FISCAL NOTE
FUND(S):
General Revenue Fund, local governments
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 provide a three percent cap on any increase in assessment on real property that is the primary residence of an individual in any one year.
The bill would 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 a loss in potential property tax revenue of approximately $18.5 million for local governments and a minimal decrease in potential State revenue in the 2010 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 $250,000 to make these changes. In addition, local governments would have increased personnel costs.
Fiscal Note Detail
Effect of Proposal |
Fiscal Year |
2008 Increase/Decrease (use"-") |
2009 Increase/Decrease (use"-") |
Fiscal Year (Upon Full Implementation) |
1. Estmated Total Cost |
250,000 |
0 |
0 |
Personal Services |
0 |
0 |
0 |
Current Expenses |
250,000 |
0 |
0 |
Repairs and Alterations |
0 |
0 |
0 |
Assets |
0 |
0 |
0 |
Other |
0 |
0 |
0 |
2. Estimated Total Revenues |
0 |
0 |
-18,500,000 |
Explanation of above estimates (including long-range effect):
The bill would 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 a loss in potential property tax revenue of approximately $18.5 million for local governments and a minimal decrease in potential State revenue in the 2010 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 provide a three percent cap on any increase in assessment on real property that is the primary residence of an individual in any one year.
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.
The West Virginia Constitution directs that the assessment level be 60 percent of market value. This bill adds a proviso that directs an assessor to avoid assessing property at any specific percentage and to ignore market changes on property where the changes result in increases that are more than three percent. In areas where market value is increasing rapidly, properties will be held to a level removed from the market. In slower market counties, the allowable increase may well capture the market increase.
Person submitting Fiscal Note: Mark Muchow
Email Address: kpetry@tax.state.wv.us