As the 2017 government budget process looms ahead, local officials have been publicly expressing concerns regarding a piece of legislation that recently cleared the Kansas Senate. The bill in question would strengthen a “property tax lid” for Kansas cities, counties and school districts.
A law enacted by the Legislature late in the 2015 session as a rider to the budget bill prohibits local governing entities from raising property taxes at a rate higher than annual changes in the Consumer Price Index without first taking the issue to a public vote. That was challenging enough due to timetable considerations, said Hays City Manager Toby Dougherty. But the recent bill passed by the Senate would remove several exemptions allowed in the original law and move up the implementation date.
“It flies in the face of home rule,” Dougherty said. “ Local governments respond to local factors. No two cities are funded exactly in the same manner, and it’s because all cities deal with localized factors. And local elected officials should have the ability to react to local factors.”
The bill, Senate Substitute for House Bill No. 2088, was passed by the Senate in late March prior to its adjournment. The bill seeks to implement the tax lid legislation Jan. 1, 2017, instead of in 2018 as originally planned.
The original legislation also allowed several exemptions that would enable local governments to generate additional revenues for purposes such as new infrastructure, federal or state mandates and special assessments.
City of Hays officials say removing those exemptions significantly could hinder the city’s growth, because it would make it difficult to generate the funds to cover additional services such as fire and police protection, street access and parks in new neighborhoods.
“It’s going to cripple any city’s ability to grow, because cities are going to be forced to take on new areas and provide services in these areas without revenues to cover it,” Dougherty said. “And it’s going to either make it worse for everybody else (by straining resources) or result in cities just saying we can’t add any new areas right now because we don’t want to make it worse for everyone else.”
Dougherty said the Hays City Commission for years has made it a top priority to maintain a mill levy of 25 and avoid raising property taxes.
“They work hard to do that each and every year,” he said. “It frustrates the heck out of me when lobbyists in Topeka know what’s best for us and are able to convince a group of legislators in Topeka to pass this.”
Sen. Ralph Ostmeyer, R-Grinnell, was among those who opposed the bill. Nearly all of the feedback he has heard from constituents has been negative, he said, noting he believes local governments are closest to the people and capable of handling their own budgets.
“I have 14 counties (in my district). Take that times three, that’s 42 commissioners I answer to,” he said. “I never got a word from any one of them saying, ‘Ralph, this is a good deal.’ ”
Ostmeyer also expressed concern about the timetable being shifted. When the legislation was passed last year, it was agreed a waiting period of two years would be allowed to further study the issue and give local governments time to prepare, he said.
“To me as a legislator, that’s disingenuous to the public,” Ostmeyer said. “That’s what upset me the most.”
Ellis County Administrator Phillip Smith-Hanes said the county also is watching the process closely and will be prepared to deal with whatever form the legislation takes.
“Nobody likes taxes to go up, and so I certainly understand the thought behind it,” he said. “But just as a general matter of principle, I think that the voters should be trusting the people here in Ellis County to make those decisions rather than people in Topeka to make those decisions.”
Smith-Hanes previously served as a county administrator in California, which has a stringent property tax lid. In that instance, counties relied more heavily on sales taxes or were forced to reduce services, he said.
“We did not have nice roads in California. We had a lot of traffic and a lot of deferred maintenance because we couldn’t afford to keep up our roads,” he said. “Everybody understands the need to not raise taxes all the time. But when you don’t have the ability to raise revenues locally to deal with local needs, then in some instances local needs just don’t get dealt with, and that’s a consequence.”
The League of Municipalities and the Kansas Association of Counties have been opposing the initiative, which is supported by the Kansas Association of Realtors and Kansas Chamber of Commerce.
A legislative update on the realtors’ association website states the property tax burden on Kansans has increased “by three times the rate of inflation” in the last 18 years. Proponents also state the exemptions previously allowed were “too broad.”
The Legislature is expected to reconvene April 27, and Smith-Hanes said he is hopeful the final result will be more of a compromise.
“Hopefully what comes out will be a little bit better bill for local governments than what was last considered by the Senate,” he said.