Despite million-dollar discrepancy, city still saw better-than-budgeted sales tax growth for 2017; local retail sales better than in most area cities
Multiple city-produced sales tax reports last year had more than $1.1 million in discrepancies, the Journal-World has found. The discrepancies didn’t result in any missing money for the city, but they did mask a more than $550,000 windfall in sales tax money the city received in 2017.
Each month the city’s finance department compiles a report for city commissioners and the public measuring the amount of sales and use tax dollars the city has collected thus far in the year. The report compares the year-to-date collections to the amount the city budgeted to collect. However, for all of 2017, the city listed the wrong budgeted amount on the reports.
For the first five months of the year, the city listed a budget figure that was about $1.1 million higher than the actual budgeted amount. For the final seven months of the year, the city listed a budget figure that was about $560,000 higher than the actual budgeted amount.
The end result is the monthly reports delivered to city commissioners failed to report that the city’s sales and use tax collections in 2017 came in about $550,000 above what the city originally budgeted to collect for the year. Instead, the key chart in the year-end report showed sales tax collections came in about $380,000 less than budgeted.
Bryan Kidney, the city’s finance director, said this week the report was mislabeled. He said the amounts listed under the “city budget” category should have been described as projected sales tax numbers.
Kidney said the purpose of the report was to show city officials how sales tax collections were coming in compared with the latest projections. But the discrepancy has raised the question of whether the city is doing enough to track surplus tax collections.
The Journal-World never found a city document that listed the amount of surplus sales tax collections. Rather, the newspaper spent several hours gathering figures from city budget documents and state treasurer’s documents, and did calculations to determine the city collected $552,087 more in sales taxes than it budgeted for in 2017. The Journal-World then confirmed that number with the city. Kidney said he does plan for 2018 reports to list both the projected amount and the originally budgeted amount.
Sales tax collections have outsized importance in the city’s budget. At about $39 million, sales taxes are the second-largest revenue source in the city’s budget — trailing only water and sewer fees — and they are the largest revenue source in the city’s general operating fund.
The city approved its 2017 budget in August of 2016, meaning the city had to project in the summer of 2016 what it thought sales tax collections would be in 2017. Because of the difficulty in projecting sales tax revenues that far in advance, it is common for governments to offer updated sales tax projections as the year progresses.
However, those updated sales tax numbers play a different role from the original sales tax numbers that are included in the approved budget. That’s because city governments only get once chance per year to set their property tax rates. That’s done during the summer budget-making process.
The amount of money the city budgets to receive in sales tax dollars can have an impact in how the city sets its property tax rates. If the city is projecting a significant increase in sales tax collections, it can lessen pressures to raise the property tax rate. A projected decline in sales tax revenues can have the opposite impact.
Since at least 2012 the city has consistently had sales tax revenues that have exceeded the city budget. In fact, the period between 2011 and 2016 produced the largest growth in retail sales in recent memory, surpassing even the booming period of the late 1990s and early 2000s, according to city figures compiled by the Journal-World. During that time, sales tax collections grew by about 23 percent. However, city taxpayers haven’t seen a reduction in their property tax rates. From 2012 to 2017, the city’s mill levy has increased from 29.5 mills to 33.2 mills. Given that home values have been rising at a significant pace, the true amount of property tax increase most homeowners have seen is even greater.
The last several years have created a question for some: Is there a flaw in the sales tax system? When the city has the rare year that it collects less sales taxes than it budgets, there is pressure to either cut services and/or raise the property tax rates. However, as the last several years have shown, when the city collects more in sales taxes than budgeted, there isn’t much pressure to use the surpluses to lower property tax rates.
As someone who has watched city budgets for more than 20 years, I should note this isn’t something new. Surpluses haven’t received a lot of attention over the years, and in some key ways the budget process under City Manager Tom Markus is more transparent and easier to understand than past processes.
In the past, though, the expenditure portion of city budgets did come in pretty much at or under what the city approved as part of its budget process. Surpluses often would end up by default increasing the city’s rainy day funds, also known as fund balances. Now, however, what happens to the surpluses is a little harder to follow. In recent years, the city has exceeded its budgeted spending amount in some areas, following the idea that addressing an issue now will be cheaper than letting it wait until the next budget year.
