A public opinion survey shows that 66% of Democratic voters want a 3% assessment limit to protect them from unaffordable double-digit increases in home valuations, but 100% of Democrats in the Kansas House of Representatives shouted it down yesterday. As many as half of House Republicans joined the ‘Nay’ chorus, despite 82% of Republican voters supporting the idea.
SCR 1616 was defeated on a voice vote, so there is no record of the actual vote, but the outcome was pretty clear to anyone listening.
Rep. Adam Smith carried SCR 1616 and urged members to support the bill.
In his closing remark, he said, “I would like to close by restating the comments from the representative from the 90th District. You know, regardless of how you feel on this, this vote today does not … make it become part of the Constitution. This is a chance for this issue, this topic to go to the voters. And I think the voters of Kansas should ultimately have the final say on whether or not this policy is adopted.”
Five other Republicans spoke in favor of the assessment limit: Reps. Carolyn Caiharr, Ken Corbet, Steven Howe, Steve Huebert, Pat Proctor, and Sean Tarwater.
SCR 1616 would limit the annual increase in taxable assessed real estate and mobile homes to 3%, based on 2022 valuations. The taxable assessed value remains with the property when it is sold or transferred, rather than being taxed at market value. Routine repairs and maintenance would not change the property’s assessed value, but improvements would trigger a markup to full value. Some legislators feared that aspect would discourage home improvement, so Caiharr proposed an amendment that would increase the taxable assessed value only relative to the improvement, rather than the entire property.
Caiharr’ s amendment was rejected on a voice vote.
Democrat Rep. Stephanie Sawyer Clayton proposed replacing the assessment limit and reducing the assessment ratio for residential property from 11.5% to 9%, thereby placing a higher tax burden on businesses. When her amendment was rejected, Democrats called for a recorded vote so, to paraphrase her, Democrats could show they voted for property tax relief.
That common political maneuver ironically undermines some legislators’ basis for opposing an assessment limit: they believe it would cause a tax-burden shift, but happily voted for a shift to score political points.
Impact on properties with declining value
Most home values have been rising much faster than many people’s incomes. Over the last four years, the average home value jumped 40% for tax purposes.
Not all values go up, however. The Derby Informer reports that 88% of Sedgwick County homeowners are getting an increase this year, while values will decline for 12%; the median increase is 11%. Some legislators oppose an assessment limit because if a home’s value declines (or the increase is less than 3%) and local governments raise mill rates to protect government revenue, the taxpayer would pay more than they would without such a limit.
It’s true that local elected officials could cause that to happen by unnecessarily raising mill rates rather than operating more efficiently. Sedgwick County Commissioners, for example, raised property taxes nearly twice as much as inflation and population growth since 1997, and their Financial Forecast will make it worse. They are planning additional property tax increases, raising personnel costs by 55% over eight years and increasing the county fund balance to $127 million.
Sedgwick County Commissioners certainly have options to avoid tax increases, but that’s not what they plan to do.
Dave Trabert, CEO of The Sentinel’s owner, Kansas Policy Institute, provides an example of how an assessment limit might impact homeowners with declining valuations.
“The example below compares a $150,000 home that declines in value by 5% with a $300,000 home that jumps 20%. If the mill rates don’t change, the first homeowner would save $129 dollars, and the other would pay $1,035 more.
“If the collective mill rates go from 150 to 153, the first homeowner saves $47, and the other gets a $333 increase. The homeowner with a declining value saves less in this circumstance, but the other goes from having a 20% tax increase to a more affordable 5% increase.
“Legislators have to decide if the potential downside justifies denying many property owners significant savings that may keep them from being taxed out of their homes.”
Rep. Tom Sawyer, a Democrat from Sedgwick County, cited the potential impact on declining home values as a strong reason to oppose an assessment limit. Citing data from Sedgwick County Commissioner Jim Howell, he said 86,000 homeowners would get a tax increase (based on Howell’s mill rate assumptions).
One might assume that the lowest-valued homes are the ones declining, and that may be true for some, but in Sedgwick County, homes valued less than $125,000 have the highest increase this year.
The table and definitions below were provided to Kansas Policy Institute by the Sedgwick County Appraiser’s Office. The email accompanying the data says, “The percentage change in assessed value should be very similar to the change in median or mean appraised value.”
This year, the group of homes valued less than $125,000 in Sedgwick County had the highest average (mean) increase in assessed value, at 18%. The next tier valued between $125,000 and $199,999 had the second-highest increase, at almost 12%.
With 12% of properties declining, some declines are likely in the two lowest value tiers. Still, the average increases were 18% and 11.7%, respectively. At least in Sedgwick County, the people who probably can least afford increases like that are being denied the right to vote on the proposed constitutional amendment.
Who is driving the assessment limit opposition?
The Kansas Farm Bureau, the Kansas Livestock Association, and the Kansas Realtors are driving the opposition.
The Farm Bureau and KLA believe the assessment limit will cause farmers and ranchers to pay more in taxes due to a shift in the tax burden. However, both oddly did not oppose a rolling-average assessment limit last year that only applied to residential property and acknowledged that there would be a tax shift to farmers.
This year, the 3% limit includes ag land, but they now oppose it.
The Realtors association believes the limit will cause a reduction in new home construction. Like all the other opponents, they didn’t produce evidence of negative consequences in states that have had assessment limits for decades.
It turns out, however, that research from Kansas Policy Institute shows new home permits increased following assessment limits going into effect in Arkansas and Oklahoma.
Next steps
The Senate was scheduled to vote on an amended mill rate limit on Thursday afternoon, but leadership delayed the vote. The Sentinel understands that the mill rate limit and the assessment limit have been referred back to the respective tax committees for additional consideration.
But with only two weeks left in the regular session, time is running out, as Rep. Ken Corbet said:
“We’re here at the bottom of the ninth. Everybody that’s talked against this bill does not have a plan any better or one at all. This underlying bill is a good bill. This bill wasn’t conceived for local government; it was put together for constituents. They’re sick and tired of having no say in watching their taxes go up. So, this shouldn’t be a partisan vote. We all ought to get together, and I don’t know how you can go home and tell your constituents. You had a chance to lower their taxes. Didn’t have another plan. (You) just voted no for no reason at all. I heard you, on both sides of this aisle, before we get out of here today, do something for your constituents, and I guarantee you, they’ll appreciate it.”
