FISCAL NOTE
Date Requested: January 26, 2016
Time Requested: 10:06 AM |
| Agency: |
Tax Department, State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1025 |
Introduced |
|
SJR1 |
|---|
| CBD Subject: |
Constitutional Amendments |
|---|
|
FUND(S):
General Revenue Fund, local governments
Sources of Revenue:
General Fund,Other Fund local governments
Legislation creates:
Neither Program nor Fund
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The stated purpose of this resolution is to submit the proposed "County Economic Development Amendment" to the Constitution of the State to the people of the state for ratification or rejection at the general election of 2016.
The proposed reallocation of property taxes under this proposed resolution appears to be limited only to the regular levy taxes on “new” manufacturing properties that might qualify for the certified capital addition preferences. In order for the regular levy property tax to be diverted, the “new” manufacturing facility or addition must cost more than $50 million. Based on past history, the number of new manufacturing additions in excess of $50 million tends to be very limited in number and also tends to be located in just a few industrial counties across the State. In addition, such properties would qualify for salvage valuation treatment for a minimum of ten years under the provisions of the certified capital addition tax preference program. Salvage valuation is five percent of original cost. The issuance of bonds backed by a limited number of industrial properties would carry above average risk.
Current regular levy rates for Class III properties vary from a low of 1.176 percent in Marshall County to a high of 1.358 percent in counties with maximum allowable tax rates for county commissions. For every $100 million of qualified property, the amount of proposed property tax diversion would initially range between $35,280 per year and $40,740. The yield would rise as the tax preferences end and are replaced with normal valuations on the depreciated properties. If this proposed program would have been in place over the past decade, the maximum current diversion would be no higher than $6 million per year across the State.
Additional administrative costs to the State Tax Department would be minimal. Additional costs to local governments cannot be determined.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2016
Increase/Decrease
(use"-") |
2017
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
0 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
The proposed reallocation of property taxes under this proposed resolution appears to be limited only to the regular levy taxes on “new” manufacturing properties that might qualify for the certified capital addition preferences. In order for the regular levy property tax to be diverted, the “new” manufacturing facility or addition must cost more than $50 million. Based on past history, the number of new manufacturing additions in excess of $50 million tends to be very limited in number and also tends to be located in just a few industrial counties across the State. In addition, such properties would qualify for salvage valuation treatment for a minimum of ten years under the provisions of the certified capital addition tax preference program. Salvage valuation is five percent of original cost. The issuance of bonds backed by a limited number of industrial properties would carry above average risk.
Current regular levy rates for Class III properties vary from a low of 1.176 percent in Marshall County to a high of 1.358 percent in counties with maximum allowable tax rates for county commissions. For every $100 million of qualified property, the amount of proposed property tax diversion would initially range between $35,280 per year and $40,740. The yield would rise as the tax preferences end and are replaced with normal valuations on the depreciated properties. If this proposed program would have been in place over the past decade, the maximum current diversion would be no higher than $6 million per year across the State.
Additional administrative costs to the State Tax Department would be minimal. Additional costs to local governments cannot be determined.
Memorandum
The stated purpose of this resolution is to submit the proposed "County Economic Development Amendment" to the Constitution of the State to the people of the state for ratification or rejection at the general election of 2016.
It is not clear why a Constitutional amendment would be needed. Based on Article X, Section 6a of the West Virginia Constitution, the Legislature has the authority to pass legislation to accomplish the goals of the amendment.
The resolution is also vague. It does not define manufacturing facilities or provide detail about the issuing of infrastructure bonds. The resolution also does not address the special method for appraising qualified additions to manufacturing facilities under W. Va. Code §11-6F-1.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov