A Lennar-backed company is lobbying for a tax break that could save money for Lennar
A Lennar-backed company is lobbying for a tax break that could save money for Lennar
The price of this tax break is probably tiny for now. But economists warn it could soar.
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Earlier this this week, following a brief hearing and a unanimous vote, a committee in the Florida Senate advanced a seemingly small tax break meant to entice homebuilders into building their homes with a feature known as a “graywater system.”
Just one company publicly testified in support of the bill: Greyter Water Systems Inc., a Canadian start-up that builds graywater systems, which capture the water drained from showers and bathtubs and reuse it to flush toilets.
But a much larger corporation may be looming behind the scenes: Lennar Corp., the second-biggest homebuilder in the country.
Miami-based Lennar is one of the lead investors in Greyter, which records show set up a new Florida subsidiary just a few months ago. Lennar led the first major investment in the company with a $3 million infusion made in March 2020. And Lennar just co-led the second major investment in Greyter, too — a $10 million round of financing that was announced one week after the new tax break was proposed in Tallahassee.
Lennar itself also recently lobbied the Florida Legislature to pass other incentives for homebuilders that use graywater systems — using the same lobbying firm that now also represents Greyter.
And Lennar, which turned a $4.6 billion profit last year, is one of the few homebuilders who would even have a chance to claim this new tax break. That’s because it’s structured as credit against corporate taxes — and Florida’s corporate tax is so easy to avoid that only the biggest, most profitable businesses in the world pay anything at all.
Only 15 percent of developers doing business in Florida — about one in seven — are even subject to the state’s corporate income tax, according to an analysis by the state Department of Revenue.
Representatives for Lennar and Greyter did not respond to requests for comment.
‘Why are we flushing toilets with water suitable for drinking?’
Supporters say they are trying to incentivize water-conservation in a state that will have to spend hundreds of millions of dollars in the coming years to keep pace with demand for drinking water. Greyter says its residential system — which collects water drained from showers and bathtubs, treats it to “near-potable quality,” and then uses it for flushing toilets — can reduce a home’s indoor water consumption by as much as 25 percent.
The proposed tax break (Senate Bill 358) would let corporate homebuilders claim tax credits of up to $4,200 each for every graywater system they buy. There is no cumulative cap: If that homebuilder built a 500-home subdivision and put a graywater system in each one, it could cut up to $2.1 million from its Florida tax bill.
“The main question you should honestly be asking yourself here is, ‘Why we are flushing toilets with suitable water for drinking?’” Sen. Danny Burgess (R-Zephyhills), the Senate sponsor of the legislation (SB 358) told the Senate Community Affairs Committee during a public hearing this week. “We’re trying to incentivize the savings of water in this situation.”
Left unsaid was the fact that Florida already gives graywater incentives to homebuilders.
Two years ago, Lennar lobbied lawmakers to pass Senate Bill 64, which makes cities and counties let homebuilders squeeze more homes into their subdivisions if those homes are equipped with graywater systems. Specifically, the law gives developers a 25 percent “density bonus” if three-quarters of the proposed homes in a development will have graywater systems — and a 35 percent density bonus if every proposed home will have one.
Rusty Payton, the chief executive officer and top lobbyist for the Florida Home Builders Association, said that, while allowing builders to put more homes into a project is enticing, it’s a perk that can take a long time to pay off.
A tax break, he said, would be a much faster-acting incentive.
“This is a bridge to help provide some incentives to get that moving,” Payton said.
The Florida Home Builders Association is one of two industry trade groups that testified in favor of the tax break this week, along with the Association of Florida Community Developers. Lennar or its executives are members of both groups, though Payton said no one from Lennar asked his organization to get involved.
Payton said his organization philosophically supports any incentive-based approach to encouraging developers to pursue goals like water conservation — though, again, this particular incentive would be unavailable to the vast majority of builders because it is a corporate tax break.
“Any carrot, we like,” Payton said. “If there’s another carrot that would pick up more developers, we’d probably be for that [too].”
Campaign cash and political power
Lennar, which built nearly 70,000 new homes last year, has long been one of the most influential companies in Florida. Just last month, the political news publication “City & State Florida” ranked Lennar’s executive chairman, Stuart Miller, the second most-powerful construction executive in the state.
In December, records show the company wrote a $50,000 check to the Republican Party of Florida, at a time when, according to Politico Florida, the party was promising donors “close access and tickets” to exclusive events during Gov. Ron DeSantis’ inauguration — including a candlelight dinner at Florida State University and DeSantis’ inaugural ball.
Last week — just eight days before Florida lawmakers gaveled open the 2023 session — Lennar put $75,000 into a political committee controlled by some of its lobbyists, which records show has in turn been making donations to individual legislators.
And while Greyter is much newer to Florida, it, too, has already become a notable campaign contributor. The Canadian company recently gave $5,000 to the most powerful person in the Florida Senate: Senate President Kathleen Passidomo (R-Naples).
State economists who studied this tax break last month have no idea how much it might save corporate homebuilders like Lennar — and how much it might cost the state.
They think it’s probably quite small right now. That’s partly because this is a relatively new technology, and Florida still has stringent rules around how graywater can be used.
But they also think the impact could grow very fast, because it’s very likely that state leaders will loosen those rules soon.
That makes for a potentially dangerous tax break.
Because state economists could not settle on a concrete price tag, that means lawmakers can pass the tax break this year without having to account for it in the state budget. But once it’s permanently locked into the tax code, the losses could start to snowball — without any further scrutiny.
“I think this whole broad area of reclaimed water is a big topic [and] has a lot of interest by the Legislature. I think everybody is still sorting through it. It will be growing in the future,” Amy Baker, one of three principal economists on the panel that evaluates tax breaks under consideration in the Legislature, said during a Feb. 3 meeting to analyze the proposal.
“Whether the regulatory environment that exists today will be the same one that exists next year, we don’t even know,” she added. “In which case, it could soar.”
Building homes in a state where insurance is unaffordable reeks of another housing bubble bursting.