Local governments hope to change tax lid law; want to eliminate requirement for public vote

Lawrence City Hall, 6 E. Sixth St., is pictured on May 3, 2016.

? An organization that represents local governments in Kansas plans to push for a bill in the final days of the legislative session that would give them more leeway to increase property tax revenues without necessarily having to seek voter approval first.

The League of Kansas Municipalities said Wednesday it plans to push for a bill that amends a “property tax lid” law that the Legislature adopted in 2015.

That law generally requires cities and counties to seek voter approval before they can adopt a budget that increases the spending of property tax revenues beyond a five-year average rate of inflation.

There have been two bills pending in the Legislature dealing with the tax lid: one that would repeal it entirely; and one that would change the election requirement by making larger budgets subject to protest petitions rather than automatically requiring an election.

Erik Sartorius, executive director of the League of Kansas Municipalities, said his group plans to push for the second option.

“We believe the protest petition legislation, brought forth this session in HB 2376, is the most viable option to give cities a workable framework for budgetary decisions,” Sartorius said in a statement emailed to the Journal-World.

The statement was important because Rep. Steve Johnson, R-Assaria, who chairs the House Taxation Committee, has said that he has been holding off working on either bill until he received a signal from local governments about which of the two bills they thought stood the better chance of getting majority votes in both chambers.

It remains to be seen whether the committee will have time in the final days of the session to work on a tax bill for local governments. Most of the panel’s focus will be on passing a tax bill to close a looming shortfall of nearly $1 billion for state government while also providing additional money for K-12 public schools.

But for cities and counties in Kansas, including Lawrence and Douglas County, the tax lid is a significant issue now because they are starting to prepare their budgets for calendar year 2018.

As it stands now, the tax lid does not apply uniformly across all areas of city and county spending. Local governments are allowed to realize growth in property tax revenues that result from new construction, annexation and increased value of “personal” property such as vehicles.

There are also areas of their budgets that are exempt from the lid, such as new money needed to improve police and fire protection and emergency medical service. The law also exempts money needed for debt service, to pay legal settlements, or to comply with state or federal mandates.

It does, however, apply to money spent on things such as road maintenance, employee pay raises and rising health insurance costs.

The tax lid law was inserted into another tax bill in 2015 by Senate Republicans who said their constituents were upset by rising property tax bills at the local level.

Douglas County Administrator Craig Weinaug, however, said that’s largely the result of local governments are now shouldering the burden of public services that the state government has either cut or eliminated in recent years, services ranging from highway maintenance to community corrections and mental health services.

“The problem with the tax lid is that it makes little provision for inflation, and it makes no provision for things that got passed down to us because the state doesn’t do them anymore,” Weinaug said. “That has added up to several hundred thousand dollars passed down to us.”

Weinaug said that if the tax lid remains in place as it is, local governments will eventually be forced to make major cuts in their annual spending.

“One year won’t be all that dramatic, but over a period of time it will be very, very significant,” he said.

Sartorius said that ultimately, local governments would rather see the tax lid repealed entirely, but they don’t see that as a realistic possibility this year.

Lawmakers budgeted for a 100-day session this year, and so far they have used 76 of those days. That means when they return May 1, they will have just 24 days to reach agreement on a two-year budget, a school finance plan and a tax package to fund them all, as well as dealing with additional issues such as the local property tax lid.