PROPERTY TAX
TASKFORCE
Appointed by:
Speaker Rod Jetton
As
Chairman of this Task Force and having listened to hundreds of
___________________________________
Dick
Roehl, Chairman
___________________________________
Rep.
Mike Sutherland, Asst. Chairman
Prepared by
Karla Strobel, Legislative Analyst II
House Research,
January 2008
To: Speaker Rod Jetton
From: Property Tax Taskforce
Date: January 7, 2008
Re: Property Tax Taskforce Report
In
accordance with your directive to the Taskforce members to study property tax,
the members gathered information from a variety of sources and held public
hearings around the state during the past few months, including testimony from
school districts, the State Tax Commission, the State Auditor’s Office, county
assessors, and numerous individuals. The
duly appointed members respectively submit their report:
Members: Dick Roehl,
Chairman Rep. Mike
Sutherland
Robert Hediger Rep.
Dennis Wood
Jo Walker Rep.
Paul Quinn
Bill Trimm Laura
Pope
Curtis Koons Barbara
Fraser
Julie Molendorp Louis
Rubin
Jim Keefe Harry
Chambers
George Winebright Colleen Wassinger
Matt Chellis
Staff: Kenny Ross, Speaker’s Office
Jacinda Walters,
Secretary
Karla Strobel,
Legislative Analyst
Mike Price, Budget Analyst
Hearings: September 12, 2007
October 10, 2007
October 24, 2007
November 14, 2007
December 3, 2007
RECOMMENDATIONS
A
majority of the members of the Task Force on Property Tax recommended the
following:
1. Set the tax rate ceiling at the preceding
year's tax revenue with an allowance for new construction. This would require a taxing district to
rollback their rates to remain revenue neutral when the district has increasing
assessment values. No consideration for
any increase in the Consumer Price Index (CPI) should be considered. This shall be accomplished through a
constitutional amendment.
2. Review economic development incentives such
as Tax Increment Financing (TIF), Enhanced Enterprise Zones, Chapter 99
(Municipal Housing), Chapter 100 (Industrial Development), and Chapter 353
(Urban Redevelopment) to determine how they impact property taxes and
particularly residential property tax owners.
Voters should have a voice in the formation of these and a school board
member should be a member of the TIF board.
3. Require clear, concise ballot language for
all school bond issues and tax increase issues that explain actual impact and
costs to taxpayers.
4. Allow a secondary appeal process for
properties with increased assessed valuations once the taxpayer receives their
tax bill. This is especially important
in taxing districts with the certificate of value requirements.
5. Fund reassessment at $7 per parcel for all
counties. Counties could use the
additional funding to hire additional personnel, provide training, or get
better equipment to improve their reassessment process.
6. Provide seniors the option to have the state
pay their real property taxes on their primary residence by placing a lien on
the property until the taxpayer dies or the property is sold or
transferred. The state would charge no
interest.
7. Increase the income limits for the Property
Tax Credit for Seniors (Circuit Breaker) to $50,000 for married filing combined
and $46,000 for singles, head of households, qualifying widows, and married
filing separate.
8. Create an advocacy group within the State Tax
Commission similar to the one in the Public Service Commission to help with
resolving disputes by providing legal guidance and assistance in court.
9. Require accurate assessments throughout the
state so that from county to county the assessed valuations accurately
represent the market value of real property.
POSSIBLE
SOLUTIONS
The
following is a list of individual Task Force member's suggestions in addition
to the recommendations agreed to by the majority:
1.
Divide each county's land mass into four sections and concentrate one section
per year until inconsistency of the assessment system is resolved. During this period those sections not subject
to the extensive study would be subjected to "normal" activities such
as sales. (Winebright)
2. Cap the tax levy determined from year to year
at the Consumer Price Index (CPI) pursuant to the Hancock Amendment. The baseline levy should be 2006, since levies
may be artificially high in 2007.
(Chambers)
3. Modify the Hancock Amendment to limit the
amount of revenue any taxing district can collect in a given year to the amount
of revenue raised the previous year plus an inflation factor not to exceed 2% (Rubin) or
2.5%. (Roehl)
4. Limit when a taxing district may go to the
voters for an increased tax rate over their allowed maximum, to only if they
have both operated at their maximum rate for two consecutive years, and have
maintained an average operating surplus of 10% or less for that period. (Rubin)
5. Prohibit the re-submission to voters of
failed tax increase proposals for a period of at least two years. (Rubin)
6. Require a two thirds (2/3) majority of votes
cast for all tax increases and a sunset provision so that they are not
authorized indefinitely. (Rubin)
7. Restrict a tax supported agency's budget
(like county government, schools, fire districts) to CPI or a 5% per year
revenue increase, whichever is lower.
