City Manager Tom Markus said a proposed property tax rate increase to fund construction of a new police headquarters is not the revival of the project voters rejected a few years ago.
“We’re going with a very different approach,” Markus said.
As part of his recommended 2018 budget, Markus is proposing a mill levy increase of 1.25 mills, utility rate increases and the elimination of nearly a dozen positions. Expenditures for all departments total about $200 million, and Markus is recommending a $415,000 increase, or .56 percent, in spending from the city’s general operating fund.
The proposed 1.25-mill increase would amount to about a $29 increase in annual property taxes on a $200,000 home. The mill levy increase would go to fund the construction of the first phase of a new police headquarters.
The budget also includes approximately $9 million in unfunded department requests, including more than $6 million in deferred capital improvement projects and unfunded requests for new staff positions in the human resources, IT, police, and fire-medical departments. In response to requests for funding increases, funding is recommended to stay flat for some outside agencies, including the Lawrence Arts Center, the K-10 Connector and the Lawrence-Douglas County Health Department.
New police headquarters
The police department has been requesting facility improvement for years. Currently, the department has staff working out of two buildings and stores evidence and equipment at additional locations. In 2014, Lawrence voters narrowly rejected a 0.2 percent citywide sales tax to fund a $28 million police headquarters.
The City Commission will begin considering Markus’ recommended budget Tuesday. Mayor Leslie Soden agrees that the proposed police headquarters project has significant differences.
“Voters shot that down, so we’re not going to just turn around and try to slide through the same kind of project that voters had just rejected,” Soden said. “That would be in bad form for us to do something like that.”
In addition to phased construction and a smaller price tag, Soden said the idea is to more efficiently address the city’s building needs by combining city facilities and looking to collaborate with the county and perhaps even the highway patrol. Not using sales tax is also important so as not to disproportionately affect people with lower incomes, Soden said.
“I think property tax can be a more appropriate mechanism for funding,” Soden said. “Sales tax can be regressive.”
The new proposal would be constructed in phases, with the first phase estimated to cost about $17 million. The parameters of the project are also different.
Markus said the proposal prioritizes constructing the building on land the city owns, as opposed to making a significant land purchase as part of the project. He said at this point there aren’t a set number of phases, and that the project will be done in increments based largely on what resources are available.
The goal is to have a campus that, over the long run, could enable the Douglas County Sheriff’s Office to also locate on the site, Markus said. The initial plans for the police headquarters are in line with the commission’s goal to operate more efficiently by consolidating some of the city’s 40-plus facilities. The same tactic is being considered for the city’s solid waste operations.
“We’re awfully scattered, and I’m trying to move us to a point where we end up with more campus-type approaches with our staff, so that there’s the economies of scale of working together,” Markus said.
If approved by the commission, the 1.25-mill increase would generate $11-12 million toward the $17 million facility, Finance Director Bryan Kidney said. He said the remainder of the funds needed for the first phase could be covered by currently outstanding debt being paid off, which would enable the city to issue more debt without raising the tax levy. Alternatively, the retired debt could provide room to fund other projects or allow the city’s tax rate to go down.
This year, $1.5 million is allocated toward the study and design of a police facility. If the budget recommendation moves forward, Markus said next year would consist mainly of determining a building site and drafting designs to match that site and potential future phases. Markus noted that process would go through the City Commission, with opportunities for public input.
“There’s a lot of process left in all of this where the public certainly has an opportunity to speak to the commission,” Markus said.
Spending on the police headquarters would fall under an exemption to the state’s new tax lid, which requires cities and counties to get voter approval before increasing property tax revenue from one year to the next beyond the rate of inflation.
More money from increased property values
A hike in the property tax rate isn’t the only place the city would see a boost in revenue. Next year, the amount generated from the citywide sales tax is estimated to grow by about 2.2 percent and the city’s share of the countywide sales tax is projected to grow by about 2 percent, according to budget projections. Licenses and permits are expected to grow 8 percent.
An uptick in the assessed value of properties in Lawrence is also expected to add new funds. The amount generated from property taxes is projected to grow by about $18.6 million, or by about 2 percent. However, the Journal-World has reported that 62 percent of homeowners saw their property values increase by more than 2 percent.
Kidney explained that the budget’s projections are conservative, and the hope is that when the actual figures are determined in mid-June, the amount generated from property taxes will increase by more than 2 percent. That will mean the state’s tax lid will likely be a factor.
