Cities and counties across Kansas on Friday lined up in opposition to a bill intended to require more public disclosure when local governments collect extra tax dollars from mushrooming property values.
They argued the legislation would impose a costly mandate that is overly bureaucratic for a process that’s already transparent locally.
They say the bill potentially doesn’t allow them to benefit from the value of new construction, and it’s hypocritical because it doesn’t address state property taxes.
“This bill is crazy in that it doesn’t allow communities to count new growth,” said Mike Taylor, lobbyist for the Unified Government in Wyandotte County/Kansas City, Kan. “To not allow us to count that makes absolutely no sense at all.”
The legislation, patterned after laws in Utah and Tennessee, is intended to force local governments to account for the extra money they receive from rising property values even if they might leave their tax rate the same.
Supporters say the bill is about bringing more openness to how property taxes are set and give local residents more information about their tax bill.
“Voters want elected officials to be honest about the entire property tax increase they’re imposing,” said Dave Trabert, chief executive officer for the free-market oriented Kansas Policy Institute.
“You could probably remove all the public notice requirements…and you would still have cities and counties opposing this because they just don’t want to go on the record and own the entire property tax increase they impose,” he said.
The bill requires local governments to hold a hearing and vote on a decision to accept extra revenues coming from increased property values.
If local governments want to collect any new tax dollars, they must send notices to individual taxpayers providing them with information that includes the revenue needed to fund their budgets, the proposed percentage change in the tax rate and the appraised and assessed values of their property.
The costs of the notices will be paid by the local government. The local governments must vote on their decision to collect additional revenues at a public hearing that must be held by Sept. 15.
The public hearing can’t be scheduled at the same time as a public hearing of another local government in the same county considering the same action.
Cities and counties say the bill would require them to hold hearings and vote on new revenues coming from new construction in their community.
There is concern that if the administrative costs and the mailings cost too much – some estimate the law could cost hundreds of thousands of dollars – that local governments won’t hold the required hearings to capture new growth.
“Not allowing growing cities like Andover to capture the revenue of new growth will be devastating to our ability to deliver effective local government,” Andover City Administrator Jennifer McCausland said in written testimony.
“It is one thing to limit the revenue derived from increases in valuation on pre-existing properties,” she wrote.
“It is entirely another to not allow cities to receive additional revenue to support new development.”
Critics assailed the bill for not applying the same new disclosure standards to the state’s 21.5-mill tax levy for schools and general government operations.
“You all are being hypocritical with this bill,” Wyandotte County’s Taylor said.
“Every time our community (property) value goes up, you collect more tax dollars as that ‘hidden’ tax increase, so keep that in mind,” he said.
“You’re grabbing more money and it’s exactly what you’re accusing us of doing,” he said.
Some local governments argued that the notice requirements included in the bill would be expensive.
Butler County estimated it would cost $250,000 a year to implement the bill, including $150,000 in extra staffing costs.
Riley County told lawmakers the bill would cost about $40,000, including $25,250 to send out the notices.
The county estimated the cost at about $1.01 per notice, compared to the 50 cents a notice lawmakers predicted.
Lenexa City Councilwoman Courtney Eiterich explained the steps her city takes to give its residents information about its budget.
Among other things, residents are kept informed through the mailing of 23,000 newsletters sent to taxpayers.
“We are very transparent about the things that we do,” Eiterich said.
“We hold two public work sessions, a public hearing on our budget and we take action on different evenings to make sure that everybody has the opportunity to come and share their concerns,” she said.
Eiterich also raised concerns about how the bill would interact with the state’s current property tax lid, which generally requires voters to approve city and county property tax increases higher than inflation from the previous year.
“We feel like leaving both budgeting structures in place becomes problematic,” she said. “We don’t know which one to follow.”
The bill had the support of a number of groups, including the Kansas Chamber of Commerce, which highlighted how taxes increase when local governments don’t adjust their property tax rate to compensate for rising property values.
“For too long, Kansas taxpayers have been subject to nontransparent property tax increases,” lobbyist Eric Stafford told the committee in written testimony.
“Local governments have been allowed to automatically collect additional property tax revenue from valuation increases, and rarely have taxpayers seen an offset in the mill rate to keep their tax burden flat.”
Linn County Commissioner Rick James testified on behalf of the bill, saying it would stop local governments from taking in more revenue because of higher property values.
The bill “holds us elected officials accountable to the public,” he told the committee.
“If passed, it obligates city and county leaders to publicly vote on any certified rate of tax increase. No more just accepting automatic increases without officially notifying the resident.”
Republican state Sen. Dan Goddard predicted the bill would see “a lot of debate” this legislative session.
“We want to maintain fairness in our system, accountability and transparency,” Goddard said.
“We’re not asking to hold down taxes or increase taxes,” he said. “We just want to make sure the taxpayer understands why their tax bill is the way it is.”
Republican state Sen. Caryn Tyson, chair of the Senate tax committee, said she expects to make changes to the bill.
Among other things, she expects to delete provisions that would prevent local governments in the same county from holding public hearings at the same time.
“We’re trying to make it as painless and effective as possible,” she said.