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Financial and legal questions surround senior property tax relief

Rebecca Smith
Boone County is the 12th Missouri county to pass a senior property tax freeze.

Boone County has agreed to freeze property taxes for all homeowners 62 and older who apply. The application process begins July 1.

The goal is to ease the burden on community members who often live on a fixed income as home values in the county continue to rise.

Counties were given the opportunity to freeze senior’s property taxes in a 2023 state law. Boone County is the 12th county to pass the freeze, said Boone County Presiding Commissioner Kip Kendrick.

About 85% of local property taxes go to public schools with the rest supporting fire departments, libraries and bonds, said Boone County Assessor Kenny Mohr.

Schools are reliant on local funding. A 2021 report from former State Auditor Nicole Galloway noted that public schools get 32% of their funding from the state, ranking 49th.

Beneath the tax freeze’s banal surface is a web of complex details and legal questions. The state has never empowered counties to carve out one demographic of the tax base, said Nathan Elwood, a legislative librarian whose role is to research past legislation for senators.

Missouri has a variety of tax credits to incentivize specific things but never has the legislature given one local taxing authority — counties in this case — the ability to freeze one group’s taxes.

Within Boone County, there are over two dozen taxing entities which can each set their own rates in property tax collections. For example, Columbia Public Schools has a rate of $5.67 per $100 of property value. At any time, the district can go to the voters and ask for a higher rate.

The senior tax freeze law allows the Boone County Commission to block the rest of the local taxing entities from certain revenues without consultation.

Unknown financial impact

Various taxing authorities in the county provided estimates of the revenue they could lose under the tax freeze before the question was put to voters in April. However, it’s difficult to determine the impact until November, once qualifying seniors have applied, said Boone County Collector Brian McCollum.

Various Census Bureau statistics give some hints to the impact, such as:

  • Twenty percent of Boone County residents are over the age of 60.
  • The median property tax bill in the county is $1,996, according to a 2022 estimate.
  • Nationally, about 80% of people over the age of 65 are homeowners.

It’s unclear whether the average person over 62 lives in a home above or below the median value in Boone County.
Homes owned by seniors will continue to be assessed like every other home, but every year when property tax bills go out, a credit will appear on the bill. That credit will be for the difference between the new tax amount and the frozen tax amount granted to seniors.

For example, if a property tax bill is $2,000 in 2024, but the home is reassessed the next year and the bill comes at $2,100, the senior will continue to pay $2,000. But it would still show up on the bill as $2,100 with a $100 credit, so the homeowner will only pay $2,000.

Seniors can expect to pay the same amount in annual property taxes until they don’t own the home anymore. However, improvements made to a house will raise the assessment and the bill.

The financial impact of the property tax freeze on Boone County is unknown. Mohr said the county does not keep demographic information on Boone County homeowners.

The tax freeze is available only to those who apply, so there will be no way of knowing what percentage of seniors sign up. The impacts won’t be felt until 2026, as homes are only assessed on a wide scale every two years.

Last year, the assessor increased the value of the average Boone County home by 8%. It’s too far out to know how much home values will go up in the next 18 months.

Columbia Public Schools’ Chief Financial Officer Heather McArthur said in an email to the county commission last year, “Absent specific data on the age range of each Boone County property owner and the historic value attributed to them, it is impossible for us to calculate the exact impact.”

Kendrick said that community demand, rising assessments and the limited income of seniors all factored into passing the policy.

“There seems to be a lot of interest across Boone County in implementing a policy like this,” he said in an interview. “We recognize seniors are typically retired and in a fixed income situation. Property values and reassessments have been higher.”

Home values in Columbia have increased about 8% a year for the last five years, according to the Columbia Board of Realtors.

Legal troubles could be coming

While the legislature passed the freeze in 2023, few counties implemented it over issues with how the law was written. Roger Fischer, the Western District commissioner of Callaway County, said in a phone interview, “A sixth grader could have written (the law) better.”

Those complaints led the legislature to pass a new law this session to ease counties legal concerns. For example, the 2023 bill specified that everyone eligible for Social Security could apply for the tax freeze. That was deemed problematic because Social Security requirements are complex, which could allow younger people to access the freeze and leave some seniors out. For example, most teachers don’t receive Social Security, but under the 2023 law they would have likely been left out.

