Colorado Legislative Council Staff

STATE and LOCAL

REVISED FISCAL NOTE

(replaces Fiscal Note dated February 20, 1998)

TABOR Refund Impact

 State General Fund Revenue and Expenditure Impact

Local Government Revenue and Expenditure Impact

Drafting Number:

Prime Sponsor(s):

LLS 98-134

Rep. Spradley

Sen. Blickensderfer

Date:

Bill Status:

Fiscal Analyst:

March 25, 1998

Senate 2nd Reading

Steve Tammeus (866-2756)

 

TITLE:            CONCERNING REDUCTION OF PROPERTY TAXES.


Summary of Legislation


STATE FISCAL IMPACT SUMMARY

FY

1998/99

FY

1999/00

FY

2000/01

State Revenues

General Fund - Income Tax

Other Fund


 


$300,000


$600,000

State Expenditures

General Fund - School Finance Act

Other Fund



 


$16,300,000


$16,500,000

FTE Position Change

None

None

None

Local Government ImpactThe amended bill will limit the exemption to the taxes paid to school districts only. There would be no exemption for business personal property for other local governments.


            This bill as referred by the Senate Appropriations Committee (Senate Journal, March 25, 1998, page 563), effective January 1, 1999, exempts all personal property from the levy and collection of property tax by school districts for the payment of the costs of the financial base of support for the system of public schools in the state. The exemption will apply to the first $25,000 of the actual value of the personal property owned by the taxpayer in each county, except that, for any public utility, the exemption shall apply to the first $25,000 of the total actual value of personal property owned statewide.


            The bill requires each school district, in determining the number of mills it will levy for the 1999-2000 budget year, to base the determination on the district’s assessed valuation for the 1999 property tax year, plus the assessed valuation of all personal property that is exempt from the levy and collection of property tax by the district. The bill will become effective upon the signature of the Governor.


            The bill will affect state General Fund revenue and expenditures, local government expenditures, and school district revenue. Therefore, the bill is assessed as having a state and local fiscal impact.


State Revenues


            Property taxes are deductible for business taxpayers as a business expense on state income tax returns, and for individual taxpayers who itemize deductions. The reduction of property taxes will increase the taxable incomes, and subsequent state tax liabilities, of those taxpayers benefitting from a property tax exemption. Legislative Council Staff estimates the provisions of this bill will increase state income tax revenue to the General Fund by $300,000 for FY 1999-2000 (one-half year) and by $600,000 for FY 2000-01.



TABOR Refund Impact


            Section 20 of Article X of the Colorado Constitution, limits the maximum annual percentage increase in state fiscal year spending. Once total state revenue from all sources that are not specifically excluded from fiscal year spending exceeds these limits for the fiscal year, the state constitution requires that the excess shall be refunded in the next fiscal year unless voters approve a revenue change as an offset. Based on the current Legislative Council economic forecast, it is projected that the state will be in a TABOR refund position during each of the next five fiscal years. Any increase or decrease in state revenue from changes in fees, fines, licenses, or other revenue sources will affect the amount of the state revenue to be refunded.



State Expenditures


            The reengrossed bill specifies that the value of the exemption would be $25,000 beginning in property tax year 1999. The school districts would also calculate what the mill levy should have been in the absence of the business personal property tax exemption.


            Table 1 provides a summary of the reduction in property taxes to be paid to schools per the provisions of this bill. State aid for school districts is computed as the difference between total program costs and the amount collected from property taxes, therefore, additional state aid may be required through the School Finance Act to provide sufficient revenue to offset the reduction of property tax revenues available to school districts.


Table 1 - Fiscal Impact Summary of HB 98-1005, as amended

 

FY

1999-00

FY

2000-01

FY

2001-02

FY

2002-03

FY

2003-04

Non-school local governments

             $0.0

$0.0

$0.0

$0.0

$0.0

School Finance Property Tax Reduction Due to

$25,000 Exemption

$16,300,000

$16,500,000

$16,900,000

$17,200,000

$17,600,000



Local Government Impact


            The reengrossed bill will limit the exemption to the taxes paid to school districts only. There would be no exemption for business personal property for other local governments. Thus, the total amount of nonresidential assessed value on the tax rolls does not change, and the residential assessment rate does not change. Other local governments would not be affected by a change in the residential assessment rate.


            The provisions of this bill may require county assessors to upgrade or modify existing computer and accounting systems in order to maintain current property tax records, calculate the amount of the exemption per taxpayer, and maintain the amount of the exemptions per taxpayer. The potential cost for each county to make these modifications is currently being evaluated.



Spending Authority


            The provisions of this bill will not affect state expenditures until FY 1999-2000. This fiscal note would imply that no new state spending authority or appropriations are required for FY 1998-99 to implement the provisions of this bill.



Departments Contacted


            Local Affairs              Legislative Council Staff