Ronald L. Book, Esq. Kelly C. Mallette
June 14, 2007
Property Tax Reform - Special Session Sine Die Update
Today the House and the Senate convened with a short agenda. Each body only had 3 bills to consider, but dozens of amendments were filed, and lengthy debate was expected. The House worked late Wednesday evening, until about 10:00 PM, answering questions about the proposals, and preparing for full consideration today. All was said and done when, late this afternoon, the House and Senate adjourned sine die a day earlier than expected.
The last 36 hours have been a whirlwind of ideas, rumors and posturing, which yielded a whirlwind of activity amongst members, staff and those of us who work the hallways. At one point Legislators were seriously considering amendatory language which would have seized local government reserves to help offset the losses to education funding.
Ultimately, House and Senate leaders decided that such an attempt would more than likely be illegal - not just a .bad idea. No language implementing this idea was ever introduced. There was a great deal of speculation about the proposed constitutional amendment, and whether or not the Democrats had indeed picked up support from several Republicans, and had enough votes to block the constitutional amendment. Slowly but surely, Senate leaders picked up their support from Republicans and it appeared the constitutional amendment would be approved for consideration by the voters. Just as that was happening, Senate Democratic Leader, Senator Geller, began working to rally support amongst Senate Democrats to block the January 29, 2008 special election date. The thought behind the strategy was simple - if the election were not held until November 2008, Democrats would have the opportunity to present a new tax plan in the 2008 regular session. House Democrats did not see the value in blocking the date, and the House passed the special election date unanimously and Senate Democrats followed their lead.
Throughout the day, numerous changes to the statutory. rollback and the constitutional amendment were proposed. Some compromises were approved. Below, please find a summary of each of the bills, and the changes approved today.
DB 1- Statutory Rollback and Cap
This bill, familiar by now,. requires cities and counties to rollback rates to 2006-07 levels and provides an additional rollback of 3, 5, 7 or 9 percent based on per capita growth for a defined time period. Independent special districts, such as hospital districts or children's services districts are included in the rollback plus 3 percent category. New cities are also exempt from the millage limitations included in the legislation for a certain period of time, depending upon when the city began levying taxes. The Legislature's intent was to exempt these cities until such time as they have had five full years to realize their full taxable value. If the city began levying taxes 2 years ago, then it would have 3 additional years without being subject to the bill's millage limitations. The House and Senate also made some noteworthy changes to this bill today, including the following:
By June 25, the state is required to report to local governments how much property tax is required to be cut. Local governments must verify the amount back to the state by July 2;
Dependent special districts, also known as Municipal Services Taxing Units, which provide fire or emergency medical services, are treated the same as independent special districts and are subject only to the rollback plus 3 percent, no matter what tier (3, 5, 7 or 9) is required to be observed by their county;
Taxing districts with nine members or more, need a three-fourths majority, rather than a unanimous vote, to exceed the revenue cap beyond 10 percent;
Allows local governments to reduce the tax rate if the state determines the rate was set too high. Governments that do not fix the rate would lose their portion of the half-cent sales tax they receive from the state;
Exempts revenues required by state law to be provided to Jackson Health System, from the rollback and 9 percent reduction provisions.
Provides exemptions for municipalities of special financial concern.
Upon completion of the changes and debate, the House approved the rollback by a vote of 117-1 and the Senate approved the rollback by a vote of 37-0. The bills will be enrolled and presented to the Governor. We will send you an enrolled version of the bill when it becomes available, most likely in the next day or two.
SIR 4 - Constitutional Amendment
The Joint Resolution provides for a super homestead exemption. It increases the homestead exemption to 75 percent of the first $200,000 in just value, plus 15 percent of the next $300,000 in just value. It provides a minimum exemption of $50,000, which is increased to $100,000 for low-income seniors. The additional 15 percent exemption is adjusted by growth in per capita income. The amendment also provides for a statutory exemption from tangible personal property no less than a value of $25,000. It also II grandfathers" homesteads that receive a better benefit through Save Our Homes.
The amendment grants the Legislature the authority to provide for the assessment of property used for affordable housing at less than fair market value, but requires the property to be subject to rent restrictions imposed by a governmental agency.
The amendment also grants the Legislature the authority to provide for the assessment of waterfront property at less than fair market value.
Qualifying properties include:
Land used exclusively for commercial fishing purposes;
Land open to the public that is used predominantly for water-dependent activities; and
Land used for public access to the water.
Implementation of this provision will be addressed during the regular session.
The Legislature also made a significant change to this proposal today. The amendment, proposed by Senator Webster, authorizes individuals to keep their current "Save Our Homes" assessment, until such time as they make an irrevocable decision to be assessed under the super exemption provision.
The constitutional amendment will appear on the January 29, 2008 ballot, and, if approved, will apply retroactively to January I, 2008. Many believe that the constitutional amendment will not get the 60 percent support required to add it to the constitution as strong opposition from teachers unions, local governments and others is anticipated. If that happens, if s anyone's guess what will be next
Senator King was recently quoted as saying that the tax cuts may not live-up to expectations created by the Governor and Legislature, since the legislation approved causes them to, /I drop like a pebble." It will be interesting to see the reaction from the many tax reform citizens groups. As you know, the proposed constitutional amendment does not provide any relief for commercial interests. Small businesses get some relief through the tangible personal property exemption, but will not receive a property tax exemption. Democrats have criticized the plan for not providing any renter's relief and homeowners may well become concerned if, in fact, there is a noticeable change in fire, police and other services to which they have grown accustomed.
One thing is for sure; support and opposition to these changes will be discussed and debated for many months to come.
As always, please feel free to contact us if you have any questions or if you require any additional information. We will keep you posted on any developments in the coming days and weeks.