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Lawrence sales tax collections remain strong; a look at how local shoppers are saving the city's budget
While the Kansas Legislature continues to struggle to find a tax policy to fill a gaping budget hole (thus far the idea of using one hand to point fingers and the other to rub a magic lamp has fallen short), the city of Lawrence continues to receive good tax news. Sales tax collections remain on a roll in Lawrence.
Lawrence recently received its April sales tax check, which reflects taxes collected on sales made generally in February or late January. Whether it was big Valentine’s Day gifts, or the gifts you have to buy for forgetting Valentine’s Day, spending totals were up in Lawrence. Sales tax collections for the month grew by 5.1 percent in Lawrence, compared with the same period a year ago.
For some reason, spending in Lawrence was much better in February than it was in other major retail centers in the state. For example, Sedgwick County, Overland Park, Olathe and Topeka all saw declines in their sales tax collections for the month.
It is never wise to read too much into any one month, but the latest report continues a trend for Lawrence. The city now has received four of its 12 sales tax checks for 2017, and they have added up to a pretty positive trend. For the year, Lawrence has seen sales tax growth of 4.2 percent — or about $350,000 — compared with the same period a year ago. That puts Lawrence near the top of the pack of other large retail centers in the state. Here’s a look:
— Lenexa: up 10 percent
— Lawrence: up 4.2 percent
— Shawnee: up 4.2 percent
— Olathe: up 3.7 percent
— Topeka: up 2.9 percent
— Kansas City: up 2 percent
— Overland Park: up 1.1 percent
— Sedgwick County: up 0.4 percent
Sales tax numbers are a good indication of economic activity in a community, but they also are important to keep in mind this time of year for another reason. It is budget season at Lawrence City Hall. As we reported, City Manager Tom Markus released his recommend budget for 2018 last week. Sales taxes are a critical part of the budget.
While Lawrence’s performance this year is good, city officials are counting on it to remain good throughout the entire year. Markus’ recommended budget shows projections for how 2017 will end. The budget is projecting that 2017 sales tax revenues will come in 4 percent higher than 2016 totals. We are at 4.2 percent now, which is better than most cities in the state. Lawrence needs to keep up the pace to meet those projections.
A closer look at the budget shows just how important sales tax revenues have become to the city. It basically is the revenue source that makes up for all the other failing revenue sources. One struggling revenue source is franchise fees, which is a special tax you pay on several utility bills, such as electric, cable, telephone and gas bills. The city budgeted to collect $8.1 million in franchise fees in 2017, but city officials now project they’ll collect only $7.8 million. Licenses and permits — building permit fees are the big one in this category — were budgeted at $1.38 million for 2017. Now, they are projected to come in at $1.26 million. And then there are fines, such as the ones you pay for speeding or parking in a spot you are not supposed to. Evidently, Lawrence is becoming much better behaved in that regard. Fine revenue is really sagging. The city is budgeted to collected $3.02 million in fines in 2017 but is now projecting to collect only $2.4 million.
Just those three categories alone account for a $1.1 million budget shortfall at City Hall. Given that, you may think the city’s budget is in trouble. It is not, though. The city in 2017 budgeted to collect $72.22 million in revenues for its general operating fund. It is now projecting it will collect $72.81 million in the general fund. The city is on pace to have a nearly $600,000 budget surplus in its main operating fund.
The reason: sales taxes. The city budgeted to collect $28.5 million in general fund sales taxes in 2017. It is now projecting it will collect $29.7 million in sales taxes for the year — a $1.2 million surplus.
Lawrence shoppers are saving the city’s budget. A valid question, though, is: Could they save it even more?
As the city asks for this tax increase — and don't forget, the county may ask for one too — it will be interesting to watch whether it creates a debate about the city’s policy for allowing new retail development. An issue that continues to lurk just beneath the surface is the city’s 2016 denial of a proposed shopping center south of the South Lawrence Trafficway and U.S. Highway 59 interchange. The city is getting sued over that denial. The lawsuit is moving slowly. Whether that is a sign the two sides are trying to reach a settlement, I don’t know, but it would not surprise me given some of the chatter I have heard.
The developers commissioned a study that showed if the City Commission would have approved the shopping center in early 2016 that by 2018 the new retailers at the center would have added about $970,000 in new sales tax collections to the city’s budget. In case you are scoring at home, the 1.25 proposed mill levy increase in Markus’ budget will generate about an extra $1.1 million in property tax revenue. If the shopping center had been in place, perhaps a smaller mill levy increase would be needed. Opponents of the shopping center may not agree. It certainly is fair to note that developers' estimates don’t always come true.
What is likely to be true, though, is that by the time the city, the county and the school district get done with their budgets, there will be a fair number of people unhappy with their property tax bills.