School districts in Jackson County saw home property assessments leap by nearly a third — and add more heft to their tax bases.
They set their property tax rates lower to reflect the beefier assessments — amid a furor from homeowners and politicians contending the numbers inflated the real value of properties in the county.
That tossed Jackson County into the center of a court challenge from the state that could test who can challenge assessments and how.
Meanwhile, those schools? And other entities that get tax money such as police, fire departments, libraries, mental health services?
School districts in the county claimed in court this week that a win for the homeowners would prove “catastrophic,” costing school districts nearly $1,500 per student.
“That’s not fair to the school districts, the fire protection districts, the libraries,” said Joe Hatley, an attorney representing the Lee’s Summit School District.
It looks most likely that those taxing districts won’t take a hit — a lawsuit demanding that nearly all the new assessments be erased faces steep odds. Meanwhile, any rebate for homeowners wouldn’t arrive for months at the earliest.
The lawsuit filed by the Missouri State Tax Commission and Attorney General Andrew Bailey contends property owners didn’t get a fair shot to challenge such dramatic increases in their assessments.
The Missouri Supreme Court threw out a similar class-action lawsuit last year. In that case, the court concluded that homeowners couldn’t sue if they didn’t appeal their property assessments with the county first.
That earlier lawsuit sought to reverse all of the assessments that increased more than 15% or didn’t get a mailed notice of the change. But most of the cases had not gone through the usual appeals. Likewise this year, the state wants to throw out all the new assessments that increased any amount.
That means Bailey is testing the limits of a fresh precedent from the high court. Bailey’s case differs by arguing that there is no fair way for homeowners to challenge assessments. That case has its next court date on June 6.
The Missouri Supreme Court has said no before
Bailey has used his office aggressively in pursuit of conservative causes with mixed success — pushing to ban gender-affirming care, abortion and federal student loan relief.
Now the Republican is stretching the scope of the attorney general’s office by stepping into an intra-county dispute between taxpayers and their local government.
Mike Ardis, a spokesman for the International Association of Assessing Officers, said he was unfamiliar with any case where a state has tried to void an entire county’s assessment increases.
“We’re not familiar … with a similar situation where a state has tried to void a county’s reassessment,” he said in an email.
Before going to court, property owners can challenge an assessment with the county’s Board of Equalization. If they strike out there, they can appeal to the State Tax Commission.
If their case fails with that state commission, they can sue.
What’s different with these lawsuits is that the attorney general is suing on behalf of all property owners whose assessments increased — even if they didn’t appeal.
Bailey argues that homeowners can go to court before taking a case to the State Tax Commission because the appeal process doesn’t give homeowners a fair shot.
Jackson County’s lawyers counter that if homeowners never tried to appeal, they don’t have the right to sue. Some homeowners have challenged through the county and the state, but the lawsuit calls for undoing all 247,500 property assessments that went up. That includes 190,000-plus that were never appealed.
Last June, a group of property owners filed a class-action lawsuit arguing that the county botched the assessment and appeal process.
The Missouri Supreme Court dismissed their lawsuit using the same reasoning the county’s lawyers push now — that the homeowners hadn’t finished appealing their assessments.
Most states, including Missouri, can order reassessments, Ardis said, “but that is usually because an assessment hasn’t been done rather than on questions about a reassessment.”
Jackson County argues the State Tax Commission can compel Jackson County to redo its assessments without going to court. The county was told by that same commission in 2018 to bring all of its 301,000 properties up to market value because it wasn’t complying with state law.
But the State Tax Commission hasn’t ordered the county to take action on the 2023 assessments. It could sue a county for not following such an order.
School districts stand to lose millions of dollars
If the attorney general’s lawsuit is successful, Jackson County’s taxing jurisdictions will be forced to refund millions of dollars to homeowners.
The Fort Osage, Oak Grove, Independence and Lee’s Summit school districts submitted an amicus brief on May 9 asking the judge to consider the “catastrophic financial harm” of tossing out the higher assessments. It estimated that would mean paying back $57 million in taxes across the four districts, or $1,468 per student.
Lee’s Summit would have to give up $32 million — almost a tenth of its revenue. But that money has already been spent on the 2023-24 school year.
“The school districts budget for the fact that there will be some successful challenges to the county’s assessments,” the brief says, “but not for an illegal rollback of assessments on virtually every property in the county.”
For Lee’s Summit, that amount is nearly a third of its reserve. It would take years to recover, and in the meantime, the district would be in a precarious position.
“It would require an immense juggling act on the part of the district’s business staff to figure out what to do,” Hatley said. “You’re not going to dig out of that hole anytime soon.”
The 30% spike in property values that Jackson County residents saw last year appears consistent with the rise in home sale prices. Tech real estate company Zillow says home values in Jackson County have increased by 45% since March 2020.
“There are parts of the county that we’re still trying to get to value … but I would say the majority of what is driving up these values right now is simply an increase in value,” Jackson County’s director of assessment Gail McCann Beatty told The Beacon in April 2023.
At the time, she said that home values have been increasing 14% to 15% every year since the housing market recovered from the pandemic.
Remote work has made the Midwest more appealing for people who previously needed to live in high-cost cities like New York City or Los Angeles. Since 2020, those workers have been able to relocate to Kansas City.
Additionally, corporations have been buying up Kansas City homes to add to their investment portfolios and renting them out. That has shrunk the number of homes for sale and made the market more expensive.
If a judge tells Jackson County to throw out all assessment increases, that will temporarily reduce property values for the 2023 tax year. But unless the county can get the housing market under control, market value will continue to increase and property owners will see their assessments spike once again in 2025.
So even if taxpayers get a property tax refund for 2023, that relief could be short-lived.
This story was originally published by The Beacon Kansas City, a fellow member of the KC Media Collective.
