The ’90s are over.

That’s the mantra these days for Lawrence City Manager Mike Wildgen as city commissioners hear myriad spending requests, like they did last week during a series of hearings for the 2006 city budget.

What Wildgen means is that the stock market is no longer booming. Gone, too, is the wave of optimism that produced a flurry of consumer spending and new tax revenues for government. That has been replaced by a penny-pinching society wincing at the gasoline pumps and nauseous from stock market roller coaster rides.

The economic changes have produced heartache for government budget-makers.

“I don’t consider it a rosy revenue picture by any means,” Wildgen said.

It’s a scenario that should make taxpayers squirm.

Wildgen, who will release a proposed budget in late June, said he hoped to put forward a plan that kept the property tax mill levy unchanged.

City commissioners said they, too, were reluctant to increase property taxes.

“My preference is for no mill levy increase,” said Mayor Boog Highberger. “But I’m not going to rule it out.”

“You always want to hold the line on the mill levy, but I don’t think anybody can guarantee that is going to be the outcome,” Commissioner Sue Hack said.

A mill is $1 dollar in property tax for every $1,000 in assessed value of property that a person owns. For the owner of a typical $170,000 Lawrence home, every 1 mill increase in property tax is an extra $19.55 in property taxes per year.

City commissioners must finalize the 2006 budget by early August.

Stagnant sales taxes

Nowhere is the city’s new revenue reality clearer than in the sales taxes it collects each month. New projections put together as part of the city budget process estimate that sales tax collections will grow by only 1.3 percent this year. That follows virtually stagnant growth in 2001 and 2002. And the percentage is well below the 5 percent to 6 percent growth rates that were common during the booming ’90s.

Youth agency at risk of losing city funding (05-19-05)

Plan calls for those who want roundabouts to pay up (05-18-05)

Salary increases sought for library staff (05-17-05)

Wildgen and others, though, were hopeful that sales tax growth was set to pick up again. The growth rate last year was near 5 percent.

But 2005 has been a year where consumers have had to swallow plenty of bad news at the gasoline pumps. Hack said she thought that was why sales taxes were slumping not only in Lawrence but in cities across the region. Scary for governments and fretful for taxpayers, too, is that no one is predicting a significant drop in gasoline prices anytime soon.

“We’re going to be facing that (gasoline prices) for a long time,” Hack said. “Maybe it is just like sticker shock and people will realize that they can live with these prices and still go out for dinner. But for a lot of people right now, they just can’t.”

Property values rising

Lawrence’s real estate market remains healthy, posting near-record high home sales during the last year. And property owners for years have seen their tax bills consistently rise because of increases in their property’s assessed valuation.

That’s expected to be the case again this year. Wildgen is predicting that property valuations in the city will increase by about 6 percent. That means the city should have about 6 percent – or about twice the rate of inflation – more in property tax revenue in 2006 than it did in 2005.

But Wildgen said that number in real dollars isn’t as large as some people may think. That’s because of all the local government budgets – city, county and school district – the city’s is the least reliant on property taxes. The city began becoming more reliant on sales taxes in the 1980s and increased that reliance in the 1990s.

In real dollars, the 6 percent increase will generate an extra $1.1 million. Meanwhile, city commissioners this week heard requests from city department heads seeking improvements that would cost $3.07 million and add 31 new city employees.

Wildgen said most of those requests wouldn’t ever find their way into his recommended budget, unless city commissioners tell him it is all right to budget for a mill levy increase. He said much of the anticipated $1.1 million in new property tax revenue must be reserved to pay for ordinary, inflation-related increases. For example, a recommended 3 percent increase in city salaries would increase the city’s cost by about $1.2 million, though some of the money would come from nonproperty tax sources such as grants or water and sewer bill revenue. And then there are expenses such as rising utility bills, health insurance, and, yes, high-priced gasoline to keep the city’s vehicle fleet running.

The reality of it all began to sink in for city commissioners after three days of budget hearings last week. City Commissioner David Schauner – who along with top vote-winner Mike Amyx campaigned hard during the last city election to keep the mill levy steady – said he had hoped the city’s increase in assessed valuation would have provided more dollars to work with. When he looked at the total amount of funding requests, he came to a simple conclusion.

“This is going to be a pretty bloody process unless we want to come up with new revenue,” Schauner said.