. In addition, new construction responds directly to the specifics of current demand. For example, as a result of the pandemic, buyers are attracted to units with larger kitchens and more flexible recreation and workspaces. Older housing can respond to these demands only through renovation or expansion.
Where Will Values Be in the Future?
The three specific factors described above will still be operative going forward, but they will be diminished. The age of the condominium stock in the Town of Longboat Key will be refreshed as the St. Regis project comes on-line. Although scheduled for 2023, reservations and presales will positively affect valuation. Other smaller developments will positively affect values are also in progress, notably the renovations to the Longboat Key Club. In addition, as construction projects are finished in the City of Sarasota, the relative attractiveness between the City and the Key will balance. The infrastructure problem remains, but history shows that people adapt, and accessibility problems will become routine and will be factored into behavior.
To a great extent, the market will dictate the course of real estate values. There are, however, four actions that the Town government can consider to adjust to the decline in valuation.
Implement a two-year planning cycle that will smooth out real estate cycles. Budgets are mandated to be done on an annual basis. But a two-year planning process that produces two annual budgets can accommodate changes in the real estate market without significant fiscal disruption. The Town is implementing a forecasting model which will be an ongoing multi-year look atmajor revenues and expenditures, thus allowing consideration of a number of “what if” scenarios
Assist aging properties by providing a practical way to redevelop. Right now, the Town is implementing two initiatives in this regard. The Certificate of Built Conditions will help a property document its grandfathered entitlements. A new redevelopment ordinance will provide flexibility for properties to redevelop while retaining their current densities.
Increased transparency in the permitting process. The appraisal process at the County is as accurate as the available data will allow. Increasing the flow of information about permitted renovations, alterations and additions will allow a better (and likely higher) valuation for the Town. Right now, the Town transmits its permitting information to the Property Appraiser. Increasing the cooperation between Town and County will create a richer flow of information. Related to this, the Town can increase its process of identifying non-permitted changes that might be taking place.
The Town has implemented an Economic Uncertainty Fund. Using this fund (now at $1.3 million) will allow the Town to smooth out any one-year valuation decreases. The Fund could be increased and maintained.”