Lawrence sales tax collections among the best in the state; city on pace to collect more than budgeted in 2017
As the holiday shopping season begins and the year ends, the general rule in some households is to ignore all financial statements (and turn off all the lights and be very quiet if a man from the bank comes to the door.) But that shouldn’t be the case at Lawrence City Hall. With just one more month to go, a key city financial indicator — sales tax collections — looks pretty good.
The city recently got its November sales tax check from the state. It was 5 percent — or about $100,000 — larger than the November 2016 check. Even though the check is for November, the money represents sales that were made more in the September time period. So, thus far, the overall Lawrence economy made up for any downturn in KU football attendance, which theoretically should pump sales tax dollars into the city.
The more important numbers, though, are the year-to-date figures. Barring something dramatic with the December check, Lawrence once again will see its total sales tax collections grow — and by a pretty respectable amount. That hasn’t been the case with other major retail areas in the state.
Through November, Lawrence sales tax collections are up 2.5 percent. That’s not as robust as last year, when Lawrence had the highest sales tax growth rate of any major retail area in the state. Collections grew by 5.5 percent in 2016. This year, Lawrence will have to settle for having the highest growth rate of any community outside of Johnson County. Here’s a look:
— Lenexa: up 7.1 percent
— Shawnee: up 4.5 percent
— Olathe: up 2.7 percent
— Lawrence: up 2.5 percent
— Topeka: up 0.7 percent
— Overland Park: up 0.7 percent
— Saline County (Salina): up 0.1 percent
— Kansas City, Kan.: down 0.4 percent
— Sedgwick County (Wichita): down 0.9 percent
— Riley County (Manhattan): down 1.8 percent
Lawrence has seen sales tax growth every year since at least 2012. Not only has there been growth, it has been historically impressive growth. From 2011 to 2016, sales tax collections have grown by 23 percent. That’s better than the 21 percent growth rate compiled from 1997 to 2002, which were considered some of the heyday years for Lawrence growth and development.
If you are looking for something to dampen the enthusiasm, it is worth noting that the second half of 2017 has been weaker than the first half of the year. That may not be a great sign for 2018.
Regardless, barring something unexpected, Lawrence City Hall leaders should be pretty pleased with 2017 sales tax totals. The city is on pace to have a budget surplus in the sales tax category. If the December check comes in at about an average level, the city will collect about $1.6 million more in sales taxes than it budgeted for 2017.
But City Hall leaders quickly will point out some other categories are coming in below budget. One of those is use taxes, which is a cousin to sales tax. It is a special tax you pay when you buy an item from out of state and aren’t charged a sales tax. For reasons that aren’t entirely clear to me, the city’s 2017 budget called for a pretty large increase in one particular type of use tax. That particular increase hasn’t materialized — although use taxes have gone up, but not as much as budgeted. That shortfall means combined sales and use taxes for the city are on pace to come in about $800,000 higher than budgeted in 2017.
Still not a bad way to end the year. It sure beats sitting in the dark.
Where is the Rock Chalk Park bump? Sales tax numbers create questions about how much Junior Olympics visitors spent in Lawrence
There is no doubt that the Junior Olympics held at Rock Chalk Park in late July was a great event. More than 8,000 athletes competed, thousands of additional fans attended, and having track and field legend Carl Lewis as a guest speaker gave me an excuse to wear my 1980s sprinter shorts. But as new numbers suggest, there is quite a bit of doubt about how much the big event added to the Lawrence economy.
Every month I track Lawrence sales tax collections. For the last couple of months, I’ve been waiting to see a large spike in sales tax collections related to the influx of Junior Olympic attendees, who presumably were spending a lot of money in town. Thus far, there has been no spike.
And now the city’s top tourism official says he’s not necessarily surprised. He thinks about two-thirds of all the spending generated by the event probably went to other communities because Lawrence had only a fraction of the hotels needed to serve all the visitors.
“I think it was a bit of a learning curve in terms of what our expectations should be,” said Michael Davidson, executive director of Explore Lawrence, the local CVB organization.
More on that learning curve in a moment, but first let’s look at the numbers. Based on the sales tax figures, it is hard to see how even a third of the spending occurred in Lawrence.
Shortly after the event, Davidson’s group estimated the event pumped about $25.8 million into the economy. That number, though, should have an asterisk. It estimated direct sales from the event were about $17.7 million, but those sales created other indirect sales that brought the total to $25.8 million. Regardless, the report estimated the coffers of local governments would get about $450,000 in sales tax revenues.
There are two months the city of Lawrence would have expected to see their sales tax checks from the state reflect that bump. Because of the time it takes for the state to process and distribute sales tax money to the city, the October check is the one that is most likely show the bump. Instead, the city’s October sales tax collections actually were down slightly from October of 2016. They were down by about $16,000, meaning that total sales in Lawrence for that time period were down by $1 million compared with the same period last year.
Conceivably, some of the impact could have shown up in the September sales tax check. That month’s collections were up by about $45,000 compared with September 2016. The $45,000 in sales taxes equates to about $3 million in sales. That represented about a 2 percent increase, which is a fairly ho-hum month for the city.
And, it is a long ways from $25.8 million. To be fair, it was never realistic to think Lawrence was going to capture all the economic impact from the Junior Olympics. It was known early on that many people would be staying in Topeka and the Kansas City area because of a lack of hotel rooms in Lawrence. But when you actually see the numbers, it is a little stunning. Davidson estimates that about 41,000 hotel room nights were booked as a result of the weeklong event. Lawrence had a little more than 7,000 of them.
