What seems like a small change in wording in a Kansas House bill could mean big changes to county revenues, as well as local taxes.

What seems like a small change in wording in a Kansas House bill could mean big changes to county revenues, as well as local taxes.

HB 2501 and SB 317 each serve the same function, essentially calling for the removal of trade fixtures from the assessed valuation of personal property. According to the bills, trade fixtures means “those articles or items used in a trade or business, whether or not placed upon and permanently affixed to real estate. Trade fixtures include commercial and industrial machinery and equipment placed upon or permanently attached to owner-occupied or leased real estate and directly used in conducting trade, business, commercial, industrial, manufacturing or processing activities.”

According to Crawford County Appraiser Mike Montgomery, that definition could be applied broadly.

Montgomery told county commissioners last week that it could include things like walk-in coolers for grocery stores, mini-marts and more. He also said bank vaults, pneumatic tubes and drive-up windows could be considered trade fixtures, even going so far as to suggest grain bins on a farm would be considered a trade fixture, marking them immune to personal property taxes if these bills were to pass.

While that would be a good thing for the homeowner on the surface, Montgomery sees a drastic effect of these bills. He said that if these are not on the value of the property, it means a lower tax valuation for the county, which narrows the tax base and lowers revenues for an already cash-strapped county government.

“We can’t have that anymore,” he said. “We know that will be raising the burden on those left. It would cause a shift in taxes to every other class of real estate.”

He’s not the only one concerned. Kansas Budget Director Steven Anderson wrote a note to the House Committee on Taxation, who is considering HB 2501, and noted some of the effects of the bill.

“Passage of HB 2501 has the potential to decrease property tax revenues by eliminating certain property tax assessments on trade fixtures. Any local government that levies a property tax would receive less revenue, and revenue would also decrease to the two state building funds, the Educational Building Fund and the State Institutions Building Fund. The bill would also have an effect on state expenditures for aid to school districts,” Anderson’s note said.

Anderson’s letter noted that the state does not keep data on what would or would not be considered a trade fixture, so a precise estimate of the effect cannot be estimated.

Crawford County commissioners don’t seem to care about exactly how big the effect could be. Commissioner Linda Grilz said Friday that “if it blows our assessed valuation by 1 or 2 percent, we’re against it.”
According to the city of Coffeyville’s website, both bills stem from an issue in nearby Montgomery County.

County officials there considered most of the Coffeyville Resources Nitrogen Fertilizer plant to be real property and assessed it at market value. The plant’s owners considered most of the property to be machinery and equipment, stating that this made it exempt from taxes. The Kansas Court of Tax Appeals ruled in favor of Montgomery County, which prompted the Chamber of Commerce and the business community to push for what became HB 2501 and SB 317.

Grilz sees this as a typical overreaction.

“It’s from one instance in Montgomery County. Instead of dealing with the one instance, the Legislature wants to make a ruling across the board instead of just dealing with the one instance,” Grilz said. “It’s been mentioned at two legislative breakfasts. I’m sorry for what they’re going through, but it’s not my problem. This change is something that could affect pretty much everyone to deal with one instance.”

The ramifications, she noted, which could lower the valuation of some homes and properties, may just cause worse effects for the county.

“As a taxpayer, I’d think this is good, because I don’t have to pay as much in taxes,” Grilz said. “But as a commissioner, that’s our county income. If income is depleted by 10 percent, you have to make that up somewhere, or else you cut service. I wish people would call their representatives, and say that they don’t want this, because when it comes down to it, everyone will just pay more.”

Andrew Nash can be reached at andrew.nash@morningsun.net or by calling 231-2600 ext. 140.