Request By:
Ms. Anne V. Gabbard
Lexington-Fayette Urban
County Council, 4th District
The Municipal Building
136 Walnut Street
Lexington, Kentucky 40507
Opinion
Opinion By: Steven L. Beshear, Attorney General; By Alex W. Rose, Assistant Attorney General
In your letter of June 9, 1982, you requested an opinion with respect to the following questions concerning House Bill 565 which was passed and signed into law during the 1982 Session of the General Assembly.
(1) If a local government establishes a property assessment moratorium program, will the freeze on a property's assessment affect only the local government's tax revenue or will it affect the state's and school board's tax revenues as well?
Answer: No local taxing authority can, by enacting an ordinance, exert control over the ability of another taxing authority to assess and collect its ad valorem tax. Section 181 of the Kentucky Constitution provides, in pertinent part, as follows:
"The General Assembly shall not impose taxes for the purposes of any county, city, town or other municipal corporation, but may, by general laws, confer on the proper authorities thereof, respectively, the power to assess and collect such taxes." (Emphasis added) Therefore, the property assessment or reassessment moratorium program established by a particular local taxing authority will be applicable only to the assessments or reassessments of qualified property for the taxing authority establishing the program.
The moratorium programs authorized by Section 172B of the Kentucky Constitution can only be made available to local taxing authorities. The first sentence of Section 172B provides as follows:
"Notwithstanding contrary provisions of Sections 170, 171, 172, or 174 of this Constitution, the General Assembly may provide by general law that the governing bodies of county, municipal, and urban-county governments may declare property assessment or reassessment moratoriums for qualifying units of real property for the purpose of encouraging the repair, rehabilitation, or restoration of existing improvements thereon." (Emphasis added)
Consequently, the moratoriums established by local taxing authorities cannot limit the assessments or reassessments of property for state ad valorem tax purposes.
The assessments of qualified property for the ad valorem tax levied by the state and those local governments which have not established moratorium programs pursuant to House Bill 565 must be made in accordance with the provisions of Sections 172 and 174 of the Kentucky Constitution. Those constitutional provisions require that all property whether owned by natural persons or corporations, not exempted from taxation by the Kentucky Constitution, be assessed for taxation at its fair cash value. Consequently, qualified property will have one assessment for those local governments which have established a moratorium program pursuant to House Bill 565 and another assessment for the state and those local taxing authorities which have not established such moratorium programs.
(2) May a local government provide in the ordinance which sets up a property assessment moratorium program that improvements of a certain value must be made before a property may qualify? If not, does the legislation require that communities which adopt such a program grant a freeze to properties that have had only, for example, $10.00 worth of improvements made to them?
Answer: Section 172B of the Kentucky Constitution provides, in pertinent part, as follows:
"Prior to the enactment of any property assessment or reassessment moratorium program, the General Assembly shall provide or direct the local governing authority to provide property qualification standards for participation in the program and limitation on the duration of any assessment or reassessment moratorium. In no instance shall any such moratorium extend beyond five years for any particular unit of real property and improvements thereon." (Emphasis added)
The General Assembly elected to provide the property qualification standards rather than direct the local governing authorities to provide such standards. Subsection (1) of Section 3 of House Bill 565 provides, in pertinent part, as follows:
"Any owner of an existing residential building, or any owner or lessee of a commercial facility, may make application to the administering agency for a property assessment or reassessment moratorium certificate. " (Emphasis added)
The phrases "commercial facility" and "existing residential building" are defined in subsections (2) and (3) of Section 1 of House Bill 565 as follows:
"(2) 'Commercial facility' means any structure the primary purpose and use of which is the operation of a commercial business enterprise and which is twenty-five (25) years old or older.
(3) 'Existing residential building' means a residential building which has been in existence for at least twenty-five (25) years and use of which is to provide independent living facilities for one (1) or more persons."
The above-quoted qualification standards as enumerated by the General Assembly pursuant to the authority given it by Section 172B of the Kentucky Constitution are exclusive. Those qualification standards place no minimum on the value of the improvements.
Although the General Assembly has provided the qualification standards to be used in determining the property which can qualify for the moratorium program, the local administering agency will have the responsibility of determining whether the improvements on qualified property constitutes "rehabilitation" , "repair" , "restoration" or "stabilization" as defined in subsections (6) through (9) of Section 1 of the Act. See subsection (1) of Section 1 of House Bill 565. It is doubtful that a $10.00 improvement would constitute any of the enumerated activities.
It should also be noted that the assessment or reassessment moratorium would not freeze the assessment on the entire unit of qualifying real property. The moratorium would only defer the addition of the improvement to the total assessment for the taxable unit for the duration of the moratorium period. "Assessment or reassessment moratorium" is defined in subsection (10) of Section 1 of House Bill 565 as follows:
"'Assessment or reassessment moratorium' means the act of deferring the value of the improvements from the taxable assessment of qualifying units of real property for a maximum period of five (5) years." (Emphasis added)
Therefore, if a $10.00 improvement happened to be eligible for a moratorium certificate, only the $10.00 improvement would be deferred. A reassessment for the remainder of the qualified unit of real property would not be precluded.
(3) May a local government set further qualifying restrictions, such as specifically disqualifying new additions, swimming pools, etc.?
Answer: As stated above, the qualification standards provided by the General Assembly in House Bill 565 are exclusive. To be eligible for a moratorium certificate, however, the improvement must constitute "rehabilitation" , "repair" , "restoration" or "stabilization" . Those terms are defined in subsections (6) through (9) of Section 1 of House Bill 565 as follows:
"(6) 'Rehabilitation' means the process of returning an existing structure to a state of utility through repair or alteration which makes possible an efficient contemporary use.
(7) 'Repair' means the reconstruction or renewal of any part of an existing structure for the purpose of maintenance.
(8) 'Restoration' means the process of accurately recovering the form and details of a structure and its setting as it appeared at a particular period of time by removal of later work or by the replacement of missing earlier work.
(9) 'Stabilization' means the process of applying measures designed to re-establish a weather resistant enclosure and structural stability of an unsafe or deteriorated property while maintaining the essential form as it exists." (Emphasis added)
Pursuant to the above-quoted definitions, only improvements to existing structures would be eligible for a moratorium certificate.