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      7-3-08  

 

 

 

 

 

LEGISLATION WILL END TAX INCREASES CAUSED BY REASSESSMENT
NO MORE BACK DOOR

by Alan McArthur and Ivan Foley
Landmark staff

A bill signed by Missouri Governor Matt Blunt on Tuesday in Platte County has caused a couple of local taxing districts to consider raising their tax levies, they say because of text included in Senate Bill 711 (SB711).

Why the districts are choosing to cite SB711 as the reason to increase their levy is a fact lost on those who sponsored, wrote and supported the legislation.

“Homeownership is a vital part of the American dream. But high property taxes make ownership less affordable,” said Blunt before signing the bill Tuesday at the home of Joe Vanover just outside of Platte City.

“In my State of the State address, I called on the General Assembly to take action against excessive property taxes. And they did, in large part thanks to the leadership of Sen. Michael Gibbons. Protecting Missourians from the threat of rising local property taxes was one of the most significant achievements of this legislative session and I am very pleased to enact this bill into law.”

The Park Hill School District is considering raising its levy from $4.6467 to the ceiling allowed of $4.6920, an increase of 4.53-cents. The Southern Platte County Ambulance Board is also considering an increase from their current $0.08 to possibly as high as the previous $0.14 levy.

Confusion seems to stem from the way some entities are interpreting the bill.

The bill was introduced by Gibbons, Missouri Senator for District 15 in St. Louis County. Gibbons was also present in Platte County at Tuesday’s signing ceremony.

According to Gibbons, the bill was created to stop unexpected tax hikes caused through increased property values by reassessment.

“It was to prevent back door tax increases through reassessment,” said Gibbons. “It treats all taxing districts the same and forces roll backs.”

“These tax increases were never voted on, and taxpayers are forced to pay them,” said Gibbons at the bill signing. “Those days are over. All tax districts now have to follow the guidelines of the Hancock Amendment.”

Gibbons said the bill was largely inspired by the County of St. Louis, where he lives, which left the tax levy at the same rate and saw an increase in revenue of 22 percent.

“In my home district, there was a $12 million tax increase,” said Gibbons, on Tuesday. “In August when the rates were set there was horrible news of a 22 percent tax increase and no one had voted on it. Now they have to follow the rules.”

Gibbons pointed out that a backdoor tax increase is an increase in a homeowner’s tax bill simply due to an increased value of the home. He said some entities boast of keeping their tax levy the same without pointing out that even though the levy may remain level, the homeowner’s tax bill will actually increase if the value of their home increased due to reassessment.

Blunt said part of the reason the bill was signed in Platte County is that there was solid legislative support for it from representatives in the area, and that “folks in Platte County” had been hit with tax increases simply due to the fact the value of their homes increased.

The Hancock Amendment was passed in 1980 and requires mandatory rollbacks of tax levies in reassessment years. Currently, under the Hancock Amendment, only taxing districts currently at their tax rate ceiling are compelled to roll back their levy.

With the new bill, all taxing entities regardless of whether they are at the tax rate ceiling, are required to roll back their levy to prevent windfall tax revenues from reassessment.

In a quick interview after the bill signing, Sen. Gibbons said he does not understand why some entities are saying the legislation entices them to raise their levy to the ceiling.

“That doesn’t make sense. They could be at their ceiling now, without this legislation,” Gibbons said.

As reported recently in The Landmark, representatives from the Park Hill School District and from the South Platte Ambulance District have said SB 711 is encouraging them to raise their levies to the state-allowed ceiling.

Fred Sanchez, member of the South Platte ambulance board, was particularly critical of the legislation, calling it an effort by state lawmakers to “pander to the taxpayers.”

Told by The Landmark of that remark, Blunt responded: “What better group to pander to?”
In response to a question from The Landmark, both Gibbons and Blunt agreed the new legislation will act as a tool to prevent entities from hiding tax increases.

