SB 0052 - Fiscal Note

Fiscal Note - SB 0052 - Limits or freezes assessed valuation of real property under specified conditions

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 0364-01

BILL NO. SB 52

SUBJECT: Taxation and Revenue: Real Property

TYPE: Original

DATE: February 7, 1999

---

FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
Blind Pension	$0	($440,000)	($450,000)
General Revenue	$0	($85,000,000)	($87,500,000)
Total Estimated Net Effect on All State Funds	$0	($85,440,000)	($87,950,000)

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
None
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
Local Government	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 4 pages.

FISCAL ANALYSIS

ASSUMPTION

State Tax Commission (TAX) officials estimated possible loss of income based on assumptions that: increase in assessed value of residential property would be 12% per year, an inflation rate of 4%, 70% of residential property is owner occupied, 26.6% of residential property owners are over 64, and an average tax rate of $5.82 per $100 assessed valuation.

TAX officials would also request one audit clerk to receive and analyze requests for payments from approximately 2,500 political subdivisions and certify for payment by Office of Administration.

TAX officials and the Cole County Assessor note that assessors would have to maintain two sets of assessments for exempt parcels. It is not possible to estimate how much those costs would be until assessors could determine how many parcels would be affected.

Officials of the State Auditor and Department of Revenue indicated that their offices could either absorb costs for duties required by this proposal or would not be affected.

Department of Elementary and Secondary Education officials noted, in responses to similar proposals, that the proposal would decrease assessed values compared to current law, which would increase the amount needed to fully fund the Foundation Formula. They also noted that 1) "hold harmless" districts would recoup their losses through state payments, 2) state payments required by this proposal are not included in the Formula, thus allowing other districts a "double dip" consisting of reimbursements from the state and increased payments through a fully funded Formula, and 3) the effects of the proposal on the Formula should disappear after three or so years.

FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
	(6 Mo.)
GENERAL REVENUE FUND
Cost - Increased Transfers to State School
Money Fund	$0	$0	(Unknown)
Cost - Reimbursements to Political
Subdivisions	$0	($85,000,000)	($87,500,000)
FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
(Continued)	(6 Mo.)
State Tax Commission (TAX)
Personal Service (1 FTE)	$0	$ 21,012	$ 21,538
Fringe Benefits	0	6,280	6,438
Expense and Equipment	0	10,000	10,300
Administrative Cost to TAX	$0	($ 37,292)	($ 38,276)
NET EFFECT ON GENERAL
REVENUE FUND*	$0	($85,000,000)	($87,500,000)
*Does not include possible increased cost to fully fund Foundation Formula.
BLIND PENSION FUND
Loss - Reduced Property Tax Collections	$0	($440,000)	($450,000)
ESTIMATED NET EFFECT ON
BLIND PENSION FUND	$0	($440,000)	($450,000)
FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002
	(6 Mo.)
POLITICAL SUBDIVISIONS
Income - Reimbursements from State	$0	$85,000,000	$87,500,000
Costs - Reduced Property Tax
Collections	$0	($85,000,000)	($87,500,000)
ESTIMATED NET EFFECT ON
POLITICAL SUBDIVISIONS	$0	$0	$0
FISCAL IMPACT - Small Business
No direct fiscal impact to small businesses would be expected as a result of this proposal.

DESCRIPTION

This proposal would limit increase in assessed value of residential property, excluding new construction or improvements, to five percent or the increase in the consumer price index, whichever is less.

The proposal would freeze assessed value of residential property owned by persons sixty-five or older who have resided on the property five years or more.

This proposal has an effective date of January 1, 2000.

This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space. This proposal would affect Total State Revenue.

SOURCES OF INFORMATION

Department of Elementary and Secondary Education

Department of Revenue

State Auditor

State Tax Commission

Cole County Assessor

Jeanne Jarrett, CPA

Director

February 7, 1999