Archive for Wednesday, August 9, 2006

Commissioners hold the line on budget

August 9, 2006

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Streets won't get as much city funding as once thought, but Lawrence residents won't be paying as much in property taxes as city leaders once projected either.

A new citywide 1-cent sales tax also doesn't appear to be imminent.

In a flurry of last-minute moves, city commissioners late Tuesday night unanimously approved a budget that holds the line on the city's property-tax mill levy, agreed to scale back an aggressive street maintenance program and at least temporarily shelved discussion of a new sales tax.

Commissioners approved the $138 million budget after agreeing to pare back the much-discussed street maintenance program from $6 million to $5.3 million. Commissioners agreed to make the cut, in part, in an effort to balance their desire for more street repairs with a desire to keep the property tax rate stable. The city's current street maintenance program is about $4 million.

"This won't do as much as recommended, but it will do a hell of a lot more than we have ever done in the past," Mayor Mike Amyx said. "The streets will be in a condition that the traveling public won't have their teeth jarred out."

The change to the street maintenance program allowed the mill levy to remain at its current rate of 26.375 mills. A mill is $1 in tax for every $1,000 in assessed valuation.

Several city commissioners said it was important to keep the mill levy stable because property tax bills likely still will rise for most people because the average increase in property values is expected to be near 6 percent.

"I would really like to see the message be that we're at least holding the line on the mill levy," City Commissioner David Schauner said. "Most people will still see a 6 percent increase in their taxes, and most people did not receive a 6 percent raise."

Commissioners also briefly discussed a proposal from Amyx that called for a new 1-cent sales tax that would have funded a variety of infrastructure issues and provided property tax relief. Amyx did not push the idea Tuesday, saying that he thought the plan probably didn't have the necessary political support on the commission at this time.

"I do have to say that I think the plan I have given you is a very good plan," Amyx said. "I think it is one we will consider in the future."

In addition, the 2007 budget includes several rate increases. Those are:

¢ a water rate increase that will average 4 percent.

¢ a sewer rate increase that will average 9 percent.

¢ a sanitation rate increase that will average 2 percent.

¢ an increase in the electric, cable and telephone franchise fees ranging from 1 percent to 2 percent.

Comments

mcoan 8 years, 8 months ago

I was about to congratulate them on living within their means, until I read:

"¢ a water rate increase that will average 4 percent. ¢ a sewer rate increase that will average 9 percent. ¢ a sanitation rate increase that will average 2 percent. ¢ an increase in the electric, cable and telephone franchise fees ranging from 1 percent to 2 percent"

So, they DID raise taxes, just not property taxes.

craigers 8 years, 8 months ago

That's what I was thinking mcoan. If I can't get in the front door, I will go in the back, and if not the back, they will crawl through the windows. But thanks for raising our "taxes".

ThomasJefferson 8 years, 8 months ago

In effect they raised property taxes as well because property values are projected to rise 6% and that means higher taxes for everyone. They could have cut the mill levy by 6% to have a steady-state budget.

Jamesaust 8 years, 8 months ago

'City Commissioner David Schauner said. "Most people will still see a 6 percent increase in their taxes, and most people did not receive a 6 percent raise."'

Apples and oranges. The question is: did most people "receive" a 6% increase in their property's value. I suspect that they did this year. Whether there will be any increase for 2007 is looking more and more dicey.

Who knows? May 2007 will see a 6% decline in valuations - a first step to more reasonable prices. I helped a friend moving here for grad school shop for a modest townhouse this last weekend - who knew that anyone would ask $140k for 900 s.f., two-level, 2 bed, unfinished "basement" and garage that couldn't have gone for more than $115k in Topeka? Now that - the purchase/sale price - and not the tax is where Schauner's "6% raise yardstick" applies.

staff04 8 years, 8 months ago

Wow. 900 s.f. would fetch about $350K where I live.

