Looking at numbers to try to figure out how much money and liquor flow into Lawrence during a Final Four
Some of the strongest memories I have of KU’s past two Final Four appearances involve a Patton-like army of beer trucks invading downtown Lawrence. I was doing daytime journalism on both national championship game days in 2012 and 2008 and still remember the caravan of beer trucks downtown getting all the bars stocked for the evening game.
We’ll see what memories are made this time. An early contender: realizing I’m no longer hip enough to understand why a large number of people are standing in line for a band called Panic! at the Disco. In case you were wondering, that is why a line of people stretched around the block outside The Bottleneck in downtown Lawrence today. (If they want to see panic at a disco, tell my wife to let me wear my open collar disco shirt.)
I’m guessing the beer trucks, though, also will be a Final Four memory again. Liquor is big business all year in Lawrence, but it becomes even bigger during the Final Four. I’ve spent some time crunching numbers to try to give you an idea of some of the financial impacts a Final Four appearance has on Lawrence.
First, let’s look at the liquor side of things. I looked at figures from the state’s liquor enforcement tax. To be fair, I’m not an expert in this tax. In fact, I only like one of the three words. But the numbers from 2012 and 2008 — the last two times the Jayhawks were in the Final Four — do provide some evidence of the bump in liquor sales. This tax is charged to people who buy liquor at a liquor store, or bars and restaurants that buy it wholesale.
In 2008, the big bump came in March. It showed that there was a 22 percent increase in liquor enforcement tax collection in March 2008 compared with March 2007. The more fun number, though, is the total increase in sales. The numbers suggest liquor sales in Douglas County increased by $581,200 in that one month. But remember, only a portion of that amount represents retail sales. A good amount of it represents wholesale purchases made by bars and restaurants. So the actual retail value of all the additional liquor sold in that month would be significantly higher.
Fast forward to 2012, and the big bump in tax collections showed up in April, when liquor enforcement tax collections jumped by about 17 percent. That equated to about $617,000 in additional sales, with the same caveat that a good portion of that amount is wholesale purchases.
Those two months both produced about $50,000 in additional tax collections. You might think that is a nice bump in revenue for the city, which will cause some state tax collector to laugh at you. You silly person, the state does not share liquor enforcement tax revenue with cities. It keeps all of that.
However, there are other types of taxes that the city does benefit from during the Final Four. There is another type of liquor tax called a drink tax that bars and restaurants serve on liquor that you buy at their establishments. The city does get a share of that money.
The other tax, of course, is the general sales tax. That catches lots of items, including the Final Four T-shirts you buy, the semitrailer of Doritos, the 15 new big-screen televisions and other entirely reasonable supplies needed for a Final Four party.
Those numbers historically haven’t soared as much as you might think. In 2008, sales tax collections during the prime Final Four period actually were flat to slightly down. In 2012, there was a decent increase of about 5.5 percent during the Final Four period.
But there is also some evidence that even when spending does go up for the Final Four, consumers maybe pull back a little bit later in the year. For instance, the 2012 Final Four bump didn’t result in a big increase for the year. City collections were up 5.2 percent for the entire year. That is a really good sales tax year, but there have been plenty of years when sales tax collections in Lawrence have increased by 5 percent or more even when we are not in a Final Four. In 2008, sales tax collections for the year were up 3.8 percent.
The bottom line is that it takes a lot of T-shirt sales and party trays to move the sales tax needle in a big way in Lawrence.
Now, enough of that talk. I have to start unloading the Doritos truck. Have fun and be safe this weekend.
Lawrence sales tax collections off to slow start in 2018; chain retailer with downtown location files for bankruptcy
My family jump-started the Branson, Mo., economy last week by traveling to Silver Dollar City and its new roller coaster, the Time Traveler. (Note: It is called Time Traveler because by the time you are finished standing in line, you are in a new century.) Thus far, Lawrence is still waiting for something to jump start its economy in 2018, according to the latest sales tax reports.
The city now has received its sales tax distributions for January and February, and Lawrence isn’t doing as well as several other area communities. That is a reversal of the trend of the last couple of years, when Lawrence was near the top of the pack in terms of sales tax growth.
