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Senate Bill 1108 — Taxing district, budgets

Senate Bill 1108 — Taxing district, budgets

Fred Birnbaum
February 20, 2021

Bill Description: Senate Bill 1108a changes the formula by which property tax levies can grow. It is a revision to earlier bills introduced to accomplish similar changes, but does not go as far.

Rating: +1

First Amendment Analysis: The first amendment to Senate Bill 1108 does not change the rating or substantively change the analysis.

Second Amendment Analysis: S1108 was further amended and weakened. The second engrossment now allows 80% of the value of both new construction and annexation to be added to the property tax formula - which differs from the language in the analysis below. Expired Urban Renewal districts are now ignored in this amendment. Fortunately, the 4% property tax budget growth cap, if forgone revenue is used, is retained in the latest amendment. 

Does it directly or indirectly create or increase any taxes, fees, or other assessments? Conversely, does it eliminate or reduce any taxes, fees, or other assessments?

Senate Bill 1108a changes the method by which taxing districts can determine how much they may increase property tax levies. The taxing districts would be able to increase budgets by 3%, or less if they choose, which is the same as existing law. The bill would make two key changes to the current formula. The first is that 75% of the value of new construction may be added to the new levy rate, meaning that 25% would go into the market value but not the budget calculation. For expired urban renewal districts, only 50% of the value may be added if covered by subsection (3) (g). Both of these provisions would reduce the amount of new construction and urban renewal value that gets added to the taxing districts’s budgets. 

Unfortunately, this bill drops the overall cap of 4% budget growth contained in the earlier versions. It does include a 4% cap if the taxing district chooses to use any or all of the previously forgone revenues - spending authority not used in earlier budgets but not disclaimed. So, taxing districts can no longer pyramid new construction and forgone revenue for an overall increase of more than 4%, if they choose to take forgone revenues.


Does it increase government redistribution of wealth? Conversely, does it decrease government redistribution of wealth?

Property taxes are a tax on wealth, not a tax on the use of government services. A home with a value of $400,000 does not inherently use more services than a home with a $300,000 value. Asking the family with the high valued home to pay more is a form of wealth redistribution. The earlier version of this bill had a hard cap of 4% on budget growth, but this bill only provides a 4% cap if the district uses forgone revenue. If the district does not use forgone revenue, there is no hard cap. Therefore, we can no longer consider this limit a significant achievement.


Analyst Note: Tax year 2020 was one of only two years on the last 40 in which property tax collections decreased. In 2020, federal money the state received under the CARES Act covered public safety costs in some taxing districts. The other year was 2006, when the sales tax was increased to 6 cents and the maintenance-and-operations school levy was largely done away with. From 1979 to 2019, property taxes have increased at a compounded annual rate of 5.9%, so this bill, by limiting increases in the value of new construction, is a small improvement.

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