Cities, counties, and school districts lobbied hard over the last three years to eliminate revenue-neutral measures and have the Legislature send them taxpayer money on the pretense of property tax relief. Last week, the House Taxation Committee approved HB 2745 last week to grant their wishes over the objection of just a handful of members.
The amended HB 2745 includes these decidedly pro-government features:
- Repeals the revenue-neutral provisions that prompted 49 counties, 271 cities, and a few dozen school districts to not raise property taxes last year.
- Creates a new $60 million fund to send bonus checks to cities and counties that increase property taxes no more than an effective rate of about 5%.
- Allows voters to sign a protest petition to try to stop increases above the roughly 5% limit, but sets a high threshold of 10% of voters in the previous presidential election.
- School districts, which consume nearly half of all the property taxes Kansans pay, are exempt from the protest petition.
The original version of HB 2745 eliminated revenue-neutral, but it had some good elements. It required an election to obtain voter approval of property tax increases exceeding 3%, excluding only increases from new construction and voter-approved debt payments.
Rep. Robyn Essex (R-Johnson County) got the committee to also exclude unapproved debt payments, abatements, and expiring subsidy programs, and Rep. Dawn Wolf (R-Mitchell and Ottawa counties) successfully removed the voter approval requirement in favor of a protest petition.
Both legislators expressed a desire to make the bill more beneficial to local governments.
Rep. Ken Corbet (R-Shawnee County) proposed reinstating the revenue-neutral provisions, but his amendment was rejected with only four committee members voting for it.
Rep. Carolyn Caiharr (R-Wyandotte) attempted to remove the school district exemption, but the committee also resoundingly rejected her effort.
HB 2745 exemptions allow the protest petition limit to exceed 5%
The tax increase limit for qualifying for a bonus payment or triggering a protest petition can easily exceed 5%. How can anyone justify rewarding cities and counties for a tax increase that’s higher than the actual increase in all but two years since 2014?
Last year, the statewide average property tax increase was 5.2%, with 1.5% attributed to new construction and 3.7% from previously existing property. The total tax increase was about $339 million, but it would only have been $194 million with a clean 3% limit. Further, the tax increase on existing property would have been 1.5% instead of 3.7%.
HB 2745, as approved by the House Tax Committee, could easily allow a city or county to impose a tax increase of more than 5%, given that the base plus new construction (at least for 2025) is already at 4.5%, plus increases for debt payments, lease payments, and expiring subsidies and abatements.
Elected officials justify subsidy programs like TIF (tax increment financing) RHID (rural housing incentive district), neighborhood revitalization programs, and property tax abatements, as smart investments that eventually expand the tax base and will one day ease the property tax burden on everyone. In reality, the new revenue simply fuels more spending, and exempting these items in HB 2745 guarantees the cycle never ends.
Exempting debt and lease payments is potentially even more detrimental to taxpayers, creating wide-open loopholes for unchecked property tax hikes.
The schedule below, from the City of Lenexa budget, shows $6.8 million budgeted in 2025 from revenue sources other than property tax to pay off debt. HB 2745 does nothing to stop cities and counties from shifting that money elsewhere and replacing it with higher property taxes, which then avoid both the $60 million government bonus cap and the protest petition trigger.
This loophole may have gone unnoticed in the rush to help local government, but it’s there, nonetheless.
There’s a growing contingency of current and former local elected officials in the Legislature, and there is even a new Local Government Caucus chaired by two former local elected officials: Lon Pishny (R-Finney County) and Allen Reavis (R-Atchison County).
Legislators rushing to the aid of local government is the opposite of what voters want. In fact, 82% of voters want to vote on property tax increases above 3%, and 75% want a limit on assessed valuation increases.
Hopefully, HB 2745 is amended to grant taxpayers’ wishes rather than local governments that created the property tax affordability crisis.
