1. Economic Impacts of Sales Tax Reduction on Commercial Property Leases Prepared for: Florida Realtors Prepared by: Fishkind & Associates, Inc. 12051 Corporate Blvd. Orlando, Fl 32817 www.fishkind.com

2. August 15, 2013 Fishkind and Associates, Inc. 2 FL and NYC Charge Sales Tax on Commercial Property Leases  AZ allows local governments to collect  Nationwide, almost no jurisdictions charge this fee  Sales tax drives up operating expenses  Additional expense hurts business competitiveness and real estate values

3. August 15, 2013 Fishkind and Associates, Inc. 3 Expected Effects of Tax Abatement  State Revenue Losses up to $1.9 billion  Improved NOI is reflected in higher leased property values  Value effect flows to non-leased/owner property values too  Wealth-effect creates additional spending as net worth rises  Tenants benefit from reduced cost  Improved property performance supports an increase in new construction

4. August 15, 2013 Fishkind and Associates, Inc. 4 Revenue Loss Florida Revenue Estimating Conference  The 6% sales tax is phased out over six years  Direct Revenue Loss to Florida $1.99 billion-yr 6  Does economic benefit offset the loss of revenue?

5. Estimates of Revenue Offsets  Benefits accrue to a wide variety of industries  Those who benefit include property owners, tenants, construction industry, medical and professional services as well as hospitality  Property Owners  Property values improve; wealth effect spending  Tenants  New business investment, new employment  New Construction  Support Industries  Multiplier Effect August 15, 2013 Fishkind and Associates, Inc. 5

6. Economic Analysis  Both correlation and regression indicate negative impact from sales tax on leases  Simple correlation between tax collection and employment growth has negative association of -61%  Regression analysis reveals tax is a causal factor in reduced employment growth  Without the sales tax on leases employment growth would increase by 185,000 jobs August 15, 2013 Fishkind and Associates, Inc. 6

7. Employment Growth Forecast August 15, 2013 Fishkind and Associates, Inc. 7

8. Economic Impact  Employment growth increases by 185,000 jobs each year without the tax  Total Economic impact is $20 billion/year  Economic Impact is 5x greater than the tax revenue impact  Very substantial benefit to Florida’s economy August 15, 2013 Fishkind and Associates, Inc. 8

9. Economic Impact Findings  Fishkind used IMPLAN (IMpact Analysis for PLANning) to evaluate the economic impacts of the forecasted lost state revenue of $1.99 billion associated with the 6% commercial lease tax  Two scenarios were evaluated  Public allocation of the $1.99 billion  Economic impact of 185,000 jobs as a result of removal of the tax August 15, 2013 Fishkind and Associates, Inc. 9

10. Economic Impact of State Spending (cont.)  Spending of the $1.99 billion at the state level was allocated across IMPLAN categories and economic impacts were generated August 15, 2013 Fishkind and Associates, Inc. 10

11. Economic Impact of 185,000 New Jobs  Removal of the tax result in 185,000 new job. The jobs were placed in IMPLAN categories for private industry and economic impacts were generated August 15, 2013 Fishkind and Associates, Inc. 11

12. Revenue Shortfall Concern  State Revenue Losses $1.99 billion  New jobs create $160 million in sales tax  New Construction: $90 million in property tax – only $38m to School Bd  State revenue offset $197 million – 10%  Economic Impacts VERY large  Revenue replacement very small August 15, 2013 Fishkind and Associates, Inc. 12

13. Policy Matters  Florida ranks high in Business Climate  Florida ranks unusually low in tax matters August 15, 2013 Fishkind and Associates, Inc. 13

14. Policy Matters  Florida’s sales tax system has many loopholes  This system is not used to the State’s best economic advantage  Realtors see front line effects in leasing and new business formations  Economic Development Rankings suggest the sales tax on leases and other tax issues negatively impact Florida’s business climate August 15, 2013 Fishkind and Associates, Inc. 14

15. Summary- Offsets and Policy  Reduction in Lease Sales Tax results in FIVE FOLD increase in Economic Benefits  $2 billion in tax causes either:  $4 billion in State budget economic impact or  $20 billion in Total economic impact benefit  Employment growth increases 185,000 jobs/year  Improve business climate and tax rankings  Limited revenues offsets go to State, only 10%  Limited additional revenues accrue to local government  State Revenue Shortfall is expected  Good policy hindered by bad revenue choices August 15, 2013 Fishkind and Associates, Inc. 15