While the city of Lawrence is considering how to cut services and jobs to deal with an expected budget shortfall this year, Douglas County’s budget seems to be on track.

But in a few weeks, county leaders will have to decide whether they want to add new services and economic initiatives in 2008.

If they do, it likely will mean a tax increase, County Administrator Craig Weinaug said. He is almost certain he will recommend a mill levy increase but isn’t sure how much. A mill is $1 for every $1,000 of assessed valuation.

Commissioners will receive Weinaug’s budget proposal later this month.

“The mill levy increase will be tied to new and additional expenditures that either I recommend or the county commission wants to make,” Weinaug said. “The increase can be avoided if the commissioners decide not to do these new things.”

Some of the “new things” involve economic initiatives but Weinaug said he wasn’t ready to disclose them. Additional county services could include programs to improve transitional services for inmates leaving jail and rejoining society.

“We have a very good jail, but when we make comparisons with what other communities are doing that have good jails, we don’t provide very good transitional services,” Weinaug said.

County Commissioner Charles Jones said he wasn’t sure what decisions he or Commissioners Bob Johnson and Jere McElhaney would make concerning the additional expenditures.

“I think if we want any enhancements, Craig is right, we’re going to have to raise taxes,” Jones said. “You never want to see the mill levy go up but it may be that we have to do some things in order to bring business to the community.”

The city of Lawrence is adjusting its spending in the 2007 budget to the tune of $3.5 million. The cuts – in response to a $1 million shortfall in sales tax revenue and an expected slowdown in property tax collections – have cost city jobs. City commissioners also want to avoid increasing the city’s tax rate.

Property taxes

The county has not been hit as hard by the downturn in sales and property taxes and has not made cuts to its current budget.

Half of the county’s revenue comes from property taxes, Weinaug said. The remainder comes from a variety of sources, including the sales tax, interest on idle funds, mortgage taxes and building permits.

Affecting property tax revenue is the leveling out of housing prices in Lawrence, fewer houses being built and fewer property improvements being made, Weinaug said. But while the value of housing and improvements are less than before, property valuations are still going up; they just aren’t going up as fast as in previous years, he said. This year’s increase has been 3 percent.

“That’s the smallest increase we’ve had in the 15 years I’ve been preparing budgets, but it is still an increase,” Weinaug said. “I’m projecting that what we’re going to see from now on is 2 or 3 percent (increases).”

Even in years when the county sees lots of new buildings and houses, the property tax revenue will not be what it once was, thanks to action by the Kansas Legislature. In 2006 the Legislature removed the tax on business machinery and implements, which was money that went to counties and not to the state. That went into effect this year and will affect the 2008 budget. In Douglas County, machinery and implements made up 6 percent of the county tax base before the legislative action. The Legislature came up with some replacement revenue for counties but that will end after a couple of years.

If the real estate market continues to decline or goes bust, the county will be hurting, Weinaug said.

Other revenue streams

The county is not as reliant on the sales tax as the city is, Weinaug said. The city projected sales tax increases this year to be 4 percent. Instead it has been flat. The county projected sales tax increases to be only 2.5 percent.

“It’s a guess, and you do the best job you can,” Weinaug said of estimating sales tax revenue. “So far, we are seeing some decline, but it was projected so we’re not seeing anything different than what we budgeted for.”

The county’s finances have been helped this year by interest on idle funds, Weinaug said. He initially projected 2007 interest revenue at $984,000. He has increased that projection to $1.5 million.

“That revenue has been a lot better than expected,” he said.