It is not for me to say what is the correct process, but I can report that as property taxes took a big spike recently, there are more taxpayers wondering if growing sales tax revenues can help offset those property tax increases.
Having a better idea of how large our sales tax surpluses are may help answer that question.
For those of you who follow my monthly report of sales tax activity, here’s a look at how the year ended: Lawrence sales tax collections grew in 2017, but not as fast as they had in past years. Compared with other major retail centers in the state, though, Lawrence still had above-average growth.
Lawrence sales tax collections grew by 2.2 percent in 2017. That’s down from past growth rates. In 2016, the city posted a 5.5 percent growth rate. It also is worth noting that sales were slower in the second half of 2017 than the first half. So, that may be a trend to keep an eye on for 2018.
Compared with other large retail centers in Kansas, Lawrence fared a bit above average. Here’s a look:
— Lenexa: up 6.6 percent
— Shawnee: up 3.9 percent
— Olathe: up 2.7 percent
— Lawrence: up 2.2 percent
— Topeka: up 0.7 percent
— Overland Park: up 0.4 percent
— Saline County (Salina): up 0.2 percent
— Kansas City, Kan.: down 0.7 percent
— Sedgwick County (Wichita): down 1.4 percent
— Riley County (Manhattan): down 2 percent
I’m sure coffee sounds good to some of you following the historic late-night Royals victory and the celebrations that lasted into the morning. My healthful ways don’t allow me to drink coffee, so I’ve resorted to popping leftover Halloween Skittles approximately every 1.2 seconds. But those of you in southwest Lawrence soon may have a new option for coffee or other fast food pick-me-ups. New plans have been filed for commercial development near the corner of Clinton Parkway and Inverness, and they likely are going to get a close look by wary neighbors in the area.
A local development group has filed plans at City Hall seeking a special use permit that would allow for a “fast order food with drive-through” type of business to locate near the southeast corner of Clinton Parkway and Inverness. It is one of four restaurants proposed for the location, in addition to two office/retail buildings.
Thus far, the development group hasn’t made any announcements about what type of restaurants it hopes to draw to the site. Neighbors in the area have been wary of several previous development proposals for the corner — the most recent one a proposed family fun center that would have housed batting cages, electric go-karts, an arcade and mini-golf.
The paperwork filed at City Hall indicates the same group — led by Lawrence businessman Glen Lemesany — is behind this project as well. Lawrence-based architect Paul Werner is designing the project, and he previously has said neighbors shouldn’t worry about the area becoming a new center for typical fast-food restaurants and their drive-thrus that sometimes can operate all night. He reiterated that point this week.
“A coffee shop is realistic,” Werner said via email of possible uses for the drive-thru space. “We won’t get, nor do we want to get a McDonald's or Taco Bell, etc.”
The actual paperwork filed with the city, however, doesn’t get into any specifics about the type of users the development hopes to attract. It only describes the proposed use as “fast-order food with drive-through.”
Werner, though, explained that the city’s code lumps a variety of uses into the fast-order food category. A coffee-shop with a drive-thru and a fast-order hamburger restaurant are pretty much treated the same under the city’s zoning code, although how they fit into a neighborhood may be significantly different.
It is worth noting, though, that the plans submitted to the city actually show drive-thrus for two of the four restaurant spaces. It probably is unlikely that there will be two coffee shops side by side, so other fast-food drive-thru uses seem possible.
Werner said tenants haven’t been found for the project yet. He said the development group has filed for the special use permit for the drive-thru use because that process can be time consuming.
“We thought we would get that in the pipeline as we sort out who might actually want to go there,” Werner said via email.
The plans do list three of the four restaurant spaces as fast order food establishments, while the fourth space is listed as a “quality restaurant,” which is a City Hall term used to describe a restaurant that generally has table service and is focused on diners coming and staying for a bit as opposed to the high turnover of a fast-food establishment. The plans show the quality restaurant building also having a 1,000 square-foot patio.
As for the office and retail buildings on the site, Werner said tenants haven’t been found for those either. The plans list one building at just over 14,000 square feet and another at 8,000 square feet.
We’ll see how the project progresses through City Hall. The area between Inverness and Crossgate has developed with a lot of apartments over the past several years. That created concern from adjacent single-family home owners, who said they weren’t envisioning apartments for the area when they bought their homes years ago.
