An open letter from the mayor
By Bobbie L. Agler
Tuesday, July 29, 2008
As I began analyzing the underlying data which might merit consideration in one’s decision on the proposed 1-cent countywide sales tax I’ve found it a challenge attempting to organize it into a brief concise communication. So, please bear with me.
Historical Data
First let’s look at the historical use of sales tax by both the county and the city.
The county first used sales tax for the retirement of the debt created to fund the jail facilities. The financial planning was approached conservatively and the debt was retired ahead of schedule. The county is currently retiring the debt created to fund the new courthouse with a one-half percent sales tax. Again, the financial planning was sound and has retired all of the cost over-runs and will retire the debt a number of years ahead of schedule. Current estimates indicate that this could occur within three years.
The city adopted a permanent one-half percent sales tax a number of years ago to basically provide relief on the growing property tax. This has served us well and is currently providing a little over $2 million per year to the general fund, which in today’s dollars that equates to 13 mills. In connection with the campaign to recruit Cessna to Emporia the city voters approved a one-half percent sales tax for industrial development. Before its fifteen year sunset the voters approved the renewal of the one-half percent sales tax, designating one-half for economic development and the remaining one-half for the aquatic center and general operations. This particular sales tax has enabled our community to attain the success in industrial recruitment that has made Emporia the envy of cities our size. In addition to the addition of many good jobs we are now experiencing the addition of those facilities to our property tax base. To assure the continued success the renewal of this 0.5 percent will be presented to the voters within the next year or so.
As indicated above, we currently have a total local sales tax of 1.5 percent, with a reduction to 1 percent in approximately three years due to the court house debt retirement.
City perspective
A typical two-part question is a) why sales tax? and b) why now?
The response to the “why sales tax?” question is that, in addition to property tax, sales tax is really the only broad-based tax made available to local governmental units under the Kansas Statutes. Maybe even more importantly, the sales tax can only be implemented with voter approval. Additionally, with the five-year sunset, it guarantees the citizen majority the right to evaluate whether both the county and city commissions have consistently met their commitment of how they would utilize the proceeds before any future renewal. Equally as important is that both commissions have demonstrated prudent application of sales tax revenue in the past.
Part of the response to the “why now?” question has been developing over the last 10 to 15 years as the Kansas State Legislature has continued to reduce and eventually eliminate various “shared revenues”, including “Local Ad Valorem Tax Reduction” and “State Revenue Sharing”. Additionally, they recently eliminated the property tax on all new business personal property. These actions have resulted in an estimated annual reduction in city revenues of $800,000. Due to the financial stress at the state level, it is clear that this trend will likely continue. The second major part of the response to the “why now?” question has also been developing over the last ten years. The city’s Capital Improvement Program has been significantly under funded in favor of keeping the mill levy as flat as possible, even in the face of the reductions in state revenue sharing. Your city commission initially developed a five year capital improvement plan two years ago and identified a substantial back log. We are updating the plan annually each year.
The bad news is that the general fund Capital Improvement Plan covering the period from now through 2013 totals over $40.5 million. However, the good news is that $16.2 million (40 percent) of the plan will be funded with non-city funds such as grants, state and federal programs and private contributions. Another $12.6 million (31 percent) is targeted to be funded with low interest city bonds. Of the remaining $11.7 million the general fund will need to provide about $2 million per year for the five-year period.
If the county wide sales tax is approved, the city commission by resolution will dedicate 100 percent of the revenue to the funding of the Capital Improvement Plan for the five year period.
Obviously a primary factor is the potential revenue that the tax will generate. The revenue is not absolutely predictable since the tax is based on the total taxable sales within Lyon County . However, based on the amount realized by the county from the “courthouse sales tax” during the last two calendar years, it is projected that the countywide tax should reasonably generate about $4,564,000 per year.