Through February, Lawrence’s sales tax collections actually are down by 0.5 percent year-to-date compared with the same time period a year ago. It is still early in the year, so not too much should be made of the decline. Plus, the early results have been pretty inconsistent. January sales tax collections — which, due to the lag time in reporting, actually represented sales made in December — were up by 4.1 percent compared with January 2016. So, that may be a sign that local retailers had a pretty decent Christmas shopping season. But February’s sales tax collections were down by 4.4 percent compared with a year ago. Thus far, sales tax collections have been a bit like that roller coaster. (Note: While intense, the Time Traveler is not the scariest attraction in Branson. That is still the Tanger Factory Outlet Mall.)
Perhaps more interesting is that Lawrence is getting off to a slower start to 2018 than many other area communities. Of the 10 large retail communities I track, six of them posted increases in sales tax collections compared with a year ago. Lawrence was part of the group of laggards, which is a departure of the trend from the past couple of years. Here’s a look:
— Kansas City, Kan.: up 37.2 percent
— Olathe: up 4.6 percent
— Lenexa: up 3.5 percent
— Overland Park: up 2 percent
— Shawnee: up 1.7 percent
— Saline County (Salina): up 1 percent
— Lawrence: down 0.5 percent
— Sedgwick County (Wichita): down 0.9 percent
—Topeka: down 1.7 percent
— Riley County (Manhattan): down 5.1 percent
Sales tax collections are important for a couple of reasons. One, they provide a glimpse at the health of the local retail industry. But sales taxes also have become a critical part of the City of Lawrence’s budget. The city is counting on sales and use taxes to generate $40.2 million worth of revenue for the 2018 budget. Even with sales tax collections being down a bit from last year, the city is still on pace to meet its budget for 2018.
But it is still early, and if February’s collections mark the beginning of a new trend, the city will find itself in a hole.
In other news and notes from around town:
• I guess I should tell you to keep an ear open for news about Claire’s, but be warned that the company tends to pierce any ear it gets hold of. Claire’s is the national chain that sells jewelry geared to the teen market and bills itself as the leading supplier of ear-piercing services in the U.S. The company has a store at 647 Massachusetts St. in Lawrence.
Claire’s on Monday announced that it has filed for Chapter 11 bankruptcy protection. However, if you are to believe the most recent statements from company officials, the Lawrence store shouldn’t be at any risk of closing.
The company said via a release that it has reached agreements with several of its major lenders to restructure its debt. The company said its operations have been improving and are profitable. However, it was saddled with large amounts of debt left over from a previous private equity buyout.
The company plans to eliminate about $1.9 billion in debt as part of the bankruptcy process. It plans to emerge from bankruptcy in September.
Here comes the opposition: Four groups join forces to campaign against Douglas County jail expansion
Get your earplugs, your nose plugs or any other means of protection you feel necessary during campaign season. Douglas County is about to enter it in full force thanks to the pending sales tax election for a jail expansion and mental health programs. Saturday will be a big day for the season as four groups are banding together to formally launch a "Vote No" campaign against the $44 million jail expansion.
The four groups are: Justice Matters, an interfaith coalition of about 20 church congregations; Kansas Appleseed, a nonprofit that advocates for “vulnerable and excluded Kansans”; the Lawrence Sunset Alliance, a local taxpayer watchdog organization; and the Lawrence chapter of the NAACP.
At least three of those four have been pretty vocal opponents already, but the NAACP hasn’t done as much to lend its voice to the opposition. It sounds like that will change on Saturday. Based on a press release sent out by the organizations, it appears the groups plan to run an organized opposition campaign. They are calling it "Jail No." The campaign already has six talking points about why its members are urging a no vote.
— Relationships between jails and U.S. policies that lead to “mass incarceration.”
— A lack of understanding on the county’s part about what is driving the “recent explosion” in the rate of incarceration.
— A failure on the part of the county to embrace reforms to lower jail population.
— An over-representation of minorities in Douglas County’s criminal justice system.
— Use of a “regressive sales tax to fund the jail expansion, placing the greatest burden for funding on the poor.”
— “Contempt for the voters by the Douglas County Commission.” The groups argue that County Commissioners should have created two ballot questions — one for a sales tax that would fund new mental health programs, and a separate sales tax question for the jail expansion. In addition, the groups have become particularly irked in recent weeks as county commissioners have said even if the sales tax proposal fails, they will seek to do the jail expansion in phases, funding it through budget cuts and existing resources. The opposition groups have taken that as an explicit threat to voters.