For general operations, the State Auditor should advise the agency to
set the limit for their next budget and maximum rate based upon last year's
rate used. (Winebright)
8. Require taxing districts to make public more
detail of their actual revenues and operating costs. (Rubin)
9. Change the debt retirement rate only upon
expiration or voter approval to increase payoff time. (Winebright &
Walker)
10. Gradually standardize the assessment
rates among agricultural, residential, and commercial properties. Assure that agricultural assessments are
truly used for agricultural purposes.
The income producing capability of agricultural land should have special
review.
(
11. Require all businesses to pay their fair
share of property taxes to aid in alleviating the tax burden on residential
home owners. This would help relieve the
burden that has shifted to home owners as a result of declining tax obligations
of businesses. (Quinn)
12. Mandate a computer system and software
package to be used for all counties and establish regional data centers for
rural areas. (Winebright)
13. Require the State to fully fund the school
foundation formula, so that school districts would not be forced to go to the
voters as often as is now required to seek additional funding. (Quinn)
14. Recognize that any change to the current
property tax structure will impact the funding of local taxing entities,
particularly school districts which are the recipients of the largest portion
of these revenues, and a reliable alternate funding source must be found to
replace any revenues lost by taxing entities as a result of altering the
current taxing structure. (Quinn)
15. Explore some alternative methods to
finance education since schools districts are the largest taxing
districts---such as a small percentage sales tax, a tax on Internet sales or
doubling the automobile license fees and earmarking the funds for
education. (
16. Eliminate property taxes and go to a state‑wide
sales tax. Current estimates for a sales
tax increase are 3.5%. This would
eliminate the current unfair and unbelievably expensive system of assessment
and taxation in
17. Require each county to adopt Certificate of
Value for more accurate statewide assessments (Fraser, Roehl),
and require the State Tax Commission to use sales ratio studies across the
state in order to achieve the most reliable local information. Currently, only
18. Abolish the current assessment method and use
of computer systems statewide.
Assessments should be based on arm's length appraisals or Certificate of
Value only. (Chambers)
19. Commission a study panel of the
effectiveness of methods and procedures of the assessment process within the
state by the
20. Require all counties across
21. Fund programs to provide tax relief for
seniors and low‑income residents with the foundation formula savings of
potentially $200 million or more as a result of accurate statewide
assessments. (Fraser)
22. Require a set minimum amount of income tax to
be returned to each school district based on the designated school code on each
resident's tax return. Property taxes
could be decreased by the amount of income tax received. Currently,
23. Eliminate residential property taxes for
seniors over 65 years of age who are retired or set a tax cap of $1,000, or
less, based on the property appraisal value.
The Homestead Preservation Credit needs to be replaced with a credit
that helps the elderly and retired.
(Chambers)
24. Fully fund the Homestead
Preservation Act or increase it to allow more eligible applicants without a
loss in revenue to the local taxing entities.
(Walker & Quinn)
25. Provide additional relief for Seniors with a
26. Review Tax Increment Financing (TIF):
(a.) Consideration should be given to requiring a
vote of the people when the TIF commission rejects a proposal and the governing
board wishes to proceed.
(b.) Affected taxing entities should have
proportional representation on TIF commissions to ensure that their concerns
and interests are fully considered.
(c.) Currently, only 50% of economic activity
taxes can be utilized to pay for an approved TIF project yet up to 100% of
property taxes can be diverted for a similar purpose. This 50% cap should also apply to property
taxes or the percentage of economic activity taxes utilized to pay for the
approved TIF project should equal the percentage of property taxes diverted for
such use.
(d.) TIF projects should not be authorized for
residential developments unless school district representatives are on the TIF
commission grant approval.
(e.) Require a five year moratorium on approving
TIF and other economic incentives.