The family fun center idea met stiff opposition from neighbors. It is a little hard to tell how they will respond to the latest proposal. One development that did go through with minimal pushback was a new Hy-Vee convenience store at the corner of Crossgate and Clinton Parkway. It is a traffic generator at many hours of the day and evening, and it involves some outdoor uses.
Would drive-thru restaurants have a significantly different impact on the neighborhood than a convenience store?
I don’t know, and I have other issues to deal with now. I have to restock my candy supply, and don’t let what you hear about stealing candy from a baby fool you. My 9-year old daughter evidently is no baby, and I don’t remember the process previously involving jiu-jitsu.
Man, I — and my midsection — sure wish I knew jiu-jitsu.
Dog treat business eyes East Lawrence for headquarters; roundabout talk at City Hall; city manager search update
Dogs around the country may end up getting a taste of East Lawrence, which may cause you to wonder whether canines soon will start creating funky art, hosting wild kickball games and forming their own powerful neighborhood association. But that’s not what I”m talking about. Instead, I have news of a business that plans to use an East Lawrence building to distribute dog treats across the country.
Lawrence businessman Gary Rexroad has confirmed that he and his wife, Angie, have purchased the long vacant building at the northwest corner of 11th and Pennsylvania streets to house a new dog treat venture. The Rexroads have been running a dog food business called Love Grub for the last couple of years. Its dog food is on the shelves of grocery and pet stores throughout the Lawrence, Topeka and Kansas City area.
But about three months ago, the couple purchased the rights to Lucky Paws dog treats, which was created by Lawrence entrepreneur Raven Rajani. Rajani was looking to exit the business, and Rexroad purchased the recipes and the rights to market the product.
Rexroad said the dog treat business was appealing because dog treats are lightweight. Bags of dog food, on the other hand, are heavy. It costs a lot of money to ship bags of dog food to stores around the country, but shipping dog treats nationwide is much more feasible for a small company. Rexroad said the plan is to make the dog treat business a national one through deals with retailers and through online sales.
That’s where the East Lawrence building at 1045 Pennsylvania St. comes into play. Rexroad has filed plans at City Hall that would allow for the dog treats to be “manufactured” inside the building.
“Manufacturing is such a big word though,” Rexroad said. “It is not smokestacks or rendering plants or anything like that. It is just a commercial oven. Right now we are doing it out of our kitchen, but there is only so much volume you can do that way.”
Rexroad said the business already is having difficulty keeping up with the demand for the product. The company has negotiated a deal to be in Natural Grocer stores across the country. He said Lucky Paws seems to be filling a niche in the treat market because it is grain free, gluten free, and made in small batches.
“We’re selling it as a product produced by a small company that gives you a healthy alternative that you can trust,” Rexroad said. “The company’s phone number is on every bag, and that number rings to my wife’s cellphone. It is not like it goes to a big switchboard.”
Rexroad said if plans are approved, the company likely would add a couple of employees to assist in the production of the dog treats, which are made from ingredients such as potato flour, whole rice flour, peanut butter, eggs, ground turkey, and even real salmon filets.
“It is a real high-end treat,” Rexroad said. “The ingredients are people-food quality.”
I’ll be honest, this is the point where I became a bit nervous. The last time I wrote an article about a dog treat business — a nonprofit venture by the Lawrence Community Shelter — I ended up being persuaded to eat a dog treat because they “taste a lot like a cookie.” I have no doubt that the dog treat was very high quality, but I will say that dogs are not the best judge of cookies. (Although, I’m sure dogs all over town talk behind my back about how my coat is lacking in sheen.)
Rexroad did not offer me a sample, but if plans are approved, you likely will be able to go to the business and buy some for yourself. In addition to the production and warehousing operations, plans call for the 2,200 square-foot building to also house a pet supplies and grooming retailer. Rexroad said an existing company in town would run that portion of the business.
Rexroad said he’s begun having meetings with the East Lawrence Neighborhood Association and other residents in the area to talk about plans for the building, which several years ago operated as a store that sold used items for home improvement projects.
“We want to be great neighbors in East Lawrence,” Rexroad said. “We want to be part of that neighborhood. It is such an awesome part of town.”
The Lawrence-Douglas County Planning Commission is scheduled to make a recommendation on the special use permit for the business at its July 22 meeting. City commissioners would hear the issue a few weeks later.
