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Minutes for HB2142 - Committee on Taxation

Short Title

Providing for reimbursement of property taxes from county government for business shutdown or capacity limitation caused by the county.

Minutes Content for Tue, Feb 9, 2021

Chairperson Smith opened the hearing on HB2142.

Adam Siebers, Assistant Revisor provided an overview for HB2142 stating the bill provides that the owner of a building with a business on the premises would be entitled to submit an application to the county for reimbursement of the property taxes for the period of time the business was shut down or limited as ordered by the county government.(Attachment 1)

Chairperson Smith stated the Fiscal Note for HB2142 has no fiscal effect on tax revenues.

Proponents:

Ken Corbert, 54th District testified as a proponent for HB2142 stating when a business has been ordered to shut its doors or have their hours of operation or capacity reduced, the affected property owner may make application to the county commissioners of the county in which the property is located for a reimbursement of the property taxes levied based upon reduced hours of operation and reduced capacity, or business doors being shut down.  All businesses are essential and customers determine that not government.  (Attachment 2) 

Mr. Corbert stood for questions from Committee members.

Scott Schneider, Hinkle Law Firm testified on behalf of the Kansas Restaurant & Hospitality Association as a proponent for HB2142 stating this legislation is a recommendation of the Joint Economic Recovery Committee.  What this bill does comes from the fifth amendment of the US Constitution.  HB2142 would adjust the amount of property taxes paid if a unit of government shuts down the business and would proportionately adjust the obligation if the capacity was limited.  This bill would be applicable to all taxable years starting after December 31, 2019.  (Attachment 3)

Mr. Schneider stood for questions from Committee members.

Eric Stafford, Kansas Chamber testified as a proponent for HB2142 which establishes a process for businesses shut down during the pandemic to receive partial reimbursement on the property tax liability. Under the existing Kansas Emergency Management Act there is a right for businesses to be compensated under the quote from a formal press release issued on  December 31, 2020 from the Attorney General's office.  The Attorney General stated the lawsuit raises important public policy questions extending well beyond the individual case that would be better answered by the Legislature rather than the courts.  Mr. Stafford stated this is an important first step in the discussion of how to address this going forward for the businesses that have been impacted throughout the pandemic through ongoing restrictions.  (Attachment 4 )

Mr. Stafford stood for questions from Committee members.

John Arnold, manager and owner of several restaurants in Wichita testified via Webex as proponent for HB2142 stating the pandemic treated the industry so differently than others.  He noted some businesses were closed then severely restricted even when others were allowed to open.  (Attachment 5)

Mr. Arnold stood for questions from Committee members.  

Kevin Timmons, owner of Nick and Jakes Restaurants testified via Webex as a proponent for HB2142 stating the legislature should adjust property tax obligations when governments limit or seize a restaurant operation.  Every restaurant in Kansas was forced into difficult decisions last year and in the foreseeable future reduced revenues through lock downs and restrictions have forced us to make choices that were previously unthinkable,  such as do we pay property tax or do we pay payroll, do we pay property tax or vendors. He remarked restaurants along with others are not fighting for pre-pandemic profits but fighting for the survival of our businesses.(Attachment 6)

Mr. Timmons stood for questions from Committee members.

Opponents:

Jay Hall testified as an opponent via Webex for HB2142 stating the County Commissioners understand the impact on businesses during the pandemic.  Mr. Hall stated the Kansas Association of Counties have five major reasons they oppose the bill which is included in his testimony.  He noted under the CARES Act, counties were not allowed to distribute any of that money in the form of tax refunds or for businesses to use for tax payments.  Under the law, counties are not allowed to pay themselves with funds from the CARES Act; therefore, this is one of the reasons you do not see any relief being sent to local businesses in the form of property tax refunds and rebates.  Mr. Hall stated counties, while they were not allowed to grant refunds and rebates under the CARES Act, did distribute about $57.8 million to small businesses and non-profits through the SPARK Committee that distributed the CARES fund to businesses who needed help due to shutdowns.  (Attachment 7)

Mr. Hall stood for questions from Committee members.

Greg McKinley, Riley County Commissioner testified as an opponent via Webex for HB2142  stated the basic validity of the bill is the property owner did not get value from their property tax.  He remarked the businesses were still receiving police and fire  protection, roads and bridges were still maintained by the county, the emergency management and health department were doing extra work.  The State made a few rules but delegated the COVID response to the counties who made their recommendations based off of other counties and local government.  Mr. McKinley noted HB2142 states counties are to reimburse property owners of property taxes as a result of forced shutdowns or limited capacity.   Riley County distributes all but approximately 24% of property taxes it collects.  The remaining 76% is distributed to other taxing units such as schools, cities, and the State of Kansas.   (Attachment 8)

Mr. McKinley stood for questions from Committee members.

Peter Meitzner, Chairman, Board of County Commission, 1st District Commissioner testified an an opponent for HB2142  noting the fiscal impact in Sedgwick county is between $25 to $50 million and the total spending from Sedgwick County's General Fund is approximately $192 million. Sedgwick County would need to make these payments from the 2021 General Fund which was set in August 2020; therefore, the only option would be to cut services. He noted many businesses affected by COVID-19 pandemic received support from Federal tax dollars and there is Federal legislation to allocate more money to the businesses.  Sedgwick county allocated over $10 million in the CARES Act funds to support local businesses in 2020.  (Attachment 9) 

Mr. Meitzner stood for questions from Committee members.

Written testimony as opponents to HB2142 was submitted by the following:

Charles McKinney, President, Kansas Legislative Policy Group, Clark County Commissioner (Attachment 10)

 Dennis Kriesel, Executive Director, Kansas Association of Local Health Departments  (Attachment 11)

Anthony Swartzendruber, Harvey County Administrator  (Attachment 12)

James R. Daily, Commission Chairman, Barton County (Attachment 13)

Michael Smith, Leavenworth County Commissioner, Chairperson (Attachment 14)

Don Schroeder, Commissioner, Harvey County  (Attachment 15)

Stuart Little, Little Government Relations (Attachment 16)

Chelsey Schmidt, Morris County (Attachment 17)

Neutral:

Trey Cocking, League of Kansas Municipalities testified as neutral for HB2142 stating what is the correct way to compensate businesses hit hard by the effects of Covid-19  is under constitutional protections of the fifth amendment.  The Constitution provides protections for the appropriation of private property under the takings clause whereas the government cannot appropriate private property for its own use without compensating the owner.  (Attachment 18)

Mr. Cocking stood for questions from the Committee.

Sheriff Jeffrey T. Easter, Legislative Chair for the Kansas Sheriff's Association submitted written testimony as neutral for HB2142(Attachment 19)

Chairperson Smith closed the hearing for HB2142.