A bill repealing mortgage registration fees won approval in the Senate on Wednesday.
Supporters called the bill a tax cut for homebuyers. Opponents said it will cost counties that collect the fee millions in revenue.
And Democrats complained that an amendment channeling some funding to county clerks’ offices unfairly benefited the chair of the state Republican Party, Kelly Arnold, who is the clerk in Sedgwick County and drafted the amendment. Arnold said he opposes the overall bill and did not use his influence as party chair to get it amended.
The Senate voted 26-12 in favor of Senate Bill 298, which is strongly backed by the Kansas Bankers Association but staunchly opposed by Sedgwick County officials and other county government officials. It now goes to the House.
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The bill would phase out mortgage registration fees over five years. Now, lenders pay the fees to county governments based on the cost of a mortgage for a residential or commercial property. The fees brought in $7.4 million in revenue to Sedgwick County in 2012.
Supporters tried to offset lost revenue for counties by increasing the document filing fee for deeds and mortgages to $4. To what extent this would make up the lost revenue has been disputed.
The Kansas Bankers Association has calculated that Sedgwick County would lose about $180,000 in 2015 and about $2 million in 2019.
Kristi Zukovich, a spokeswoman for Sedgwick County government, said the county’s budget office projects the bill would cost the county as much as $800,000 in 2015 and $3.4 million by 2019.
Supporters of the bill say mortgage registration fees are an unfair tax on homebuyers. But opponents say lenders actually pay the fee to the county after it has been collected from homebuyers.
Sen. Jeff Melcher, R-Leawood, compared the fees to pickpocketing.
“It’s just an unfair tax and it’s a hidden tax,” he said. “Nobody realizes that they’re paying it, it’s just another hidden way for them to get into taxpayers’ pockets without them even knowing it.”
If county governments need to make up the lost revenue, he said, they should have to raise their mill levies, or property taxes, and be held accountable by voters for doing so.
Sedgwick County Chair Dave Unruh, who opposed the mortgage fee repeal for months, said such arguments are flawed.
“The argument just starts getting all strung out. They don’t want us to raise mill levies. They think it’s too high,” Unruh said in a phone call. “And yet at the same time they’re cutting our other revenue sources and there’s a considerable amount of services we provide that are state mandated services.”
Doug Wareham, vice president of the Kansas Bankers Association, said the legislation is needed. “At the end of the day, it’s a tax cut and that’s how we view it. It is reducing the cost of borrowers that need a mortgage to buy a business, a home and land. And that’s a tax cut.”
The bill also levels the playing field between banks and farm credit service loans, which under federal law are not taxed. Wareham said the cost of mortgage registration fees on commercial properties puts banks at unfair disadvantage against farm credit service lenders.
Arnold said the bill does not adequately offset the revenue lost by counties. “This bill has gutted the revenue for counties,” he said in a phone call.
“I’m against this bill until we have adequate revenue replacement,” he added later.
Arnold faced criticism from Democrats when the bill was debated Tuesday for originating an amendment that takes 50 cents of every $4 collected and places it into a technology fund for county clerks’ offices.
Senate Minority Leader Anthony Hensley, D-Topeka, accused Arnold of using his influence as Republican Party chair to protect his own office from the impact of the revenue loss at the expense of other departments.
The amendment, introduced by Sen. Julia Lynn, R-Olathe, in committee earlier this month, states that if the money in the technology fund surpasses $50,000 and the county clerk says no more is needed, it will go to the county.
Arnold brushed off the criticism that he had used his political influence as GOP chair to get an amendment that helps the clerk’s office.
“Never once in any conversation with any senator was my role of Republican Party chairman brought up. The Republican Party has actually no position at all on this bill, for or against,” Arnold said.
The technology fund is needed to help the clerk’s office upgrade its paper into an electronic database, he said.
Lynn said she thought Arnold was “acting as any Kansas citizen.”
“Anyone can come to this Legislature and request an amendment. And I thought the amendment was very fair in that it actually, first of all, targeted some of those dollars to a purpose that is needed,” she said.
Access to funds
Sen. Michael O’Donnell, R-Wichita, introduced a similar amendment Tuesday that does the same thing for the treasurer’s office. He said he was not approached by the Sedgwick County Treasurer’s Office, but did consult with it before introducing the amendment.
Unruh said the amendments further highlight problems with the bill, which he said encroaches on local authority.
“Once it’s segregated like that, it reduces our ability to plan and reduces our access to those funds,” Unruh said in a phone interview. “We’re the ones who set the budget and we’re the policy makers … to take some of our money from general fund and allow another entity to have control over it, I’m not sure that’s good policy.”
E-mails obtained by The Eagle showed that the Kansas County Clerks and Election Officials Association did not support the amendment for clerks.
Sharon Seibel, president of the association and clerk of Ford County, confirmed in a phone call that Arnold approached Lynn without consulting the clerks’ association.
“The amount of money that the clerk’s office would benefit wouldn’t make up for the loss that the county would suffer. And me being able to lower my individual budget if that happened because of that fund wouldn’t solve the problem that it (the bill) creates,” Seibel said.