Senior citizen property tax relief program.

08LSO-0186.L1

FISCAL NOTE

This bill contains an appropriation of $15,500,000 from the GENERAL FUND to the State Treasurer.

	FY 2009	FY 2010	FY 2011
NON-ADMINISTRATIVE IMPACT
Anticipated Revenue Decrease:
AD VALOREM TAX	0	0	15,470,000

Source of revenue decrease:

Property tax exemption of 50% of the first $200,000 of fair market value of residential property for owners 65 years of age or older

Assumptions:

The above estimate assumes there will be 27,940 residential properties eligible for deductions by individuals 65 years of age or older that have lived in their current residence for at least 10 years in 2010. This number has been increasing about 2.25% per year since 2006, according to the Economic Analysis Division.

Eligible property would receive a maximum tax credit of $638 ($200,000 x 50% = $100,000 market value, $100,000 x 9.5% level of assessment = $9,500 assessed value, $9,500 x .067135 = $638 (average state wide mill levy in 2007 was 67.135 mills).

The median home value in the state is $146,522, so it is assumed that less than one-half of the residences that qualify for an exemption will receive the full $638 credit. The median house will receive a tax deduction of $467 ($146,522 x .5 = $73,261 x 9.5 = $6,960 (assessed value) x .067135 (67.135 average mill levy) = $467).

Estimating that 50% of residences will receive $467 and 50% of the residences receive a full $638, the total cost of the program for the 2010 tax year would be $15,470,000. ($638 x 14,000 = $8,932,000,

$467 x 14,000 = $6,538,000. $8,932,000 + $6,538,000 = $15,470,000)

Without knowing the specific value of homes owned by individuals 65 years of age and older who have lived in their homes for 10 or more years, it is impossible to estimate the exact amount of funds needed to fund this program until after the application process.

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This bill is effective January 1, 2010, but only if the electors adopt a constitutional amendment prior to December 31, 2009 authorizing a homeowner's property tax credit exemption for senior citizens. This effective date will result in a decrease in property tax revenue beginning in FY 2011.

Local governments are held harmless in FY 2011 by the appropriation in the bill. The estimated revenue decrease of $15,470,000 is offset by the $15.5 million appropriation, bringing the net impact to local governments to zero. The Governor shall include in his state budget submitted for the 2011 legislative session and thereafter a recommendation for any additional appropriation necessary to fully reimburse local governments for the full exemption provided by this exemption.

Prepared by:   Dean Temte, LSO    Phone: 777-7881

(Information provided by Marvin Applequist, Dept. of Rev. 777-5235:

Wenlin Liu, Economic Analysis Division; 777-7504)

NOTICE-AGENCY ESTIMATE OF ADMINISTRATIVE IMPACT REQUESTED

This bill has administrative impact that appears to increase (or decrease) duties or responsibilities of one or more state agencies and may impact agency spending or staffing requirements. As introduced, the bill does not modify any state agency budget or current personnel authorizations.

The following state agencies will be asked to provide their estimate of the administrative fiscal impact prior to the first committee meeting held to consider the bill:

Department of Revenue

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