That’s under 20 percent of all the rooms. If you remember, Davidson is estimating that Lawrence captured about a third of all the spending from the event. But did it really? It is hard to see that in the sales tax numbers.
I think the hope was that even though people may have been staying in a hotel elsewhere, they would do a lot of exploring and spending in Lawrence. The city even created a special bus route to take people from the Junior Olympics event to downtown. But Davidson said that bus didn’t attract large numbers of riders most days.
“We didn’t see a lot of activity,” Davidson said. “We learned these were really serious athletes. They stayed on site a lot.”
Davidson said he did hear from discount retailers and other such stores that they had an uptick in business with spectators buying everything from bottled water to umbrellas. I’m sure restaurants were busy too. Our eyes didn’t deceive us; there were a lot of people in town.
I’ll be honest. I don’t understand why the sales tax collections didn’t see a bump. I’m just telling you that they haven’t received one thus far. (It is possible the event provided a boost, but sales were sluggish in all other parts of the month. I don’t think that is what happened because that would mean normal retail sales plunged by about 15 percent, which would be concerning for other reasons.)
But the numbers do give Lawrence leaders something to think about. If the event business is going to be a major part of our economic development efforts, we need to understand the paybacks. The city and the CVB spent more than $200,000 attracting the event to Lawrence. As we’ve noted, it is not clear the city’s coffers have received enough of a boost to cover those upfront expenses.
While sales taxes appear stagnant during the period, the city’s transient guest tax — a special tax charged on hotel rooms — has received a boost. But depending on which month you look at, the boost is closer to $25,000 to $50,000 in new revenue.
"Our hotel business was strong," Davidson said, pointing to those numbers.
Davidson said his office certainly is working on a strategy to convince area communities to help pay for some of the upfront costs associated with events. The pitch is that communities like Topeka and Kansas City benefit from the overflow visitors. While the number of hotel rooms in Lawrence is growing, it is unrealistic to think we’ll build enough to handle an event of this size. But, speaking of realistic, will governments in area towns really agree to provide funding to help Lawrence win a bid for a major event? Davidson thinks so.
“We definitely will have to educate, but I don’t think there will be a lot of hurdles,” he said. “They will be able to look at how their transient guest taxes go up during that time. The nice thing about this is the numbers don’t lie.”
If that is true, Lawrence needs to better understand what our numbers are saying.
For those of you who follow my monthly reports on sales taxes, here are those basic numbers:
Lawrence sales tax collections for the October period fell by 0.7 percent. For the calendar year, sales tax collections in Lawrence are still 2.2 percent ahead of where they were last year. The city is still on pace to collect more in sales tax revenues than what the city budgeted to collect for 2017. Lawrence sales, though, have been slower in the later part of the year, which creates questions heading into the holiday shopping season.
Here’s a look at how Lawrence’s sales tax collections year to date compare with other major retail areas in the state:
— Lenexa: up 7.2 percent
— Shawnee: up 4.4 percent
— Olathe: up 2.6 percent
— Lawrence: up 2.2 percent
— Topeka: up 0.7 percent
— Overland Park: up 0.6 percent
— Saline County (Salina): down 0.1 percent
— Kansas City, Kan.: down 0.7 percent
— Sedgwick County (Wichita): down 1.1 percent
— Riley County (Manhattan): down 2.5 percent
The plan to grow the city’s sales tax coffers by filling Memorial Stadium had a bit of a setback this weekend. Regardless, the latest report shows the city’s sales tax collections are still growing, although not as rapidly as in past years.
Plus, I still think something positive will come out of last weekend’s game. If you were like me and watched it on the Jayhawk Television Network, you saw approximately 200 ads for a miraculous device called the Brownie Bonanza, and I ordered approximately that many of them. That ought to cause something to grow.
In actuality, the latest sales tax report is for the city’s August collections, so spending from KU football fans isn’t yet showing up. The large amount of spending the city saw as a result of the Junior Olympics in late July also isn’t reflected in these numbers. Though the state calls this its August sales tax report, there is a delay in the time it takes for retailers to collect sales taxes and send them into the state. So, the figures in the August report really are more indicative of sales that happened in June or thereabouts.
For the month, Lawrence sales tax collections were up by 0.3 percent, which is kind of a ho-hum performance. One-month totals, though, don’t mean a whole lot. They vary widely from month-to-month. Year-to-date numbers show a better trend. Through August, Lawrence sales tax collections are up 2.7 percent compared to the same period a year ago. That is still one of the better growth rates in the state, but it is not as good as last year’s performance, when sales tax collections grew by about 5.5 percent.
For much of last year, Lawrence sales tax collections were the fastest growing of any of the large retail markets in the state. The fact that the growth has slowed down lends some credence to the theory that Lawrence saw a large uptick in 2016 thanks to the addition of some major retailers, especially Menards. But Menards has now been open for more than a year, so its numbers are already baked into the system, so to speak. (Sorry for the phrasing. I’ve still got Brownie Bonanza on my mind.) Are there other retailers out there that would add significant amounts of money to local sales tax collections, if they were to locate in Lawrence? Are some of them part of the proposal for a shopping center south of the South Lawrence Trafficway and Iowa Street intersection? I don’t know. City Hall officials, though, should work to figure it out, given the importance of sales tax collections to the city’s budget.
