Concerns about tax lid bill, possible future recession lead Prairie Village council to reject 1 mill property tax rate reduction

Jay Senter - May 22, 2019 8:51 am
Prairie Village city officials this week voted to reject a proposed 1 mill tax rate reduction.

A proposed reduction in the property tax rate in the 2020 budget put forth by the Prairie Village finance committee stirred debate on Monday, with a majority of members of the council agreeing it would not be a responsible move given the prospect of a recession in the coming years and the realities of the tax lid bill recently enacted by the state legislature.

The council voted 8-4 after lengthy debate to remove the proposed 1 mill rate reduction from the budget, and instead hold the mill rate steady at its current level. Councilmembers Chad Andrew Herring, Jori Nelson, Serena Schermoly, Ron Nelson, Tucker Poling, Andrew Wang, Courtney McFadden and Terrence Gallagher voted in favor of an amendment to hold the mill rate constant at 19.314. Councilmembers Sheila Myers, Brooke Moorhead, Dan Runion and Ted Odell voted against the amendment, indicating their support for the proposal that would have reduced the mill rate to 18.314.

The 1 mill rate reduction included in the finance committee’s budget proposal would have saved the average Prairie Village homeowner about $3.25 per month, or about $39 per year, compared to the current rate. The mill rate decrease would have amounted to approximately $425,000 less in revenue next year than will come in at the current mill rate.

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Councilman Tucker Poling argued that the proposed property tax reduction did not provide meaningful relief to homeowners — but would save commercial property owners thousands.

Runion, the finance committee chair, said the committee had taken a budgeting approach this year that avoided the previous practice of “budgeting to a mill rate” — that is, calculating what revenue would come in with the tax rate holding steady and then allocating funds based on that total.

“The approach we took this year was to budget to allow us to more seriously consider a possible mill rate adjustment, which is in the proposed budget,” Runion said, noting that the budget met or slightly exceeded the funding requests of the city’s department heads.

Councilman Tucker Poling, who sits on the finance committee, was first to raise concerns about the proposed property tax rate reduction. He said that while the savings realized by an average homeowner would not be significant enough to amount to real tax relief, the change would end up reducing the tax burden on commercial property owners by thousands and thousands of dollars. He noted that First Washington Realty, the Bethesda, Mary.-based company that owns Corinth Square and the Village Shops, stood to save about $20,000 next year if the reduction were enacted.

“While this doesn’t meaningfully benefit PV families, it does disproportionately benefit some who least need tax relief – and that includes out of state corporate landlords,” Poling said of the proposed 1 mill reduction.

What’s more, Poling argued, because of the state property tax lid bill passed in 2015, Prairie Village might have a hard time restoring the tax rate to its current level if revenues wane during a recession.

“This is not something we can easily undo in the future because of the property tax lid,” Poling said, noting that the city had opposed the tax lid law in its legislative platform in recent years.

Ward 1 councilwomen Jori Nelson was among those to most strongly support Poling’s concerns, noting that some forecasts suggest that a recession could be in the offing in the coming years, an event that would sap hundreds of thousands of dollars in revenue to the city.

But Mayor Eric Mikkelson pushed back forcefully on those arguments, saying that the savings would not be inconsequential for many of the city’s lower income families.

“We have thousands and thousands of homeowning families in Prairie Village, and thousands and thousands of homes at or below our average home value who will benefit from this,” Mikkelson said. “Many of them are seniors on fixed incomes who are crying out to us for help…$40 [per year] means something to them.”

The budget will return to the council for additional consideration in the coming weeks, including discussion of how to allocate the additional funds that would come it at the current mill level.

Of note, however, is that fact that even if the mill rate reduction were to have been approved, many Prairie Village homeowners would still see the total dollar amount they pay in city taxes increase next year.

Prairie Village is among the cities where homeowners have seen appraised values rise the most sharply in recent years, with many homes seeing double digit increases. That trend means hundreds of Prairie Village property owners have seen their real tax burdens rising even as the tax rate has stayed constant. If the property tax rate holds steady from year to year but a home’s value increases by 10 percent, for example, the homeowner’s out of pocket tax liability will increase by 10 percent, even though the tax rate hasn’t changed.

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