COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. No.:         3244-01

Bill No.:          HB 1207

Subject:           Property, Real and Personal; State Tax Commission; Taxation and Revenue - Property

Type:              Original

Date:               February 11, 2010

Bill Summary:            Would classify sawmills and planing mills as agricultural and horticultural property instead of commercial property for property taxation purposes.

FISCAL SUMMARY

Numbers within parentheses: ( ) indicate costs or losses.

This fiscal note contains 6 pages.

☐ Estimated Total Net Effect on All funds expected to exceed $100,000 savings or (cost).

☐ Estimated Net Effect on General Revenue Fund expected to exceed $100,000 (cost).

FISCAL ANALYSIS

ASSUMPTION

Officials from the Office of the State Auditor, the Department of Conservation, the Department of Elementary and Secondary Education, the Department of Revenue, the State Tax Commission, Linn State Technical College, the Metropolitan Community Colleges, DeKalb County, St. Louis County, the City of Centralia, the Parkway School District, and the Special School District of St. Louis County assume this proposal would have no fiscal impact on their organizations.

Officials from the Department of Elementary and Secondary Education and the State Tax Commission assume this proposal would result in revenue reductions for local governments.

Officials from the Office of Administration, Division of Budget and Planning (BAP) assumed there would be no added cost to their organization as a result of this proposal. The proposal would reclassify sawmills and planing mills as agricultural property instead of commercial property, and lower the assessed valuation on those properties from 32% to 12% of total value.

According the US Census Bureau, County Business Patterns, there were 215 sawmills in Missouri in 2007, a total of 0.14% of all firms. BAP has no data on the value of sawmill properties. However, BAP notes that sawmills are a very small percentage of firms, and therefore of commercial property in Missouri. If levies remain unchanged, this proposal may lower local government and Blind Pension Fund revenues.

Officials from the Department of Conservation (MDC) provided information regarding sawmills in response a similar proposal in the previous session (HB 287, LR 0860-01, 2009) which indicated there are approximately 450 sawmills in Missouri with an aggregate value of $327 million.

ASSUMPTION (continued)

Oversight is not able to determine the current appraised or assessed valuation for these properties and will use the information provided by MDC. Oversight has calculated an estimated maximum fiscal impact for the implementation of this proposal as follows.

            A.        Assessed valuation of sawmills at current 32% ratio -

                        ($327,000,000 x .32) = $104,640,000.

            B.        Assessed valuation of sawmills at proposed 12% ratio -

                        ($327,000,000 x .12) = $39,240,000.

            C.        Reduction of assessed valuation -

                        ($104,640,000 - $39,240,000) = $65,400,000.

            D.        Reduction of local government tax revenue -

                        ($65,400,000/$100 x $6.16 per $100 average tax rate) = $4,028,600.

Oversight notes that the maximum calculated impact would occur only if local governments are unable to increase their tax levy rate to recover the loss of assessed valuation associated with the reclassification of these properties from commercial to agricultural. If local governments are able to increase their tax levy rate to recover those losses, this proposal would likely shift the property tax burden from sawmill owners to other commercial property owners, and to agricultural and residential property owners.

Oversight has reviewed the available information as to current levies and maximum authorized levies, and has noted that certain local governments would have the ability to increase their levy rates beyond their current level. Oversight does not have any information as to which local governments would have sawmills or planing mills, nor do we have the information that would be required to determine which local governments would be able to increase their levy rates to recover the loss of assessed valuation associated with the change in classification of the sawmills and planing mills. For the purposes of this fiscal note, Oversight will indicate a range of fiscal impact from $0 to $4,028,600.

Oversight assumes that revenue for the Blind Pension Fund would be reduced by about one-half of one percent of the reduction in local government revenues, or a range from $0 to $20,143.

ASSUMPTION (continued)

Oversight assumes this proposal would become effective in August 2010 after the completion of 2010 assessments and would become effective for 2011 assessments, resulting in a loss of revenue starting with FY 2012.

FISCAL IMPACT - Small Business

This proposal would have a direct fiscal impact to small businesses which operate sawmills and/or planing mills..

FISCAL DESCRIPTION

This proposal would change the assessment classification of sawmills and planing mills from commercial to agricultural, and reduce the assessed value of those properties from thirty-two percent of appraised value to twelve percent of appraised value.

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

Office of the State Auditor

Office of Administration

            Division of Budget and Planning

Department of Conservation

Department of Elementary and Secondary Education

Department of Revenue

State Tax Commission

Linn State Technical College

Metropolitan Community Colleges

DeKalb County

St. Louis County

City of Centralia

Parkway School District

Special School District of St. Louis County

                                                                                                Mickey Wilson, CPA

                                                                                                Director

                                                                                                February 11, 2010