The text of the bill says, “The increased tax rate ceiling as approved shall be adjusted such that when applied to the current total assessed valuation of the political subdivision, excluding new construction and improvements since the date of the election approving such increase, the revenue derived from the adjusted tax rate ceiling is equal to the sum of: the amount of revenue which would have been derived by applying the voter approved increased tax rate ceiling to total assessed valuation of the political subdivision…increased by the percentage increase in the consumer price index, as provided by law. Such adjusted tax rate ceiling may be applied to the total assessed valuation of the political subdivision at the setting of the next tax rate.”

This means that if a taxing entity had a total assessed valuation of $100 million and the tax levy for the entity was at $1 per $100 assessed valuation the entity would receive $1 million.
Currently, if the tax rate ceiling were $1.5 per $100 assessed valuation, the district would not be required to roll back their levy.

During the next reassessment year, the total assessed valuation increases to $125 million, and $5 million of that is new construction.

The district would first calculate the amount it would receive with the consumer price index (CPI) included. If the CPI were 2.3 percent then the total amount the district would receive from reassessment would be $1.023 million.

The district would then take the amount it could receive and divide it by the reassessed value without new construction of $120 million. This would give a new tax levy of $0.8525. Applying this rate to new construction would then yield an additional $42,625 for the district.

The total the district could receive under SB711 is $1,065,625. Without SB711, if the district had left the tax rate at $1 per $100 assessed valuation, the district would have received $1.25 million.

The difference saves taxpayers in the district from paying $184,375.

Some officials have stated the bill would hurt any taxing entity that is not currently operating at their tax rate ceiling because they would be required to roll back their levy and some feel they lose the difference between the operating levy and the tax ceiling.

The portion of the bill regarding the difference in tax ceiling and operating levy states:

“In a year of general reassessment, a governing body whose tax rate is lower than its tax rate ceiling shall revise its tax rate pursuant to the provisions of subsection 4 of this section as if its tax rate was at the tax ceiling. In a year following general reassessment, if such governing body intends to increase its tax rate, the governing body shall conduct a public hearing, and in a public meeting it shall adopt an ordinance, resolution, or policy statement justifying its action prior to setting and certifying its tax rate.”

The attorney for the Southern Platte County Ambulance District, Daniel Fowler, had questioned what the “subsection 4” of the bill refers to.

According to Brian Schmidt, executive director of the joint committee on tax policy, the subsection 4 listed is referring to the Hancock Amendment, telling districts how to roll back their tax levy.

“Clearly this does not force anyone to increase taxes,” said Gibbons. “This just limits districts from raising taxes through a back door method.”

Some taxing districts have argued the bill would still require them to raise the levy, because the section lists the Hancock Amendment, which applies to the tax ceiling and does not allow a district to go above the rolled back levy.

SB711 goes on to state that districts may have an operating levy lower than the tax ceiling and there is no penalty.

“The governing body of any political subdivision may levy a tax rate lower than its tax rate ceiling and may, in a non-reassessment year, increase that lowered tax rate to a level not exceeding the tax rate ceiling without voter approval in the manner provided under subdivision 4 of this subsection. Nothing in this section shall be construed as prohibiting a political subdivision from voluntarily levying a tax rate lower than that which is required under the provisions of this section or from seeking voter approval of a reduction to such political subdivision's tax rate ceiling.”

Because of SB 711, taxing districts may now only raise their tax levy during a non-reassessment year and must hold a public meeting and a public hearing to adopt an ordinance, resolution or policy statement.

The subdivision 4 listed refers to the previously quoted section requiring a public hearing for increasing the tax levy.

The bill was introduced because of the large reassessment year in 2007, and many taxing districts did not reduce their tax levy and saw windfall tax revenue because of the reassessment.

The Park Hill School District is considering raising its tax levy to the ceiling of $4.6920 from the current levy of $4.6467. The rationale given was the district would lose out on the difference if they do not raise the levy.

The Southern Platte Ambulance District has also previously discussed raising the tax levy from the current levy of $0.08 at least a couple of cents or as high as the previous $0.14. The same rationale was given.

According to Mark Harpst, superintendent of the Platte County R-3 School District, the district does not plan to present an increase in the levy to the board of education. The current tax levy in the R-3 School District is $4.1953.

 
 

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