Kansas counties brace for loss of mortgage fees

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TOPEKA, Kan. (AP) - Gov. Sam Brownback said Thursday that Kansas is helping home buyers and its economy by phasing out a mortgage registration fee, but the state’s counties are bracing for revenue losses.

Bankers and real estate agents pushed for an end to the fee paid by lenders to register mortgages with the state’s 105 counties, saying it’s an unfair tax that gets passed onto borrowers. But county officials contend they’ll just be forced to consider raising property taxes to maintain existing services.

The state is increasing other fees counties receive for handling mortgage documents, but the Legislature’s research staff projects counties still will lose $53 million over five years under the changes approved by lawmakers earlier this month. In July, the state also will change how it values property at cement-manufacturing plants for tax purposes, settling a southeast Kansas dispute in favor of an Overland Park firm.

All of the changes were part of a bill Brownback signed Wednesday.

“It puts us in a better position to grow as a state,” Brownback said. “A home is the biggest thing people buy, and this helps a little.”

The state currently imposes a fee of $2.60 for every $1,000 borrowed under a mortgage, and the bulk goes to counties. The charge is in addition to fees paid by lenders to file mortgage papers with counties, and all those costs typically are passed along to consumers.

Luke Bell, a lobbyist for the Kansas Association of Realtors, said the changes will help home sales “on the margins,” but will be a bigger boon to businesses because they borrow money more often and in greater amounts. Bell also called the fee a “discriminatory tax” because wealthy Kansas residents who can pay cash for their homes or business property don’t have to pay it.

Local officials said many counties face either reducing services or raising property taxes to offset the lost revenues. Several predicted the higher document fees the state is imposing won’t prove as lucrative as expected because lenders will shorten the records they submit.

Johnson County Manager Hannes Zacharias said the Legislature’s projections also don’t anticipate an increase in home sales as the economy improves. Johnson County projects it will lose $49 million over five years - almost $20 million more than the Legislature’s staff predicts.

The cement-plant change arose from a tax dispute between Neosho County in southeast Kansas and Ash Grove Cement Co., though it applies to all such facilities. Ash Grove is based in Overland Park but has a 140-employee plant in Chanute.

The change increases the number of fixtures at cement plants falling under the state’s property tax exemption for business machinery and equipment.

Ash Grove estimates its Neosho County property taxes will drop $4 million annually. Chairman and CEO Charles T. Sunderland said existing taxes drive up the cost of cement and inflate expenses on public and private construction projects.

But Neosho County Appraiser David Thornton noted that the Chanute plant, appraised in 2013 at nearly $169 million, represents 27 percent of the county’s total property wealth. He said the county faces “major erosion” of its revenue-raising abilities, which could shift more of the tax burden onto homeowners and others.

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