(Quinn)
27. Reduce agricultural taxing categories to two
or three and require that non‑productive land pay a fairer share of the
tax burden in rural counties. The tax
rates currently paid are
unreasonably
low and detrimental to schools and other taxing districts in rural areas. (Roehl)
TESTIMONY
Sept. 12, 2007
–
Representative Charles Portwood
Representative
Portwood provided data that showed a windfall for his
tax district from 2001 to 2007 because of increased property valuations without
rollbacks in the tax rates. Portwood proposes a constitutional change to apply the
Consumer Price Index (CPI) to the tax revenue increases rather than tax
ceilings. He wants to place the burden
on taxing authorities instead of individual taxpayers to prove the value of
their homes. Also, he proposes the
Certificate of Value (COV) be extended to the entire state and require truth in
ballot language. While property tax is
not only a problem for seniors, but all taxpayers, he wants to increase the
homestead act and property tax credit to provide more assistance to
seniors. He is concerned with fairness
with business property taxes and required rollbacks for extra districts like
fire or ambulance.
Representative Walt Bivens
The
problem is the tax rate and not the assessment process. Representative Bivens recommends bold action to fix the problem
with property taxes by finding new ways to fund taxing entities. He suggests looking at a sales tax and
additional fees to fund the operating portion of the levy and allow only debt
service to be funded by property tax. He
wants a closer look into
Representative Jim Lembke
The
first concern of taxpayers in his district is property tax. The root of the problem is the never ending
desire for more expanding government. A
government big enough to give you all you want is big enough to take it all
away. Many taxpayers in the district are
needing to move because of the high cost of their property tax. The root of the problem is school funding
needs to be separated from the assessment process. Representative Lembke
recommends a freeze in the property tax for seniors based on age and number of
years in the home.
Laura Pope, Taskforce Member
Assessors
in rural counties are limited in funding and personnel making it difficult to
do their job effectively. Assessors are
held to the constitution to value all properties in their counties. They do a good job.
Charlie Nordwall, State Tax
Commission
Property
tax is complicated with the assessment process as one part of it. State law requires assessment to be at market
value. Mr. Nordwall
provided an overview of the assessment process and the role of the State Tax
Commission. He stated that
Steve Gardner,
TESTIMONY
October 10,
2007 –
Dr. Doug Hayter, Superintendent,
Property
tax has been the most stable and dependable tax for school funding in the
past. Sixty to seventy percent of
Branson public school funding comes from local property tax. Two thirds of all property tax revenue goes
to schools statewide. The prior
foundation formula rewarded schools for having higher property tax rates while
the new formula is based on student needs.
The new formula should provide more equal funding across the state. Each district must compute their tax rate
each year for operating and debt services.
The State Auditor's Office reviews this process. The Branson school district has grown with
new construction and is currently taxing at its ceiling with voter approval for
an increase. Districts transfer from
their operating fund to debt service to keep their levy constant. Mr. Hayter reminded
the taskforce to beware of the impact to schools when considering changing
property tax to an increased individual income, corporate income or sales
tax. He recommends a review of the
special funding and tax deals given to businesses. He recently saw $21 million in Tax Increment
Financing (TIF) pulled out of their rate calculation putting more burden on
residential real property.
Gary Arthaud, Superintendent,
The
new foundation formula increased property tax minimums causing low income
households and retired taxpayers to share more in the burden of school
funding. Seniors' ability to pay is
limited by stable incomes. Any increase
in property tax forces seniors to make choices between basic needs, taxes, or
selling their homes. Property taxes
can't be the foundation for education forever.
Mr.
Arthaud believes assessments in his district are at
good levels and the problems are related to the tax rates and providing
adequate funding to retain teachers. All
seniors need to be informed about the property tax credit. He recommends freezing property taxes for
seniors with care taken to replace lost revenue, forcing levy rollbacks, and
looking into tax increment financing and other business tax incentives. Property tax should not be the main support
for education since it does not produce enough adequate support for children in
poorer districts.
Representative Bob Dixon
The
disparity in valuation and assessment statewide and the rising property tax
costs are hurting our seniors, young families, single parents, and lower income
taxpayers. The circuit breaker and
homestead act offer some relief for qualifying seniors. The representative recommends a local option
to increase sales or income tax to fund schools instead of relying on property
tax. He is concerned with agricultural
land that is held for development, and land purchased by government, schools,
parks, churches, etc. and taken off the tax roles.
Property
taxes are vital to the operation of public schools and are the most stable form
of local revenue available to school districts.