I look forward to the day I can move back to KS and buy 900 s.f. for $140K.

prioress 8 years, 8 months ago

Jamesaust: "The question is: did most people "receive" a 6% increase in their property's value. I suspect that they did this year. Whether there will be any increase for 2007 is looking more and more dicey." Property values are an interesting situation aren't they? We all want our houses to increase, even though that has tax implications. The opposite is more unpleasant. If, for example, your house's value declines 7% a year for a few years, in 10-11 years it will be worth "nothing." Unless one owns the house outright, this is a disaster. If the house's value falls below what is owned on the mortgage, the bank can call the note and demand immediate payment on the balance to protect their assets. Think about it........

belle 8 years, 8 months ago

Staff04, Just because housing is higher where you live, doesn't make it right. The income levels in Lawrence do not accomodate for housing, even if it is ONLY 140K for 900 s. f.

prioress 8 years, 8 months ago

Some people buy more house than they can afford. There is no way to monitor or control this. Want to avoid at least some taxes? Don't own expensive houses and vehicles.

staff04 8 years, 8 months ago

belle- I'm just telling you that it is worse in some areas. I read the LJW online every day, and to hear you all tell it, you live in the most expensive, oppressive place on the planet.

The median income in Lawrence, based on the last census bureau statistics in 2000, is about 60% of what it is here. The median home value based on that same census year in Lawrence is about 45% of what it was here. That is a 15% disparity between income levels and housing costs, yet people here still manage to do it...

Consequently, that median home value has increased by over $100K here in the last 6 years. Unless I see a 300% increase in my salary soon, I have ZERO chance of ever owning property here.

Jamesaust 8 years, 8 months ago

prioress - If value falls at a steady 7% annual rate for 10 years then the value at the 11th year is 51% of the original starting point.

Whether this is a "disaster" depends on the circumstances. What did you buy the house for? How long ago? Did you overpay? Have you "borrowed" the equity in the house to finance your lifestyle? (Do you have $20k @ 30% on credit cards for "stuff" now worth less than $20k?)

Of course, it would seem doubtful that property values would fall 7% for 10 years. Maybe 3% for 10 years. Or 15% over 2 years and then hold steady.

My guess is that the disparity in incomes and property values is about to shrink a tad. If value = $100 but your income = $85 (slightly more than 15% disparity), all it takes is for the value to be cut 5% for 2 years but the income to increase 3% for 2 years for both to arrive at an equal $90. Could valuations decline 5% for 2 years? Sure. Think you can manage a 3% raise 2 years running? Many will. (There we go, staff04 gets a house.)

Still, some fool will buy that townhouse I mentioned and find themselves in the exact circumstance you describe. Sometimes the only way life can teach some people "life lessons" is to smack them hard with a rolled up newspaper across the snout - it hurts, but you get to keep the "learning" for life. The wiser people never got themselves into that pickle to begin with.

(Perhaps the wisest ones of all sold their $1.25M shacks in L.A. this spring that they paid $200k for 20 years ago and moved to Texas where the average house is like $110k - and can now live on the (tax free!) difference for the remainder of their lives - a/k/a, laughing all the way to the bank.)

Richard Heckler 8 years, 8 months ago

Inflated values=inflated property taxes. Normal increases are about6 3%-4% annually.

Just because a community is in a housing boom town situation does not necessarily justify assessing property at boom town rates. A property owner could still sell at high demand prices without an inflated assessment. It all depends if the buyer wants to pay high dollar to live in Lawrence. County assessment should have little to do with high demand market value. I say we are due rebates.

Richard Heckler 8 years, 8 months ago

Considering the city/county has been receiving inflated tax rates for the last 20 years why were they not keeping the streets maintained? Why all of a sudden does Lawrence have sewer capacity problems? Where was the money being spent from 1987-2001?

Since the street situation was not created over night we may as well be patient.

I would have rather have a 1/4 cent sales tax devoted to a city position with staff focused on bringing high salaried non polluting employment to Lawrence. At least that would have the potential of paying for itself.

Sigmund 8 years, 8 months ago

If the community has a lack of supply of new housing (because of zero growth policies for instance) and the demand for housing increases, guess which way the fair market values and assesments are going to go? You are in effect causing the boom in prices.

