Hillsborough warned property tax reform could blow $343M hole in county funds

Hillsborough County officials are warning that Florida’s latest push for property tax relief could leave local leaders choosing between cutting services, raising other revenues or finding new ways to pay for public safety. 

Hillsborough County could face a $213 million hit to its countywide general fund and another $130 million squeeze in its unincorporated area fund if voters approve a proposed property tax overhaul in November.

Financial staff warned County Commissioners that the proposal, now headed for the November 2026 ballot, could reshape Hillsborough’s budget and force difficult choices over public safety, libraries, reserves, service cuts, fees and possible alternative taxes.

Budget Director Tom Fesler told Commissioners on Wednesday the county should expect large impacts from a major expansion of Florida’s homestead exemption. The proposal would create a $150,000 exemption in Fiscal Year 2027, affecting Hillsborough’s Fiscal Year 2028 budget, before increasing to $250,000 the following year.

He said the proposal would also reduce the assessment cap on non-homesteaded properties from 10% to 5%, require five years of Florida residency to qualify for the expanded exemption and allow exemptions to increase annually by inflation.

The local math is stark. Fesler said about 66% of the countywide general fund already goes toward constitutional officers, outside agencies and fire rescue, including the Sheriff. If the proposal passes, he warned, ad valorem revenue would no longer cover those services entirely, likely forcing the county to look to alternate revenues.

“It would be very difficult to make that work without impacting public safety,” Fesler said.

One piece of the proposal could affect Hillsborough even before voters weigh in. A separate statutory change would tie the county’s maximum millage rate more closely to the rollback rate, which is the rate needed to collect the same amount of revenue as the prior year. 

Fesler said that could cost the county about $17 million in ad valorem revenue for the Fiscal Year 2027 budget if Commissioners cannot reach a supermajority vote on the proposed millage rate.

The library district, which funds Hillsborough’s public library system, would also take a hit. Fesler said the district currently collects about $96 million in ad valorem revenue and would see an estimated $21 million impact under the proposal. He said the loss in funding would likely affect future library projects.

“The library district would probably be able to continue to fund its ongoing operations,” Fesler said. “But the thing about the library district is, historically, the ad valorem revenues associated with the library district have been used to replace libraries and build new libraries. As you can see, there would be very little room left to be able to accumulate revenues to be able to do that in the future.”

Staff laid out possible options that Commissioners could consider, including using reserves, freezing compensation or hiring, reducing nonprofit funding, creating special assessment districts, cutting service hours, raising fees or finding new revenue sources. One possibility would be a public service tax, which Fesler noted Tampa already levies on utility bills. He estimated Hillsborough could generate about $80 million to $90 million if it levied the tax at 10%.

Commissioner Harry Cohen said he expected some form of tax relief to emerge from Tallahassee, but not a proposal with such sweeping consequences.

“I do not think it’s hyperbolic or bombastic to point out to people that there is no possible way to make this work without making major cuts in public safety expenditures or funding them through another mechanism that will cost money that comes from somewhere,” Cohen said.

“I think that it is also not hyperbolic or bombastic to point out that, yes, it will be on the ballot for people to decide, but they should know what it is that they’re actually voting on and what it could mean to our local governments.”

Commissioner Gwen Myers moved to accept the staff report and hold a workshop early next year if the property tax amendment passes.

The constitutional amendment would require 60% voter approval in the November 2026 General Election. The first impacts from the expanded homestead exemption would hit Hillsborough’s budget in Fiscal Year 2028.