In other news and notes from around town:
• It is a busy night at City Hall this evening. Commissioners meet at 3 p.m. to go over the recommended 2016 budget from Interim City Manager Diane Stoddard. Then, commissioners have a long list of topics they’ll discuss. Here’s a look at some of the larger ones:
— The Lawrence Community Shelter on Monday made its plea for increased funding from the Douglas County Commission to help the homeless shelter address a shortfall in funding this year. Tonight, the shelter will make its request to the City Commission. It is seeking $200,000 total from the city and the county, and has warned of staffing and service cuts if it does not receive the funding this month. City commissioners are expected to hear the item tonight but not make a final decision on any funding, Mayor Jeremy Farmer told me.
— We’ll learn something about roundabouts and city commissioners this evening. The three commissioners who took office in April will have their first decision to make about a roundabout. The commission is being asked to accept a $600,000 federal grant that would fund the construction of a roundabout at Harvard Road and Wakarusa Drive. The past commission had gotten back on the roundabout bandwagon after construction of the devices had slowed somewhat in recent years. That group approved the construction of the new dual lane roundabout at Wakarusa and Legends/Inverness Drive. At the time, engineers said they likely would recommend one for Harvard and Wakarusa, which has been the site of 18 crashes from 2011 through 2014. We’ll see whether this commission continues to support roundabout projects. This grant will require the city to come up with $60,000 in matching funds.
— In case you have forgotten, the city is searching for a new city manager. That process hasn’t come out of the gates blazing, but rather commissioners have taken their time to find a search firm to help with the process. Tonight, commissioners will consider a $26,200 contract to hire Ralph Andersen and Associates to oversee the city’s search process. According to the contract, the firm expects the process to take about 75 to 90 days. No word yet on other details of the search process. For example, commissioners will need to decide whether they want to host public meetings with two or three finalists for the position. That has become a more common practice with high-profile hires in governmental organizations. I’ve heard some commissioners express interest in that idea, but the commission hasn’t yet committed to the process.
— Property tax breaks for the rest of us. That’s one way to look at a discussion that is expected at City Hall tonight. Commissioners will discuss how to use the Neighborhood Revitalization Act in the future. The act is a method where property owners can get a rebate on a portion of their property taxes, if they make improvements to their properties that cause the value of their properties to increase. For example, I tear down the ramshackle garage on my house, and replace it with something more befitting my scholarly nature, like a library that just happens to have an 85-inch flatscreen television and a chair with a built-in cooler. (For like Shakespeare on PBS and such.) That may cause the value of my house to go up, say $40,000. The Neighborhood Revitalization Act would allow me to receive at least a partial tax rebate on the property taxes I would pay on that $40,000 addition.
But commissioners haven’t used the act in that way. Instead it has been approved to provide a tax rebate for an expansion of The Eldridge Hotel, for an architecture office, for the rehabilitation of an abandoned historic property, apartment projects, improvements in the Warehouse Arts District and several other projects. Plus, commissioners have struggled with the policy that currently is in place. The policy recommends that the standard NRA tax rebate should be for no more than 50 percent of the new taxes. But thus far, every NRA rebate the city has approved has been greater than 50 percent, often checking in at the 85 to 95 percent level.
Commissioners will discuss whether they want to shift gears a bit by declaring a few neighborhoods in need of revitalization, and then letting property owners know that their improvements would be eligible for a partial tax rebate. There also will be discussion about whether the city wants to continue to use the act to provide an incentive to larger commercial projects as well. But all indications are that the three new commissioners — Stuart Boley, Matthew Herbert and Leslie Soden — are going to have a different set of criteria for determining when such projects should receive an incentive. If you are in the business of developing multimillion dollar developments in town, the discussion tonight and in future days will be one to follow.
Commissioners meet at 5:45 p.m. tonight at City Hall.
Another urgent care medical clinic slated for Sixth Street; big announcements from Free State Festival; items of note from City Commission elections
If turkey-on-pita or that wonderfully catchy Spangles jingle was medicine for your body, you’re still out of luck in Lawrence. But soon you will be able to go see a doctor in the Sixth Street location that formerly housed the Spangles restaurant. (And, you can always ask the doctor to sing the jingle. You never know.)