On a related issue, the ONLY place in the City budget they could find to cut was streets? We need to get new leadership on the Lawrence City Kommission. Now who was it that said the LCK's would be too cowardly to put a sales tax increase on the same ballot as the PLC?

prioress 8 years, 8 months ago

Jamesaust: "If value falls at a steady 7% annual rate for 10 years then the value at the 11th year is 51% of the original starting point." Good point. I stand corrected. The point remains, however, that one is better off to be living in a house that is increasing, rather than one that is decreasing. I still maintain many folks buy too much house. A wasteful society, we are.............

just_another_bozo_on_this_bus 8 years, 8 months ago

"On a related issue, the ONLY place in the City budget they could find to cut was streets?"

I'm sure each of us could find areas to cut that would have little or no effect on our own lives. For instance, people without cars probably think the street budget should be cut, not increased. The criminals amongst us would like to see a cut in the police budget.

What would you cut, Sigmund?

Sigmund 8 years, 8 months ago

The reason many people buy too much house. It is a way to store value without being clobberred by income taxes. Further, with the changes in tax law most people can sell their house without paying capital gains. What other investment is so favorable? Even further, interest on the loan and property taxes are a deduction from current income taxes. People are not just consuming for the fun of it. There is a sound financial reasoning involved that even the dumbest home owner undrstands.

True, all of this assumes that property is worth more than the original purchase price, but over a couple of decades, given the immediate tax benefits, and add in the lack of taxes on gains if you do see appreciation and it is one of the few ways "average" or "working" (pick your favorite populist label) Americans can have money at retirement.

Sigmund 8 years, 8 months ago

I would cut 7% from everyones budget (or at least freeze the budget at last years rate). Then I would order a 5% cut across the board in city employees, with the exception of police and emergency. It is the only fair and egalitarian way to do it, don't you agree? Everyone feels the "pain" equally. Oh, and I wouldn't have wasted all the dollars opposing the SLT.

We elect officials to manage and if needed cut budgets, now you want me to do their job for them? They are to busy planning "Dada Days"? Fine. You give me the authority and the wages of one of the PLC Kommissioners and I'll do it. Deal? If not quit with the shifting the responsibility (and the discussion) away from the elected leaders whose duty it is and who are paid to do the job.

justthefacts 8 years, 8 months ago

On a related issue, the ONLY place in the City budget they could find to cut was streets?"

Amen.

If you don't take proper care of streets, in advance of them getting too awful, they will cost more in the long run.

So instead of doing a regular maintenance program on city streets - one of the FEW government provided services that most people make use of - they decide to cut money for THAT expense and NOT cut out things like ugly sculptures and excess personnel at the high end of the salary structure?? That's like deciding to cut corners in the family budget by drinking less milk, so you can still afford to buy all the beer you are used to drinking!

Jamesaust 8 years, 8 months ago

"I still maintain many folks buy too much house."

I don't disagree. (Statistics make it clear that the size of the average house has been increasing for decades.) But THAT is primarily a function not of value, or income, but of tax subsidies (but to be fair also of real increases in household wealth).

The multiple financial benefits provided by the federal government - particularly via the federal income tax - are exceedingly inefficient in phasing out as income rises. Yes, we do not subsidize Bill Gates' house but I sometimes think we must be subsidizing every else's.

Its one thing to implement such a program for the poor and the lower middle class: making the jump to homeowner is famously difficult. However, democratic societies are also famous for the ability of the majority to vote themselves benefits (even if those benefits are illusionary, where the left hand pays the right hand and vica versa).

What is the consequence of this massive interference with an otherwise free market? Market distortions of course. By lowering the "cost per square foot" of housing for virtually everyone, then virtually everyone "consumes" more. Even Marxists conceed that obvious point. Heck, not only can you keep tax free much of the capital gain on your property even if you aren't "rolling it over" into another house, you can do that for two houses. (How many people "need" a subsidy for two houses? I would say few. But you find a politician willing to vote against that type of largess and I'll show you a suicidal politician.)

Sigmund 8 years, 8 months ago

I agree with what Jamesaust says but would like to add a couple of things he did not mention. First is that landlords do not get the same tax breaks as homeowners (they get different ones true, but not as favorable) and as a result renters in this society end up paying more than they otherwise would have to. Second, it has been a long establish public policy dictum that home ownership provides the community as a whole with benefits (better and more involved citizens come from ownership than tennantship) which are at least equal to the cost of the tax "subsidy". You would have to make a convincing argument against that later point before the tax law is going to change.

