COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:3205H.02P Bill No.:Perfected HCS for 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:April 29, 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 2027General Revenue*$0UnknownUnknownTotal Estimated Net
Effect on General
Revenue $0UnknownUnknown
*Oversight notes the changes in the proposal have an opt-in clause in §137.115.17(4). Oversight
assumes there will be residential property owners that opt-in and participate in these changes in
assessment, resulting in a reduced growth amount of residential property taxes paid compared to
current statutes. Oversight assumes the fiscal impact could exceed the $250,000 threshold.
ESTIMATED NET EFFECT ON OTHER STATE FUNDSFUND AFFECTEDFY 2025FY 2026FY 2027Blind Pension Fund*$0 (Unknown) (Unknown) Total Estimated Net
Effect on Other State
Funds $0 (Unknown) (Unknown)
* Oversight assumes the unknown fiscal impact to the Blind Pension Fund depending on
prevailing market conditions (and program participation) 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.02P
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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 (Unknown) (Unknown) L.R. No. 3205H.02P
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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 residential real
property, used as a primary residence, 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 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 residential
real property, used as a primary residence, 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.02P
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market conditions. An assessment limit may impact assessment growth and over time potentially
create a large disparity.
Officials from the Department of Revenue (DOR) note in order to determine how much a
person will owe in real property tax, an assessment of the real property must be done every two
years by the County Assessor. Using the value of the property, the assessor can calculate the
property tax owed by applying a formula outlined in statute. This proposal starting January 1,
2025, would stop the increases of the value of real property unless the property is sold or
construction on the property doubles the value of the property. Future property values will be
based on the sale price of property. Property taxes are handled by the county assessors and the
State Tax Commission. DOR defers to them for an estimate of the impact to the counties.
The Department notes that the constitutionally-created Blind Pension Fund (Article III, Section
38(b)) receives $.03 for each $100 valuation of taxable property in the state of Missouri.
Reducing or holding constant the assessed value could decrease the amount of future revenue
growth expected by the Fund. DOR defers to the Department of Social Services for the
estimated loss of funding to the Blind Pension Fund.
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 L.R. No. 3205H.02P
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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.)
Oversight notes some taxing entities have tax rate ceilings that are at their statutory or voter
approved maximum. For these taxing entities, any decrease (or increases that do not occur) 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 growth.
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 and
other administrative functions. Oversight will show an unknown cost to county assessors to
implement this proposal beginning in FY 2026.
Oversight will show an unknown savings to General Revenue beginning in FY 2026. Oversight
notes total property tax credit amounts claimed would need to decrease by approximately 0.75%
to reach a $250,000 impact.
In response to a previous version (HB 1906) officials from 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.
In response to a previous version (HB 1906) officials from the City of Osceola assume there is a
fiscal impact of an indeterminate amount. L.R. No. 3205H.02P
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Officials from the Callaway County SB 40 Board assume there is a fiscal impact of an
indeterminate amount.
Officials from the Rolling Hills Consolidated Library assume any bill that has the effect of
lowering the amount paid in real property or personal property tax will have a detrimental effect
on the Rolling Hills Consolidated Library district. Lowering the assessment of real property or
limiting the growth in value of property changes how property tax levies fund essential public
services. This could result in the loss of income substantially over time, resulting in future
requests to voters to increase the total library levy to keep up with inflation and other rising costs
such as increases in the minimum wage, etc. The library is unable to determine at this time the
total dollar figure this might result in a reduction of library tax levy income.
Officials from the Daniel Boone Regional Library assume a minimum $10,000 in lost revenue
the first year this is in effect; in subsequent years likely much higher due to stagnant
assessments.
In response to a previous version (HB 1906) 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
Implementing both of these would result in a loss 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. L.R. No. 3205H.02P
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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.
In response to a previous version (HB 1906) officials from the Eureka Fire Protection District
(EURE) - St. Louis
FPD would be about $20,000. This does not include increased legal fee's
Officials from the Newton County Health Department, Phelps County Sheriff, Kansas City
Police Department, and the St. Louis County Police Department 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, Office of the State Auditor, 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
but did not. A listing of political subdivisions included in the Missouri Legislative Information
System (MOLIS) database is available upon request.
FISCAL IMPACT – State GovernmentFY 2025
(10 Mo.)
FY 2026FY 2027GENERAL REVENUE FUNDCost Avoidance – Potential reduction in
property tax credit redemptions due to
the reduction in assessed values if the
bill results in lower property taxes$0 (Unknown) (Unknown)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND$0 (Unknown) (Unknown) L.R. No. 3205H.02P
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FISCAL IMPACT – State GovernmentFY 2025
(10 Mo.)
FY 2026FY 2027BLIND PENSION FUND Revenue Loss - §137.115.17 - from the
limitation of assessment growth $0 (Unknown) (Unknown)
ESTIMATED NET EFFECT ON
THE BLIND PENSION FUND$0 (Unknown) (Unknown)
FISCAL IMPACT – Local GovernmentFY 2025
(10 Mo.)
FY 2026FY 2027LOCAL POLITICAL
SUBDIVISIONS
Costs - County Assessors - computer
programing and administrative costs $0 (Unknown) (Unknown)
Revenue Loss - §137.115.17 - from the
limitation of assessment growth $0 (Unknown) (Unknown)
ESTIMATED NET EFFECT ON
LOCAL POLITICAL
SUBDIVISIONS$0 (Unknown) (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
This legislation modifies provisions relating to the assessed valuation of real property.
This legislation is not federally mandated, would not duplicate any other program and would not
require additional capital improvements or rental space. L.R. No. 3205H.02P
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SOURCES OF INFORMATION
State Tax Commission
Office of Administration - Budget and Planning
Department of Social Services
Department of Commerce and Insurance
County Employees’ Retirement Fund (CERF)
City of Kansas City
City of Osceola
St Louis Budget Division
Eureka Fire Protection District (EURE) - St. Louis
Newton County Health Department
Phelps County Sheriff
Kansas City Police Dept.
St. Louis County Police Dept
Office of the State Auditor
Callaway County SB 40 Board
Rolling Hills Consolidated Library
Daniel Boone Regional Library
Julie MorffRoss StropeDirectorAssistant DirectorApril 29, 2024April 29, 2024