The 2024 bill eased some of those concerns and is awaiting the governor’s signature. Once that is signed, many counties are expected to pass the freeze. Fischer said Callaway County is likely to do that.

The 2024 bill was also passed without a provision allowing counties to set limits on the freeze. Democrats offered an amendment that would have allowed counties to exempt high-value properties to prevent wealthy people from getting the tax break.

“I’m not against cutting taxes,” Senate Minority Leader John Rizzo, D-Independence, said on the Senate floor when discussing the bill. “I’m not against this bill, I think it’s a good program, I just wish it was targeted to give relief to people who really need it.”

Based on the 2023 legislation, St. Louis County passed a freeze for all seniors who own a home under $500,000. Now they will likely have to adjust that policy to comply with the law.

According to Steve Hobbs, the executive director of Missouri Association of Counties, the law is legally problematic. There are a few avenues of legal action.

“The Missouri Constitution is pretty clear that taxes shall be applied fairly and equitably,” Hobbs said. He’s referring to Article 10, Section 3, of the Missouri Constitution, which reads in part, “Taxes may be levied and collected for public purposes only, and shall be uniform upon the same class or subclass of subjects within the territorial limits of the authority levying the tax.”

Former Missouri Solicitor General Jim Layton said he thinks the law could potentially be challenged under that provision. Counties are essentially putting seniors into a class of taxation separate from everybody else, which could be legally challengeable, said Layton. Layton has argued dozens of cases on the state’s behalf before the state Supreme Court.

There is also a possibility that the policy could be unconstitutional as the state would be affecting the finances of local taxing authorities without a supplement to replace the funding. Layton doesn’t see this challenge as a strong possibility, because it’s optional for counties to pass a policy freezing property taxes for seniors. Therefore, the state isn’t forcing counties to forgo revenue without replacing it, which would be legally problematic, he said.

The state legislature has the power to add, cut or adjust state law, but the Missouri Constitution supersedes state statute.

If it turns out this freeze is unconstitutional, it will be counties that are left with the costs of litigation, not the state.

Many counties don’t have legal departments to independently study the legality of a law and would have to hire outside counsel to defend themselves, according to Hobbs. Even if a county were to win a lawsuit over the policy, it’s unlikely they would get their legal expenses back from whoever sues them, Layton said.

Hobbs said that some counties support the idea of freezing taxes for seniors but many don’t see the demand for it. On the whole, the association is against the law and is planning on going back to the legislature next session for more adjustments to the bill.

Mohr, who’s in charge of assessing the value of property in the county, isn’t thrilled about the policy but feels giving seniors tax relief is important.

“Is this the correct measure? I don’t know,” he said. “It’s the measure that we’ve got to run with, because that’s what the law is. I’m all for any kind of relief for senior citizens.”

Other tax relief for seniors

A statewide property tax credit, known as the circuit breaker, already exists for seniors but hasn’t been updated to keep up with inflation.

The credit exists for people over 65 or disabled veterans who make less than $29,200 and are renting. Married homeowners can access the credit with an income under $34,000. Applicants who qualify receive a property tax credit of up to $1,100 or $750 toward rent.

Seniors who are eligible for the circuit breaker can take advantage of that program and the freeze.

In fiscal year 2023, the state issued $73 million in circuit breaker tax credits. In fiscal year 2015, $105 million was distributed. That’s a 45% reduction in disbursements over that eight-year period after adjusting for inflation.

The circuit breaker hasn’t been updated since 2008. Meanwhile, inflationary adjustments to social security — which many seniors rely on — have gone up 32% between 2008 and 2024. Seniors who have had their benefits go up because of cost-of-living adjustments are likely beyond the $34,000 limit.

Adjusting the circuit breaker would have avoided the tax freeze’s potential legal troubles. Payouts from the circuit breaker are made by the state, which would have no effect on local subdivisions, like school districts. As of February, the average Social Security payment nationally is $22,344 a year.

Several lawmakers from both sides of the aisle have proposed adjustments to the circuit breaker.

The Columbia Missourian is a community news organization managed by professional editors and staffed by Missouri School of Journalism students who do the reporting, design, copy editing, information graphics, photography and multimedia.
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