The total countywide sales tax collected will be allocated among Lyon County and each of the incorporated cities within the county based on variables specified in the Kansas Statutes. Based on preliminary calculations by Lyon County Controller Dan Slater, the allocations are approximately 41 percent to Lyon County , 54 percent to city of Emporia and 5 percent among the remaining cities in the county. Therefore, based on the estimated total tax, the city of Emporia would receive approximately $2.45 million annually. When compared to the estimated CIP need of $2 million, a cushion would potentially be available for other CIP emergencies or early bond retirement. The options available for funding the CIP are basically limited to 1) sales tax, 2) property tax, 3) reductions in operational programs and application of the savings, 4) additional debt (the primary funding method for a number of years), or 5) a combination of all the above. There is the other option of continuing the neglect of our infrastructure and other assets, but we do not believe that is an acceptable option.
Broader perspective
A tax increase of any kind is never desirable. However, we believe it is imperative that we not only tackle the current issue but work toward an ongoing plan that will serve our needs in the future. Could the approval of the countywide sales tax with a five year sunset be part of the answer? Frankly, we’re very glad that you have to participate with us in answering that question at the polls. We’re thinking through the issues just as you.
We also believe it is important for all of us to consider the local tax impact overall. As indicated earlier, sales and property taxes are the primary source of revenue for funding local government. Based on an estimated city assessed valuation of slightly over $153 million, one mill raises approximately $153,000 in property tax. Therefore it would take approximately a 16 mill increase in property tax to generate the same $2.45 million in sales tax.
Currently the property tax paid by a property owner in Emporia is based on the assessed valuation of their property multiplied by the mill levy. On property within the city of Emporia , the total mill levy included in your property tax bill last December was 149.296 mills. Following is a graph representing the breakdown of where your tax dollars were used:
Based on the chart, left, 42.033 mills, or 28 percent of your annual property tax bill, goes to the city. It has basically remained in the area of 42 mills for the last five years and if the county wide sales tax is approved by the voters, we currently anticipate it to remain at that level for another five years, based on current operations.
The above allocation is based on the “assessed valuation” within each of the governmental units. The “assessed valuation” of Emporia property is a major portion of each governmental unit, representing 64.4 percent of the county and 86.6 percent of the USD 253. Therefore, Emporia property provided $7.75 million of the $12.05 million County total and $7.80 million of the $9 million USD 253 total. Basically, taxes paid on Emporia property totaled approximately $22.1 million last year, representing 80 percent of $27.7 million combined total.
Conversely, should the sales tax be approved and the County applies most of their benefit to “property tax reduction” over 64 percent of the reduction will directly benefit Emporians.
As you are all aware, there are a lot of other sources of stress on our individual budgets very similar to what our business community and governmental units are experiencing. Just as we are considering changes in our personal spending habits we need to encourage all of our governmental units to adopt a similar approach, realizing that this will probably result in less than desirable changes in services. Although not without pain, this can be a good thing and have benefits far into the future.
My closing suggestion is for you to hold your elected officials accountable, at all levels. Constructive communication, whether positive or negative, is extremely beneficial for both of us. As part of this open communication the city commission is conducting a public meeting to be held at 7 p.m. Wednesday in the cafeteria of Riverside Elementary School , 327 S. West St. The primary purpose of the meeting is to obtain public input on the 2009 Budget. We encourage you to attend.
Comments
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Posted by booker5m (anonymous) on July 29, 2008 at 1:37 p.m. (Suggest removal)
Again officals are trying tax us into prosperity. Isnt great we are so dumb and they are smart
Posted by Summer_Breeze (anonymous) on July 29, 2008 at 2:08 p.m. (Suggest removal)
Sales tax is the most regressive type of tax, because it's applied to essentials that even the poorest among us must have--food, drink, school supplies, over-the-counter medications, gasoline, etc. If our government officials would impose sales tax on only non-essentials (remember the term "luxury tax?"), then I'd say go for it.
Since a selective sales tax isn't being contemplated, I say let the property owners bear the burden of economic development, quality of life improvements, and infrastructure maintenance and repair. They're the ones who can best afford it. And before anyone gets too excited, let me say that I AM a property owner.
Of course I don't own as much property as the "fat cats" in Emporia. Hmmm...now I see why the City Council wants a sales tax!
