YOUR BUSINESS AUTHORITY
Springfield, MO
YOUR BUSINESS AUTHORITY
Springfield, MO
The headline-grabber for Missouri Senate Bill 3, signed into law by Gov. Mike Kehoe on June 16, was stadium funding for the Kansas City Chiefs and Royals, but a property tax credit tucked into the legislation has some area officials concerned.
The legislation hits Missouri counties in one of three ways: Counties could either enact a cap on property tax increases at the rate of the consumer price index or 5% per year, whichever is greater (5% designation); freeze increases to personal property tax for individual taxpayers (0% designation); or be exempt from any limitations on property tax increases (exempt designation). That determination was up to each county’s state senator, with several lawmakers opting for the 0% and 5% designations to provide tax relief to their constituents. The change is subject to voter approval.
Greene County Sen. Lincoln Hough opted for the exempt designation. Christian is one of 22 counties with a 0% designation. Sen. Mike Moon, R-Ash Grove, selected that option for the counties he serves: Christian, Barry, Lawrence and McDonald.
In the offices of the economic development agency Show Me Christian County, the talk on Senate Bill 3 is not about football and baseball; it’s about part of the measure that might freeze increases in real property tax bills.
Anna Evans, vice president of Show Me Christian County, said the legislation seems simple – but it’s anything but. She explained that counties that have been opted in by their senators have to hold an election by April to ask the public to decide whether the property tax credit will be granted to eligible taxpayers.
The legislation explains the credits in one dense sentence – and there’s not a lot more information available for county officials, with the legislature in recess until January. January is also when ballot language for a special April election must be certified.
The bill says the credit would be applied when calculating a property owner’s tax liability for the year, and the amount of the credit is to be noted on the tax statement sent out by the county collector. The amount of credits authorized are to be regarded as tax revenue received by the county for the purpose of calculating property tax levies, the bill states, meaning counties would not technically show a revenue deficit on their books and would have to pass new levies to make up for any shortfall created by the credit.
The freeze does not apply to commercial properties or to new construction, which means some property taxes could still be collected, Evans noted.
Polk County Clerk Rachel Lightfoot’s senator, Sandy Crawford, R-Buffalo, chose a 5% tax credit designation for counties in her district, including Polk, Benton, Cedar, Dallas, Henry, Hickory, Pettis, St. Clair and Vernon. Crawford declined to comment for this story.
Lightfoot said the measure raises a lot of questions.
“There’s little language to it, so everyone’s trying to do the best they can to try to grasp it,” she said.
She added that the legislation forces Polk County to hold a countywide election in April, and the tax credit question may well be the only issue on the ballot. That could cost her county $20,000-$25,000, she said.
Additionally, lawmakers did not provide specific ballot language, so it’s unclear what the measure would even ask Polk Countians, she said.
“Everyone was so focused on the main purpose of that bill, which was the stadium funding,” she said. “Little fire districts, special road districts, sewer or water districts – all the little ones that don’t get a whole lot anyway – they don’t have any other funding source. There’s no other way for them to generate any revenue.”
By statute, some of those taxing districts are limited in their ability to seek sales taxes – not that a sales tax in a rural district with few or no businesses would be sufficient to support a taxing district’s services.
There is a ripple effect to the crisis, she added.
“Think about your fire district,” she said. “If you no longer have a fire district, as a homeowner, your ISO – your insurance rating – is reflective upon that. I don’t think people have thought about that.”
In Polk County, the library and health department are funded by levies, and so are Senate Bill 40 programs that provide services for people with developmental disabilities, such as school programs and sheltered workshops.
The senior service board would also be impacted, she said.
“Seniors that like to go to the senior center for meals – part of that funding comes from a tax levy,” she said. “When you cap it or reduce it, it trickles down all the way.”
Lightfoot said Polk County has about 20,000 parcels – half of them with houses on them. That means about 10,000 parcels will be impacted by the measure.
The impact of the tax freeze is hard to calculate, according to Lightfoot. She noted Polk Countians passed a senior tax credit in November that resulted in 1,381 applications.
“This year as we go through the levy-setting process is going to be the first year where we’re going to see the true impact of those,” she said.
Lightfoot has estimated county coffers would lose $214,000 in one year through the tax credit. The county brought in $1.4 million from general revenue and road and bridge levies in 2024 and has an overall budget for this year that sets expenditures at $3.7 million and revenues at $2.3 million.
Outside of the courthouse and across Polk County, calculating property taxes collected for schools, senior services, fire services, Ozarks Technical Community College and others, $22 million is brought in from levies each year, Lightfoot said.
She said in a county the size of Polk, the loss will be impactful and will likely result in county employees’ wages being frozen and in higher health insurance expenditures as premiums increase.
In Christian County, Evans has multiple concerns about the measure.
First, there’s the fact that local voters have already weighed in on the property tax levies they’re assessed, and they will be frozen in their ability to increase funds via property tax beyond the 2024 tax year assessment. In her reading of the measure, the freeze is indefinite.
There’s also the fact that homeowners will receive a tax credit for any increase that would have been assessed beyond the 2024 valuation.
“The legislation specifically says that the amount of tax credits authorized by a county will be considered tax revenue received by a county for the purposes of levies,” she said.
Evans said general sentiment seems to be against property taxes as a funding mechanism, and efforts to move away from them are gaining steam.
In Christian County, districts that are funded include 14 school districts, nine fire districts and nine cities, plus senior citizens services, services for people with developmental disabilities, libraries and more, according to the published list of 2024 certified levies by Christian County Clerk Paula Brumfield. Real estate valuation in Christian County was assessed at $1.4 billion in 2023.
