Sources of Revenue:

General Fund,Other Fund local property tax

Legislation creates:

Neither Program nor Fund

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

The stated purpose of this bill is to require the reevaluation cycle of real property be lengthened from every three years to every five years. The bill also limits any assessment increase to ten percent in any one year. This bill would change the time for periodic valuations and assessments of real and personal property from every three years to every five years. The bill would also provide a cap on increases to assessments. This cap would apply to individual assessments. Assuming no changes in tax rates, passage of this bill would result in the loss in potential property tax revenue of approximately $11.3 million for local governments and $40,000 for the State in the 2012 fiscal year. This loss would decrease slightly each year, but the decrease would be offset by the fiscal effect of the limitation on assessment increases in future years. Local jurisdictions may increase their property tax rates to offset at least a portion of the revenue loss tied to valuation limitations. As a result of passage of this bill, programming changes would be needed to track property on a property-by-property basis. The State Tax Department would incur additional costs of $25,000 to make these changes. In addition, local governments would have increased personnel costs.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2010 Increase/Decrease (use"-")	2011 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	25,000	0
Personal Services	0	0	0
Current Expenses	0	25,000	0
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	0	0	0
2. Estimated Total Revenues	0	0	0

Explanation of above estimates (including long-range effect):

This cap would apply to individual assessments. Assuming no changes in tax rates, passage of this bill would result in the loss in potential property tax revenue of approximately $11.3 million for local governments and $40,000 for the State in the 2012 fiscal year. This loss would decrease slightly each year, but the decrease would be offset by the fiscal effect of the limitation on assessment increases in future years. Local jurisdictions may increase their property tax rates to offset at least a portion of the revenue loss tied to valuation limitations. Since assessments and tax increases would need to be tracked on a property-by-property basis, the State Tax Department would incur a one-time programming cost to enable such tracking. In addition, there would be additional personnel costs for local governments, but the actual amount of these costs cannot be readily determined.

Memorandum

The stated purpose of this bill is to require the reevaluation cycle of real property be lengthened from every three years to every five years. The bill also limits any assessment increase to ten percent in any one year. The bill limits annual increases in assessed value of real property to ten percent. Article X, Section 1 of the West Virginia Constitution provides that “all property, both real and personal, shall be taxed in proportion to its value to be ascertained as directed by law”. By limiting such increases in value to a maximum of 10 percent per year, the bill allows some property to be taxed in a way that is not proportionate to its value, which may possibly violate the constitutional provision. The bill does not adjust for assessment increases due to additions, new construction or beginning recovery of natural resources under one interpretation of “same property”. If, however, “same property” means identical property, any changes would exclude these properties from assessment limitations contained in the bill. The bill could result in properties of similar value being taxed dissimilarly and may violate equal protection provisions of the State Constitution.

Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov