COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:3205H.01I Bill No.:HB 1906 Subject:Taxation and Revenue - General; Taxation and Revenue - Property; Property, Real
And Personal; Counties; Department of Revenue; State Tax Commission
Type:Original Date:January 23, 2024Bill Summary:This proposal modifies provisions relating to the assessed valuation of real
property.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND AFFECTEDFY 2025FY 2026FY 2027Total Estimated Net
Effect on General
Revenue $0$0$0
ESTIMATED NET EFFECT ON OTHER STATE FUNDSFUND AFFECTEDFY 2025FY 2026FY 2027Blind Pension Fund*$0$0 (Unknown) Total Estimated Net
Effect on Other State
Funds $0$0 (Unknown)
* Oversight assumes the unknown fiscal impact to the Blind Pension Fund depending on
prevailing market conditions could exceed the $250,000 threshold relative to what it would have
received under current law.
Numbers within parentheses: () indicate costs or losses. L.R. No. 3205H.01I
Bill No. HB 1906
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ESTIMATED NET EFFECT ON FEDERAL FUNDSFUND AFFECTEDFY 2025FY 2026FY 2027Total Estimated Net
Effect on All Federal
Funds $0$0$0
ESTIMATED NET EFFECT ON FULL TIME EQUIVALENT (FTE)FUND AFFECTEDFY 2025FY 2026FY 2027Total Estimated Net
Effect on FTE 000
☒ Estimated Net Effect (expenditures or reduced revenues) expected to exceed $250,000 in any
of the three fiscal years after implementation of the act or at full implementation of the act.
☐ Estimated Net Effect (savings or increased revenues) expected to exceed $250,000 in any of
the three fiscal years after implementation of the act or at full implementation of the act.
ESTIMATED NET EFFECT ON LOCAL FUNDSFUND AFFECTEDFY 2025FY 2026FY 2027Local Government$0$0 (Unknown) L.R. No. 3205H.01I
Bill No. HB 1906
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FISCAL ANALYSIS
ASSUMPTION
Section 137.115.1 Property Tax Assessment
Officials from the Office of Administration - Budget and Planning (B&P) note beginning
with calendar year 2025, this provision would hold the market value of all real property at the
market value determined during 2024. The market value will remain at the 2024 amount until the
property is sold/transferred or enough new construction/improvements has occurred to trigger a
reassessment. B&P notes that this proposal would apply to all real property, not just residential
real property. Other types of real property include: commercial, industrial, utility, railroad,
agriculture, horticulture, etc.
B&P notes that this proposal would allow the market value to increase if new construction and/or
improvements have added 50% to the value of the real property. B&P further notes that in 2022,
the median market value for residential real property was $199,400. Therefore, it would take at
least $99,700 in new construction or improvements before a reassessment is triggered. This
proposal requires owners to inform the county assessor when new construction or improvements
have been made so that the assessor can reassess the property.
This proposal also allows assessors to appeal a sales price, if the assessor believes the price does
not accurately reflect the true market value of real property. In addition, an owner of real
property may opt out of this proposal and continue to be assessed under the current assessment
method.
B&P notes that the Blind Pension Trust Fund levies a $0.03 per $100 value property tax on all
property in Missouri. B&P further notes that while this proposal will not result in a direct loss of
revenue, it could result in significant forgone revenue in the future.
Officials from the State Tax Commission have determined that this bill proposes residential real
property be valued at the most recent assessed value, or the fair market value for said property be
determined at the most recent sale. This bill also proposes that the increase of real residential
property only occurs when the property is sold or an improvement occurs that is equal to or
greater than 50% of the property value. This proposal has an unknown fiscal impact on the State
Tax Commission, however the limitation on assessment growth may negatively impact revenues
for school districts, counties, cities, fire districts and other local taxing jurisdictions supported by
property tax revenues.
Additionally, restrictions on assessment growth may create disparities and inequities over time
among residential properties and categories of homeowners, potentially shifting a greater share
of the tax burden from one class of homeowner to another. A newer home's true market value
used for assessment may increase far more than an older home or vice versa depending on L.R. No. 3205H.01I
Bill No. HB 1906
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market conditions. An assessment limit may impact assessment growth and over time potentially
create a large disparity.
Oversight notes this proposal would set the true value of a property (that has been sold since its
most recent assessment) at the total fair market value of the compensation received by the seller.
Oversight assumes if the compensation received by the seller is substantially different from the
value as determined by the county assessor, this proposal could impact property tax revenues for
the Blind Pension Fund and local political subdivisions. Oversight notes the STC conducts a
biennial ratio study
recent sale price or value estimated by an independent appraisal. Most county ratios studies
indicate the assessed values are below (in some cases substantially below) the market value
proxy.
Additionally, for properties that have not sold since their most recent assessment, Oversight
assumes this proposal would limit increases in the assessed values of real property. Property
values would stay fixed in time until the property is transferred or sold (or extensively
improved). Oversight is unable to calculate this change as it would depend on the market
conditions within each taxing entities’ boundaries. For purposes of this fiscal note, Oversight
will illustrate the potential impact assuming different scenarios in the chart below.
Per the State Tax Commission’s Annual Report, the current assessed value of real property is
$100,357,805,420. If the limit in increases to assessed value caused the following overall
reductions.
Foregone IncreaseForegone Assessed
Value
Forgone Tax
Revenue Blind
Pension
Foregone Tax
Revenue Local
Political
Subdivisions*
0.25%$250,894,514$75,268$14,129,3750.50%$501,789,027$150,537$28,258,7511.00%$1,003,578,054$301,073$56,517,502
* Oversight notes property tax levies differ based on the location of the property and the varying
taxing entities. Oversight estimated the impact to local political subdivisions using the tax levy
experienced by a property in the City of Springfield at $5.6316 (not counting the .03 collected
for the Blind Pension Fund).
Oversight notes property tax revenues are designed to be relatively revenue neutral from year to
year. The tax rate is adjusted relative to the assessed value to produce roughly the same revenue
from the prior year with an allowance for growth. Currently, growth in assessed value allows the
tax rate to fall over time. Under the proposed legislation, the tax rate would fall at a slower rate
than under the current law (or rise). (This in turn could shift a higher burden of taxation to
personal property.) L.R. No. 3205H.01I
Bill No. HB 1906
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Oversight notes some taxing entities have tax rate ceilings that are at their statutory or voter
approved maximum. For these taxing entities, any decrease in the assessed values would not be
offset by a higher tax rate (relative to current law) rather it would result in a loss of revenue.
Also, Oversight notes improvements to real property under 50% of the value of the property
would no longer be included in the assessed value (until sold or transferred). Oversight notes this
may also result in foregone revenues for all taxing entities.
Oversight notes both impacts are cumulative, which could result in a substantial loss to local
political subdivisions over time. Oversight will show an unknown loss in property tax revenue
for local political subdivisions.
Oversight assumes the magnitude of the impact to the Blind Pension Fund would depend on
prevailing market conditions. Oversight will show a potential unknown negative fiscal impact
that could exceed $250,000 to the Blind Pension Fund relative to what it would have received
under current law.
Oversight assumes there could be costs for implementation and computer programming.
Oversight will show an unknown cost to county assessors to implement this proposal beginning
in FY 2026.
The County Employees’ Retirement Fund (CERF) review of this bill would indicate that it
would likely result in reductions in contribution revenue to CERF of an unknown amount
annually. A certain portion of the moneys that are used to fund the County Employees’
Retirement Fund are tied to the collection of real property taxes. Data is not available to quantify
how changes to real property assessments under HB 1906 would impact contribution revenue but
CERF assumes the impact would be negative.
Officials from the City of Kansas City assume there is a negative fiscal impact of an
indeterminate amount.
Officials from the City of Osceola
Officials from the St Louis Budget Division note according to the City of St. Louis Assessor’s
Office, the passage of this legislation would result in less revenue from City Property taxes.
Existing legislation allows for a 5% reassessment growth and places no limits on new
construction growth. The proposed legislation would do two things:
50% of the existing value of the property L.R. No. 3205H.01I
Bill No. HB 1906
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Implementing both of these would result in a lost of $23.4M in revenue for all taxing
jurisdictions. Revenue losses to the City of St. Louis would total $4.7M. The City’s Collector’s
Fund would lose $356K and the Assessment Fund would lose $148K.
By requiring the Assessor to treat sold property and unsold property differently, it should be
noted that enacting this legislation may violate the Assessor’s responsibilities under Article X of
the MO Constitution that assessments and taxes be uniform upon the same class (or subclass) of
subjects within boundaries of the City. Additionally, freezing assessments may also violate
Article X of the MO Constitution.
Most new construction in the City is due to remodeling, alterations, additions, repairs,
demolitions, etc. It is difficult to estimate how much of the new construction will exceed 50% of
the existing value. For the purposes of this fiscal note, it is estimated that 20% of new
constructions will meet the threshold of being above 50% of the existing value. The legislation
requires the owner to notify the Assessor of any new construction or improvements, but the
legislation does not indicate what happens if the owner fails to provide the information.
The scenario where some taxpayers opt out of the legislation will make for administrative
challenges and necessitate program changes that may result in some large one-time fees.
