Republican legislators joined Gov. Sam Brownback in Wichita on Friday to announce a proposed property tax reform plan that they said will put an end to “an ever-increasing escalation in assessed valuations” on houses and buildings and give residents and businesses some tax relief.
But the flip side of that relief could also be that local governments, already squeezed from lower tax revenue during a long recession, find themselves having to cut back their spending even more, one official said.
Rep. Steve Brunk, R-Wichita, said the Property Tax Transparency Act would insert a mathematical formula that, when an area’s assessed valuation on houses and buildings increases, would force the mill levy rate to be adjusted lower so Kansans’ property tax bills would not increase. If a county or a city needs to increase their budgets, then its county commissioners or city council members would have to vote on accepting the additional funds from the higher assessed valuations and not adjusting down the mill levy.
“If the assessed value goes up, the mill levy goes down (at an equal percent),” Brunk said in an interview after a Friday news conference held at the Wichita Area Builders Association headquarters downtown. “It’s a protection against exponential increases in property taxes.”
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Because property taxes are levied against values that can grow annually, an owner can still pay more in taxes even if a city, county or school district doesn’t increase its levies.
Brownback said more tax relief is needed, beyond the income tax cuts he ushered through the Kansas Legislature earlier this year. Those cuts could lead to a potential $2.5 billion shortfall in state revenue, according to the Kansas Legislative Research Department.
“Kansas families and businesses are taxed every time they turn around,” Brownback said at the news conference.
The proposal, Brownback said, will make the state “more competitive” and “more transparent” on tax increases. “I’m delighted to announce my support for it,” he said.
Brownback said the state would not increase the property taxes it collects for school districts and public property.
The proposal would, however, allow local governments to collect gains from new construction.
Rep. Jim Ward, D-Wichita, said Democrats are interested in talking with the governor about property tax cuts, which he said they have been trying to do for a year.
“Not caps or just slowing the growth of property taxes,” Ward said. “We want to cut them.
“If the governor is really serious we’re willing to sit down and have a conversation and get that done.”
Ward said the proposal takes the onus of property taxes off state officials and instead puts “the pressure on locals when in fact state policy is driving some of the costs.”
Sen. Susan Wagle, R-Wichita, said at the news conference that she thinks it will make local elected officials hesitant to increase their budgets because they would have to essentially vote on a property tax increase, rather than approve a budget that anticipated increased funding from higher assessed valuations.
“What we are doing here is making the act of spending additional dollars transparent,” Wagle said. “And I think that will slow it.”
Sedgwick County Manager Bill Buchanan said real estate taxes are a key source of revenue for the county, representing 33 percent — or $136 million — of its $412 million budget. While Buchanan said he doesn’t yet have the details of the proposal, it will almost certainly have an impact on the county’s operations.
“One of our main sources of revenue is real estate tax and this will have a negative effect on that and services will have to be cut,” Buchanan said. “If this is what the state believes is important, we will make it work.”
Wichita City Manager Robert Layton said he couldn’t immediately speak to the effects of the proposal until the City Council has had a chance to review it. “I think they want to study the bill before they take a position,” he said.
Kim Winn, deputy director of the League of Kansas Municipalities, said the process of local budgets is already a public and transparent one, including publishing of city budgets, public hearings, and multiple voting processes to approve or change a budget. “We need to see what is in the actual legislation … and we need to see the actual language before we can comment on the specifics,” Winn said.
Brunk said the exact wording of the proposal is being worked on, but that it would be introduced before the Kansas Legislature convenes Jan. 14.
Contributing: Associated Press