According to the Department of Elementary and Secondary Education, 55.8%
of school districts' revenues came from local sources in 2006. The state provided 34.6% and the federal
government provided 9.6%. The
indiscriminate use of TIF, Chapter 100 projects, Chapter 353 projects, and
other types of economic development incentives have shifted a significant
portion of the property tax burden to homeowners. In 2005, legislation passed that granted
businesses significant reductions in assessed valuation of business personal
property, and this change in law largely benefits big businesses, leaving small
businesses and homeowners to make up the difference. To help relieve the burden on individual
taxpayers, all businesses should be required to pay their fair share. Increasing the property tax credit and the
homestead act would help to reduce the burden on qualifying seniors. The state should provide state funding for
resources for assessors to improve equalized assessments in all counties. Ms. Rector requested the taskforce to
consider the potential impact on public schools of any property tax reform.
Jerry Bowers
Mr.
Bowers lives in Willard and is concerned with the assessment process and the
taxes placed on mobile homes.
Kay Chilton,
Ms.
Chilton recommends the certificate of value to assist with the assessment
process. Right now she sends a letter
when property is sold and gets about a 35% response. She feels the schools need to cut back to
help with the increased costs of education which would help with the property
tax.
Representative Charles Portwood
Representative
Portwood provided updated data that showed a windfall
for his tax district from 2001 to 2007 because of increased property valuations
without rollbacks in the tax rates. Portwood proposes a constitutional change to apply the
Consumer Price Index (CPI) to the tax revenue increases rather than tax
ceilings. He wants to place the burden
on taxing authorities instead of individual taxpayers to prove the value of
their homes. Also, he proposes the
Certificate of Value (COV) be extended to the entire state and require truth in
ballot language. While property tax is
not only a problem for seniors, but all taxpayers, he recommends an increase in
the homestead act and the property tax credit to provide more assistance to
seniors. The representative is concerned
with fairness of business property taxes, charitable properties, and required
rollbacks for other taxing districts like fire or ambulance.
TESTIMONY
October 24,
2007 –
Representive Jerry Nolte
Representative
Nolte welcomed everyone to his area and stated he was concerned with how
property tax is effecting people's lives.
He wants consistency of the property tax from county to county and
increases in the property tax credit (circuit breaker) and the Homestead
Preservation Act to help seniors pay their taxes.
Charles Nordwald, State Tax
Commission
Mr.
Nordwald provided an overview of the assessment
process of agricultural land including historical agricultural assessed
valuation data. Active agricultural land
is assessed based on its productive value rather than its market value pursuant
to the Missouri Constitution while vacant and unused agricultural land is
assessed at 12% of its market value.
Gerri Ogle and Roger Dorson,
Department of Elementary and Secondary Education
Ms.
Ogle and Mr. Dorson provided an overview of the
school district tax rate setting process.
The Department of Elementary and Secondary Education (DESE) works with
schools to set their rates while the State Auditor's Office actually sets the
rates. Schools set levies for their
operating funds and debt service. The
adjusted tax levy for operating funds is the tax rate ceiling as determined by
the State Auditor's Office, minus any voluntary rollbacks and proposition C
rollbacks. The debt service tax rate is
levied to meet the annual debt service requirements of the general obligation
bonds of the district. This levy is
usually deemed reasonable if the revenue to be generated plus the existing fund
balances doesn't exceed the current payment requirements plus a reserve for the
following year's payments. At least one
public hearing is held by the board of education of the school district before
the tax rates are set. The minimum tax
rate levy is $2.75. Property taxes are
increasing today at the same rate as the assessed valuations because of debt
services. A school district can opt to
payoff early or pay down their debt and go to voters with a "no tax
increase" bond levy to continue the current debt service levy.
Paul Harrell, Cheif Financial
Officer,
Mr.
Harrell stated good schools are necessary for strong communities and good
development is important for a community.
However, the property tax system is broken when in 2007, the assessed
valuation for the school district was decreased by $67 million for a Ford
Settlement, $42 million for increased Tax Increment Financing (TIF) projects,
and $30 million for the change in business personal property valuation. Economic development incentives like 353
plans, TIF, Chapter 100, Enhanced Enterprise Zones, Neighborhood Improvement
Districts (NID), Community Improvement Districts (CID), and Transportation
Development Districts (TDD) divert money from schools and residential
homeowners are paying for it. School districts
depend on property tax as a stable form of revenue. We need uniform assessment methods across the
state. While economic development is
important, aggressive use of incentives is troublesome to schools and
individual taxpayers.
Individual Taxpayers
The
following taxpayers are concerned with the assessment process and the taxes
placed on their homes:
Stan
Cunningham
Susan
Mason
Thomas
Clossick
Sal
Bonsigmore
Dennis
Daly
David
Peironnet
Theresa
Jennings
Richard
Jennings
Anna
Hensley
Joyce
Wilcor
Virginia
Battayler
Adelaida Gerhardt
Senator LuAnn Ridgeway
Senator
Ridgeway recommends that the percentage increase in taxes does not exceed the
same percentage increase in assessments in a given county to help stabilize
property taxes. She supported HB 444
last session which provides assistance to working retirees with their social
security and retirement income.