Plans have been filed at Lawrence City Hall for MedExpress to locate in the former Spangles building at 3420 W. Sixth St. If you remember, the fast-food restaurant closed down in late 2013. MedExpress is a West Virgina-based walk-in health clinic that treats everything from broken bones, cuts and scrapes, colds and flus, and a host of other nonlife-threatening ailments.
According to its website, the walk-in clinics are open seven days a week from 8 a.m to 8 p.m. The company has locations in seven states, but it looks like the Lawrence clinic will be its first in Kansas.
It certainly won’t be the first to start the trend of walk-in health clinics coming to Lawrence. West Lawrence residents, I don’t know what you have been doing — but perhaps we can talk in private later — but doctors certainly have been interested in serving you lately. Just a couple of weeks ago we reported that another walk-in clinic company — XpressWellness Urgent Care — had filed plans to build near the corner of Sixth and Folks Road. That’s just a couple of blocks away from this site. Interestingly, Lawrence developer Doug Compton played a hand in both projects. XpressWellness is going into the Bauer Farm development that Compton is a part of, and the paperwork for MedExpress shows that Compton’s First Management now owns the Spangles building.
No word yet on when MedExpress plans to open. The site will undergo a significant renovation. For some reason, it appears the medical office will not be keeping all the 1950s diner-style neon that exists at the Spangles buildings. Plans call for most of the existing building to be demolished. A new structure that is about 2,000 square feet bigger will be built. All told, the clinic will be about 5,000 square feet.
In other news and notes from around town:
• This news is just in: For those of you who didn’t get enough funk in the recently completed election season, one of the masters of funk will be performing a live concert in Lawrence this summer as part of the Free State Festival. The Lawrence Arts Center announced this morning that George Clinton and Parliament-Funkadelic will be a headliner of the festival, which runs June 22-28.
Noted comedian Bobcat Goldthwait also will be in town for the festival. He’ll be screening a documentary that he directed about comedian Barry Crimmins. Look for more information about the complete festival lineup and more details about showtimes soon.
• My french fry habits alone put me much closer to Bill Clinton than George Clinton, so you should find it as no surprise that I’m better versed on politics than funk. Even though I suspect there are many of you sick of the political season, we should do a quick wrap-up of some items from last night’s City Commission elections. Here are some things I think we learned:
— It was an odd year for money in Lawrence politics. The top three vote winners in the election were the candidates who raised the least amount of money. Leslie Soden, the top vote-winner, raised just less than $7,000 for the entire campaign, according to the most recent filings. The top fundraiser, Stan Rasmussen, raised just more than $25,000. He finished fifth in the six candidate field. The second-highest fundraiser, Bob Schumm, finished sixth. Couple this with the fact that supporters of the police headquarters sales tax greatly outspent opponents in November but still lost. Perhaps the role of money is changing in local politics. Perhaps social media is making it easier to run grassroots campaigns. Perhaps we just caught voters in a particular mood. Likely, it is a bit of all three.
— Any money that even looks like it may have touched the Koch brothers, Americans for Prosperity or other such conservative causes is poison to the touch in Lawrence. That seems to be the most likely explanation for why Rasmussen fell from second-place in the March primary to fifth place in the general election. Rasmussen had to deal with a controversy in the final week of the campaign as some voters expressed concern about $4,500 in donations that he took — and then later returned — from a prominent southeast Kansas family involved in conservative political causes. Rasmussen tried to explain that the money from the Crossland family came to him because he was a classmate with the elder Crossland in Leadership Kansas, not because the two shared political philosophies. For what it is worth, several people have come forward and said Rasmussen really isn’t a conservative in the ilk of Crossland. But Lawrence voters, it appears, take no chances on that front.
— This may be the last April election we have. One of the items that got a bit of talk in political circles last night is whether the Kansas Legislature will approve a law that would move the city and school board elections to even numbered years in November. County Clerk Jamie Shew told me he thinks the bill has a real chance of approval. City and school elections would still be nonpartisan but they would be on the ballot with partisan races such as governor and presidential races. Now that the campaigning is done, I’m going to look at that bill more, and I’ll report back. The implication could be large though. For one, some members of the City Commission will have to have their terms adjusted, if elections move to even numbered years. The bigger implication, though, may be how it changes the voter mix in Lawrence. Generally, KU students don’t come out to vote in City Commission elections. Generally, they do for presidential elections. If there are City Commission names on the ballot, will they vote in that race as well? It has the potential to be a game-changer.
