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 change the time for periodic valuations and assessments of real and personal property from every three years to every five years and provide a three percent cap on any increase in assessment 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. Passage of this bill would result in the losses in potential property tax revenue of approximately $51.7 million for local governments and $208,000 for the State with the 2006 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. As a result of passage of this bill, programming changes would be needed to track property on a property-by-property basis. The Tax Department would incur additional costs of $200,000 to make these changes. In addition, local governments would have increased personnel costs.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2005 Increase/Decrease (use"-")	2006 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	200,000	0	0
Personal Services	0	0	0
Current Expenses	200,000	0	0
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	0	0	0
2. Estimated Total Revenues	0	-51,900,000	-5,190,000

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

This cap would apply to individual assessments. Passage of this bill would result in the losses in potential property tax revenue of approximately $51.7 million for local governments and $208,000 for the State with the 2006 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. Since assessments and tax increases would need to be tracked on a property-by-property basis, the 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 change the time for periodic valuations and assessments of real and personal property from every three years to every five years and provide a three percent cap on any increase in assessment in any one year. The five-year cycle relates to the time frame for visits to the property by a member of the assessor’s staff, not to restricting valuations and assessments to one in five years. West Virginia Code §11-3-1 requires the assessor to assess the property annually, and this requirement is not being amended. 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.

Person submitting Fiscal Note: Mark Muchow
Email Address: kpetry@tax.state.wv.us