Newton Kansan

Realtors and bankers in Kansas want to do away with county fees to register property bought using a mortgage —and that would eliminate a funding stream of county governments.

The groups say the mortgage registration fee discriminates against people who borrow money to buy homes or business property.

County officials want to keep the fee; it is estimated counties across the state would lose about $47 million a year in revenue if the fee goes away and isn't replaced.

In Harvey County the numbers are fairly clear, according to a report given to county commissioners this week.

In 2014 the mortgage registration fee accounts for $301,954 of an $11.1 million general revenue budget in Harvey County. In terms of mills, elimination of the fee would impact the county levy by 1.13 mills. In 2013, the county collected $351,905.

"This is a major issue," said John Waltner, county administrator.

The commission is preparing a letter for senators and representatives in Topkea — and the message is clear. Don't touch the fee.

"We encourage them to reject this because of the impact on Harvey County," Waltner said.

The Kansas Bankers Association also says the registration fee is actually a tax because nearly all the amount charged goes to the county's general fund and doesn't reflect the cost of recording the document.

Counties say increasing property taxes to make up for lost revenue would be a bigger burden on homeowners and businesses than the fee. Waltner said counties have few revenue streams available, and if the fee is taken away only property and sales taxes would be available.

"The challenge remains how we fund local government and provide the services people say they want and need," Waltner said. "The pressure that is being placed on residential and commercial property tax payers is incredible."

Residential property taxes have gone from $798 million in 1996 to $1.9 billion in 2012. In 1996 residential property tax was 40 percent of the property tax collected in the state — in 2012, it grew to 48 percent. Commercial property tax collection has nearly doubled in the same time period.

"The cost of providing services has gone up in the past 15 to 20 years, and unfortunately those increases are not being born uniformly — at all," Waltner said.

He said losing the equivalent of a mill would put more pressure on property and sales tax. And he points to a loss of more than $800 million from the county-city revenue sharing fund and Ad Valorem Tax Reduction Fund.

The Kansas mortgage registration fee is 26 cents on every $100 borrowed. Of that, 25 cents goes to the county and a penny goes to the Heritage Trust Fund, which provides matching funds to preserve historic buildings. The fee was created in 1925 by the Kansas Legislature, and the law has been amended six times — the last time in 1994.

Johnson County Commission Chairman Ed Eilert noted the mortgage fee only is paid when a new mortgage is created.

"So by eliminating the mortgage registration fee on that kind of activity, you're passing the responsibility for that revenue on to people who don't have a mortgage, or who have already paid a mortgage registration fee, so they're paying twice," he said. "I mean, it's a fairness thing."

Doug Wareham, vice president for government relations with the Kansas Bankers Association, said basing the fee on the amount of money borrowed in the mortgage doesn't make sense because it costs the county the same to process a $500,000 mortgage as it does a $100,000 mortgage.

He said the registration fee discriminates against the middle class and in favor of the wealthy.

"We're bringing this forth because our banks are tired of our customers (borrowers) being saddled with this tax while cash buyers are not being saddled with any tax," he said. "We do not want to be adversarial with local government, (but) because of this fee, we're really hampering people who want to buy real estate."

— The Associated Press contributed to this report.