Under the lid, the amount of additional money the city is allowed to collect without getting voter approval is generally limited to the five-year average rate of inflation, likely to be about 1.5 percent. If the additional funds from increased property values don’t fall under the law’s exemptions, the new spending lid dictates that the tax rate go down or that an election be held to get voter approval to collect those increases.
However, Kidney said the breadth of the exemptions to the law could mean neither occurs. He said some of the most notable exemptions are increases in valuation due to new development, as well as spending on debt service and public safety.
He said the majority of the city’s expenditures are within the exemption.
“What we’re hoping is we can capture the valuation increase for those exempted purposes,” Kidney said. “But there’s not an indication in the general fund that we would exceed the tax rate more than what was needed, which would require an election.”
Once the final figures are known, the City Commission will consider the budget with the updated revenue projections at a work session June 13. Commissioners will determine June 20 whether to hold a mail ballot election to increase taxes beyond the parameters of the new spending law.
Eliminating the city auditor
The recommended budget eliminates 11 positions, including the city auditor position, which examines the performance of city programs. Markus proposed eliminating that position as part of the 2017 budget, but commissioners ultimately agreed to keep it.
Recent audit reports have included a review of the Lawrence Police Department, which concluded that better data collection could strengthen law enforcement responses to people with mental illness. Last year, an audit report found the city was not collecting some payments on deadline, or at all. Markus recently ordered an independent financial audit after it was found that a local business owed the city "significant" sums and may not have been billed.
The elimination of the position would save the city $130,000 in 2018. Markus emphasized that the city auditor position is not a financial auditor, and said that instead the position deals mainly with evaluating city programs by gathering information about the city’s procedures, comparing that to best practices and trends in other cities, and making recommendations.
“From my perspective, staff should be doing that anyway,” Markus said. “… I don’t think it’s the norm to have this position.”
The city auditor falls under the direction of the City Commission, and along with the city manager is the only commission-appointed position. Open meeting laws require any discussions with the auditor that involve more than two commissioners to take place during a public meeting.
Markus said that ultimately, the decision regarding the city auditor comes down to commissioners. Mayor Soden said she is undecided regarding the choice, but she thinks that at least the structure of the position needs to be reconsidered.
“We’ve been kept so busy over the last two years; the idea that we could also manage, as a group, one person is really optimistic,” Soden said.
Of the 11 positions Markus is proposing to eliminate, the city auditor position — currently held by Michael Eglinski — is the only one that is filled. The other 10 positions that are recommended for elimination are vacant, including three utility meter reader positions, one assistant golf pro position, an administrator at Sports Pavilion Lawrence, and the city's communications manager.
In the 2017 budget, Markus also recommended the elimination of the city’s arts and culture director position, currently held by Porter Arneill. Markus said he is not recommending that position be eliminated this year because Arneill has also assumed the duties of the communications manager.
Increasing utility rates
Under the recommended budget, residents would see an increase in their utility bills.
If adopted, city utility bills for the typical household would go up about $65 per year. The largest increases would come from proposed increases in water, sewer and stormwater rates, which the commission will vote on as part of the budget process.
A key factor in those hikes is the more than $74 million Wakarusa Wastewater Treatment Plant, which will give the city greater capacity to handle growth and meet new treatment regulations by the Environmental Protection Agency. The plant is more than halfway complete and is scheduled to begin operating in January 2018.
When explaining why a rate increase is needed, Markus said water, sewer and stormwater services are heavily reliant on infrastructure, and that it’s an area that cities often fail to keep pace with.
“We have to keep up with our infrastructure,” Markus said. “Quite frankly, that’s where we’ve headed with a lot of this.”
The City Commission will consider two billing models for water and sewer services designed to encourage residents to use less water by penalizing high consumption. Commissioners told city staff in November that they were generally supportive of adopting a three-tiered rate model for residential water use, which if adopted would go into effect in 2018 along with the yet-to-be determined base-rate increase.
The budget process going forward
Exactly what the final budget will look like will be determined this summer. City commissioners will alter the budget over the next two to three months, for final adoption in either August or September, depending on whether an election related to the tax spending lid is held.
The recommended budget was released Thursday, about a month earlier than last year.
“We’ve tried to start this a lot earlier,” Markus said. “And part of that thought process was to get the manager’s recommended budget out there to give the public enough time to really see what is there, rather than waiting until the latter part of the process.”
The recommended budget will be presented to the City Commission at its work session Tuesday. The work session will begin at 3 p.m. Tuesday at City Hall, 6 E. Sixth St.