County commissioners, of course, disagree with many of the opposition’s assertions. They believe opponents have been misrepresenting the rate of incarceration in Douglas County. County officials point to statistics that show local incarceration rates are below the national average and are near the lowest in the state of Kansas.
County officials also point to a multitude of programs they already have implemented to try to reduce the jail population, including a pre-trial release program that cuts down on the amount of time people spend in jail waiting for a court proceeding.
The county also believes a myth is forming in the community that there are lots of people in the Douglas County jail for simple offenses, such as small-scale possession of marijuana. County officials contend that if someone is in jail for simple marijuana possession they also have other underlying charges against them, such as fleeing from the police or some other action that made the incident more serious. (Full disclosure: The Journal-World is currently reviewing data about the jail’s population and hopes to soon publish an article detailing the type of inmates who currently are in jail.)
But, clearly, county officials have a lot of work cut out for them. Organized opposition groups aren’t that common in local elections. To have four groups come together to oppose a project is pretty rare in Douglas County politics.
Plus, there are several numbers that voters likely will want an explanation on. For example, the percentage of black inmates in Douglas County jail is high compared to the black population of the county.
Another question — one that I know the Journal-World is trying to get an answer to — is why does Douglas County have such a high percentage of felony court cases that take more than a year to resolve? As we’ve previously reported, 12.8 percent of all felony cases in Douglas County in fiscal year 2017 were still pending after a year in the system. Of the 31 judicial districts in the state, that is the sixth highest rate in Kansas. Notably, it is the highest rate of any urban county in the state. Thus far, we haven’t gotten a lot of answers from judicial officials about why that is the case.
And, finally, Douglas County officials may have to overcome a piece of their own literature. Homeowners this week should start receiving their annual change of value notices for their properties. As we’ve reported, more than 75 percent of all homeowners are going to see the tax values of their homes increase. Unless local governments make some sort of pledge to decrease property tax rates, those higher values essentially ensure that most residents will see higher property taxes next year.
Saturday may be a gauge of how spirited this campaign season will be. The four groups are hosting a rally on the west steps of the Douglas County Courthouse at 11 a.m. Saturday.
The sales tax election will be conducted by mail-in ballot. Ballots will begin arriving in mailboxes on April 24, and they will be counted on May 15.
• Feb. 21, 2018 — Douglas County will face tough choices on jail expansion if tax referendum fails, official says
• Feb. 20 — Building jail expansion in phases would take 16 years, $6M to $8M a year, county says
• Feb. 19 — Town Talk: Fact checking county commissioners on assertion that big budget cuts will come if voters reject jail/mental health sales tax
• Feb. 17 — Activist leaders blast proposed expansion of Douglas County Jail
• Feb. 12 — As voters consider $44M expansion, report finds some changes could reduce overcrowding at Douglas County Jail
• Feb. 7 — Douglas County Commission to schedule forums on jail and mental health referendum, provide information on what happens if voters reject
• Feb. 4 — Johnson County built a larger jail and now has 300 unused beds; Douglas County can't use them
• Jan. 30 — State law won't allow Douglas County commissioners to campaign for passage of jail, mental health sales tax
• Jan. 24 — Douglas County Commission approves language for ballot question on jail expansion, behavioral health campus
• Jan. 22 — Following the money: Douglas County partners beefing up behavioral health services with funding
• Jan. 17 — Douglas County Commission agrees to put jail expansion, behavioral health campus on same ballot question
• Jan. 16 — Town Talk: Many residents want to vote separately on jail, mental health projects; there's a way, but county unlikely to go there
• Jan. 16 — Douglas County commissioners ready to ask voters to approve jail expansion, behavioral health initiatives
• Jan. 15 — 2014 speedy trial redefinition clogging Douglas County jail, district court
• Jan. 10 — Price tag of behavioral health campus, services estimated at $5.76 million annually
• Jan. 8 — No insurance and hooked on drugs? Chances are, you won't find treatment in Douglas County
• Jan. 5 — Town Talk: A look at how high Lawrence's sales tax rate would be if voters approve increase for jail, mental health
• Jan. 3, 2018 — Due to misunderstanding, county now says jail expansion, mental health projects must be on same sales tax ballot
• Dec. 31, 2017 — Undersheriff says 2016 annual report shows overcrowding threatening jail safety, re-entry programming
• Dec. 18 — Behavioral health campus plan grew from recognition of housing's role in crisis recovery
• Dec. 13 — Services that will be part of behavioral health campus to be introduced next month at LMH
• Dec. 13 — Douglas County commissioners confident of voter buy-in on jail expansion plan
• Nov. 30 — Douglas County commission agrees to move ahead with $44 million jail expansion design
• Nov. 26 — Sheriff's Office exploring modular units as stopgap solution to Douglas County Jail overcrowding
• Nov. 8 — Douglas County Sheriff's Office recommends jail redesign that would more than double number of beds
• Oct. 4 — Jail expansion, crisis center would require public vote on new taxes, officials say
• Sept. 20 — Estimated cost to expand Douglas County Jail jumps by millions of dollars
• July 26 — Douglas County Commission to forward report on future jail population to architects
• July 16 — Double bunking not considered solution for Douglas County Jail overcrowding
• June 26 — Jail, mental health initiatives help drive proposed tax increase in 2018 county budget
• May 14 — Douglas County data showing swelling jail population despite fewer arrests
• April 5, 2017 — Sheriff urges Douglas County Commission to make jail expansion a priority
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
A look at how high Lawrence’s sales tax rate would be if voters approve increase for jail, mental health
The questions are beginning to pile up on Douglas County’s effort to win voter approval for a sales tax increase for more than $50 million of jail and mental health projects.
