COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. No.:         3243-07

Bill No.:          SCS for HCS for HB 1321 & 1695

Subject:           County Officials; Elderly; Political Subdivisions; Revenue Dept.; Taxation and Revenue - General; Taxation and Revenue - Income; Taxation and Revenue - Property

Type:              Original

Date:               May 6, 2008

Bill Summary:            Would make changes to the senior citizen property tax relief program and nonresident income tax calculations, and to local property taxation procedures.

FISCAL SUMMARY

Numbers within parentheses: ( ) indicate costs or losses.

This fiscal note contains 17 pages.

☒ Estimated Total Net Effect on All funds expected to exceed $100,000 savings or (cost).

☐ Estimated Net Effect on General Revenue Fund expected to exceed $100,000 (cost).

* Net of offsetting revenue increase and reduction.

FISCAL ANALYSIS

ASSUMPTION

Senior Citizens Property Tax Relief

Officials from the Department of Revenue (DOR) noted that a previous version of this proposal would change the Senior Citizens Property Tax Credit program. DOR officials assume that this proposal would require refunds issued by the state to increase and in essence, decrease General Revenue. DOR officials also stated that this proposal would extend the sunset date for assessment fund withholding from local property tax collections.

DOR submitted a cost estimate to implement this proposal including three additional FTE and related equipment and expense, totaling $110,179 for FY 2009, $116,171 for FY 2010, and $119,657 for FY 2011.

DOR officials also provided an estimate of the IT cost to implement the proposal from the Office of Administration, Information Technology Services Division (ITSD/DOR). ITSD/DOR assumes the IT portion of this request could be accomplished within existing resources, however; if priorities shift, additional FTE/overtime would be needed. ITSD/DOR) estimates that this legislation could be implemented utilizing 2 existing CIT III for 3 months for modifications to MINITS at a total cost of $25,116.

Oversight has, for fiscal note purposes only, changed the starting salary for the additional positions to correspond to the second step above minimum for comparable positions in the state's merit system pay grid. This decision reflects a study of actual starting salaries for new state employees for a six month period and the policy of the Oversight Subcommittee of the Joint Committee on Legislative Research. Oversight has also adjusted equipment and expense amounts in accordance with OA Budget Guidelines, and Oversight assumes the limited number of additional FTE could be accommodated in existing office space.

Officials from the Office of Administration, Division of Budget and Planning (BAP) assumed there would be no added cost to their organization as a result of a previous version of this proposal.

BAP officials stated that the proposal would make numerous changes to the Senior Property Tax Credit Program. BAP defers to DOR for an estimate of the fiscal impact to the state General Revenue Fund.

ASSUMPTION (continued)

Officials from the University of Missouri, Economic and Policy Analysis Research Center (EPARC) assumed a previous version of this proposal would change the senior citizen property tax credit program. EPARC estimated that a provision which increased the maximum credit to $1,100 would the result in an increase in credits of $1.2 million per year.

Officials from the Office of the St. Louis County Collector assumed a previous version of this proposal would have no fiscal impact on their organization.

Officials from Clinton County assumed a previous version of this proposal this proposal could result in a loss of revenue to their organization and a gain to their citizens. Clinton County officials stated that there could be minor costs to educate the taxpayers, and noted that there could be revenue reductions for the taxing authorities.

Oversight notes that this proposal would increase the maximum credit to $1,100 for taxes paid but not for rental equivalents. Oversight assumes this proposal would result in additional credits, and a resulting revenue reduction of less than $1.2 million per year.

Assessment Fund Withholding

Officials from the State Tax Commission (TAX) assume this proposal would have no fiscal impact on their organization. TAX officials also provided statewide annual assessment fund totals of $3.71 million for 2005 (FY 2006) and $3.83 million for 2006 (FY 2007).

Oversight notes that this proposal would extend the sunset for assessment fund withholding from December 31, 2009 (FY 2010) to December 31, 2012 (FY 2013). Oversight assumes that assessment fund withholding for FY 2010 would have been collected on or before December 31, 2009 and there would be no significant fiscal impact on FY 2010. Oversight will include an estimate of the assessment fund withholding for FY 2011 in this fiscal note.

Property Tax Rollback Provisions

This proposal would specify that tax rate ceiling computations are to based on the previous year's tax rate. Further, the amount of additional revenue received from a voter-approved levy increase could not be greater than the amount calculated by applying the levy increase to the previous year's assessed valuation.

ASSUMPTION (continued)

In response to a similar proposal (HB 1349 LR 3697-01), officials from the Office of Administration, Division of Budget and Planning (BAP) assume this provision would not result in additional costs or savings to their organization.

