September 23, 2023
The Lee’s Summit R-7 School District plans to rollback its tax levy this September by more than 59 cents to offset significant increases in assessed valuation this year.
Here are some answers to some common questions about the rollback.
Is there a limit to the amount of revenue a school district can collect when property values increase rapidly?
Yes. The State of Missouri limits local tax revenues available to Districts via a Missouri Constitution amendment commonly referred to as the Hancock Amendment. Local tax revenue increases from existing property within the District are restricted to no more than inflation as measured by the Consumer Price Index (CPI), or 5 percent if CPI exceeds 5 percent. This year, revenue is capped at 5 percent because the most recent CPI was 6.5 percent. When a district’s calculated revenue exceeds the state’s limit based on the increase in assessed valuation, districts reduce or “rollback” their operating tax rate per state statute. This can be altered by the vote of the people setting a new tax rate.
LSR7 passed a tax levy transfer in April 2023. Will LSR7 rollback its tax rate this year?
Yes. We received final assessed value numbers from Jackson County on September 11. (Cass County was received in July.) LSR7 plans to rollback its overall tax rate by a significant amount to offset increases in assessed valuation above the 5 percent limit. The final assessed valuations have been calculated and the District plans to roll back its tax levy from $5.3089 to $4.7112 per $100 of assessed valuation.
Does new construction impact setting the tax rate this year?
No. New construction will not impact the setting of the tax rate until next year.
The District receives revenue from new property, also called “new construction,” that was not previously on the tax rolls. New construction does not impact setting the tax rate in the year it comes on the rolls, but it is considered in the following year’s calculation as existing assessed valuation.
Why is LSR7 rolling back its tax rate?
While LSR7 is not legally required to roll back their rate this year because of the levy transfer election, the district does plan to roll back the rate to meet the integrity of the ballot question. It was never the intention of the District to experience a windfall from this ballot issue because of large increases in assessed valuation. The intent of the rollback is to more accurately reflect the revenue the District anticipated with the data available at the time of the election. Rolling back the tax rate means that the district will not collect $22 million that it would otherwise have collected based on the operating tax ceiling.
Has LSR7 rolled back its tax rate in past years?
Yes. See the graph below showing the change in tax rate over time. When assessed valuation exceeds the inflation rate or the 5 percent cap, we roll back our tax rate accordingly. Notice the 55 cent drop during the 2019-20 school year when the assessed valuation increased substantially higher than the rate of inflation.
What rules does the assessor’s office have around setting assessed valuation?
State statute says that assessed valuation has to be within 90 percent of market value. When it is not, the State Tax Commission reaches out to county assessor offices to ensure compliance.
Does the state fund LSR7?
Yes. State funding will make up 25 percent of our revenue this year. This is down from 34 percent a few years ago. Over the past six years, LSR7 has averaged 0.6 percent increase in state funding from the foundation formula, which is much lower than inflation. We are relying more and more on local funds to educate 17,000+ students each and every year.
Has LSR7 also experienced inflation?
Yes. During the 2022-23 school year, the district experienced big increases in operational costs due to inflation. Natural gas expenses doubled. Electric costs jumped 19.5 percent. And bus fuel costs rose 48.6 percent. From 2013-14 to 2022-23 school year, the inflation rate is 32 percent. The state foundation formula payments in LSR7 have increased by 23 percent.