Perhaps near the top of that list is this question: Does Lawrence want to have the second highest sales tax rate of any major city in Kansas?
I crunched the numbers recently, and if voters approve a half-cent sales tax increase for jail and mental health projects, Lawrence would have the second highest citywide sales tax rate of any large city in the state, depending on how you categorize large.
Lawrence currently has a citywide sales tax rate of 9.05 percent. The number that Douglas County commissioners are now considering for the jail/mental health projects is a 0.5 percent sales tax. That would take Lawrence’s rate to 9.55 percent.
Based on the current sales tax rates released by the state on Jan. 1, only 10 cities in Kansas have a citywide rate higher than 9.55 percent. The largest is Shawnee in Johnson County, with about 65,000 people and a sales tax rate of 9.6 percent. The average population of the other towns was about 6,000 people. The only other city approaching large status is Junction City, a 24,000-population community that has faced a lot of financial distress in recent years.
To be clear, there are several dozen “special taxing districts” that have rates higher than 9.55 percent. Those are things like hotels, travel plazas, destination shopping centers and such. For instance, when you shop in the Village West stores near the Kansas Speedway, you’ll pay 10.325 percent in sales taxes. (There is a theory why those stores are located next to a racetrack. Anybody who charges you that much in sales tax needs quick access to a fast getaway car.)
Lawrence has three of those special taxing districts: one at Ninth and New Hampshire that includes the Marriott hotel and the multistory apartment, office and retail building on the northeast corner of the intersection; The Oread hotel near the University of Kansas campus; and the Bauer Farm retail project near Sixth and Wakarusa. If a half-cent sales tax increase is approved, those three special taxing districts will charge 10.55 percent in sales taxes. Yes, they will charge a higher rate than the retail center near the Kansas Speedway.
Lawrence is among a handful of cities in the state that have worked to become a retail center. Here’s how a Lawrence rate of 9.55 percent would stack up against these other traditional retail communities:
— Dodge City: 8.65 percent
— Garden City: 8.65 percent
— Great Bend: 8.25 percent
— Hays: 8.75 percent
— Hutchinson: 9.1 percent
— Lenexa: 9.35 percent
— Manhattan: 8.95 percent
— Olathe: 9.475 percent
— Overland Park: 9.1 percent
— Salina: 8.75 percent
— Topeka: 9.15 percent
— Wichita: 7.5 percent
Of course, there are other considerations with this issue besides our sales tax rate. The jail is overcrowded at the moment, and concerns are that we don’t do enough as a community to provide mental health care. Do those concerns outweigh the concerns of having a sales tax rate that is near the top in the entire state? That is not for me to say. But it is important to point it out and the questions that come with it. If Douglas County residents do decide a tax increase is in order, we may want to ask: What is it about Douglas County that requires us to have one of the highest sales tax rates in the state in order to meet our needs?
Some other interesting questions are emerging on this jail/mental health tax issue, which, by the way, county commissioners have not yet formally put on the ballot. It looks like January will be a key month for the issue. County commissioners are scheduled to get some new cost estimates next week and may vote by the end of the month to put a sales tax question on a future ballot.