BAP officials stated that this provision would revise the definition of "tax rate ceiling" to the tax rate used by the taxing authority in the preceding year and would limit the revenue received from a voter-approved tax rate increase to the amount determined by applying the levy increase to the prior year's assessed valuation. This proposal would not impact general and total state revenues, but could have implications on state spending, such as the schools' foundation formula.

In response to a similar proposal (HB 1349 LR 3697-01), officials from the Department of Elementary and Secondary Education (DESE) assume this provision would have no fiscal impact on their organization.

DESE officials stated that this provision would appear to revise the definition for the ceiling levy to be the levy the taxing authority levied the preceding year. Reassessment rollbacks would be applied to that preceding year actual levy. The impact on revenue would be at the local level and should not have a fiscal impact on the state. If the adjustment for the CPI is removed from the calculation, districts will have to eliminate some programs and staff. Districts may be faced with proposing a tax levy change to voters every year and that election process is costly.

This legislation appears to address concerns that taxing authorities pass levies that are more than they need and then voluntarily roll back for one or more years. Then when reassessment occurs, the actual tax levy of this authority is not rolled back because there is room between what they are levying and their ceiling levy. This difference is a voluntary rollback.

This proposal does not appear to increase the cost of the public school foundation funding formula as there is no provision to increase state money to offset a decrease in local revenue. The decrease of local revenue cannot be estimated.

Officials from St. Louis County stated that a similar proposal (HB 1349 LR 3697-01) would result in unknown local revenue losses.

Oversight assumes this provision would result in unknown reductions in local tax revenues and will indicate that impact in this fiscal note.

ASSUMPTION (continued)

County tax levy error provisions

These provisions would specify that a taxpayer could not be assessed a penalty or interest due to an error by the county. The taxpayer would file a claim and the collector would make the refund.

Oversight assumes that errors tax billings would be relatively rare and that this provision would have no net fiscal impact to local governments.

Assessment, tax levy, and rate deadline provisions

These provisions would require specified counties and the City of St. Louis to complete their assessment process and determine their tax levy rates by certain dates, and to hold hearings before setting tax rates.

Oversight assumes that this provision would have no net fiscal impact to local governments.

Protested property tax procedures

These provisions would modify the process for payment of taxes under protest including the appeals procedures.

Oversight assumes that this provision would have no net fiscal impact to local governments.

Horse show arena assessment provisions

In response to a similar proposal (SB 805 LR 3626-01), officials from the Department of Agriculture (AGR) assumed the proposal would have no fiscal impact on their organization. AGR officials stated that they don't have any way of determining how many horse arenas there are.

Officials from the Department of Elementary and Secondary Education deferred to the State Tax Commission as to the fiscal impact of a similar proposal (SB 805 LR 3626-01).

Officials from the Department of Revenue assumed a similar proposal (SB 805 LR 3626-01) would have no fiscal impact on their organization.

ASSUMPTION (continued)

Officials from the State Tax Commission (TAX) assumed a similar proposal (SB 805 LR 3626-01) would have no fiscal impact on their organization. TAX officials stated that they have no information as to the number of properties being used for showing horses, and would be classified as commercial property. The proposal would change the classification of those properties to agricultural and result in reduced assessed valuations for the properties.

Officials from Linn State Technical College, the Metropolitan Community Colleges, St. Louis County, the City of Centralia, the City of Kansas City, and the City of West Plains assumed a similar proposal (SB 805 LR 3626-01) would have no fiscal impact on their organizations.

Officials from the Office of Administration, Division of Budget and Planning (BAP) assumed a similar proposal (SB 805 LR 3626-01) would have no fiscal impact on their organization. BAP officials stated that the proposal would add real property used for showing horses to the definition of agricultural property. The proposal would have no impact on the state General Revenue Fund, and minimal impact on the Blind Pension Fund. To the extent the proposal may impact the foundation formula for schools, state expenditures may increase. BAP defers to DESE for any calculations of that impact.

Oversight assumes this proposal would require a county assessor to change the assessment status and thus the assessed valuation of a horse showing facility from commercial to agricultural. Oversight is not able to determine how many such situations might exist and assumes this proposal would have an impact on property tax revenues for local governments and the Blind Pension Fund that is less than $100,000.

Rental facility owners report of lessors

This provision would require owners of certain rental facilities to provide the county assessor with a listing of all lessees including a description of personal property stored at the facility that the lessor is aware of.

Oversight assumes this provision would have no net fiscal impact on the state or on local governments.

ASSUMPTION (continued)

Property Tax Credit for Rolling Stock Expenditures

Officials from the Department of Revenue assume this proposal would have no fiscal impact on their organization.

In response to a similar proposal (HB 1810 LR 4268-01), officials from the State Tax Commission (TAX) assumed the proposal would create a tax credit against a freight line company's ad valorem property tax. TAX assumed that only those freight line companies that are defined by Section 137.1003. (4) RSMo would be eligible for the tax credit. There are approximately 345 freight line companies that could qualify for this credit.

