FISCAL NOTE



FUND(S):

General Revenue Fund, local governments

Sources of Revenue:

General Fund,Other Fund Local Property Tax revenu

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 capping a property tax increase resulting from an increase from the three-year reappraisal at five percent of the previous year’s property tax assessment. Assuming no changes in tax rates, passage of this bill would result in the loss in potential Property Tax revenue of approximately $83.7 million for local governments and $340,000 for the State in the 2015 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. Some local governments could recoup a portion of the revenue loss by raising property tax rates with an increase in tax burden on other properties including real property and business inventory, machinery, equipment and vehicles. 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 $20,000 to make these changes.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2013
Increase/Decrease
(use"-")
2014
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 20,000 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 20,000 0
2. Estimated Total Revenues 0 0 -84,000,000


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


Assuming no changes in tax rates, passage of this bill would result in the loss in potential Property Tax revenue of approximately $83.7 million for local governments and $340,000 for the State in the 2015 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. Some local governments could recoup a portion of the revenue loss by raising property tax rates with an increase in tax burden on other properties including real property and business inventory, machinery, equipment and vehicles. 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 $20,000 to make these changes.



Memorandum


The stated purpose of this bill is to capping a property tax increase resulting from an increase from the three-year reappraisal at five percent of the previous year’s property tax assessment. The bill limits annual increases in assessed value of real property to five 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 5 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. Additionally, the proposed 5 percent cap on increase would result in some property being assessed at less than 60 percent of its value, as required by Article X, Section1b of the West Virginia Constitution.



    Person submitting Fiscal Note: Mark B. Muchow
    Email Address: Roger.D.Cox@wv.gov