Judge promises quick decision on challenge to Missouri property tax caps

Taxing jurisdictions need a ruling as well, Limbaugh was told, because local boards must hold public hearings in August to set tax rates as the next step in preparing this year’s property tax notices.

The property tax provisions being challenged in the lawsuit before Limbaugh were included in the bill lawmakers passed last year diverting state tax revenue to support stadium construction for the Kansas City Chiefs and Royals. 

The property tax provisions were a demand from rural lawmakers reluctant to provide more than $1 billion in tax support for professional sports teams.

In a late night session, the state Senate added provisions directing 97 of Missouri’s 114 counties to place questions on their April ballots asking voters if they wanted to limit increases in property tax bills. 

For 22 of those counties, the question was whether they wanted to freeze residential tax bills, with exceptions for new voter-approved taxes and debt service levies. For the other 75, the question was whether to enact a cap, set at 5% or the rate of inflation, whichever is greater.

The lawsuit heard Wednesday was filed by a taxpayer from St. Louis, which was excluded from the law, one from Warren County, which was in the zero growth group, and seven taxing districts. The lawsuit was joined by county commissions from 43 counties.

The lawsuit contends the portions of the bill containing the property tax caps and freezes violate the Missouri Constitution. The counties designated for a cap or freeze are described based on population and each provision is a special local law, the plaintiffs argued Wednesday.

There is no rational basis for why any county is given the designation it received, attorney Natalie Ann Hoernschemeyer said.

“There is absolutely no pattern,” she said. “It is absolutely random.”

Attorneys for the state, defending the law, said the designations mostly put counties where assessment updates are needed into the category that gives the most protection.

The Missouri State Tax Commission grades each county on how close its residential and commercial property assessments are to market value. It pressures counties that lag into updating the values, which can bring unwelcome and surprising increases in property tax bills.

Not every county designation is perfect and deciding if there is a rational basis for the designations in the bill does not require perfection, said Sean McDowell, assistant attorney general. 

“The idea that we are just advocating for the policy interests of the General Assembly is wrong,” he said.

If Limbaugh rules in favor of the plaintiffs, it will only impact the enforceability of the property tax provisions of the stadium bill. While the Chiefs have decided to move to Kansas, the Royals are pressing forward with plans for a new ballpark in Missouri.

In a separate case challenging the constitutionality of the stadium subsidies, Limbaugh ruled in January that state Sen. Mike Moon of Ash Grove, state Rep. Bryant Wolfin of Ste. Genevieve and conservative activist Ron Calzone did not have standing — the legal right to sue.

They argued that the stadium bill was an unconstitutional grant of state resources to a private entity and improperly combined widely different and unrelated subjects.

Calzone, Moon, and Wolfin are appealing the dismissal. The Missouri Supreme Court will hear arguments in the appeal on Sept. 1.

Not every county directed to hold an election did so, court filings in the case show.

Of the 97 counties listed in the legislation:

• One, Texas County, placed it on the November ballot and it passed.
• 23 counties directed to hold a vote under the legislation did not do so.
• 61 counties enacted the cap in April, 14 designated for tax bill freezes and 47 with the 5% cap.
• 12 counties voted against the ballot measure, five designated for a tax freeze and seven that would have had the 5% cap.

Much of Wednesday’s arguments focused on the fine details of state tax law and how taxes are governed under the Constitution. 

The state legislature is not supposed to enact any laws granting homestead exemptions from property taxes without making restitution to local taxing districts for any lost revenue. In court, the attorneys argued over whether that meant future revenue that would not be collected as a result of the law or whether it meant the taxing districts had to show an actual decline.

The law granting the freeze or cap does not have any provision regarding restitution.

The arguments also focused on whether the legislation created an impermissible new subclassification of property — owner-occupied residences — in the law.

The Constitution promises uniformity of taxation for all property within a taxing district, said Jim Layton, attorney for the taxing districts. 

“This is actually the simplest legal analysis on which to resolve this case,” he said.

The bill did not create a new subclass of property, McDowell said. The Constitution promises uniformity of tax rates on particular types of property and the bill does not change tax rates, he said.

The counties that joined the lawsuit object to being forced to bear the cost of the April election, attorney Travis Elliott told Limbaugh. That is a violation of the Hancock Amendment’s ban on legislation that imposes new duties on local governments without providing the funding necessary to perform the function, he said.

And, he said, the counties agree that it violates the ban on special or local laws. Each provision uses the general phrase “any county” before using a description based on population characteristics that limit the actual application to a single county.

“That’s not a general law,” Elliott said. “That’s county-specific legislation wearing a population classification costume.”

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