A bill that will gradually repeal mortgage registration fees, saving homebuyers money but costing Sedgwick County millions in revenue, has been signed by the governor.
HB 2643, passed in the final hours of the legislative session, bundled several tax policies, including a gradual phase-out of the fees paid to register a mortgage with a county.
“I think on the whole it puts us in a better position to grow as a state. Overall, it’s a good bill,” said Gov. Sam Brownback at a campaign event Thursday. He said he had signed the bill Wednesday.
The bill also includes language that will give property tax relief to cement companies in southeastern Kansas and clarifies whether a piece of equipment should be classified as real property.
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The mortgage fee repeal was pushed by the Kansas Association of Realtors and the Kansas Bankers Association. Both said mortgage fees unfairly tax people who borrow money to buy property.
Brownback echoed this on Thursday. “A home’s the biggest thing people buy, most people buy, and this helps a little,” he said.
Doug Wareham, vice president of government relations for the bankers association, praised the governor’s decision to sign the legislation.
“It’s going to be easier, less costly, for Kansans to borrow and make their dream of homeownership or land ownership come true,” Wareham said in a phone call.
County governments throughout the state have strongly opposed the repeal of the fees, which are a major revenue source for urban counties like Sedgwick and Johnson in particular.
The legislation partially offsets the lost revenue by increasing the per-page filing fee with the recorder of deeds. But Sedgwick County will still lose money each year.
The nonpartisan Kansas Legislative Research Department estimated the county would lose $180,000 in the next fiscal year and $2 million when the policy is fully implemented. These estimates were based on data provided by the Kansas Division of Property Valuation and counties, according to the department.
The county projects the losses to be higher: more than $230,000 in 2015 and as much as $3.7 million when fully implemented, said Kristi Zukovich, spokeswoman for Sedgwick County. She called those conservative estimates and said the county was not consulted for the state estimates.
The Sedgwick County Commission met Wednesday and Thursday to begin the task of crafting the fiscal year 2015 budget.
Dave Unruh, the commission’s chair, said commissioners would weigh the lost revenue as they make decisions, especially since it comes after other reductions to county revenue.
“This one is a single stroke that is very significant. And we don’t have, we just simply don’t have, any other option except to deal with it,” Unruh said in a phone call. He has repeatedly warned that ending the fees could lead to cuts in services or an increase in property taxes in the coming years.
“We have got to figure out how we’re going to continue the level of services that our citizens expect, and we’re going to have to figure out whether that’s going to require a mill levy increase or if there’s some other way we can handle it,” he said.
House Speaker Ray Merrick, R-Stilwell, pushed back last week against the notion that county governments would necessarily need to increase mill levies to make up for the lost revenue.
“There is no need to increase the mill levy in order to absorb the incremental loss of revenue due to the mortgage registration tax phase-out,” Merrick wrote in an e-mail to legislators and to members of the Johnson County Commission, pointing to the gradual implementation and the county’s rising property values.
The legislation is meant in part to make Kansas bank loans more competitive against tax-exempt farm credit service loans. Mortgage fees put Kansas banks at a disadvantage, Wareham said. He said this would help more than just bankers.
“Sure, it’s a good thing for Kansas banks. But we think that’s a good thing for all of Kansas, because when people do business with Kansas banks, you know, those banks support their local communities and those banks are paying state and local taxes,” he said.