Evans noted community services rely on voter-approved property taxes for funding.
“The ability of these districts to continue to provide their level of service to a growing population is going to be dependent upon their ability to, No. 1, use their revenues wisely, and two, to be able to go to voters to give them the opportunity to say yes to increased services,” she said.
Evans said the county is endeavoring to recruit and retain businesses and skilled talent.
“You don’t have economic investment without being a community that people want to invest in,” she said.
Time for a conversation
Sen. Joe Nicola, R-Independence, proposed the freeze on property tax increases, stating during Senate debate that the property system in Missouri is a disaster, the Missouri Independent reported.
“I’m a hard no on the stadium tax bill unless we get some solid property tax relief for my people in Jackson County,” he said, adding he can count on one hand the number of his constituents who want him to vote in favor of stadium funding.
A fiscal note prepared by the Senate’s Committee on Legislative Research Oversight Division, prepared in advance of the vote, covered the components of the Senate bill related to stadium projects and disaster relief; however, the tax credits were not addressed in the document.
Sen. Moon came to the stadium funding discussion firmly opposed.
“A lot of people were calling it the stadium bill. I think it was intended to pass before we got there,” he said. “They likely had determined what needed to be given on the Senate side, especially, to gain the support needed to get it passed. Obviously, that happened.”
But Moon said the state never had any business passing the Show-Me Sports Investment Act, which authorizes the state to expend funds for the financing and construction of an athletic and entertainment facility project.
“The state can’t use public funds – taxpayer dollars – to satisfy a debt from a private entity or corporation,” Moon said. “I placed my anchor there as my overall opposition.”
The tax cuts, he said, have been discussed during his entire 12 years in the House and Senate – never with any resolution.
He said taxing districts provide certain services, like ambulance service or even the ability to pick up a good book at the library. Counties want to maintain those services with money generated through taxation, he said.
“The other side is people, and I include myself here,” he said. “I talk to county commissioners and assessors, and when they put on their people hat, they want taxes to be lowered, too. They’re also feeling the effects of inflation and higher prices at the pumps.”
The state has seen massive increases in taxation since the COVID-19 pandemic, Moon said, noting that something has to be done. He saw an opportunity in selecting the tax credit freeze for the counties he represents.
“My intent was not to punish anyone but to have conversations,” he said.
Moon favors something called a fair tax, which would replace income and property taxes with a consumption tax. Such a tax would generate the revenue needed for the services mentioned while giving every person 100% of their income to use as they see fit.
“Is it a perfect plan? Probably not,” Moon said. “But it would help to satisfy arguments from people who say they don’t have enough money to go around, and the main thing is people wouldn’t lose their property – they could stay in their homes.”
Moon said he believes the legislation will be challenged in court on a number of grounds, including the fact that the Missouri Constitution – Article 3, Section 23 this time – has a single-subject rule, requiring that each bill can cover only one subject. The stadium bill not only hooked in property tax credits, but disaster relief funding as well.
Someone else who anticipates a challenge is Steve Hobbs, executive director of the Missouri Association of Counties.
“It’s obvious that none of the political subdivisions were consulted,” he said of the legislation. “It’s unconstitutional at best. In this instance, if it’s going to be bad, it might as well be real bad.”
Hobbs pointed out a number of problems with the measure. It was never heard in committee. There was never any public testimony. Senators declared their counties’ status with no input from House members. And all of this was done in the middle of the night.
“Not to mention the fact that there’s basic ignorance of political subdivisions and how they’re structured,” he said. “You’re going to have school districts and possibly road or library districts that cross county lines.”
Additionally, the constitution says all taxes will be applied fairly and equitably, Hobbs said.
“You’re going to have some counties that are under one standard and others under another and still others under a third,” he said. “Everyone is saying it’s not if the lawsuit happens but when.”
Laura Holloway, deputy director of the Missouri Municipal League, also anticipates challenges. While her organization supports sports tax credits, she said, it does not support the property tax portion of the Senate bill.
“There have been many proposals over the last few years regarding taxes, and property taxes in particular,” she said. “We would like to see a broader overview, rather than picking out portions – we want to see a more consistent approach.”
She said that may be happening. A House subcommittee is currently looking at property taxes, and the Missouri Municipal League supports that.
“We want to be part of looking at the structure as a whole and how that can benefit Missourians,” she said.
A measure that assesses counties at different rates creates uncertainty, she said.
“That’s why we really just want to take a step back,” she said.
Chief Jarett Metheny of the Ozark Fire Protection District said Senate Bill 3 has been at the forefront of his attention and that of his peers for several weeks now.
He noted 100% of his district’s funding comes from property taxes, and 70%-80% of its budget would be affected by the freeze.
“Any changes in our funding mechanism certainly concerns us in how we move forward with our purchasing and day-to-day operations,” he said.
Metheny said the cost of fire apparatus has gone up significantly in the past four or five years, to the extent that U.S. Sen. Josh Hawley is heading up an antitrust investigation into the matter. The Ozark district just bought a fire truck for $1.5 million, and Metheny said not long ago, the equipment would have cost $500,000-$600,000.
These are the types of pressures fire districts are facing, Metheny said.
“We are concerned that this change was implemented without any input from emergency services,” he said. “Continuing on with strategic and capital projects is going to be nearly impossible.”
Metheny said he understands that rising property taxes have been targeted by lawmakers for some time.
“What we would request is a seat at the table on an alternate funding mechanism,” he said.
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