Should the manner in which property is valued for tax purposes be changed? That depends on whom you ask to comment on the so-called Proposition K just starting to make its way through the legislative process in Topeka.
Though all three admit to being less than fully familiar with details of the proposal at this point, Kiowa County Commission Chair Gene West, Greensburg City Administrator Steve Hewitt and 116th District House Representative Pat Maloney did take time Thursday morning to comment on the pending legislation.
Originally fashioned by Arthur Hall, a former economist for Koch Industries who now heads the Center for Applied Economics at the University of Kansas, Prop K’s signature feature is automating the property-appraisal process and limiting property valuation increases to two percent in a given year. Rep. Steve Brunk, R-Bel Aire, introduced the measure in the Kansas House last Wednesday.
Brunk and other supporters of the measure contend Prop K would bring stability to property taxation and push local forms of government to more intentionally justify tax hikes, as opposed to simply letting rises in appraised value push spending higher from one year to the next. The watchword for acolytes of the proposal is transparency, meaning county and city government would be more prone to having to raise the mill levy to increase tax revenue if valuation were capped at two percent a year. The transparency issue is one that makes sense to Hewitt.
“I think it does allow more transparency,” Hewitt said. “If you leave the mill levy the same as the year before while valuation goes up, you can tell people ‘We didn’t raise your taxes.’ But is that really true? Maybe you didn’t actively raise their taxes, but you allowed their taxes to go up through increased valuation, so in a sense you did raise their taxes.
“I believe in zero based budgeting where you justify every dollar spent. Departments are forced to look at what they need to do that year and how much it will cost, and where you stand on raising the revenue to fund it. If valuation increase is capped, then you have to raise the mill levy if you’re going to come up short of needed funding. That way government must prove what it wants to do and how it will pay for it.”
West, on the other hand, thinks implementing Prop K would have the opposite of the intended effect.
“I think it makes things less transparent because it hides the true value (of property) since no one knows what property is really worth if you’re artificially limiting its valuation from one year to the next,” West said. “That’s especially true after a number of years. Let’s say property in a certain place is actually appreciating five percent a year on average in value. After five years its value has gone up 25 percent, but only a 10 percent increase has been allowed under this plan, so you’ve got a gap of 15 percent.
“What you’re paying taxes on will have no correlation to the true value of property after a number of years, and that will eventually have to be leveled out. When that happens there could be a lot of wailing and gnashing of teeth.”
Sandy Jacquot, general counsel for the Kansas League of Municipalities sounds much the same concern as West, having recently been quoted as saying, “The problem with this kind of legislation is it’s artificial—it’s not market driven.” Like West, Jacquot has voiced concerns over property tax valuations being divorced from the reality of market forces in favor of a one-size-fits-all system.
Brunk points out that while landmark property tax measures of the past like California’s Proposition 13 prevented government from increasing property taxes, Prop K would allow the local authority to raise taxes by adjusting the mill levy.
Pointing out, however, that the County’s mill levy was as high as 60 mills “not that long ago” and currently sits at 48 mills, West implied stability in mill levy rather than valuation is more palatable as well as being more economically realistic.
“Our (the county’s) valuation went up about $4 million this last year,” he said. “Our mill levy would’ve stayed about the same if not for the building (projects) we’re doing now, which means we had to go up about one-and-a-third mills. That would’ve been an increase of more like three to four mills if the valuation rise would’ve been capped.”
West also points out that, unlike any of the cities of the county, Kiowa County is affected far more by shifting valuations of such commodity related resources as oil and gas production, attendant pipelines and agricultural land, rather than housing.
Because of that, he admits Prop K has a natural, populist appeal for those of a more urban setting such as Johnson County, where valuation centers more exclusively on housing and commercial space, especially in view of the measure providing for property buyers inheriting their tax valuation from the seller, rather than having properties revalued based on sale price.
Hewitt refers to Prop K’s basic premise of a two-percent cap on valuation increases as something that “seems like a fair way to deal with property tax” on a statewide basis. Unlike the County, however, a municipality like Greensburg relies far less on property taxation to raise revenue; sales tax and utility revenue bring in the lion’s share of funding, meaning year to year adjustment of mill levy is less of a factor if property valuation is indeed capped.
Though it’s been tagged Proposition K, the fate of Brunk’s measure won’t be determined by voters. It will instead meet its fate as a regular bill to be dealt with in the Legislature. Because of that, constituents will likely be looking in the coming days for signs from their representatives in Topeka as to how favorably they view the bill.
Pat Maloney, recently selected successor to long-time 116th District representative Dennis McKinney told The Signal Thursday morning that while he’s yet to learn enough of Prop K’s details to determine his stance on its future, he is open to at least the intent of the measure.
“I don’t know that it’s right that they (local politicians) don’t have to raise taxes (by raising the mill levy) just because the dang valuation keeps going up,” Maloney said. “As for this being a more transparent way of handling this I think that has some merit.”
Maloney went on to say, however, he’d need to “study” the measure more before deciding whether or not he’ll support its passage through the House.
“I’ve got the information on my desk and haven’t gotten to it yet, and I know it’s being discussed and proposed, but I need to learn more about it before saying whether I’m yea or nay on it,” he said. “It’s too early for me to have a feel for its chances of passage. I should know a lot more this time next week.”
Greensburg, KS —