Officials from the Eureka Fire Protection District (EURE) - St. Louis assume this bill could
produce additional election expenses which for the FPD would be about $20,000. This does not
include increased legal fee's
Officials from the City of O'Fallon, Newton County Health Department, Phelps County
Sheriff, Kansas City Police Department, and the St. Louis County Police Dept each assume
the proposal will have no fiscal impact on their respective organizations. Oversight does not
have any information to the contrary. Therefore, Oversight will reflect a zero impact in the fiscal
note for these localities.
Oversight received a limited number of responses from local political subdivisions related to the
fiscal impact of this proposal. Oversight has presented this fiscal note on the best current
information available. Upon the receipt of additional responses, Oversight will review to
determine if an updated fiscal note should be prepared and seek the necessary approval to
publish a new fiscal note.
Officials from the Department of Social Services and the Department of Commerce and
Insurance each assume the proposal will have no fiscal impact on their respective organizations.
Oversight does not have any information to the contrary. Therefore, Oversight will reflect a zero
impact in the fiscal note for these agencies.
Oversight only reflects the responses received from state agencies and political subdivisions;
however, other local political subdivisions were requested to respond to this proposed legislation L.R. No. 3205H.01I
Bill No. HB 1906
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but did not. A listing of political subdivisions included in the Missouri Legislative Information
System (MOLIS) database is available upon request.
Oversight will assume a net negative fiscal impact to both the state’s Blind Pension fund as well
as to local political subdivisions.
FISCAL IMPACT – State GovernmentFY 2025
(10 Mo.)
FY 2026FY 2027BLIND PENSION FUND Revenue Gain - §137.115 - from an
unknown impact on assessed values if
assessments are based on compensation
received$0$0$0 to Unknown
Revenue Loss - §137.115 - from the
limitation of assessment growth $0$0
$0 or
(Unknown)
ESTIMATED NET EFFECT ON
THE BLIND PENSION FUND$0$0 (Unknown)
FISCAL IMPACT – Local GovernmentFY 2025
(10 Mo.)
FY 2026FY 2027LOCAL POLITICAL
SUBDIVISIONS
Costs - County Assessors - computer
programing and administrative costs $0$0 (Unknown)
Revenue Gain - §137.115 - from an
unknown impact on assessed values, if
assessments are based on compensation
received$0$0$0 to Unknown L.R. No. 3205H.01I
Bill No. HB 1906
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FISCAL IMPACT – Local GovernmentFY 2025
(10 Mo.)
FY 2026FY 2027Revenue Loss - §137.115 - from the
limitation of assessment growth$0$0
$0 or
(Unknown)
ESTIMATED NET EFFECT ON
LOCAL POLITICAL
SUBDIVISIONS$0$0 (Unknown)
FISCAL IMPACT – Small Business
Oversight assumes there could be a fiscal impact to small businesses if the change in assessed
value of residential property resulted in an adjustment in the tax rate for commercial property.
FISCAL DESCRIPTION
Beginning January 1, 2025, the true value in money of real property for assessment purposes
shall be equal to the most recent purchase price of such real property. Such true value in money
shall be the true value in money for all subsequent assessments until the next sale of such
property.
As specified in the bill, if a homeowner makes additions or improvements to the property, and
those additions or improvements increase the value of said property by 50% or more, the
homeowner shall notify the assessor. The assessor shall then establish a new assessed valuation,
which shall be the true value in money for all subsequent assessments until the next sale of such
property.
If the sale of a piece of real estate results in a transaction that is below market value, the assessor
shall provide evidence to the Board of Equalization or other equivalent entity that such sale price
should not be used as the new true value in money for assessment purposes.
If a homeowner does not want to participate in the assessed valuation provisions under this bill,
such owner may opt out by notifying the assessor's office, and the homeowners' real property
shall be assessed under the assessment process in existence on or before December 31, 2024.
This legislation is not federally mandated, would not duplicate any other program and would not
require additional capital improvements or rental space.
SOURCES OF INFORMATION
State Tax Commission
Office of Administration - Budget and Planning
Department of Social Services
Department of Commerce and Insurance L.R. No. 3205H.01I
Bill No. HB 1906
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County Employees’ Retirement Fund (CERF)
City of Kansas City
City of Osceola
St Louis Budget Division
Eureka Fire Protection District (EURE) - St. Louis
City of O'Fallon
Newton County Health Department
Phelps County Sheriff
Kansas City Police Dept.
St. Louis County Police Dept
Julie MorffRoss StropeDirectorAssistant DirectorJanuary 23, 2024January 23, 2024