For Navarre Beach leaseholder Stephanie Lansden, paying a hefty lease fee on top of an equally hefty property tax on her Summerwind West condominium would have come to about an $8,000 annual price tag — a $4,000 lease fee plus $4,000 in taxes.
But luckily she won't have to face that dilemma — hopefully, ever.
After years of inconsistencies, litigation and questions of equitability surrounding lease fees and property taxes for Navarre Beach residents, the lease fee issue may finally have been put to bed by the Santa Rosa County Board of County Commissioners in the form of a completely new residential lease fee policy for the beach.
The board implemented a new policy this month standardizing residential lease fees on Navarre Beach, capping fees at $250 per lease per year and providing what commissioners say is a fair solution not just to leaseholders, but to all residents of Santa Rosa County.
"I'm happy with it," said Lansden, who has been dealing with the lease fee issue for years as a condo owner and president of the board at Summerwind West. "I'm hoping it'll put it to bed — I don't want to revisit this."
With lease fees ranging anywhere from less than $100 to upward of $4,000 each year, county commissioners hope the policy will bring consistency to a longstanding, often controversial issue on Navarre Beach.
The new policy will be retroactively effective Nov. 1, 2014, also eliminating an additional 5 percent fee previously charged for third-party rentals on certain leases.
"The biggest problem that we had, and the leaseholders had, was the inconsistencies in the leases, and that was because they were negotiated at different periods of time," said District 3 Commissioner and Board Chairman Don Salter. "So our goal was to try to find a consistent lease fee policy that was fair to the leaseholders and also fair for the county as a whole."
Changes through the years
Though lease fees on Navarre Beach date back to 1956, when Santa Rosa County began leasing the beach from Escambia County, complications began to arise in November 2001 after Navarre Beach properties became subject to ad valorem taxes on improvements.
The change was driven by Santa Rosa County Property Appraiser Greg Brown, whose understanding of the leases led him to begin taxing the land improvements. The issue went to the U.S. Court of Appeals and eventually the Florida Supreme Court, which both upheld Brown's notion that land improvements could be taxed on Navarre Beach.
Brown said since leaseholders are privy to the same benefits as landowners, his position was that they should be subjected to the same taxes.
"They can live on (the property), they can rent it, they can take mortgage interest on their properties, so they've got the same benefits and burdens as anybody else does," Brown said. "But they wanted to be in a special class and not pay taxes like everybody else, and that wasn't fair."
In 2006, Navarre Beach properties became subject to property taxes on the land in addition to improvements, a decision also pursued by the property appraiser's office and upheld by the appellate and Supreme courts.
With the addition of ad valorem taxes — commonly known as property taxes — to the lease fee payments, many beach residents cried foul against what they called double taxation.
And despite the court rulings, groups of Navarre Beach leaseholders sued Brown and Santa Rosa Tax Collector Stan Nichols through various lawsuits from 2001-13, petitioning against paying property taxes on the leased land. The lawsuits were unsuccessful, with courts upholding the county's right to tax Navarre Beach properties.
The county responded by implementing a lease payment credit policy in 2001, which gave leaseholders a credit on lease payments equal to any property taxes paid in full.
"What we tried to do, we simply didn't think it was fair to have someone paying taxes and an additional lease fee above what the taxes would have been," Salter said. "So we adjusted the taxes to give them credit on the lease fee, not to exceed what the total taxes would have been."
Issue resurfaces, county resolves
The lease fee credit policy remained in place for years, only recently suspended by the county on Oct. 23 based on input from the Attorney General's Office that such credits act as a tax exemption and are unconstitutional.
This decision led the county to temporarily suspend collection of residential lease fees on the beach while county officials searched for an equitable solution for leaseholders.
With an overall positive response from beach residents regarding the new policy, it seems the county may have accomplished just that.
John Cottle, a senior attorney at the Becker and Poliakoff law firm in Fort Walton Beach who has represented the Summerwind Condominiums since 2009 in relation to the lease fee issue, said he's more than happy with the resolution.
"It did two things that we wanted to achieve, which is to set the fee at something fair and reasonable and get the Summerwind owners out of essentially paying double taxation," Cottle said. "Secondly, it fixed the amount at a set amount that can't easily be modified going into the future."
That fixed amount could prove to be beneficial not only to current leaseholders, but also in attracting potential buyers and creating a more stable real estate market, said Ira Mae Bruce, a realtor on the beach and a former county commissioner representing the Navarre district.
"It's just been a conglomerate of different things, and it was very difficult for buyers to understand why their lease was less or more than anybody else," Bruce said. "This evens things out across the board."
Even with the lease fee credit policy, lease fees on Navarre Beach are a substantial revenue source for the county, generating hundreds of thousands of dollars each year from the approximately 2,000 residential leases on the beach.
As part of the new lease fee policy, Santa Rosa County agreed to dedicate all future lease fee revenue to Navarre Beach, rather than putting the money in the county's general fund as was previously the case.
Between staffing Navarre Beach with lifeguards, maintaining beach facilities and keeping roads clear after storms, Salter said beach-related expenses take up about $650,000 of the county's budget each year.
"There are a lot of additional expenses that go along with maintaining an island," he said. "So that's why it was important for us to commit the standardized lease fee to go toward those expenses."
The net revenue produced by residential lease fees on Navarre Beach in 2014 was about $495,000, taking into account the county's previous lease fee credit policy.
County Attorney Roy Andrews determined that the new fixed-rate policy would be essentially revenue neutral for the county, reducing the county's revenue by about $9,000 based on the amount generated last year.
Though the $250 policy won't affect revenue, the county's decision to eliminate the additional 5 percent fee affecting about 700 leases is another story.
The fee generates about $228,000 for the county annually, varying depending on the number of leases reporting the revenue.
Elimination of the fee passed in a 3-2 vote, with Salter and District 5 Commissioner Lane Lynchard voting against it.
"We'll be losing approximately a quarter million dollars a year that would be recurring over the years," Salter said. "So now we're going to have to try to find a way to possibly replace that money."