FISCAL NOTE

Date Requested: March 06, 2017
Time Requested: 10:28 AM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
1503 Introduced SJR4
CBD Subject: Constitutional Amendments


FUND(S):

General Revenue Fund, local governments

Sources of Revenue:

General Fund,Other Fund local property tax

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 bill is to authorize the Legislature to, by general law, allocate a portion of ad valorem property taxes paid by owners of certain new manufacturing facilities and large capital additions to existing manufacturing facilities located in counties in which county commissions elect to fund infrastructure capital improvements using property taxes.
    
    The bill allows for the reallocation of property tax revenues to finance infrastructure capital improvement projects. There are thirteen approved projects in eight counties that meet the $50 million threshold. The estimated revenue impact of this bill would be $7.0 million per year if applied to projects that currently meeting the $50 million threshold. The first reallocation of funds would begin in Tax Year 2018, and the allocations would gradually increase to $7.0 million annually by Tax Year 2026, based on the current number of projects. The reallocation of $7.0 million would result in a loss in revenue of $3.7 million to the General Revenue Fund, $2.9 million to county commissions and $410,000 to county school boards. The distribution of estimated cost is based on information from taxes levied as reported in the FY2017 Classified Assessed Valuations Taxes Levied publication of the State Tax Department and the incorporation of the calculation of local property tax share within the State Aid to Schools Formula. The actual reallocations will probably be greater than this due to reallocations for future projects.
    
    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
2017
Increase/Decrease
(use"-")
2018
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 bill allows for the reallocation of property tax revenues to finance infrastructure capital improvement projects. There are thirteen approved projects in eight counties that meet the $50 million threshold. The estimated revenue impact of this bill would be $7.0 million per year if applied to projects that currently meeting the $50 million threshold. The first reallocation of funds would begin in Tax Year 2018, and the allocations would gradually increase to $7.0 million annually by Tax Year 2026, based on the current number of projects. The reallocation of $7.0 million would result in a loss in revenue of $3.7 million to the General Revenue Fund, $2.9 million to county commissions and $410,000 to county school boards. The distribution of estimated cost is based on information from taxes levied as reported in the FY2017 Classified Assessed Valuations Taxes Levied publication of the State Tax Department and the incorporation of the calculation of local property tax share within the State Aid to Schools Formula. The actual reallocations will probably be greater than this due to reallocations for future projects.
    
    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 bill is to authorize the Legislature to, by general law, allocate a portion of ad valorem property taxes paid by owners of certain new manufacturing facilities and large capital additions to existing manufacturing facilities located in counties in which county commissions elect to fund infrastructure capital improvements using property taxes.
    
    The resolution is vague. The resolution does not define manufacturing facilities. It also does not provide much detail about the issuing of infrastructure improvement bonds.
    
    The proposed resolution does not address the special method for appraising qualified capital additions to manufacturing facility under W.Va. Code §11-6F-1 et al.
    
    A number of the capital additions to manufacturing facilities whose property taxes are being diverted under this resolution would also fall under the definition a qualified capital addition to a manufacturing facility under W.Va. Code §11-6F-2(e). If those capital additions fall under that definition, those property taxes would be reduced to salvage value.
    
    Furthermore, the West Virginia Constitution already specifically provides for the use of property taxes to finance county economic development projects and to pay revenue bonds through tax increment financing.
    
    
    



    Person submitting Fiscal Note: Mark Muchow
    Email Address: kerri.r.petry@wv.gov