Here’s a look at how Lawrence’s year-to-date sales tax growth compares to other major retail areas in the state:
— Lenexa: up 7.8 percent
— Shawnee: up 4.3 percent
— Lawrence: up 2.7 percent
— Olathe: up 2.7 percent
— Topeka: up 0.9 percent
— Overland Park: up 0.7 percent
— Saline County (Salina): down 0.1 percent
— Sedgwick County (Wichita): down 0.3 percent
— Kansas City, Kan.: down 1.1 percent
— Riley County (Manhattan): down 2.3 percent
• When it comes to sales taxes, there is one other figure worth tracking these days: The sales tax surplus at City Hall. While sales tax collections aren’t growing as fast as they did in 2016, they still are on pace to come in well above budget.
Estimating future sales tax collections is difficult (predicting the future tends be that way.) As a result, the city ended up being pretty conservative in terms of budgeting for 2017 sales tax revenues. It budgeted to collect about $23.8 million in city sales taxes. (It also gets a large portion of the countywide sales tax, but that’s not included in these numbers.) If the city’s sales tax collections stay on their current pace — i.e. finish the year 2.7 percent higher than last year — the city will collect about $25.4 million in city sales taxes.
That will result in about a $1.5 million surplus, or in other words, about $1.5 million that the city will receive but has not budgeted to spend in 2017. That would continue a trend. I previously did some math and estimated that from 2012 to 2016 that the city has collected at least $3.5 million more in sales and use taxes than what it budgeted to collect. If you were to add in the city’s share of the countywide sales tax, the number likely would be even higher.
That unexpected money, though, hasn’t been enough to prevent increases in the city’s property tax rate. From 2012 to 2017, the city’s property tax rate has increased from 29.5 mills to 33.2 mills.
One of the reasons the extra sales tax money hasn’t been enough to prevent property tax increases is because the city also is spending more than expected. As we reported in July, spending in the 2017 budget is expected to come in about $4 million above budget.
• In other news and notes from around town, today is Sept. 11. It has been 16 years since the terrorist attacks. On this day, I re-read an article that I wrote back in 2011. It is about a small Kansas town and the connection it made with a group of New York City firefighters who responded to the terrorist attacks there. It reminds me of our ability to connect and to be kind. If you would like to read it, click here.
The latest report is out, and Lawrence sales tax collections continue to be good — but not good enough in one key regard. They aren’t good enough to avoid a property tax increase from City Hall.
The city recently got its July sales tax check from the Kansas Department of Revenue. It showed it collected 2.8 percent more in sales tax revenue than it did during the same period a year ago. Monthly totals vary wildly, so the more important figure is the year-to-date calculation. Through the first seven months of 2017, the city has collected 3 percent more in sales tax revenue than during the first seven months of 2016.
That’s not bad. It is about twice the rate of inflation. But, it is not as good as it has been in past years. Sales tax collections in 2016 grew by 5.5 percent. The slowdown comes at an inopportune time for Lawrence taxpayers. In a roundabout way, it is one of the reasons Lawrence taxpayers are set to see a 1.25 mill increase for the 2018 budget.
Here’s the quick version of the city’s proposed 2018 budget: In May city staff recommended a budget with a 1.25 mill levy increase to help pay for a new police headquarters building. The city built the budget with the idea that sales taxes would grow by 4 percent but property values would only grow by 2 percent. In June, the city got word from the county that the city’s property tax base actually grew by 6 percent. That meant if the city made no other changes to its budget, it would get an extra $1.4 million in property tax revenues that it wasn’t expecting.
In the past, this may have been good news for taxpayers. City officials would take some of that $1.4 million in unexpected revenue and use it to reduce the 1.25 mill levy increase. Here’s an example of what happened this year. Of the $1.4 million total, about $948,000 of it goes into the city’s general operating fund. The city took a second look at its proposed budget for the general operating fund and decided that some other revenues projections needed to be adjusted downward by $485,000. On the expense side, it decided some projections needed to be adjusted upward by $485,000. The result: That $948,000 in unexpected revenue is all gone, and then some.
But back to the sales tax issue. The biggest change the city made from May to June is it reduced its projections for sales tax collections in 2018. That one change wiped out $590,000 of the unexpected money. It probably was a reasonable change. The city was budgeting to see 4 percent sales tax growth in 2018. Sales tax collections in 2017 may not even grow 4 percent, so it would be unwise to assume they will in 2018.
But there is another sales tax number to pay attention to. How much does the city collect in sales taxes compared with how much it budgeted to collect? For years the city has consistently underestimated how much money it will collect in sales taxes. The result is the city ends up with money that it hasn’t budgeted to spend at the end of the year.
Two key questions: How much money, and where does that money go? The how much isn’t really easy to figure out. But after looking at several line items of several years worth of budgets, I’m comfortable estimating the city has collected at least $3.5 million more in sales and use tax revenues from 2012 to 2016 than what it budgeted to collect. The number is almost certain to go up in 2017. Current projections have the expected excess at a little more than $1.5 million for 2017.
Where the money goes is easier to answer. It basically goes into a series of rainy-day accounts called “fund balances.” They are basically used to cover unexpected expenses, unexpected revenue declines or calamity.
It is good to have an account like that, but it also would be good to have a discussion about whether it needs to continue to be funded by excess sales tax revenues. Sales tax revenues are tough to predict, but when the city has a sales tax prediction fall short, it often results in residents paying more in property taxes than they really need to.
But what if the city kept all of its excess sales tax collections from past years in a separate fund? It could be called the excess sales tax fund. The city would still have to make sales tax projections, but the stakes would be lower if the projections are wrong. If there is a year that taxes come in below the projection, the city pulls money out of the excess sales tax fund. If it comes in above the projections, the fund grows. It would have been helpful this year. Remember that $550,000 last-minute reduction in sales tax projections? Such a fund could cover it, if it even materializes.
As for the city’s rainy-day fund, that would still exist. The general operating fund balance has more than $15 million in it, and it can grow in ways that don’t involve excess sales tax revenues.
Certainly, flaws can be found in this type of system too. But I believe taxpayers — especially those who don’t like property taxes — are finding flaws with the current system. Sales tax collections have been really good for a lot of years in a row now, yet the property tax rate continues to rise. This year both sales tax collections and property values are up, yet the property tax is set to rise.
From 2012 to 2017, a time when sales tax collections have come in millions over budget, the city’s property tax rate has grown from 29.5 mills to 33.2 mills upon approval of this budget. Everything else being equal, that is a 12.5 percent increase in taxes, which isn’t that bad, until you look at one other statistic: incomes.
In 2012, the federal Housing and Urban Development department estimated the median family income in Douglas County at $71,500. In 2017, the estimate is $68,500.
That’s perhaps the most important number for budget-makers to keep in mind.
I’m no dummy. I’m going to make sure I do any articles that involve math prior to the Fourth of July. That way I’ve got full use of all 20 digits for computational purposes. So, with that, let’s crunch some sales tax numbers. With half of the year gone, Lawrence’s sales tax collections are still among the strongest numbers in the state.
Each month the city gets a check from the state for its share of sales tax collections. It recently received its June check — which represents sales taxes that were paid by consumers a couple of months earlier. There’s a lag time in computing the city’s share. The latest report shows Lawrence sales tax collections thus far in 2017 are up 3 percent compared to the first half of 2016.
As Lawrence City Hall officials work to put together a 2018 budget — and recommend a 1.25 mill increase in the property tax rate — they’ll quickly note that the 3 percent growth rate isn’t as strong as what Lawrence has been experiencing. That is correct. In 2016, Lawrence finished the year with a 5.5 percent growth in sales tax collections. That was the best growth rate of any major retail market in the state.
So, is there reason to worry that Lawrence is now only growing at 3 percent? Well, if this trend holds, it will be the slowest growth rate since 2013, when collections grew by 1.9 percent. A bit of a slowdown, though, is perhaps expected. The last three years of 2014-2016 have been some of the best sales tax years on record for Lawrence. It is tough to keep setting records every year.
Plus, there’s reason to believe Lawrence may end up posting a better than 3 percent growth rate in 2017. The year got started off a bit sluggish, but there have been signs that shoppers are becoming looser with their wallets. The city’s June sales tax collections were up 7.5 percent compared to the same period a year ago, indicating that shoppers were spending well in April and May. Plus, you have to think that the city is in for a sales tax bump when the Junior Olympics arrive in town later this month. If Lawrence doesn’t see an increase in sales tax collections from that event, then it had better rethink its tourism strategy.
Perhaps the biggest thing to keep in mind, though, is that the slower sales tax growth may not be a major reason to worry, at least from a City Hall budget standpoint. That’s because 2016 sales tax collections exceeded the city’s expectations so much that 2017 revenues don’t have to grow much at all to still keep the city within budget.
Regardless, there are plenty of other communities that wish their sales tax collections were growing by 3 percent. Here’s a look at the growth rates for several of the state’s major retail areas.
— Lenexa: up 5.6 percent
— City of Shawnee: 4.1 percent
— Lawrence: up 3.0 percent
— Olathe: up 3.0 percent
— Topeka: up 2.1 percent
— Sedgwick County: up 0.2 percent
— Overland Park: down 0.8 percent
— Kansas City: down less than 0.1 percent
— Hays: down 1.3 percent
— Hutchinson: down 2.1 percent
In case you are wondering about our fellow college community of Manhattan, it recently changed its sales tax rate, so its 2017 numbers aren’t comparable to 2016 figures.
• This is the time of year when sales tax figures may be at their most important. That’s because all of the city and county governments are working on their budgets for 2018. Budget-makers take a hard look at how sales taxes are doing now to determine how they may do in 2018. Plus, the numbers are far enough along that it gives them a good idea whether they are going to meet, exceed or miss their 2017 budget numbers.
With that in mind, here’s a look at how some area towns are faring with sales tax collections. I’ll show you the growth rate, but more the importantly, the actual dollar amount over or above what they collected last year. One thing to keep in mind, I’ll show you totals for both cities and counties, but remember that counties don’t get to keep all of their sales collections. A good portion of a countywide sales tax gets redistributed back to the budgets of cities that are located within the county.
• Douglas County: up 3.2 percent or about $272,000.
• Franklin County: up 5.4 percent or about $117,000
• Jefferson County: up 13.6 percent or about $70,000
• Leavenworth County: up 5.8 percent or about $193,000
• Baldwin City: up 1.6 percent or about $3,300
• Eudora: up 24.9 percent or about $57,000
• Lawrence: up 3 percent or about $370,000
• Leavenworth: up 2.8 percent or about $121,000
• Lecompton: up 8.4 percent or about $2,000
• Ottawa: up 52 percent or about $630,000
• Oskaloosa: up 4.8 percent or about $3,200
• Perry: up 33 percent or about $8,500
• Tonganoxie: up 12.7 percent or about $43,000
• Wellsville: up 24.9 percent or about $16,000
Note: Although Ottawa is a booming retail center — especially this time of year (the semi-trailers at fireworks stands in Ottawa aren’t to store the fireworks but rather to store the money) — the economy hasn’t surged by as much as the number above suggests. Ottawa raised its sales tax rate in the last year, which explains why the increase is so large.
• Here’s hoping that everybody has a happy Independence Day, and has reason to remember the meaning of the holiday. And do be safe. Although you may never need algebra in life, you do need your fingers.
Maybe it was shoppers buying an extra large Thanksgiving turkey. Maybe it was voters buying post-election migraine medicine, or maybe it was prescient Atlanta Falcons fans buying choke collars. Whatever the case, Lawrence shoppers appeared to be big spenders during the early holiday shopping season, a new report from the state shows.
The city received its first sales tax check of 2017 from the Kansas Department of Revenue. Although the check is the city’s January distribution it actually measures sales that took place in November.
The report shows Lawrence sales tax collections were up 6.7 percent in November from the same period a year earlier. That was the best growth rate of any large retail community in the state.
The latest report continues a trend. Throughout 2016, Lawrence had the largest sales tax growth rate of any of the large retail communities in Kansas. Lawrence saw sales tax collections grow by about 5.5 percent in 2016.
This latest report only shows one month worth of activity, but it was an important month for retailers. The report captures sales made on the Black Friday shopping spree after Thanksgiving. Next month’s report will provide an indication of how sales went after Black Friday. Here’s a look at how Lawrence stacks up against other large retail communities:
— Lawrence: up 6.7 percent
— Topeka: up 4.7 percent
— Lenexa: up 3.5 percent
— Olathe: up 2.4 percent
— Manhattan: up 1 percent
— Sedgwick County: up 0.9 percent
— Johnson County: down 0.6 percent
— Overland Park: down 2.4 percent
— Kansas City: down 23.2 percent
No word on what is going on with Kansas City, Kan. Because it is just one month’s worth of data, I wouldn’t read too much into it. It could just be a reporting anomaly.
Lawrence’s numbers will be worth watching in 2017. Sales taxes are more important than ever for City Hall finances. Both the city and county are now operating under the state’s property tax lid, which means it is more difficult for those governments to raise property tax rates without holding an election. Any growth in sales tax revenues would help them avoid contemplating that type of property tax increase.
The sales tax numbers for 2016 are in, and they show Lawrence was perhaps the hottest retail market in the state — and that is before sales of the Donald Trump inauguration T-shirts and the replica Meryl Streep Golden Globe statuettes.
As we have been telling you all year, Lawrence’s monthly sales tax collections have been growing at a faster rate than any of the other major retail markets in Kansas. Well, cities across the state have received from the state their final sales tax check of 2016, and Lawrence has retained that distinction.
Lawrence finished 2016 with sales tax revenues growing by 5.5 percent, compared with 2015 totals. When you combine sales and use taxes (use taxes are the tax you pay when you buy something online and the retailer doesn’t charge you a sales tax) the city’s total collections grew by 6.4 percent. That’s not a record year, but it is close to it. Here’s a look at the growth rates from recent years and the total amount of sales and use taxes received by the city:
— 2016: up 6.4 percent to $27.3 million
— 2015: up 4.4 percent to $25.7 million
— 2014: up 5.5 percent to $24.6 million
— 2013: up 1.9 percent to $23.3 million
— 2012: up 5 percent to $22.9 million
The 2016 growth rate ended up being the best since 1998, when sales tax collections grew by a whopping 8.5 percent. (You all remember the glorious year of 1998, when we were buying Beanie Babies and our only Russian worry was whether Boris Yeltsin inadvertently would become trapped in a vodka bottle.) Those were good times for Lawrence’s retail scene. But it may surprise people that this last five-year period has been every bit as good. Even though it may not have felt as fun, Lawrence’s sales tax collections from 2011 to 2016 have grown by 23 percent. From 1997 to 2002, they grew by 21 percent.
If local governments have funding problems, they should not blame consumers or sales tax collections.
In 2016, Lawrence definitely didn’t have anything to complain about on the sales tax front. Here’s a look at how Lawrence performed compared with the other major retail communities in the state:
— Lawrence: up 5.5 percent
— Olathe: up 3.6 percent
— Topeka: up 3.3 percent
— Overland Park: up 2.7 percent
— Manhattan: up 1.8 percent
— Johnson County: up 1.8 percent
— Kansas City: up 1.7 percent
— Sedgwick County: up 1.1 percent
— Lenexa: down 2.5 percent
For what it is worth, it also appears sales tax collections strengthened as the year went along. For example, when I reported on sales tax collections in April, Lawrence had posted just a 2.9 percent increase, and Topeka, Johnson County and Overland Park all were in negative territory. All those communities saw significant growth in sales tax collections since then.
As to why Lawrence had such good sales tax numbers, 2016 was the year Menards opened its large home improvement store in south Lawrence. City reports note that sales tax collections on building materials sold in Lawrence were up 24 percent compared with 2015. Sales tax collections on vehicles and car parts sold in Lawrence were up 9 percent. And sales tax collections on grocery items were up 5 percent.
The building materials number is the most interesting. It is not definitive proof that the Menards store is causing people to keep more of their dollars in Lawrence, but that is what it suggests. If the city wants to study something else, a good topic would be how much money do Lawrence residents spend outside the city, and have developments such as Menards and Dick’s Sporting Goods helped lessen that number? You would think city commissioners would want to have that information before they decide whether to reject new shopping center developments, like the proposal south of the SLT and Iowa Street interchange, which is now the subject of a lawsuit.
• Now that we have year-end numbers, it also is interesting to look at just how much business the largest retail markets in the state did in 2016.
— Johnson County (Home to Overland Park, et al): $11.44 billion
— Sedgwick County (Home to Wichita): $9.01 billion
— Shawnee County (Home to Topeka): $2.94 billion
— Wyandotte County (Home to Kansas City): $2.59 billion
— Douglas County: $1.71 billion
— Manhattan (Manhattan is in two counties so I used the city totals instead of trying to combine the two county totals): $1.12 billion
— Saline County (Home to Salina): $1.11 billion
— Reno County (Home to Hutchinson): $947.73 million
— Leavenworth County: $685.85 million
— Finney County (Home to Garden City): $673.75 million
— Ellis County (Home to Hays): $622.11 million
— Ford County (Home to Dodge City): $575.84 million
— Lyon County (Home to Emporia): $465.41 million
— Geary County (Home to Junction City): $427.35 million
• And just because the warm weather has done wonders for my arthritic fingers and toes, I decided to do one more math exercise to pass along. Here’s a look at per capita spending levels in the large counties. I find the numbers interesting because they provide a little more context. A county like Johnson County should have a lot more retail sales than a county like Douglas County, if for no other reason than it has a lot more people. The per capita numbers give you an idea of how well a market is doing in terms of pulling in outside residents to shop, and they also may give you an idea of whether residents of the county have more disposable income to spend.
— Ellis County: $21,430 per capita
— Saline County: $19,931 per capita
— Johnson County: $19,718 per capita
— Finney County: $18,320 per capita
— Sedgwick County: $17,612 per capita
— Ford County: $16,660 per capita
— Shawnee County: $16,449 per capita
— Wyandotte County: $15,853 per capita
— Manhattan: $14,884 per capita
— Reno County: $14,873 per capita
— Douglas County: $14,485 per capita
— Lyon County: $13,959 per capita
— Geary County: $11,540 per capita
— Leavenworth County: $8,647 per capita
Lawrence obviously finishes in the lower half of that list. Some people would argue Lawrence is destined to always be low on that list because we are too close to major shopping districts in Johnson County and Topeka. Others argue that Lawrence could move up the list if it allowed more shopping developments to occur in Lawrence, thus giving people less incentive to drive to Topeka or Johnson County.
That’s an argument that likely is to continue. One thing that is a little more concrete: State numbers show that out of the 93 Kansas counties that have a local sales tax, 56 of them saw their sales tax totals decline in 2016. Douglas County ought to be pleased that it is not yet among them.
New fabric and craft retailer opens in south Lawrence; sales taxes continue to surge, while questions persist about SLT shopping center
Nothing says fall like pumpkin spice and a head-to-toe wardrobe of fleece. There is obviously no shortage of pumpkin spice, as intravenous drip bags of it are now available on every corner. But I do have news on the fleece front. A national chain fabric and craft retailer has opened along south Iowa Street.
Jo-Ann Fabric and Craft Store has opened its Lawrence location in the shopping center at 27th and Iowa streets. The store officially opened at 9 a.m. Thursday with a ribbon-cutting and several giveaways. Apparently there are people who love fleece even more than I do (or perhaps they thought there was a pumpkin spice giveaway) because there was a line outside the store of several dozen people about a half-hour before opening.
Whatever the case was, the competition level in the fabric and craft world has increased in Lawrence. Jo-Ann occupies the space that formerly housed Hancock Fabric, a national chain that went bankrupt. Hancock primarily was a fabric and sewing store. Jo-Ann has a full line of fabrics and sewing supplies, but also has a larger inventory of crafting items. I got to take a special pre-opening walk through the store (it may or may not have ended prematurely when I rolled in a pile of fleece). Among the categories of crafting items were scrapbooking items, food crafts like cookie cutters, holiday decoration kits, craft paints and several other categories.
The store is broader than Hancock’s but not as large as Hobby Lobby and Michaels, the two large craft and fabric superstores in town.
In addition to the numerous customer giveaways, local schools are set to get something from the store. The company plans to provide a $2,000 grant to one school in the community, according to a press release from the company.
In other news and notes from around town:
• Maybe it was pumpkin spice sales. Maybe it was fleece sales. Hold the phone, could it be sales of pumpkin spice-scented fleece? Surely not, but something continues to have retail spending in Lawrence on a hot streak.
The latest one-month report from the Kansas Department of Revenue shows Lawrence sales tax collections are up 11 percent compared with the same one-month period a year ago. The report was the October report, but that’s not really when the sales were made. Because of the delay in sales tax reporting, the sales are more likely reflective of activity in August.
The 11 percent increase is impressive; the city collected about $220,000 more in sales tax during that one month than it did the previous year. But at this point, such an increase is not all that surprising. Sales tax collections in Lawrence have been really strong for pretty much the entire year. As we have reported month after month, Lawrence has seen the most robust sales tax growth of any of the major retail markets in the state. That continues to be the case.
Year to date, Lawrence sales tax collections are up 6.1 percent compared with the same period a year ago. Thus far, Lawrence has collected about $1.2 million more in sales tax revenues than it did during the same period a year ago. Importantly, the 6 percent growth is far exceeding what the city budgeted to receive in 2016. The city budgeted for a 3.7 percent increase. If my abacus is working correctly, the city has about $470,000 more in sales tax revenues than it expected to receive, and that number could grow more before the end of the year.
Here’s a look at how Lawrence’s sales tax collections stack up to some of the other large retail centers in the state:
— Lawrence: up 6.1 percent
— Olathe: up 3.6 percent
— Topeka: up 3.4 percent
— Overland Park: up 2.5 percent
— Manhattan: up 2.3 percent
— Kansas City: up 1.7 percent
— Johnson County: up 1.6 percent
— Sedgwick County: up 1.3 percent
— Lenexa: down 3.6 percent
One of the more interesting questions in town continues to be why are sales tax collections up so much? It is a bit of a guessing game, but the city does try to analyze each month’s reports. The city hasn’t yet released its report for this most recent batch of sales tax data, but the analysis for last month’s data is available. It shows the same thing we have seen most of the year. Three areas of the economy are performing pretty well. Sales taxes collected on building materials are up 25 percent; sales taxes from retail stores are up 9 percent; and sales taxes from grocery stores and other food and beverage stores are up 6 percent.
As we have noted before, Menards — a major seller of building supplies — is a new entrant into the market. That certainly could be playing a role in the increase in that category. Evidence continues to mount that there were people leaving the community to buy building supplies and now they are keeping more of those dollars at home.
You also could argue that the addition of Dick’s Sporting Goods, Ulta Beauty, The Boot Barn and PetSmart at 27th and Iowa streets has helped boost the retail totals. But it can’t be said definitely. It could just be sales of pumpkin spice chewing gum at Wal-Mart. It could just be that Lawrence’s slightly better population growth of the last few years is paying off.
Whatever is happening, though, is eye-catching. Add that to the pending completion of the South Lawrence Trafficway — it is scheduled to open by Thanksgiving — and you can see why Lawrence may be drawing some good interest from retailers who want to be in the market.
But, for all those positives, the city also has to contend with what potential retailers must surely view as a negative: a lawsuit over potential retail development at the intersection of the South Lawrence Trafficway and U.S. Highway 59.
As we have reported, a shopping center was proposed for the site, with thoughts that it would bring everything from an Old Navy to Designer Shoe Warehouse. The property already is in the city limits. The city’s long-range growth plans label the area as being appropriate for “auto-related” commercial development. It is not entirely clear what that means, but it is different from plain old regular commercial development. A debate ensued, the project gets rejected by the City Commission, and a lawsuit is filed by the out-of-state development group. That lawsuit is still in its early stages.
The City Commission’s rejection of that project in January left a lot of uncertainty about what is the appropriate use for that very high-profile piece of property. Nearly 11 months later, none of that uncertainty has been cleared up. Once the lawsuit was filed, city officials have hardly uttered a peep about what the future of that land should be.
Think about this: The South Lawrence Trafficway project has been more than two decades in the making. Now that it is completed, we don’t know what we want to have happen at its premiere intersection.
The iron is hot, but it seems that the community is paralyzed on whether to pick up a hammer to strike it.
You want statistics. I’ve got ‘em. KU’s football team has a better 2016 record than Oklahoma, K-State and Missouri. After 96 hours of college football on a Labor Day weekend, you will go through 192 bags of Doritos, three overheated remote controls and not nearly enough ScotchGard. I even have a couple of new statistical reports on Lawrence’s economy. Retail sales are surging while home sales are slumping.
• First, a look at retail sales. In a trend that has held steady pretty much the entire year, Lawrence continues to lead the state in sales tax growth.
Lawrence officials recently received their August sales tax check from the state, and collections were up 3.8 percent compared with the same one-month period in 2015. (A reminder: Even though the report is for August, due to a lag in reporting, the report actually measures sales activity that happened about 30 to 60 days ago.)
As usual, the more important number is the cumulative total for the year. That’s where Lawrence continues to outshine the other large retail centers in Kansas. Here’s a look:
— Lawrence: up 5.3 percent
— Olathe: up 3.9 percent
— Topeka: up 3.2 percent
— Overland Park: up 2.3 percent
— Kansas City: up 1.7 percent
— Johnson County: up 1.5 percent
— Manhattan: up 1.4 percent
— Sedgwick County: up 1.2 percent
— Salina: down 2.8 percent
— Lenexa: down 6.1 percent
The numbers are good news for more than just the city’s retailers. If the trend continues, it will be good news for the city’s budget too. The city budgeted sales tax revenues to grow by 3.7 percent for 2016, or in dollar terms, about $940,000. If the city can finish the year with a 5.3 percent increase, it’ll exceed its estimates by about $360,000. Of course, things could change quickly, especially if Lawrence has a lackluster holiday shopping season for some reason.
As for why sales tax collections are on the rise, that’s always a bit of a guessing game. City officials, though, continue to point to a few key areas. The city hasn’t yet analyzed the August sales tax distribution, but in a report on the July distribution, the city noted the sale of building supplies continues to be the biggest driver of the increase. Sales of building materials are up 27 percent compared with the same period a year ago. The biggest change in that sector has been the opening of Menards store near south Iowa Street.
The city also notes the auto industry and the grocery store industry also are doing well. Year to date, motor vehicle and parts sales are up 8 percent, while sales from food and beverage stores (not to be confused with bars and restaurants) are up 7 percent.
There is one area that has declined significantly in 2016, but consumers likely don’t mind. Sales taxes charged on utility services — think water, gas and electricity bills — are down 11 percent year to date. Rates for those services haven’t gone down, but usage evidently has. But that too could change quickly.
• The news isn’t as bright for home sales. The Lawrence Board of Realtors recently released figures for July home sales. It was a rough month.
Home sales in Lawrence fell by about 23 percent in July, compared with the same period a year ago. The weak July pushed year-to-date totals squarely into negative territory. Year to date, home sales are down 5.3 percent, for a total of 756 sales.
The reason for the downturn is beginning to sound like a broken record. (Did somebody mention records? I hear KU’s football team has a better record than K-State’s.) The supply of homes on the market is very tight, according to real estate professionals.
Carl Cline, president of the Lawrence Board of Realtors, said the lack of homes for sale is having a “significant impact” on the market. “The drop in July sales is attributable to a shortage of supply and not a drop in demand,” he said. “Segments of this market have buyers in line for just the right listing.”
The tight supply of homes has been a pretty consistent theme for the Lawrence market all year. Really, it has been building for a couple of years. In 2014, the median number of days a home sat on the market before selling was 34. In 2015 that dropped to 24 days. Thus far in 2016 it has dropped to 16 days.
Other statistics of note from the recent report include:
— Despite there being a shortage of homes on the market, the sales of newly constructed homes dipped a bit in July, falling to 11, compared with 13 in July 2015. Year to date, however, sales of new homes are up by nearly 24 percent. Lawrence builders are on pace to post their second straight year of gains.
— The number of active listings on the Lawrence market stands at 288, down from 317 at the same time in 2015 and 417 in July 2014.
— Home prices are starting to rise significantly in Lawrence. Through July, the median selling price of homes is $176,175, which is up 6.8 percent compared with the same period a year ago. If July was any indication, those numbers may rise more rapidly during the rest of the year. The median selling price for homes in July rose 13.9 percent compared with July 2015.
Latest report shows Lawrence sales tax growth among tops in the state; are City Hall leaders paying attention?
It is the season for City Hall couch cushions strewn about and organ grinder music in the background. The city’s budget process is underway, and the last several years the theme has been that any loose change matters, as the city’s major operating fund in 2015 spent more than it received in revenue. It is budgeted to do so again in 2016.
That is happening despite a key positive trend: Lawrence is experiencing the best sales tax growth of any major retail area in the state.
State revenue officials have released their latest sales tax report — it basically measures sales through early April — and Lawrence continues to be on a roll. The report showed sales tax collections for the latest one-month period were up 6.2 percent compared with the same period a year ago.
The more important numbers, though, are the year-to-date totals. There have now been five sales tax reports issued by the state in 2016, so we are almost to the halfway point of the annual reporting period. Thus far, Lawrence’s growth rate is tops among the 10 large retail markets that we track. Here’s a look:
— Lawrence: up 4.6 percent
— Overland Park: up 3.6 percent
— Olathe: up 3 percent
— Topeka: up 2.5 percent
— Johnson County: up 2.1 percent
— Sedgwick County: up 1.4 percent
— Manhattan: up 0.8 percent
— Kansas City: up 0.3 percent
— Salina: down 3.3 percent
— Lenexa: down 8 percent
The most interesting number may be what’s driving Lawrence’s increase. The city has provided a breakdown of the industries that are seeing the largest increase in sales tax collections. The city noted three: grocery and beverage stores are up 6 percent from a year ago; bars and restaurants are up 7 percent; and sales taxes on building materials are up 29 percent.
The building material category is obviously an eye-catcher. There seems to be an obvious explanation to that large increase: Menards and its superstore near 31st and Iowa have entered the market.
But sometimes the obvious answer isn’t always the correct one. So, I looked a little deeper. Not all building materials are bought through home improvement centers. Many of them are bought through wholesale companies that deliver to job sites, and construction firms pay the sales tax on those materials. If Lawrence’s building scene is booming, that could account for the increase in sales tax collections, and it really wouldn’t have much at all to do with Menards. But the city’s building permit reports show that is not what’s happening. Construction totals are very high this year, but they are about 15 percent below the record-setting totals of 2015. Based off that, you would think sales tax collections for building materials would be down.
I also considered that perhaps there has been an increase in the price of building materials, which would cause the sales tax collections to increase, even though the amount of work has declined some. That doesn’t appear to be the case either. The construction cost index put out by the large construction company Turner indicates that the cost of building materials actually has declined some.
I don’t know definitively why Lawrence is collecting so much more in sales taxes for building materials, but it seems the Menards effect is a real possibility. It seems that what’s happening may be exactly what Menards officials said would happen: Lawrence residents who were leaving town to shop at Menards are now staying in Lawrence to shop at Menards. It seems likely some shoppers from nearby communities are coming to Lawrence to do their Menards shopping. Here’s a little fact that maybe has been overlooked: Menards really doesn’t have any stores in the Kansas City market. It has one in St. Joseph, but that is about it. That means the Lawrence store is the closest Menards store for lots of communities in Johnson County. Of course it also is the closest store for places like Franklin and Jefferson counties. The Lawrence store may be getting more out-of-town traffic than what you would think.
Again, I don’t know if that is what’s happening here. But I would think City Hall leaders would want to figure it out. If indeed Menards is keeping more retail dollars in Lawrence and attracting more retail dollars from outside Lawrence, then it seems possible other select retailers could do the same.
Perhaps this is causing you to think of the City Commission’s recent rejection of a proposed multimillion dollar retail center that would have brought several new brands to Lawrence near the Iowa Street and SLT interchange. The rejection has landed the city in a lawsuit filed by the proposed developers. The developers of that proposed center said their numbers showed 40 percent of all Lawrence retail dollars spent on apparel are being spent outside of Lawrence.
I can almost guarantee you that Menards had a similar study that told it that there were a lot of home improvement dollars leaving the Lawrence community.
Is the 40 percent number about apparel accurate? I don’t know. But I would think City Hall officials would want to find out. A trusted third party easily could be hired to figure it out, and many other retail questions. The problem is, Lawrence fights so much about retail development, it would be difficult to hire a third-party that both sides would trust. It is sad that we are so deep in the weeds that we can’t even get data.
But if the 40 percent estimate is accurate, then something else also is true: Millions of sales tax dollars are leaving the community every year.
Capturing them may be easier than operating the organ grinder.