In calendar year 2006, the amount of freight line ad valorem property tax was $3.5 million dollars and in calendar year 2007, the amount of freight line ad valorem property tax was $4.1 million dollars. TAX assumes that annual taxes would be approximately $4 million dollars. If we assume that each of these companies have significant eligible expenses to offset the total amount of tax due, the State of Missouri would be required to annually reimburse the local political subdivision approximately $4 million dollars. This credit would be effective on January 1, 2009 for property taxes due in FY 2010.

Officials from the Department of Transportation did not respond to our request for information.

Oversight will use the State Tax Commission estimate of tax credits allowable and the reimbursement due to political subdivisions. The reimbursement for local revenues lost would be known in FY 2010, and appropriated and paid from the General Revenue Fund in FY 2011. Oversight assumes the Blind Pension Fund would have a revenue loss and reimbursement of 1/2 of 1% of the local government impact.

Notification of estimated property tax provisions

Officials from the Department of Elementary and Secondary Education (DESE) assumed a similar proposal (HCS for SS for SCS for SB 711 LR 3297-18) would have no direct fiscal impact on their organization. DESE officials stated that the proposal would make numerous changes to various tax statutes. DESE officials assume this change would increase costs for some school districts while also decreasing tax revenue, but would not appear to have an impact on the foundation formula.

ASSUMPTION (continued)

Officials from the Missouri State Tax Commission (TAX) assumed that the provision in a similar proposal (HCS for SS for SCS for SB 711 LR 3297-18) would require TAX to develop a software program or a contract to be awarded to a vendor that would produce a tax liability notice. It is unknown to TAX the number or the complexity of the various computer systems maintained by the county collectors throughout this state. TAX would

need to employ at least 1 Computer Information Technology Specialist III and secure the necessary funding for office supplies and computer equipment. This individual would be responsible for developing a computer software program to assist with the production of the notices or work with the Information Technology Service to develop a contract to be awarded. Once the contract is awarded to the successful bidder, this individual would coordinate the installation of the new software with the numerous computer systems used by the county collectors. The cost of the contract is unknown but could be substantial. The Commission will prepare a budget request to secure the necessary funding for the FTE and contracts.

Oversight will indicate a cost in excess of $100,000 per year for the State Tax Commission for staff and/or contract costs to implement the proposal.

Officials from the Office of the State Auditor (SAO) assumed a version of asimilar proposal (HCS for SS for SCS for SB 711 LR 3297-18) would require additional staffing due to an anticipated increase in tax rate review workload. SAO submitted a cost estimate including 3.0 additional FTE and related equipment and expenditures totaling $144,851 for FY 2009, $157,504 for FY 2010, and $162,229 for FY 2011.

Oversight has, for fiscal note purposes only, changed the starting salary for the new positions to correspond to the second step above minimum for comparable positions in the state's merit system pay grid. This decision reflects a study of actual starting salaries for new state employees for a six month period and the policy of the Oversight Subcommittee of the Joint Committee on Legislative Research. Oversight has also adjusted equipment and expenditures in accordance with OA budget guidelines.

ASSUMPTION (continued)

Officials from the Office of the Secretary of State (SOS) provided this response to a version of a similar proposal (HCS for SS for SCS for SB 711 LR 3297-18).

Many bills considered by the General Assembly include provisions allowing or requiring agencies to submit rules and regulations to implement the act. The SOS is provided with core funding to handle a certain amount of normal activity resulting from each year's legislative session. The fiscal impact for this fiscal note to the SOS for Administrative Rules is less than $2,500. The SOS recognizes that this is a small amount and does not expect that additional funding would be required to meet these costs. However, we also recognize that many such bills may be passed by the General Assembly in a given year and that collectively the costs may be in excess of what our office can sustain with our core budget. Therefore, we reserve the right to request funding for the cost of supporting administrative rules requirements should the need arise based on a review of the finally approved bills signed by the governor.

Officials from Linn State Technical College assumed version of a similar proposal (HCS for SS for SCS for SB 711 LR 3297-18) would have no fiscal impact to their organization.

Officials from the City of Centralia assume their organization would have nominal costs as a result of a version of a similar proposal (HCS for SS for SCS for SB 711 LR 3297-18).

Officials from the Metropolitan Community Colleges assumed a version of a similar proposal (HCS for SS for SCS for SB 711 LR 3297-18) would cost their organization approximately $250,000 per year.

Officials from Moberly Area Community College assumed version of a a similar proposal (HCS for SS for SCS for SB 711 LR 3297-18) would have no fiscal impact to their organization.

