1. Show Me the Keys: Tax Levy Setting presented by Jim Smith Information adapted from Boone County Assessor’s web site and presentations by Nathan Nickolaus, City Counselor, Jefferson City; Joshua Payton with Cunningham, Vogel & Rost, P.C.; and Mark Grimm, Gilmore and Bell

2. Goal The goal of this presentation is to discuss the property tax calculation, the tax rate setting process, impact of the Hancock Amendment, impact of Senate Bill 711, and to touch on other legislation that can impact assessed valuation.

3. DBRL Operating Revenue 2008

4. Presentation PART 1: Overview of the Property Tax Calculation PART 2: Overview of Property Tax Rate Setting and Impact of Legislation such as Hancock Amendment and Senate Bill 711 PART 3: Overview of Legislation that can Impact Property Tax Valuation

5. PART 1: Property Tax Calculation ASSESSMENT

6. County Assessor Calculates Market Value “Actual Value” is Market Value: What an ordinary willing buyer would pay an ordinary willing seller

7. Market Value to Assessed Value Multiply the actual value by a percentage based on the type of property

8. The Percentages Are Residential: 19% of value Agricultural: 12% of value Commercial & Other: 32% of value Manufactured Homes: 19% of value Farm Machinery 12%: of value Historic Cars, Planes: 5% of value Crops (grain): 0.5% of value Other Vehicles: 33.3% of value

9. County Collector Applies the Tax Rate ($ Actual Value X Assessment % / 100) X Tax Rate % You divide the assessed value by 100, since the rate is per $100 of Assessed Valuation You multiply the result by the tax rate approved by the voters

10. Example Thus if the tax rate levy is 10¢, and a house is worth $100,000, the calculation would be: $100,000 (market value) x 19% = $19,000 (assessed value) $19,000 ÷100 = $190 $190 x 0.10 (levy rate) = $19 (the tax due)

11. Assessment Cycle Real Property assessed on 2-year cycle – Value determined in odd years – “reassessment years” –Even years are non-reassessment years Personal Property is valued every year Assessed Value is determined on January 1st of each year Local government sets levy by now by September 1 st of each year Property Tax Bills are mailed in November Property Tax is due and payable on December 31st of each year Local government then receives the money anywhere from November of the current year to February of the following year

12. Other Considerations Exempt Property – Some Personal Property – Some Real Estate Government property Property used as nonprofit cemeteries Property used exclusively for religious worship, schools and college Property for purely charitable purposes

13. PART 2: Rate Setting

14. Rate Setting Overview: – Each political subdivision must set its own levy rates (§ 67.110.1 RSMo) – Formula: Levy Rate ×Assessed Value/100 = Tax Amount Owed

15. Procedures for Rate Setting Missouri State Auditor’s Office (SAO) requests information to be sent to the County Clerk’s Office County Clerks provide assessed valuation and other information to the SAO to prepare the tax rate calculation for each political subdivision (137.245.3 RSMo) Library staff uses the information from the County Clerk and SAO to provide the board with all information necessary as required by 67.110.1 RSMo. Library staff prepares a proper notice to the public about the public hearing for setting the tax rate (137.055.2 RSMo) Once each individual board approves the tax rate, the SAO form is filled out and filed with the County Clerk.

16. Hancock Amendment Who? – Businessman from Springfield, Missouri What? – Constitutional amendments (Art. X §§ 16- 24) that limit state and local government taxes When? – November 4, 1980 – voter approved initiative

17. Hancock Amendment Requires voter approval for new or increase in existing taxes above previously voter approved rate Reduces tax rate levy when tax base expands or allows increases to tax rate levy when tax base declines (but not above the voted tax rate limit) Rollbacks (tax rate adjustments) to voter approved rates occur when assessed value of property increases to above the previous year’s tax revenue collections (total tax revenue) plus the lesser of CPI or actual growth (a.k.a. “Hancock Ceiling”) Impacts only the Operating Levy.

18. Hancock Ceiling Example Voted Tax Rate 10 cents & Current tax rate 9.85 cents per $100 of Assessed Valuation Prior year revenues = $985 Cost of Living = 1% & Actual Growth 9% Permitted current year revenue = $995 Total current year EAV = $1,100,000 Less New Construction = $10,000 Adjusted Assessed Value = $1,090,000

19. Hancock Ceiling Formula: – Permitted Current Year Revenues ÷ Adjusted Assessed Valuation = Maximum Authorized Levy $995 ÷ ($1,090,000/100) = $0.0913 $.0913 × $1,100,000/100 =$1,004 (Actual Tax Revenue) This results in a required rollback to new rate. If the EAV was changed to $900,000, their would be no growth and the maximum rate would be $0.1000, the tax rate ceiling

20. Senate Bill 711 Changes Rate Setting Procedures The purpose of SB 711 is to target increased taxes resulting from rising assessed values.

21. SB 711 Summary of Changes Creation of Second “Gibbons” Ceiling New methodology for calculating voter approved levy rate increases

22. SB 711 Second “Gibbons” Ceiling -When does Gibbons Ceiling apply? – When political subdivisions levy a tax rate voluntarily below Hancock Ceiling in even year (non-reassessment), then – In odd-numbered year (reassessment) the new Gibbons Ceiling applies – Why? – Limits tax revenues to previous year plus cost of living Increase – Targets increases in tax revenues due solely to rising assessed values

23. SB 711 Second “Gibbons” Ceiling Potential Long-Term Affect – Never achieve Hancock Ceiling Can “bust” through Gibbons Ceiling – When? In even-numbered years – How? Hold a Public Hearing Governing body passes ordinance/resolution/policy statement justifying increase NO vote of qualified voters required

24. Property Tax Elections Care will need to be taken when drafting ballot language How implementing levy rate increase? Approving new overall rate? Increase over existing rate? Consultants want to change language... Legal versus practical effects of ballot language Other considerations Future use of revenues

25. Delinquent Taxes and Appeals Property Tax is due and payable on December 31 st of each year. Tax becomes delinquent January 1 st Liens are created for Real Estate Tax Personal Property Taxes are collected by civil suit Three Steps to contesting an assessment Informal adjustment Board of Equalization Appeal to Tax Commission (From here can go to court)

26. PART 3: Other Legislation Economic Development Methods Impacting Library – Tax Increment Financing (TIF) – Chapter 100 Property Tax Abatement Others Methods Available – MODESA – MODESA “Light” – Chapter 353 Urban Redevelopment Corporations

27. Tax Increment Financing (TIF) Creates a special district to make public improvements to generate private sector development Tax base is frozen and any new development is used to pay project costs Tax freeze lasts for a defined period of time no more than 23 years Done to stimulate areas that would not grow without action

29. Chapter 100 Gives cities, counties and other governments authority to issue revenue bonds to companies wishing to move into or expand in the area Company buys the bonds, gives title to the government and leases the property Property is exempt from taxation and company makes payment in lieu of taxes (PILT)

30. Property Tax Questions and Answers