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Lawrence building totals off to slow start in 2014; a brief history of local property tax rates
Perhaps my wife has infiltrated the Lawrence construction industry and convinced the builders of her motto: Summer is for shopping (And in case you are wondering, the calendars that show summer beginning on June 21 are sneered at in my house.)
As we told you yesterday, current retail sales numbers are painting a positive picture of the Lawrence economy. Recent building permit numbers, however, aren't quite as rosy.
The latest report from City Hall shows that the total value of construction projects underway in Lawrence is at its lowest level since at least 2009. Through May, the city has issued permits for $31.5 million worth of building projects, which is more than a 55 percent drop from the same period a year ago.
That's not too surprising. Last year was a monster year for the local building industry, at least when it came to big projects. There was the downtown hotel, Rock Chalk Park and the library, which all contributed mightily to construction totals. But what is surprising is that this year's construction totals are lagging behind more ordinary years. From 2009 to 2012, the average number of projects underway through May was about $39 million. We're 20 percent below that average, so it seems safe to say that we're off to a slow start in 2014.
Home builders, apparently, are among those out shopping with my wife. (That explains the pink hammers and the "bedazzled" tool belts.) Builders in May started only nine new homes in the city. That's the lowest May total since at least 2009, although the average since 2009 has been only 13. For the year, builders through May have started 51 homes, down from 74 started at this time last year.
The five year average number of home starts is 55. So, the numbers aren't that bad for home builders, but the 2013 totals had created some optimism that 2014 would be the year the industry really started to sustain some momentum. That doesn't seem to be happening in Lawrence, although early totals suggest it is occurring in the Kansas City metro area. May numbers haven't been released yet, but through April the eight-county KC metro area was off to its best start since 2007. In case you are wondering, builders in KC have started 1,304 homes through the first four months of the year. More specifically, Olathe has issued 174 permits, Overland Park 142, Lenexa 63 and Shawnee 55. Again, all of those numbers are through April.
Lawrence's numbers also have one other oddity to them thus far: No permits have been issued for apartment units. This is the first time since 2010 that the city has started the first five months of the year without new apartment construction.
But things change quickly in the construction industry. Plans have been approved for at least two large apartment projects that could begin construction later this year: a multistory loft-style development near Ninth and Delaware streets in East Lawrence, and a huge seven-story apartment/retail project across the street from Memorial Stadium. Developers with that project recently announced that it is expected to be a $75 million project. That single project would be more than double all the construction that has taken place thus far in the city.
So, the picture may look a bit different in a few months. Maybe the motto should be wait until fall. Maybe fall will provide some relief for the construction industry, but not for me. Where I reside, the motto is Fall is for Fashion. Winter? No. Winter is for Waterford. Spring? Surely you jest. Everyone knows Spring is for Second Mortgages.
In other news and notes from around town:
• We've also been reporting lately on the potential for a property tax increase at Lawrence City Hall. Commissioners had their latest budget study session yesterday, and while no decisions were made, I didn't hear anything to make me believe a tax increase isn't likely. It appears the discussion will start around a 1.5 mill increase and grow from there.
Part of the numbers provided by City Hall on Tuesday was a history of the local property tax rates. You can look at the chart here . The quick takeaway from the numbers is that during good economic times, the city was fairly successful at holding the property tax rate stable or even allowing it to decline. From 2003 to 2008, the city's property tax mlll levy dropped by 1.44 mills. During tougher economic times, the city's mill levy has increased. From 2009 to today, the mill levy has increased by 3.36 mills. During that time period, the city also added three sales taxes that increase the sales tax rate by 0.55 percent.
Increasing taxes during tough economic times isn't uncommon. When growth slows, government still has to pay its overhead. Paying overhead costs — like salaries, health insurance and pension costs — has been a theme of this latest proposed tax increase. But the period since 2009 also has been one of significant new projects as well. They have included an $18 million expansion of the Lawrence Public Library and $22.5 million of expenditures related to the Rock Chalk Park recreation center and the adjacent privately developed sports facilities that will be leased to KU.
Voters approved the library expansion at the ballot box, and that has been the single largest increase in the city's mill levy during the time period. Voters also approved the sales tax increases, which fund public transit and infrastructure repairs. The recreation center never was put to a public vote, and it hasn't technically caused an increase in any tax rates. City officials are using sales tax money that previously was dedicated to paying off debt that has since been retired. But I mention it in this context because the option existed for those sales tax dollars to have been used to help fund the existing budget as opposed to funding a new building project.
Of course, the city is not the only tax game in town. The chart shows the tax rates for the city, the school district, the county and the state of Kansas. When you add up all the tax rates, you'll see that the total mill levy paid by Lawrence residents has increased 10 out of the last 13 years.
Since the end of 2008, which is when the economy really started to sour, the mill levy has increased by 8.11 mills. For the owner of an average $170,000 home, that means the property tax bill currently is $158 more than it was in 2008. Another way to look at it is to compare how the tax bill has increased compared with inflation. In 2008, a $170,000 home paid $2,314 in taxes. Today, it pays $2,472. If the tax bill would have grown at the rate of inflation during that time period, the bill would be $2,547. So, in that scenario, taxes have increased less than inflation.
Before you throw your shoe at me, though, let me note another scenario. Perhaps the value of your house also grew at the rate of inflation. If so, your $170,000 home in 2008 is now worth about $187,000. The tax bill on a $187,000 home is $2,719, or about 7 percent greater than the rate of inflation. Of course, the key variant there is whether your home increased at the rate of inflation or not. I'm not sure that all did, given the downturn in the real estate market. But some certainly did.
As for the sales tax, that is kind of easier to understand. For every $10,000 of taxable goods you purchase in Lawrence, you are now paying an extra $55 in taxes because of the increased sales tax rate.
Make of that what you will, but this is the season that City Hall is awash in numbers, so I thought I would let you swim around with us for a bit.