Officials from the Parkway School District assumed a version of a similar proposal (HCS for SS for SCS for SB 711 LR 3297-18) would previous version of this proposal would have a fiscal impact of $1,000 for their organization, to prepare property tax revenue estimates.

Officials from Clinton County assumed a version of a similar proposal (HCS for SS for SCS for SB 711 LR 3297-18) would adversely affect local governments if less revenue was collected.

ASSUMPTION (continued)

Officials from Cooper County assumed a version of a similar proposal (HCS for SS for SCS for SB 711 LR 3297-18) would have startup costs in 2011 of $10,500 for computer programming, $5,075 for additional staff, and $350 for office supplies in the County Clerk's Office, and $25,000 for computer software and $45,000 for labor and supplies in the offices of the assessor and collector.

Officials from Buchanan County assumed that a version of a similar proposal (HCS for SS for SCS for SB 711 LR 3297-18) would have costs no less than $50,000 per year for their organization.

Officials from Barry County assumed a version of a similar proposal (HCS for SS for SCS for SB 711 LR 3297-18) would require additional resources in the County Clerk's office including computer programming estimated at $12,500, additional staffing estimated at $4,660, office supplies estimated at $465, and additional software, labor, and supplies in other courthouse offices totaling $30,000 and $45,000, respectively.

Officials from Carroll County assumed that a version of a similar proposal (HCS for SS for SCS for SB 711 LR 3297-18) would moving the timetables from the current dates to a more accelerated schedule for the offices of the Assessor, County Clerk and Collector-Treasurer. That change would result in staffing, programming, and postage and supply costs that will exceed $50,000 for the three offices involved.

Officials from St. Louis County assumed that a version of a similar proposal (HCS for SS for SCS for SB 711 LR 3297-18) would result in additional costs for form design, printing setup, folding, and insertion totaling $27,500 per year.

Additional costs in the Assessor's office would include outsourcing new construction identification, occupancy verification, commercial valuation modeling, and quality control field reviews. These outsourcing costs are estimated at $668,120 for2009 (FY 2010). Additional staff cost to perform the additional work in-house for the 2011 reassessment totaled $607,390.

Oversight assumes the additional cost of additional staff would be permanent and that the costs are stated on an annual basis.

ASSUMPTION (continued)

Officials from Linn County assumed that a version of a similar proposal (HCS for SS for SCS for SB 711 LR 3297-18) would result in additional costs to their organization as follows.

Programming: The Clerk's Office would need additional programming at an estimated cost of

$10,000.

Additional Staffing: A part time person for at least for two months at minimum wage would cost around $2,600.

Additional Office Supplies: Postage, paper, envelopes and other related materials in calculation the non-binding tax levy with 37 political subdivisions would cost $350.

Other County Offices: The costs for software, labor and supplies for the Assessor and Collector would be approximately $40,000.

Officials from Atchison County assumed that a version of a similar proposal (HCS for SS for SCS for SB 711 LR 3297-18) would result in additional costs for their organization.

Additional Staffing

The requirements of the County Clerks office in this legislation will cover a two month time period. Eight weeks with one new office staff who shall make an abstract of the assessment book showing the aggregate amounts of different kinds of property, shall forward that information to the governing body of each political subdivision, will work in conjunction with each political subdivision to arrive at a "non-binding tax levy", shall forward each "non-binding tax levy" to the county collector. 1 staff x $5,075 ($3,975 salary + $1,100 benefits) = $5,075.

Overhead

Office supplies, postage, envelopes, and other related materials used in calculating the non-binding tax levy with 25 political subdivisions $250.

Other County Offices

The previous listed costs are only those that will occur in the County Clerk's office. Additional costs for offices of Assessor and Collector are Software estimated at $25,000 and Labor and supplies $45,000.

ASSUMPTION (continued)

Oversight notes that the proposal would require the State Tax Commission to develop and provide software to the counties for preparing the required tax estimates. Oversight assumes the local governments would have significant additional costs as a result of this proposal. Oversight notes that certain assessment procedure changes in this proposal would become effective on January 1, 2009 for charter counties and effective January 1, 2011 for the balance of the state. For the purposes of this fiscal note, Oversight will indicate additional costs statewide in excess of $1,810,485 to local governments beginning in 2009 (FY 2010) for the additional responsibilities and notices to taxpayers.

Oversight assumes the proposal would have no significant impact on local government revenues.

School tax levy provisions for small school districts

This provision would allow schools which have a levy rate less than the performance levy to remain eligible for the small school districts allocation if the levy was reduced due to a rollback requirement.

Officials from the Department of Elementary and Secondary Education assume this proposal would have no net fiscal impact on their organization.

School bond debt ballot provisions

This provision would require certain language to be included on ballots for school bond elections.

Oversight assumes this provision would have no fiscal impact to the state or lo the schools.

This proposal could reduce total state revenue.