We have been receiving many emails from leaseholders on Pensacola Beach who are very concerned about double taxation for leaseholds since they received their tax notice from Escambia County recently. Please read previous newsletters and blog postings on the background of lease fees, taxation, tax lawsuits, fee simple title.

The Pensacola Beach Advocates organization has been involved in these important issues for years. These issues are complex and there are no simple solutions. We share your concerns and our board of directors has prepared this information to bring attention to this issue.  We will remain involved until it is resolved.

If you are concerned and want to support us please joint PBA and make your annual donation of $30. Come to our annual meeting in October.

Assumptions:

• We need to prepare a backup plan for Beach leaseholders assuming that the Florida Courts uphold the taxation of both land and improvements on Pensacola Beach and the leaseholders are faced with paying lease fees in addition to ad-valorem taxes.
• This “double taxation” of Pensacola Beach leaseholders is unfair, and the only remedy is to eliminate the lease fees.
• The County has introduced legislation to Congress to allow transfer of fee simple ownership of land to Pensacola Beach leaseholders. But this legislation could take four years, or may never be enacted at all. The citizens and businesses on Pensacola Beach cannot wait for the U.S. Congress to act to resolve the double taxation issue.

Issues that need to be addressed:

• Lease fees are pledged as collateral on certain bond issues. How can these guarantees be released?
• The development agreement for Portofino provides for an Island Beautification Fund that currently reserves $490,000 per year of Portofino lease fees for island improvements.  What happens to these funds, now and in the future? The agreement also provides for up to $4.7 million in infrastructure improvements for the future development of the 12 acres of land east of Portofino. How will the County assume this commitment?
• If the County decides to disband the SRIA, what state legislation will be needed to dissolve the SRIA, or can the Board of County Commissioners do that without state legislation? What will the successor entity to the SRIA look like? What will its functions be? How will it be funded?
• There are 13 master leases that are in the names of corporations or LLC’s. There are 849 subleases to these master leases. In some cases (which ones yet to be determined) the rent paid by the sub-lessees is greater than the amount paid by the master lessee, yielding the master lessee a net profit.  How are such situations to be handled when the master lease fees go away? How will the sub-lessees derive any relief from double taxation?
• It will take time to resolve these issues.  In the meantime, residential lessees are paying $2.7 million per year in lease fees in addition to ad-valorem taxes.  How can the County protect them in the meantime?  Should they drop lease fees for leaseholders paying taxes as was done in Santa Rosa County? Should they escrow tax dollars to later refund the lease fees if the courts rule in the Property Appraiser’s favor?
• Currently the commercial leaseholders pay about $3.5 million per year in lease fees to the SRIA which are collected in the form of a 2 to 5% “SRIA fee” on commercial sales and rental income. Should some form of tax or fee on sales and rental income remain after the lease agreements are gone?