Kansas lawmakers consider moving up property tax lid date; Lawrence opposes

Kansas Statehouse in Topeka, February 2014.

? The city of Lawrence has joined a coalition of local governments pushing for changes in a law passed last year that will impose a new property tax lid on cities and counties.

Both the House and Senate tax committees are holding hearings this week on competing bills that would revisit the tax lid that lawmakers passed last year near the end of the 2015 session as part of a broader tax bill aimed at balancing the state budget.

Under that new law, beginning in 2018, cities and counties would have to get voter approval before they could increase their property tax revenues by more than the rate of inflation.

The Senate is now considering a bill, which Lawrence opposes, that would move up the effective date of that law to July 1 of this year, which would effectively block cities and counties from raising taxes in their upcoming budget cycle because there would hardly be enough time to schedule such an election.

Senate Assessment and Taxation Committee Chairman Les Donovan of Wichita, left, and Sen. Tom Holland, D-Baldwin City, listen during testimony Wednesday on a bill that would impose a property tax lid on local governments effective July 1.

Chairman Marvin Kleeb, left, R-Overland Park, and other members of the House Taxation Committee listen to testimony from cities and counties in favor of a bill to modify a property tax lid enacted last year.

The city said it opposes that bill, and the tax lid generally, in part because it ties revenue increases to the urban consumer price index, or CPI, which is generally thought of as the inflation rate.

But Lawrence said the CPI measures the cost of a basket of goods and services, like food and housing, that are consumed by households, and it does not reflect the cost of things municipal governments typically buy, such as sand and gravel, water and sewer pipes, fire trucks and playground equipment.

But the city is supporting an alternative bill in the House that would leave the 2018 effective date in place and allow cities and counties to use their home rule authority to exempt themselves from it.

It would also change the election requirement to provide that at least 10 percent of the registered voters in a city or county would have to sign a petition in order to force a public vote on a proposed tax increase.

And it would use something called the municipal cost index, instead of the consumer price index, as the standard for limiting property tax increases.

“The city of Lawrence believes strongly that local spending and taxing decisions should be left to local officials representing the citizens that enacted them,” the city said in written testimony to both committees.

Last year’s amendment was introduced by Sen. Jacob LaTurner, R-Pittsburg, with strong backing of the Kansas Association of Realtors. LaTurner said at the time that some of his constituents had asked for state action after their local governments had approved mill levy increases.

The city of Lawrence has increased its property tax rate in recent years as well, but the city said that was largely in response to actions by the state.

It noted, for example, that since 2003 the state has stopped funding aid to local government through the Local Ad Valorem Tax Reduction program, a form of revenue sharing that sent state sales tax money back to cities and counties to hold down their local property taxes. That would have amounted to more than $1.2 million for Lawrence this year, the city said.

Since 2003, the city’s property tax rate has risen 12 percent, to 31.488 mills. That translates to about $543 a year in property tax on a home valued at $150,000.

The city also pointed to a 2006 law that effectively phased out property taxes on machinery and equipment used in manufacturing, a law that took two-thirds of the personal property value in Lawrence off the tax rolls.

“Our local elected officials are faced with trying to fund a number of community priorities, including addressing a need for affordable housing for our residents, maintaining adequate facilities and equipment for our operations, providing for public safety, and maintaining public infrastructure,” the city said.

The Senate Assessments and Taxation Committee wrapped up two days of testimony on its bill Wednesday. Chairman Les Donovan, R-Wichita, said afterward that he wanted supporters and opponents of the bill to work out a compromise before his panel would begin working on the bill.

Sen. Tom Holland, of Baldwin City, the ranking Democrat on the panel, said he also believes the Senate bill needs work.

“There are economic development implications to the bill. There are social service implications of the bill. There’s just a lot to evaluate in trying to understand that trade-off,” he said.

The House committee held its first day of testimony Wednesday, hearing from supporters of that bill. It will hear from opponents on Thursday.