Chris Byrd,
Mr.
Byrd expressed concern with bonus value rent.
When rent is below the market, the county can tax on the
difference.
Steve Gardner,
Mr.
Gardner presented historical property tax data including information about
property tax revenues, assessments, policy, and comparisons to other
states. He said
TESTIMONY
November 14,
2007 –
Gene Leung, St. Louis County Director of Revenue
Mr.
Leung provided an overview of the
Representative Charles Portwood
Currently
the Hancock Amendment applies to the tax ceiling and not the current rate. The representative proposes the following
changes:
1. Make a statutory change to require a uniform
process across the state to value homes;
2. Make a constitutional change to make
rollbacks apply to the tax rate not the tax ceiling, with an allowance for the
Consumer Price Index (CPI);
3. Require a taxing district to operate at their
maximum levy for two years before they can ask for an increase; and
4. Look back to the 2006 assessment levels and
hold assessments there.
Robert W. Becker,
Mr.
Becker stated the assessment process is flawed since a house is valued from the
outside only. An appraiser doesn't know
when to use the base price for square footage or when improvements make a house
more valuable. Tax Increment Financing
is a problem in the area. He recommends
eliminating property tax and increasing the sales tax by 3%, similar to
Charles Spenbeck,
Individual Taxpayers
The
following property owners expressed concern with the assessment, rollback, and
appeals processes, school and government spending, increased property taxes in
the
Susie
Patton Michi Ishikawa Branham
Britt
& Sharon Holt Dennis
Fitzgerald
Diana
Steward Ruth
Hemmann
Mary
Ann Barr Charles
B. Hook
Craig
Canatsey Mary
Black
Jim
Sindelar David
Pauluhn
Gary
E. Mitchell Mary
& Fred Aufderaeide
Tomaso Sacco Robert
Javavo
Randall
Roth Daniel
L. Sulliun
Lockwood
Hill Tom
Schneider
Harvey
A. Keymer John
Burns
Bill
Larson Linda
Koleda
Barbara
A. Cole Henry
V. Taber
Annette
Phillips Tom
Clemens
Diane
M. Javaux John
& Dianne Dettrie
Steve
J. Elsner Gregory
T. Pieper
Arthur
L. Carter Shirley
Carroll
Sharon
M. Carroll Kathleen
A. Kerlagon
Ann
Bussen Edmund
Wilkinson
Roland
D. Williams Ernest
Thompson
Margaret
L. Mitchell Melvin
Klearman
Robin
Harris Dennis
Beaver
Robert
S. Nation Charles
Selin
Dorthea B. Nevils Albert
Barbieri
Ronald
Kardell Robert
Thoele
Pauline
L. Heckert Mary
F. Gvion
Barbara
R. Billen Maryann
Rober
Sharon
& David Krueger Sharon
Colborn
Charles
Moore Bill
Barry
Ronald
E. Levy Dave
Kummer
Ray Kerlagon, Alderman for the
City of
Citizens
of the fourth ward are very displeased with their new assessed valuations, the
real estate tax process, and tax increases year after year. They need relief ‑‑ especially
seniors who have lived in their homes for years.
Carrie Cline,
Public
libraries are state‑mandated to operate on property taxes and therefore
need to be considered when there is any kind of property tax reform.
Louis J. Chiodini, Retired Army
Colonel and Engineer, Assistant to Councilman John Campisi
Mr.
Chiodini has spoken with over 400 residents of
David Glaser,
A
quality education costs money. Rockwood
relies on property taxes to fund 63% of its budget. Rockwood's cost per pupil is low and its
student achievement is among the highest in the state. When assessments increase, Rockwood can
maintain their current debt service levy and repay outstanding debt more
rapidly, but must reduce its operating levy so that the growth after new
construction is the lower of CPI (2.6% for 2007) or 5%. Mr. Glaser recommends updating the
Representative Jane Cunningham
Taxing
repairs and maintenance of homes will cause less to be done. Many taxpayers are moving because of property
taxes. The representative is filing two
bills to help taxpayers. The first one
is similar to the
John Urkevich, Cooperating School
Districts of Greater
The
organization represents 61 area schools.