The Next Step: Raising Revenues
Balancing Emporia’s City Budget
By Scott Rochat
Tuesday, August 7, 2007
Editor’s note: City Manager Matt Zimmerman recently outlined a three-step plan of budget cuts to help balance the city of Emporia’s 2008 general fund. In this four-part series, The Gazette looks at each step and possibilities for generating revenue.
Municipal budgets do not live on cuts alone. At some point, you’ve got to bring money in, too.
Property taxes bring in more than $6.2 million for the city of Emporia, according to the proposed 2008 budget and that figure does not include revenue from fines, fees, utility rates and sales taxes.
When it came time to plan the general fund for 2008, city officials found that their dreams and means were about $2.5 million apart — more, if there was going to be any kind of cash reserve for emergencies.
A package of budget cuts was proposed to do most of the heavy lifting but to create a cash reserve, fresh revenue was needed.
City commissioners have asked for no more than a four-mill increase in the property tax rate — about $46 on a home valued at $100,000 — and many residents have been reluctant to see it go up even that much.
There may be some new revenue options. But it will take patience to get there.
Sold on sales tax
One idea that has gained wide currency at a number of forums — public and online — is a sales-tax increase.
City Manager Matt Zimmerman has heard that idea a number of times.
“There’s a perception out there that sales tax is fairer, because you can choose how much you want to spend with the dollars you have available,” he said.
It can be a lucrative option. Last year, a one-cent sales tax cleared more than $4 million for the Emporia coffers. A half-cent bump could mean an additional $2.1 million by Zimmerman’s estimates.
In addition, higher sales taxes don’t just pull money in from Emporians, but from visitors as well, making it even more popular.
However, there are a couple of catches. First, a sales tax increase has to be approved by voters and an election couldn’t happen before 2008. If approved, the money would be reflected first in the 2009 budget.
The other snag is theoretical. Sales tax is traditionally seen as a regressive tax, hitting the poor harder than the rich. That’s because there are some things everyone has to buy and those items make up a larger percentage of a smaller income.
“It would have an impact,” Zimmerman agreed. “But for some of those people who are on that fixed income, how much more is property tax going to hit them?”
Added value
Another longterm solution is to put more property on the tax rolls — specifically, business property that can add value to the city without burdening homeowners. Next year, some newcomers will join the list.
Menu Foods Midwest, Glendo and Camoplast will be added to the tax rolls in 2008 in time to generate revenue for 2009. It’s not as big a windfall as a sales tax hike but the three together will contribute another $60,000 of property tax revenue for the city.
Even longer-term is the issue of business recruitment. Most industries receive five or 10-year property tax exemptions to move to Emporia, meaning it takes time for city coffers to see a gain.
But new retail businesses are another fish in the sea, one that Emporia officials have been interested in trying to hook.
The Emporia City Commission has agreed that it could offer property tax incentives to retailers. But they aren’t the kind that would take a business off the tax rolls.
Tax-increment financing (TIFs) uses part of the additional property tax generated by a business to pay for the cost of developing it. Transportation development districts (TDDs) raise sales taxes on a particular business in order to pay back the city’s cost of building roads, utilities and other infrastructure used by the business.
In both cases, any new businesses still would pay property and sales taxes. The TIF and TDD mechanisms are an attractive incentive, some city officials say, and they are endorsed by the Regional Development Association of East-Central Kansas, which now has responsibility for both commercial and industrial recruitment.
“By increasing commercial activity, not only do we increase sales tax revenue, but they typically pay higher property taxes and pay them immediately,” Commissioner Jeff Longbine said at a recent meeting
The usual suspects
But these possibilities exist in the future. For 2008, any increase in revenue is going to have to come from old familiar faces — mostly from property taxes and fees, according to the proposed budget.
If commissioners approve the proposed four-mill tax increase, about $229,000 more than last year would go to the general fund. The rest of the increased property tax revenue would get siphoned to other budget categories, mostly to pay for city bonds, which cost has increased by $368,000 since the 2007 budget.
Additional revenue would come from a 10 percent hike in golf course greens fees, cart rental and storage and trail fees and a proposed rental fee for city parks. In addition, the discount for bulk fuel sales would be eliminated at the airport. Taken together, the various adjustments give the city $47,525 in additional revenue.
Another $64,000 could be roped in, Zimmerman said, by taking back a percentage point from the 6 percent guest tax allotted to the Convention and Visitors Bureau, leaving the CVB with the remaining 5 percent. The guest tax, also known as the “bed tax,” is levied on motel stays and used to promote tourism.
Commissioner Bobbie Agler asked at a recent meeting if the money could stay within the CVB and be used for appropriate city projects — say, improvements at White Auditorium — rather than moving it into the general fund where it might never be seen again.
“The issue is that the CVB board controls the CVB funds,” Zimmerman said. “If we say we want some of it for the civic auditorium and they say no, there’s nothing we can do.”
“For the first year,” Longbine noted, drawing a chuckle from others in the room.
The proposed cuts and new revenue come to $2,846,229, enough to close the gap and sock some money away for a rainy day. But the budget process isn’t over yet.
More discussion and, maybe more changes, will take place at a city commission study session at 1:30 p.m. on Friday.
The commission will vote on the proposed budget at either its Aug. 15 or Aug. 22 meetings, as it approaches the state’s Aug. 25 filing deadline.
“In government, it gets complicated very quickly,” Zimmerman said. “I don’t envy the city commission. They have a really hard task to balance it all out.”
dhcc66 (anonymous) says...
i'm very suprised nobody commented on this section.
August 8, 2007 at 6:38 a.m. ( permalink | suggest removal )