(Replaces Fiscal Note dated January 19, 1998)State General Fund Expenditure Impact

TITLE: CONCERNING THE ELIMINATION OF THE CONSIDERATION OF FEDERAL BROADCAST LICENSES BY THE PROPERTY TAX ADMINISTRATOR WHEN DETERMINING THE ACTUAL VALUE OF A WIRELESS CARRIER FOR PROPERTY TAX PURPOSES.

The bill, as amended by the House Finance Committee (House Journal, February 13, 1998, page 514), would exempt the value of licenses granted by the Federal Communications Commission (FCC) to a wireless carrier for purposes of statewide valuation for assessment of tangible property for property tax purposes. This exemption will result in lower assessed values for wireless carriers. The lower reported assessed values will cause lower property tax revenues than would otherwise be collected in certain cases. Therefore, the bill is assessed as having local fiscal impact. The bill would become effective upon signature of the Governor, and would apply to property tax years commencing on or after January 1, 1998.

STATE FISCAL IMPACT SUMMARY	FY 1998/99	FY 1999/2000
State Revenues General Fund Other Fund
State Expenditures General Fund - School Finance Other Fund	$992,000	$992,000
FTE Position Change	None	None
Local Government Impact — The bill is projected to reduce total property tax collections for local governments by $2,307,000 annually beginning in calendar year 1999. This property tax revenue reduction includes approximately $992,000 for school districts that may be reimbursed for operating purposes through the School Finance Act.

The bill will result in a reduction in property tax collections for units of local government (see the Local Government Impact section below) where affected companies are located. However, since state aid for schools is computed as the difference between Total Program and the amount collected from property taxes and specific ownership taxes, state aid may be increased to make up for the lost operating budget property tax revenue through the School Finance Act in affected school districts. The need for additional state aid through the School Finance Act identified in this bill is estimated to be $992,000 annually beginning in FY 1998-99.

Background. If this bill had been in effect in 1997, two mobile telephone companies with a combined FCC license assessed valuation of $93,826 would have been affected. The reason for this is that cellular and mobile radio companies that existed prior to 1997 were not required to pay for their FCC licenses. Therefore, the value of the license was not considered in the valuation process by the Division of Property Tax.

Personal Communications Services (PCS) that came into existence in 1997 were required to purchase their FCC cellular licenses from the federal government. However, since these companies were not in operation as commercial telephone companies as of December 31, 1996, they were not valued for 1997. Two companies reported the value of their FCC license as “Other Assets” in 1997, and the value attributable to the license was omitted from the assessed valuation assigned to these companies due to the incorrect reporting.

Estimated Property Tax Reduction. For the 1998 tax year, all PCS companies are required to report the value of their FCC licenses as operating property. Therefore, the value of the FCC license will be considered in deriving the assessed valuation for these companies. The Division of Property Tax has determined that the effect on 1998 taxable value attributable to FCC licenses will be $95,877,397, with a total assessed value of $27,804,445. Based on the statewide average mill levy of 83 mills, the projected property tax loss statewide as a result of exempting the value of FCC licenses is projected to be at least $2,307,000 annually beginning in calendar year 1999. School districts, however, may be reimbursed for their lost property tax revenues for operating purposes through the School Finance Act. Of the $2.3 million loss in local property taxes, 43 percent, or approximately $992,000 of this amount may be made up to school districts through the School Finance Act. In addition, it should be noted that any reduction in the value of nonresidential property will affect the calculation of the residential assessment rate.

The provisions of the bill suggest an increase in the FY 1998-99 appropriation for the Department of Education, Public School Finance, Total Program of $992,000. However, the bill contains a “no appropriation clause” stating that no separate appropriation of state moneys is necessary to carry out the provisions of the bill.