Florida local governments would face greater credit pressure if voters approve a plan to largely eliminate property taxes on more than half of homes in the state, according to S&P Global Ratings.
The proposal would create financial uncertainty for local governments and municipal bond issuers. S&P analysts said some issuers could face material revenue and spending challenges if the measure becomes law.
The rating company covers more than 100 Florida credits. Those include 22 counties, 67 municipalities, and 22 school districts, making the proposal important for a large part of the state’s public finance market.
Florida Governor Ron DeSantis introduced the plan last month after discussing property tax cuts for more than one year. Lawmakers later passed a version that would raise the homestead exemption from $50,000 to $150,000 in 2027.
The exemption would then increase to as much as $250,000 in 2028, with later increases tied to inflation. DeSantis said a $250,000 homestead exemption would eliminate property taxes on 60% of Florida homes.
The measure would require a constitutional amendment. It would need approval from 60% of voters in the November 2026 election before taking effect.
S&P said the plan could substantially reduce tax revenue without a replacement source. It could limit annual growth in taxable assessed value and restrict property tax funding for services such as public safety and education.
Schools have been excluded from the proposal. They would still be able to collect property taxes under current rules.
Some local officials have warned that governments might impose new fees for parks, transportation, and other public services to offset revenue losses. Others worry that weaker revenue flexibility could increase borrowing costs.
Florida issuers have more than $175 bn in municipal debt outstanding, according to Bloomberg data. That makes the proposal relevant not only for local budgets, but also for investors in the state’s bond market.
Shrinking dedicated revenues could create pressure around existing bond obligations. Credit ratings could suffer if governments lose revenue without a stable replacement source.
S&P said property tax elimination is not the only risk facing Florida issuers. Analysts also pointed to declining public-school enrollment, hurricane exposure, and uncertainty around cost-sharing from the Federal Emergency Management Agency.
The report also flagged slowing population growth from migration. Migration has been a major driver of Florida’s economy, tax base, housing demand, and public revenue growth.
In 2025, domestic and international migration brought 140,000 newcomers to Florida. That was nearly half the 264,000 arrivals recorded one year earlier.
Parker described the migration decline as a normalization after the recent boom. Still, he said S&P will watch whether federal policy pressure and elevated living costs create more meaningful compression in Florida’s economic base.
According to Beinsure analysts, the proposal creates a direct tension between homeowner tax relief and municipal credit quality. Local governments depend heavily on predictable property tax revenue to fund services and support debt.
If that revenue falls without replacement, bond investors will focus on reserves, spending flexibility, fee authority, and exposure to hurricane-related fiscal shocks.