Posted by pizza (anonymous) on July 29, 2008 at 3:27 p.m. (Suggest removal)
Mayor, thank you for the detailed description of the sales tax issue. It seems to me there has been very minimal coverage of this proposal and the Gazette has done little to explain and publicize it. While nobody wants higher taxes this would seem like a pretty good solution for most local residents. It would certainly bail the city out of a very tight situation while lessening the property tax burden on every property owner in the city and county. I really do not understand why we have heard so little from those who usually voice opinions on this type of thing such as the Gazette, the Chamber and the City Manager. I have heard that they all want the sales tax issue to fail so they can come in and propose a city sales tax where the city would keep all the money and those outside the city would receive nothing but those paying the tax would remain roughly the same people. I would hope that this rumor is not true as it would simply be one more area where the city wanted to fight with the county and would also be one more reason not to shop in Emporia. Greed has a way of biting one in the butt. Working together is always the best policy.
Posted by stevo (anonymous) on July 29, 2008 at 3:56 p.m. (Suggest removal)
Mr. Agler, I would like to say that I am not against the sales tax for it is the best way that is fair to all... The Emporia people need to watch their receipts when they go out of Emporia, like to Topeka, Wichita and or KC and see what they are paying for sales tax...It is at least 1 % or more than ours and they are not helping us in Emporia and or Lyon County They think they are getting a bargain shopping out of town, but with the gas and sales tax, they need to start to do the math... Also, you, Mr. Agler and your son, and commissioner Longbine alone would help the Budget too, when you would go to the our Courthouse and pay for tags and taxes for the vehicles that you drive and all your family members, (Plus add all the other car dealers in Lyon Co.) that have driven all your cars on Dealer Tags and have gotten by without paying Taxes for many, many years. Sometimes you need to dig out of your pocket books and quit working the system to your advantage too..... Good luck on the election, I know you will need it... I know that Emporia sure does and we need your money too. (sometimes things can bite in the wrong way)
Posted by slvrnblck (anonymous) on July 29, 2008 at 4:27 p.m. (Suggest removal)
Thank you for the information. That is by far the best info that has been posted about the potential tax.
Sales tax is the fairest way and forces everyone to contribute equally.
Posted by wouldntuliketoknow (anonymous) on July 29, 2008 at 5:16 p.m. (Suggest removal)
It's time to start cutting some spending here. I just heard on KVOE that there was a significant amount of money set aside by the county for a fireworks show next year. Come on people!! You've got money to buy the old John Deere business, revamp it and put in a paved parking lot, money to burn to pay county employess to drive around the county and see if any signs need to be replaced etc. etc etc.
Cut Cut Cut people, I'm tired of paying your way through life.
Posted by hickory (anonymous) on July 29, 2008 at 6:34 p.m. (Suggest removal)
I hope all the citizens of the small communities around get out and vote for the sales tax. It would really help. In Americus, they can't even afford to buy gravel and rock to put on the roads anymore, because of the rising cost of everything. If everyone is upset about how Emporia spends their tax dollars, at least give the smaller towns a chance to improve theirselves. They have very little the way it is.
Posted by jayhawker (anonymous) on July 30, 2008 at 12:28 a.m. (Suggest removal)
I appreciate Mr. Agler providing this information. I note that the vote on this proposal is at the Primary Election, rather than the General Election. With very few offices disputed in the primary, turnout will be much lower than at the General Election. I suspect that that was a strategic decision hoping to improve this tax's chances for passage. Although there are conflicting signals about whether there is a strategy to assist us in recovery after the loss of untold numbers of jobs recently (and the comment that Emporia is the envy of cities our size for success in industrial recruitment belies this), I understand that our strategy is, at least in part, to attract retail businesses. While I believe that retail is not an efficient method of economic recovery, it it is our strategy, and therefore I wonder why we would propose the worst possible approach to making our strategy successful. Making the cost of retail items increase will neither attract new retailers nor make their products marketable. Clearly, this sales tax is not only a replacement for property tax, it is also part of a tax increase. In troubled economic times, tax increases are counterproductive to recovery. We cannot tax ourselves into prosperity; but we can tax ourselves into the poor house. As painful as it truly may be because of service curtailment, for the good of our families, our community and our hopes for long term recovery, we should vote no on this tax.
