House of
Representatives
SB 1421
special districts; secondary levy limits
Sponsor: Senator Waring
SB 1421 will establish a statutory levy limit for secondary property taxes that are levied by fire districts.
History
The total tax rate assessed against a parcel of property is the combination of the primary and secondary tax rates levied by all jurisdictions. The state, counties, community college districts, cities, local school districts and most special districts all have the authority to levy property taxes.
Primary tax levies: A primary property tax can be levied by a county, municipality, community college or school district and is dedicated for the maintenance and operation of the respective jurisdiction. Primary taxes are levied to defray the necessary expenses of general government. After approval by the voters in 1980, a constitutional primary property tax levy was initiated in 1982 that limited the amount of revenues that can be raised by this source. These entities are allowed a 2% levy increase on property that was taxed in the preceding year. They are also allowed growth in excess of 2% by taxing new construction and escaped property. After the levy limit is calculated, it is up to each taxing jurisdiction to determine how much they want to levy within their limit. There is no requirement to levy to the maximum amount. Over the years, as some of these entities do not use all their taxing capacity, excess capacity builds up. During the 2006 legislative session, the Legislature addressed the issue of excess capacity and passed HCR 2056, which was approved by the voters as Proposition 101. This proposition rebased the primary levy limits to the 2005 levy amount and eliminated the excess taxing capacity.
Secondary tax levies: Secondary property taxes are levied to pay for voter-approved bond indebtedness, voter-approved budget overrides and special district levies such as a flood, library, jail, fire, etc. Currently, most districts have no limitations on the growth of secondary tax levies. Some of these special districts do have maximum tax rates which they cannot exceed. Since these districts are not subject to Truth-In-Taxation provisions, a constant rate results in increased taxes equal to the growth in assessed value. There are no controls on the growth of these taxes when assessed valuation increases.
Fire Districts: County fire districts receive funding from two sources of revenue, both generated from secondary property taxes. First, county fire districts receive funding from the county through the Fire District Assistance Tax (FDAT). The FDAT is levied by the county on all taxpayers and the rate is limited to no more than ten cents per one hundred dollars of assessed valuation. The amount of funding from this source is equal to 20% of the district’s levy, but is capped at $300,000 each fiscal year. If the FDAT does not raise sufficient revenue to cover 20% of each fire district’s budget, then the amount is prorated among the county fire districts. In addition to the FDAT, the fire district may levy a secondary property tax to fund the remainder its budget and that tax rate is capped at $3.25. There is no levy limit for fire districts and this bill is proposing a statutory levy limit for these secondary taxes.
Provisions
· Imposes a statutory secondary property tax levy limit for fire districts that is the lesser of:
o 8% greater than the amount of the levy in the preceding tax year.
o $3.25 per $100 of assessed value.
· Sets forth requirements for determining a fire district’s levy limit if the district annexes additional territory or if districts merge or consolidate.
· Requires a fire district to hold any property tax revenues in excess of the maximum allowable levy in a separate fund for the purpose of reducing the property tax levy in the following year.
· Allows the levy limit for county fire districts to increase to the maximum limit each year regardless of whether the district actually levies taxes up to the maximum limit.
· Allows the qualified electors of the fire district to authorize property tax levies in excess of the limit. The voters may approve one, but not both, of the following options:
o A permanent override allowing annual levies without reference to the previous year’s levy but still subject to the $3.25 maximum rate cap.
o If the net assessed valuation declines by 20 % or more over two consecutive valuation years, a five-year override that allows annual levies to increase by 5% and are exempt from the $3.25 maximum rate cap. After the fifth year, the district returns to the 8% levy limit, computed from the year preceding the override.
· Requires any override election to be held at a regularly scheduled November General Election.
· The call of the override election must state:
o The purpose for requesting additional secondary property tax revenue for the district.
o Information stating that if the levy is approved, the maximum dollar amount of additional secondary property tax collected in the first year compared to the existing maximum secondary property tax levy and the estimated secondary property tax rate that will fund the proposed levy amount in the first tax year compared to the secondary property tax rate levied in the previous year.
· Requires the Property Tax Oversight Commission (PTOC) to review the secondary levies of fire districts to determine compliance with the levy limit. Fire districts may appeal decisions of the PTOC in the same manner as other taxing jurisdictions for primary property taxes.
· Requires a fire district to report the total assessed value of all property annexed in the previous year to the PTOC by February 10 of each year.
· For Tax Year 2010, allows a fire district to levy secondary property taxes that are 16% greater than the amount levied in Tax Year 2008.
· Makes technical and conforming changes.
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Forty-ninth Legislature
First Regular Session 2 June 29, 2009
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