Property tax lid could have opposite effect of what legislators intended

A tax lid on local governments may affect the decision of the Unified Government Commission on how to spend a $12 million windfall from the payoff of the bonds at Village West.

But the effect may be something other than what Kansas legislators had in mind when they passed the tax lid. From remarks made by local officials Monday, the local governments may be reluctant to reduce taxes because of the lid, because they cannot raise taxes again the next year without a vote of the people.

Nevertheless, the local leaders still are planning to reduce taxes; it’s just a question of how much, they said Monday.

“This tax lid has just disincentivized every community in the state from lowering their mill levy, because once you lower it, you can never raise it again,” Kansas City, Kan.,-Wyandotte County Mayor-CEO Mark Holland said at a strategic planning session Monday at City Hall. “In the event we go through a recession, you can’t do anything with your mill levy. The key is we had talked about lowering our mill levy, and that’s been a goal of people in this community with the STAR bond payoff for a long time, and we need to talk about how much of the $12 million do we apply to mill levy reduction.”

In the discussion at the UG Commission’s strategic planning session Monday, the UG Commission talked about long-range budget issues and decisions, as well as UG goals. No action was taken at the meeting.

Some residents have been waiting for a long-anticipated property tax reduction as the result of the upcoming payoff of the Village West sales tax revenue bonds in 2017.

Property tax reduction is one of the items that has been brought up at Mayor Holland’s listening tour this year, along with park improvements and better streets, as well as other projects, the mayor said. There were 555 responses so far in the listening tour, he said. The commission also plans to put a question about how to spend the money on a community survey next year.

The UG Commission on Monday articulated goals of cost of living increases for employees, mill levy reduction, and infrastructure improvements, he said.

Mayor Holland said perhaps some significant projects are needed for the $12 million windfall, and would be very tangible items such as the community neighborhood infrastructure program, along with property tax reductions. But, there are so many projects needing funds that the UG could put the $12 million into its existing goals and not have any of it left, according to officials.

UG Administrator Doug Bach said the governor’s anti-growth tax lid was placed on local communities, and if values go up, the government doesn’t get those funds unless it is put before the voters. The tax lid is scheduled to go into effect January 2018.

“That’s an issue we have to deal with, and it really impacts our future decision-making, impacts how we would look at contracts, too,” Bach said.

Mayor Holland said if the community’s valuation goes up 5 percent and the consumer price index goes up only 1 percent, that additional 4 percent of value that the UG has to spend today has just been taken away by the state.

“We can’t give that to employees, we can’t buy new equipment, we can’t improve our city, we have to go to a vote, we have to lower our mill levy to match that revenue, the consumer price index revenue,” Mayor Holland said. “If we don’t want to do that and capture the additional revenue that we earned by growing our city, then we have to go to a vote of the people every single time.

“It is probably the most anti-growth, foolish discussion,” Mayor Holland said. “It was an idea hatched at noon and voted on at 4. It was about the most foolish a notion and a poorly drafted piece of legislation as you can imagine.

“It’s simply an attack on the cities,” Mayor Holland said. “Eighty-five percent of the jobs in this state are in the cities, and if we don’t maintain the quality of life in our cities, then we’re not going to be able to attract talent to the state of Kansas, and they’re going to go to other states where they can do it.

“This tax lid is probably the most destructive piece of legislation that they’ve hatched yet in Topeka, because it directly attacks the economic engine of the state, which are the cities,” Mayor Holland said.

The mayor noted that the Wyandotte County and Kansas City, Kan., combined mill levy rate was lower than the Shawnee County-Topeka rate. However, the UG’s mill levy was higher than many other city-county rates, including Sedgwick County-Wichita and Johnson County-Lenexa, as well as Johnson County and other cities there.

Leavenworth, he noted, had made a big shift, putting in a sales tax and reducing property tax significantly.

The Leavenworth County property tax picture is much different than Wyandotte County, as Leavenworth County has a lot of land for institutions that are not taxed because of state, federal or religious exemptions. It did not rely as much to begin with on the property tax as Wyandotte County. Plus, Leavenworth County has about half or so the population of Wyandotte County. Leavenworth County does not have the same level of industries and retail that Wyandotte County has.

“Is our goal to match Overland Park and Johnson County, where we would need to cut our mill levy in half or more to be competitive, or is it to be more competitive with Sedgwick and Douglas County?” Mayor Holland asked, trying to get a sense of direction from the UG commissioners on how far to reduce taxes. It is a topic the commission agreed to think about and come back later to discuss again.

Some support for the property tax lid

Meanwhile, on Monday state Sen. Steve Fitzgerald, a Leavenworth Republican from the 5th District who represents part of Leavenworth County as well as the western edge of Wyandotte County, sent out a news release about the property tax lid. He recently appeared on a Comcast interview that is posted at https://www.youtube.com/watch?v=Tjkm2aqeZkU&feature=youtu.be.

Sen. Fitzgerald supported the property tax lid and said that since 1997, property taxes in Kansas have risen 112 percent as compared to the inflation rate of 44 percent during that same time. The new law was intended to save property owners about $2 billion over 10 years, according to Fitzgerald. It would require local governments to put tax increases before the voters in regular August or November elections, not special elections. The former spring elections, which are about the time that local governments consider their budgets, have been eliminated by the Legislature.

Revenues for the state of Kansas, which cut income taxes, are running about $42 million below estimates right now, according to Sen. Fitzgerald. But the state is also collecting about $73 million more now than it was at this time last year, he said. According to Sen. Fitzgerald, more needs to be done to cut state spending.

Still pondering the tax reduction questions

The UG Commission is still pondering the questions about the mill levy reductions. Should the UG drop it one time a lot, or reduce it gradually over time, Mayor Holland asked. What percent of the $12 million should the UG use to reduce property tax? Reducing the PILOT fee on Board of Public Utilities bills, which is 11.9 percent and raises $31 million in revenues, also was discussed.

The UG plans to meet with the legislators from Wyandotte County in December to talk about how the tax lid can be repealed, Mayor Holland said.

The UG’s dedicated sales tax, which raise $9 million, will sunset in July 2020. If the community wants it to continue, there would probably have to be an election in 2018, according to Bach.

Commissioner Jane Philbrook noted that the UG is not the only taxing entity in Wyandotte County.

“We’re not the only ones that imposes a mill levy in Wyandotte County,” Commissioner Philbrook said. “We can bring ours down one or two, but what are the schools going to do with their funding drying up? They brought theirs down, but what are they going to do next year? We can bring it down, but if the others bring it back up, we’re going to get lost in the shuffle. I don’t think anybody’s going to pay any attention.”

Commissioner Mike Kane said there was no right or wrong answer, and no matter what they did they would make someone mad.

“I guess I’m just warning them that we’ll do the best we can with what we’ve got,” he said.

Many other topics were discussed at the four-hour planning session. For more information, visit YouTube under Unified Government in the next few days to see if the video of the meeting has been posted.