Kansas House and Senate negotiators moved toward compromise Thursday, outlining exemptions on legislation that would advance the implementation of the property tax lid law passed last year. Gov. Sam Brownback called in January for a more aggressive tax lid, which would require some property tax increases above the rate of inflation to be put to a public vote, than the version adopted in 2015 by the Legislature. Republicans and Democrats in both chambers have worked with lobbying organizations through the 2016 session on a complex bill moving implementation up one year to 2017 and layering exemptions into the text.
Kansas lawmakers are set to battle over a measure that would accelerate the implementation of a property tax lid law passed last year. Under the state law, city and county governments will have to hold a public vote if they want to raise spending by more than an adjusted Consumer Price Index rate to be set by the state of Kansas. If voters don’t approve spending increases, cities and counties will have to cut their property tax rates to adjust to the spending level allowed by the state. As it stands, the property tax lid will start in January 2018, but Gov. Sam Brownback wants that date moved up to this July.
The Kansas Supreme Court recently struck down a state law that gave property owners who successfully challenged the appraised value of their property a two-year moratorium from any increases in tax valuation, except in some narrowly defined circumstances. The boards of county commissioners from 21 counties, including Johnson and Wyandotte, filed a lawsuit last year against Kansas Secretary of Revenue Nick Jordan and the state’s director of property valuation.
A Kansas house committee will introduce a three-bill package on Wednesday intended to “increase and stabilize resources public higher education institutions draw from for development of academic infrastructure.” One of the proposals would expand a statewide property tax by $120 million to support state university building maintenance. The other two bills could potentially escalate local property taxation, as they would grant new authority to community colleges and technical schools to generate property tax revenue.
Many oil- and natural gas-producing counties in western Kansas are starting to suffer from the energy industry downturn, facing major local tax revenue declines just as the state is ending an aid program meant to insulate them from industry downturns. Reduced oil and gas prices resulted in lower property values, and many counties are forced to either cut spending or increase property tax levies to offset the revenue decline.
After concluding this year's 113-day legislative session, the longest in Kansas history, it turns out legislators aren't quite off the hook yet. Lawmakers inadvertently passed two conflicting versions of a new property tax lid law, and must reconvene June 26th in order to pass a bill addressing the problem, a "technical clean-up." Lawmakers increased sales and cigarette taxes as part of a package expected to raise $384 million during the fiscal year that begins July 1. The higher taxes closed the last part of a projected $800 million budget deficit after numerous other adjustments. The package also included two bills addressing the controversial property tax lid, which will require local governments to seek a vote of the people for certain property tax increases in the future.
Property owners in energy producing Kansas counties are either facing property tax hikes or cuts in local government services as gas prices continue to decline, according to the Topeka Capital-Journal. Energy-rich western counties and those along the Oklahoma border will be hit the hardest and suffer from the greatest revenue loss. As county commissions across Kansas begin their budgeting process for next year, those which heavily depend on taxes from oil and gas production in their counties are facing some difficult decisions in the coming weeks. In Morton County, 70 percent of the county’s tax valuation is based on oil and gas. Officials there expect their tax valuation to fall by one-third next year. Meanwhile, Ellis County officials are scrambling to close an anticipated $2 million budget shortfall.
In an effort to fill the state's projected $600 million budget shortfall for the next fiscal year, a Kansas Senate committee advanced a bill that would eliminate the automatic 10-year property tax exemptions given to companies that build new oil and gas pipelines in Kansas. Enacted in 2006, the pipeline tax abatement went largely unnoticed until construction of the Keystone XL pipeline began and counties and school districts learned they wouldn't be benefiting from the property tax revenues for 10 years.
By Jeff Pence, Senior Managing Consultant, Kansas City
& JP Rand, Senior Managing Consultant / Principal, Kansas City
Senate Bill 231, effective July 1, will give commercial property owners in Kansas a new way to appeal their property values. According to Wichita Business Journal, SB 231, signed into law by Gov. Sam Brownback, gives property owners the right to appeal their values to district court. No longer does the final word lie with the Kansas Court of Tax Appeals. The bill renames the tax appeals group as a board rather than a court, lowers the interest rate on delinquent property taxes and allows retroactive appeals of the tax court back to May 2, 2012. Appeals past the tax board can be filed in any district court or the Kansas Court of Appeals, with the district court cases a de novo trial, or a complete re-litigation of the tax case. The impact of the bill will be more significant to commercial property owners, as they are more likely to be over-assessed, and they will now have a better chance of a successful appeal process.