Jamesaust 8 years, 8 months ago

"You would have to make a convincing argument against that later point before the tax law is going to change."

True. But I'd think that the convincing argument is merely to reassemble the horse and the cart --

while on one hand home ownership may provide "better and more involved citizens," on the other hand maybe "better and more involved citizens" is a characteristic that is co-incident or even a precursor to home ownership. (The old "chicken-and-egg" question.) Just because two things tend to occur together does not mean that one causes the other, or if you cause more of one to occur, you also get more of the other.

The convincing argument might be that every dollar of tax not paid (because of housebuying subsidies) is a dollar someone else - a person without a house subsidy - has to pay instead. Or, instead of pretending that the left hand doesn't pay more taxes because the right hand is getting a tax subsidy, you eliminate the subsidy for virtually all but the truly needy and lower the tax rate for all. While this is a zero-sum game for tax purposes, it removes the distortion to the trade-off housebuyers make (that is, how much can I / do i want to afford).

Steve Jacob 8 years, 8 months ago

They say now you can/should buy a house as high as 6 times you household yearly income, when it used to be 2-3 times your income.

Sigmund 8 years, 8 months ago

Enforcer, money is scarce for streets in large part because it has been spent on various pet projects, waste (ie we are still paying for a City Manager that was fired, one who knew how to live within a budget until the current PLC LC Kommissioners), zero growth policies which do not allow tax base to expand, spending related to fighting the SLT and Walmart and on and on.

In fact, the income from all taxes has never been higher, its just that waste and frivilious spending has far outpaced tax revenue growth!

Sigmund 8 years, 8 months ago

Which came first the chicken or the egg? Actually both sceintist and philosphers have agreed upon the answeer to that seeming puzzle. Want to guess what they decided? As to carts before horses, I think most everyone is agreed that the PLC dominated Lawrence City Kommission has put the spending cart before the revenue horse, and now that the chickens have come home to roost, they find that they have counted their chickens before they hatched and wish to revive the goose that laid the golden egg.

As to which came first .... http://www.cnn.com/2006/TECH/science/05/26/chicken.egg/

just_another_bozo_on_this_bus 8 years, 8 months ago

"I think most everyone is agreed that the PLC dominated Lawrence City Kommission has put the spending cart before the revenue horse,"

Personally, I think the biggest problem with revenue is the neglect of basic services and maintenance over several decades. Nevertheless, I think a lot of posters here would agree with you, despite the lack of any actual evidence to support that contention.

Instead of making one unsupported statement after another, why don't you add up all the stuff you think money has been wasted on, (give us an actual number) and tell us exactly how that should have been spent, or how much it would have saved the average taxpayer if it hadn't been spent at all.

Sigmund 8 years, 8 months ago

If your point is that this City Kommission continues in the tradition of neglecting basic infrastructure of past Commissions, I don't think I would disagree. But the past is the past and to improve the future we can only make changes in the present Kommission and demand they not continue past nor make new mistakes.

I stand by my specific reccommendation that when faced with budget shortfalls it is far better for the long term future health of the community that the budget be balanced. If there is a shortfall all departments, including streets, share equally in cost cutting (the exceptions being rare, police, fire, emergency medical). If the Kommission goes on a wild spending spree and exceeds current revenues, everyone should suffer the negative impact. This puts wide spread political pressure on the Kommission to check and balance that behavior.

I don't hate roundabouts, libraries, buses. I hate political pandering that this represents especially when the Kommission runs out of money for more basic things like sewers and streets. I don't hate the smoking ban, living wages, the Business Czar. I hate that the loss of future tax revenues this represents and the arrogance of those who claim its not their ideas that are to blame. I do resent our Kommission raising taxes when there is not evidence they have done a thing to reduce waste and redundancy in the current budget.

Lawrence deserves better. We deserve better leadership and management than we are getting and paying for. Sceince and philosophy may have solved the riddle of the chicken or the egg, but the great mystery to me is why Lawrence tolerates the leadership we have, and why they don't demand better?

just_another_bozo_on_this_bus 8 years, 8 months ago

Sorry, Sigmund, but your schizophrenic rants in which you simultaneously try to sound "reasonable" while spewing your unsubstantiated vitriol are unconvincing.

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