Kobach proposes capping valuation hikes. Some say it may be unconstitutional
photo by: Associated Press
TOPEKA — Republican gubernatorial candidate Kris Kobach has proposed a major change in the state’s property tax laws that some experts say could only be done through a state constitutional amendment.
The plan calls for capping property appraisal increases at no more than 2 percent a year, regardless of how much the property might increase in actual fair market value.
Kobach says his plan is meant to provide “predictability and stability” for property tax payers, particularly for retirees and others on fixed incomes.
“Those individuals need to be able to plan out their retirement and have some knowledge that their home value is not going to be jacked up by 50 percent over a four- or five-year period, which is not unusual in some parts of the state,” Kobach said in a recent interview.
Property appraisals are the foundation of all property taxes in Kansas, and property taxes are a key source of revenue for all local governments and for public schools, because they determine how much tax each property owner in a jurisdiction owes each year. The higher the value of any given piece of property, the more tax the owner of that property owes.
Linda Terrill, a Johnson County attorney who has been practicing property tax law for about 40 years, said in an interview that she believes Kobach’s plan does raise constitutional issues.
That’s because, in 1986, Kansas voters approved an amendment requiring the state to have “a uniform and equal basis of valuation and rate of taxation of all property subject to taxation.”
By capping increases, she said, certain properties that appreciate in value over time would no longer be valued or taxed at their actual fair market value, while others would be, something she said could cause long-term problems for local governments and some taxpayers.
“The more you move away from uniform and equal, the more difficult it is to fix it when you finally realize it wasn’t a good idea.”
The 1986 amendment was accompanied by a statewide reappraisal of all property. The amendment also divided property into several different classifications — primarily residential, commercial and agricultural — and provided for different assessment rates for each class of property.
Terrill said the amendment came about because, in the 1980s, the state’s entire property tax system was “out of whack” due to the fact that many counties had not reappraised property for decades and their valuations were woefully outdated.
At the time, she said, all property was supposed to be taxed based on 30 percent of its value, but in reality, some properties, particularly residential ones, were only being taxed at 6 to 8 percent of their value.
There were also discrepancies between new homes and older homes where owners had lived for years. That’s because people who had lived in one home for many years were being taxed based on outdated values, while someone who bought a new home would be taxed at the property’s sale price at that time.
“I think they call that the ‘welcome stranger’ legislation,” Terrill said. “You bought a house at a certain price and your taxes are going to go up.”
Kobach said he hasn’t decided whether his plan should cap appraisal increases for all time, or whether the state should allow the sale of a property to trigger a new appraisal, saying that’s a decision he would leave to the Legislature.
Either way, though, that could have a big impact in places like Lawrence, where homes sell relatively quickly and actual sale prices of homes often rise by much more than 2 percent a year.
Kobach, however, said he thinks those kinds of distortions would work themselves out over time.
“Especially when you consider that, typically, real estate goes in cycles,” he said. “So there would inevitably be a period where prices are stable or dropping, and during that period, the property could be appraised to catch up to market value.”
But even within the category of existing property, Terrill said appraisal caps can still have a distorting effect.
“Let’s say you take three commercial buildings, and one is 50 percent overvalued, one is right and one is 30 percent undervalued, and it’s been sneaking without anybody noticing them,” she said.
With a cap, she said, the property that is underappraised may never catch up to fair market value, while the owner of an overappraised property may continue to pay higher taxes for years to come.
Kobach, however, said he believes that would also even itself out over time.
“If property is truly below market value, if that’s the case, the appraiser presumably knows that and would be able to catch up to market value by increasing it by 2 percent every year,” he said. “Meanwhile, the property that is overappraised should be pulled down in appraised value, although, unfortunately, that doesn’t happen very often. So you would eventually see the property come to parity within a few years.”
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This is the first piece in a series on the Kansas gubernatorial candidates’ positions on issues. Read others:
What is unknown, though, is whether the Kansas Supreme Court would allow any kind of variation from the fair market standard for any extended period of time.
In 2016, the court struck down a law that the Legislature had enacted two years earlier that imposed a similar kind of cap for people who successfully protested their appraisal values and had the values lowered.
That law said once such a property owner won his or her appeal, the county appraiser could not then increase that property’s valuation for the next two years.
The court said that law violated the “uniform and equal” requirement in the Kansas Constitution because it meant certain properties were not being appraised at fair market value each year, while others were.
Kobach, however, said he doesn’t believe that case would apply to his proposal.
“Because this would be uniform and equal for all property categories and all properties within each category,” he said. “Absolutely, the Constitution does require uniform and equal treatment. I would argue this would be outside the scope of the prior precedent.”
Kobach has also called for limiting reappraisals to once every two or three years, instead of doing them every year as the state now requires. That, he said, would provide even more stability for property owners.
On that, Terrill said she agrees, saying that would effectively amount to the same thing as an artificial cap on increases.
“Everybody would be capped for two years in the entire state, and you could appeal and get your value corrected if it’s wrong,” she said. “I think it’s a better idea, and it saves counties a ton of money, because it’s very expensive to appraise every year.”