Nebulous state tax lid bill causes concern for Prairie Village mayor

Increased property values in Prairie Village will require the city to hold a special election on property tax rates under the state's new tax lid bill.
Increased property values in Prairie Village will require the city to hold a special election on property tax rates under the state’s new tax lid provision.

Count Prairie Village Mayor Laura Wassmer among the growing contingent of officials scratching their heads about the passage of a provision in the state tax bill that requires cities to put property tax increases that exceed the consumer price index before residents for a vote.

Wassmer was an early critic of the bill, urging Prairie Village residents to contact legislators before the provision went to a final vote earlier this month. But the tax lid provision was included in the controversial tax package passed by the House in the early hours of June 12, and was signed into law by Gov. Brownback several days later.

Since the bill was signed into law, the tax lid provision has drawn increased scrutiny from editorial boards and municipal officials across the state. Wassmer continues to maintain that it’s a gross overreach by a group of legislators that have had problems of their own keeping the state’s finances stable.

“I believe local taxing decisions are best left to locally elected officials; this issue is unrelated to the state budget. This proposal did not receive a hearing and was passed without public notice, input, research or testimony, which is improper and does not represent good government,” Wassmer said. “This is an erosion of choice by local elected officials and is some Kansas legislators’ effort to control city and county budgets from Topeka.”

As written, the bill is tied to the total amount of property tax revenue a city brings in, not its property tax rate. So cities that experience a significant boost in assessed valuation would in many cases actually be forced to cut their existing mill levies instead of taking in more revenue. That provision could cause headaches in cities like Prairie Village, where the city council struggled to make ends meet during a period of stagnant or declining property valuations during the depths of the recession, putting off maintenance projects in hopes of rebounding values a few years down the road. Under the new tax lid bill, instead of reaping the benefits of rising property values with revenue that could be spent on deferred roads or parks projects, Prairie Village would have to hold a public election at a cost of approximately $60,000 just to keep its current mill levy intact.

Assistant to the City Administrator Nolan Sunderman compiled the following document showing which years Prairie Village would have had to put its tax rate before voters. The city would have been required to hold public elections five times since 2006:

https://dfv6pkw99pxmo.cloudfront.net/wp-content/uploads/2015/06/Property-Tax-Levies-and-Collection.pdf

The election provision also presents an unworkable logistical issue for cities. Under state law, cities must present their adopted budgets to the county by August 25. Elections can only be held in November — long before cities have their next year’s budgets ready to consider — or late August — far too late in the budget process for cities to incorporate a tax increase or decrease into their decisions.

“This scheduling and process is still unclear,” Sunderman said. “In practice, a budget is established with the mill levy in August but an election cannot be held until late August or in November.  The legislation is not clear on this item.”

Wassmer also worries that the legislature’s decision to increase sales taxes statewide while implementing the tax lid provision puts border cities like Prairie Village in a special bind.

“With limits on property tax revenue, cities will become more reliant on sales taxes,” Wassmer said. “With the recent increase in state sales tax and with our community on the state border, we could see a decrease in sales tax if residents choose to shop in other areas.”

As currently written, the tax lid provision of the bill is scheduled to go into effect July 1 of this year, but Prairie Village Assistant to the City Administrator Nolan Sunderman said the intent was for that provision not to kick in until 2018.

“Due to an error in drafting the legislation with the late changes, the effective date as it stands is July 1, 2015,” he said. “However, the legislature is returning for sine die on June 26 to hopefully correct this issue and make the effective date January 1, 2018.