City estimates it may cost hundreds of thousands of dollars per year to keep concealed weapons out of city buildings
It appears the city soon will have to buy hundreds thousands of dollars worth of security measures. Either that, or the city will have to learn to live with a new state law that would allow concealed-carry permit holders to bring firearms into City Hall and other city buildings.
City commissioners at their Tuesday evening meeting will consider formally asking the Kansas Attorney General for an exemption from the new state law until Jan. 1, 2014. The state law — approved by the legislature and signed by the governor this session — essentially contains an automatic one-year exemption period for local governments. The city also may be able to get three additional one-year exemptions, although that is less certain.
The law no longer allows city or county buildings to be posted with the "no gun" signs that make it illegal for anyone, including concealed-carry permit holders, to bring a concealed weapon into the buildings. Under the new law, governments can only post those signs if the buildings have adequate security measures, such as metal detectors and security officers.
Lawrence city officials have begun calculating the cost to purchase and staff such metal detectors. A memo from City Attorney Toni Wheeler estimates it will cost about $5,000 for each metal detector, plus at least $42,000 a year for a single police officer to staff the metal detector—and the Lawrence Police Department, Wheeler wrote, believes two officers may be necessary for each detector. That would place the annual operating costs for the program at more than $84,000 for each building with a detector. And the cost may be even greater, because the personnel numbers represent starting salaries and don’t factor in benefit costs or other costs to equip a police officer.
Wheeler says at least three city buildings — City Hall, Lawrence Municipal Court and the public access area of the Police Department’s Investigations and Training Center — all warrant consideration for security systems. Beyond those three, city commissioners also would have to decide whether recreation centers and other city offices need the security measures.
New security costs for the city are expected to be addressed in the City Manager’s recommended 2014 budget, which is scheduled to be released in July. The costs could add up. If the city decided to include recreation centers in the program, there would be a total of nine buildings to equip and staff. At a minimum of $42,000 per building, that's almost $400,000 a year, plus the cost of the metal detectors. At $84,000 per building — which would be the case if two officers are required — it would be more than $750,000 a year.
But say you wanted to have security measures in place for every city-owned building that currently prohibits concealed firearms. The city currently has 47 buildings listed in its administrative policy, which means it would cost $3.9 million to provide a two-member security detail at every location. That, of course, is not going to happen. It probably would be a bit odd to have a metal detector at the city’s Landscape Shop or the Wastewater Treatment Plant, for example. Those places probably will become buildings where concealed-carry permit holders can have a weapon.
It will be interesting to see how city commissioners react to the new legislation. The previous City Commission sent a letter to the legislature objecting to the bill while it was under consideration. Whether the city’s objections rise to the level of spending more than a half-million dollars on security each year, I don’t know. The city already spends some money on security: a police officer attends each Lawrence City Commission meeting, and a bailiff is employed by the Lawrence Municipal Court.
If the city gets serious about installing metal detectors, there will be quite a few items to discuss. It probably would require the public entrances at City Hall to be changed significantly, since there are three ways for the public to enter City Hall. The city also could have a discussion about whether security officers — rather than fully sworn police officers — would be appropriate to staff the metal detectors. That may reduce the personnel cost for a security program.
And then there are city buildings such as the Lawrence Public Library and the Lawrence Arts Center that attract large crowds on a regular basis. How would they be secured and staffed?
Of course, the city always could have the discussion of whether any harm would come from allowing licensed individuals to carry a weapon in city buildings. According to the Kansas Attorney General’s office, it already is legal for concealed-carry permit holders to carry a weapon on various pieces of city property. Every city-owned park, for example, is a place where concealed-carry permit holders are entitled to have a weapon. “Parks, parking lots and other open public property" are no longer able to be restricted through signs, according to the Attorney General’s Web site. That didn’t always use to be the case, but the law was changed, I believe, during the 2010 legislative session.
City commissioners won’t be the only ones that get to have this fun. Douglas County also will have to go through the same exercise with its buildings, although it already has a metal detector for the Judicial and Law Enforcement Center. Public schools won’t have to install metal detectors under the new law. School officials can continue to post the "no gun" signs on school buildings, which will make it illegal for concealed-carry permit holders to bring a weapon into the building.