Posted by funston (anonymous) on July 30, 2008 at 2:29 a.m. (Suggest removal)
Democracy Countdown
How Long Do We Have?
'A democracy is always temporary in nature; it simply cannot exist as a permanent form of government.'
'A democracy will continue to exist up until the time that voters discover they can vote themselves generous gifts from the public treasury.'
'From that moment on, the majority always vote for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship.'
'The average age of the world's greatest civilizations from the beginning of history, has been about 200 years'
'During those 200 years, the nations progressed through the following sequence:
1. from bondage to spiritual faith;
2. from spiritual faith to great courage;
3. from courage to liberty;
4. from liberty to abundance;
5. from abundance to complacency;
6. from complacency to apathy;
7. from apathy to dependence;
8. from dependence back into bondage'
Yours very sincerely and respectfully,
Frank Funston Eckdall
Esquire
Posted by emporialifer (anonymous) on July 30, 2008 at 8:08 a.m. (Suggest removal)
Thank you Mr. Agler for taking the time to share this information with us. Unfortunately whatever anyone in a leadership position does in this town is going to be met with gratitude and criticism. You really can't make everybody happy, but I appreciate what you have tried to do here.
stevo - perhaps if you would like the few advantages that owning your own business has (don't forget all the stress, extra work, personal investments, etc. that go along with that), you should start your own car dealership. I would say that's just being a smart business man.
Posted by USNretired (anonymous) on July 30, 2008 at 10:30 a.m. (Suggest removal)
funston - How about Rome? I recognize the treasury quote and agree, but hopefully we do better than some ancient Greeks. As for a sales tax, it is the fairest of all taxes because we can budget for our future expenditures. I hate it when savings and income are taxed. Property taxes and handouts favor the indigent, while tax cuts are only for tax payers.
Posted by stevo (anonymous) on July 30, 2008 at 1:32 p.m. (Suggest removal)
emporialifer, I do own my own business and sure don't get the tax breaks that the car dealers do... I am taxed out...you need to do the math and see what you should be paying for all those cars/trucks driven on dealer tags would cost...the money would be in the thousands no doubt.....
Posted by orlando (anonymous) on July 30, 2008 at 1:57 p.m. (Suggest removal)
Frequently when someone is against the sales tax, it is because of the cost of the basic commodity of food. Food costs are high as it is. I have never heard anyone here propose taxing only non-food items. I know some states do not have a sales tax on food, and some also have a sales-tax-free day just before school starts so people can buy their school supplies at a lesser cost. Perhaps this needs to be considered.
Posted by momus (anonymous) on July 30, 2008 at 2:22 p.m. (Suggest removal)
When we talk about the "fairness" of a sales tax, I think we need to look at who is actually taxed and what the potential impact is on the community. This 1% comes off the top of disposable income. Looking at the city sales figures, that means between 2.6 and 2.9 million dollars lost in consumer goods sold. Our pull factor is already under one (meaning the people currently in the trade area aren't pulling their "fair" share), and this tax only makes the problem of out-of-town shopping worse by giving Emporian's another excuse to leave. It's been pointed out that additional sales tax will also make it harder to recruit new retailers to the Emporia area. By raising the sales tax we also loose a competitive advantage which currently allows the city to pull in some (not enough) sales from outside the trade area. Passage of the tax increase will negate that advantage.
It's also been stated on this board that an increase in sales tax will have its greatest impact on the poor, who are currently dealing with gas fueled inflation in this stagnant economy. Increased pressure on current and potential businesses, increased pressure on the poor, making current pull factor problems worse; how is this fair?
Posted by dale011 (anonymous) on July 30, 2008 at 5:08 p.m. (Suggest removal)
Tax as much as you want, then watch the tail lights as folks head for Topeka or Wichita to shop.
