Promised property-tax break in Olathe may vanish

A delay this summer in removing the new Olathe West High School from the Johnson County tax rolls — typically a formality for publicly owned property — is likely to increase tax bills throughout the Olathe area.

Last week, the Johnson County Clerk’s office released the property valuation and tax rates for cities, school boards, and other taxing jurisdictions throughout the county.

Some local officials were surprised that the final property valuation for their jurisdiction was significantly lower than the preliminary figure they received this summer and which they used to build their budgets for 2018.

In many cases, that means property-tax bills that are now posted online and scheduled to be mailed out this month are higher than expected to make up for the difference in revenue.

For example, members of the Olathe City Council on Tuesday expressed frustration that, after heralding in August that their annual budget would allow a quarter-mill reduction in the city’s property tax rate to 24.458 mills, the tax rate will actually be 24.700 mills, about the same as it was this year.

“It makes us look foolish,” Councilman Jim Randall said. “If we can’t fix this, it makes us look foolish, and it wasn’t our fault.”

The effect is even larger for the Olathe School District, which already expected its tax rate to go up by three mills next year. The final number released last week means the tax rate will increase an additional 0.4 mills to 71.174 mills. A mill is $1 of tax for every $1,000 of taxable value.

So what happened? When the county sent local jurisdictions a preliminary total of their taxable property on June 1, it included $16 million in assessed value for Olathe West High School.

As a publicly owned building, the school is tax-exempt, but state law still requires the school district to apply for an exemption and for the state to approve it.

In this case, the district applied for the exemption in March but it wasn’t approved at the state level until after the June 1 values went out. Once the exemption was approved, and the school’s value was removed, the jurisdictions were basing their annual spending plans on an inflated revenue projection.

County officials said they sent an email to the local governments on June 6, noting the total value of property whose owners were either appealing their valuation or asking for an exemption. It included the $16 million for the school.

City spokesman Tim Danneberg said the city did receive the email and saw the amount, but that there was no indication it was for a publicly owned building and that the full $16 million was likely to be removed. There are typically requests for tax appeals and exemptions each year, but they normally shave only a few million off the tax rolls at most.

“Clearly, there was a miscommunication,” Danneberg said. “If we had known that was the school, we would have factored that into our (budget) forecasting.”

John Hutchison, the school district’s chief financial and operations officer, said the district similarly was taken by surprise because, after filing for an exemption in March, they didn’t think their school was still on the tax rolls three months later.

“We didn’t change our process for filing an exemption,” Hutchison said.

Mayor Michael Copeland said that if the council hadn’t adjusted its budget revenues to provide a smaller mill rate, residents could have actually faced a tax increase next year.

“We need to get this fixed,” he said. “It’s unacceptable.”

City Manager Michael Wilkes said staff is looking at the city’s options.

“We’re going to see if we can figure out a way to solve it and do what the council intended to do (with a tax cut), and we’re going to take steps to make sure something like this doesn’t get by us in the future,” Wilkes said.

Danneberg said in a statement Thursday that the city is working with the county on a possible resolution and hopes “to have a clearer answer” soon, but that he’s “feeling more confident that we will be able to resolve the issue and meet the Council’s intent of providing a mill levy reduction.”

County spokeswoman Sharon Watson said in an email that the change did not affect the county government’s own millage rate because after receiving the school district’s application for an exemption the county had factored it into its revenue expectations.

Watson said the county would support asking state officials to change the exemption process so that county appraisers themselves can grant property exemptions for government entities rather than going through the same process as private property.

“The delay in exemption approvals from the state causes challenges for governmental entities and that’s what happened in this situation,” she said.

This story was originally published November 8, 2017 at 11:51 PM with the headline "Promised property-tax break in Olathe may vanish."