Posted by emporialifer (anonymous) on July 31, 2008 at 8:53 a.m. (Suggest removal)
stevo
Do you take advantage of any tax breaks offered to business owners that regular folks that don't own businesses do not get? I am simply saying that there are a few advantages to owning a business (depending on the kind of business) and tax breaks owners can take advantage of as they should. Doesn't the car dealership have to pay taxes for those dealer tags anyway, so the taxes are getting paid?
Posted by paulkersey (anonymous) on July 31, 2008 at 9:20 a.m. (Suggest removal)
"Tax as much as you want, then watch the tail lights as folks head for Topeka or Wichita to shop."
Topeka already has a sales tax of 7.4%, and they are wanting to increase it by another half a percent, so your argument holds no water, as being the sales tax here would still be lower.
http://www.cjonline.com/stories/072408/l...
Emporialifer, there are no tax breaks for owning your own business.
Sales tax, unemployment tax (fed and state), payroll tax, workers comp tax, etc etc ad nauseam. Owning a business is easy, all you have to do is write checks! Plus you get to work half days--you even get to pick which half! It's great, let me tell you.
Posted by emporialifer (anonymous) on July 31, 2008 at 2:01 p.m. (Suggest removal)
paulkersey -
I must not have explained what I meant very well. I didn't mean that there are specific tax breaks set up for business owners simply because they own businesses, what I meant was that there are some advantages that owners use to their personal benefit. Stevo mentioned car dealership owners getting to drive dealership cars without having to pay for the tags and taxes of those vehicles. Now I believe the point might have been off base because I believe that the dealership has to pay for the tags and taxes of that vehicle that is being driven, but that is an example of what would have been a personal expense (car, tag, taxes), that a dealership owner is able to have the company pay for.
I apologize for not being more clear in my original question/explanation.
Posted by notasheeple (anonymous) on July 31, 2008 at 3:35 p.m. (Suggest removal)
I’ve got an idea to pay off the debt for the courthouse. Go in rip out all the GRANITE (If that’s what it is) and sell it to someone, you could make a great profit off of it! That is, you bought low and can sell high.
Posted by stevo (anonymous) on July 31, 2008 at 4:43 p.m. (Suggest removal)
emporialifer, I don't have the problem with you as a business owner having the dealer tag.. I have the problem when all children, spouses, parents and employees all drive on them..and I do not believe that sales tax or personal property tax is paid on any vehicle until it is purchased and title under an individual... that is the problem I have ( I know of one car dealer that has 4 children driving on dealer tags, a spouse, his mother and father and 2 that he drives..plus all his employees not just to and from work but full time, plus the spouse employee....now do the math..
Posted by jayhawker (anonymous) on July 31, 2008 at 4:49 p.m. (Suggest removal)
steveo: I sure hope (I really do) that that would not be either of our City Commissioners. If so, that needs to be pointed out.
Posted by stevo (anonymous) on July 31, 2008 at 4:57 p.m. (Suggest removal)
Yes, I have seen Mr. Agler many of times in a Dealer Tag vehicle and his son, daughter in law and All grandchildren... Plus Mr Longbine and his wife...
Posted by emporialifer (anonymous) on August 1, 2008 at 8:47 a.m. (Suggest removal)
Perhaps use of company vehicles is part of the compensation package for those employees - much like other businesses that provide company vehicles for certain employees? Just a guess. I don't know all the particulars of car dealerships, but does the dealership have to pay any kind of taxes on the cars it buys that are sitting on its lot waiting to be sold or have to pay for those dealership tags? Perhaps when the economy turns around, car dealership is the business to get into.
Posted by stevo (anonymous) on August 1, 2008 at 1:24 p.m. (Suggest removal)
I don't think that Mr Agler and Spouse or Agler's Grandchildren are employees!!!!
Posted by emporialifer (anonymous) on August 1, 2008 at 1:41 p.m. (Suggest removal)
I guess that's the beauty of being an owner, you get to decide who gets the perks that the business pays for.
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