Here’s a look at a couple of other questions:
• How should voters be allowed to vote for this tax increase? We reported earlier this week that county leaders now believe it is not possible to put two separate tax issues on the ballot: one tax increase for the jail expansion project and another tax increase for the mental health projects. There are certainly people who want to vote for one or the other. But the county says it can’t do that because the specially approved state law giving Douglas County the authority to put a sales tax question on the ballot only allows for one half-cent sales tax question.
But almost immediately the question became: Couldn’t the Legislature just change the wording of the Douglas County ballot bill it approved in 2015? Presumably, legislators don’t care whether Douglas County splits its half-cent sales tax increase into two 0.25 percent questions or any other combination thereof.
Douglas County Commission Chairman Mike Gaughan, however, showed no inclination to ask legislators to do that. He said such a process would take time. Certainly, Kansas legislators are not known for being quick workers. But, at first glance, it looks like they would have plenty of time to do this.
If Douglas County wants to put the sales tax question on the November general election ballot — that is the one where the governor’s race will be hotly contested — they need to have the ballot question issue resolved by Sept. 1, County Clerk Jamie Shew told me. The Legislature starts next week. While lawmakers have been slow in the past, the session has never even come close to going into September. Last year the regular session ended in April.
• When should voters be allowed to vote for this tax increase? I believe some people are assuming that the county will put the sales tax question on one of the two elections already scheduled for 2018: the August primary or the November general election. Otherwise the county will have to pay for a special election. Regardless, I think it is possible the county may choose to go with a special election in the spring, just like the Lawrence school district did with its bond election last May. That was a mail-in ballot. County Clerk Shew confirmed to me that the county could use a mail-in ballot for a sales tax election.
But it is worth asking why the county wouldn’t put the sales tax question on the November ballot? If you want to have high voter turnout determine this sales tax question, then the November 2018 general election seems like a gift. Turnout is going to be very high as a race potentially involving Kris Kobach for governor will create a lot of interest, and Lawrence resident Paul Davis likely will be competing for a spot in Congress.
People have been impressed with the voter turnout produced by mail-in ballots in Douglas County, but the numbers strongly suggest a mail-in ballot in May, for example, won’t produce near the turnout that the November general election will. The May 2017 mail-in ballot for the school bond produced a 35 percent turnout rate. The November 2014 general election — the last time the governor’s race was on a ballot — produced a 50 percent turnout. I asked Shew if a mail-in ballot had any chance of producing a turnout equal to or greater than November’s general election.
“Probably not,” he said.
Maybe the county thinks it has to get voter approval as soon as possible because the overcrowding at the jail is that dire. It may still have more of a case to make on that front. And, then, voters will have to decide whether the desire for expediency outweighs the greater cost of a special election and the likely lower turnout it would produce.
As I said, the questions are plentiful.
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.
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.
Let’s get in the time machine and set the dial to 2008. No, I’m not looking to relive the decision about a Mario Chalmers tribute tattoo or other such common KU National Championship celebration issues. Something else happened that year: Voters went to the polls to approve a new sales tax for infrastructure projects. Just like the tattoo, there are questions that linger from that vote.
As the headline implies, I believe there is a question about whether city commissioners are breaking a political promise about how they’re using that sales tax money and paying for street maintenance.
That question has come up from time to time, but has been renewed by the City Commission’s recent discussion of a five-year capital improvement plan. As proposed, that plan calls for the city to spend $3.14 million in 2017 for its contracted street maintenance program. It also calls for that same annual funding level for the life of the five-year plan.
What’s interesting is that in 2008 — before voters approved the 0.3 percent sales tax for infrastructure — the city approved $4.83 million in spending for contracted street maintenance.
Before we get too deep into the weeds here, a quick word about the city’s contracted street maintenance program. It is the program that seals the cracks in streets, puts a new coat of pavement on sections of streets, repairs portions of curbs and gutters and other such maintenance issues.
Engineers deem this program critical. I’ve frequently heard it is just like caring for your house. You have to do the mundane maintenance in order to avoid or delay the really big, expensive rebuilding projects. Simply put, the city is spending less money on those type of projects than what they were before voters approved millions of dollars in new sales tax funds for streets.
Here’s where we get into the weeds a little bit: Overall, the city certainly is spending more money on streets now than it did prior to the sales tax vote. It darn sure better be. The sales tax in 2015 alone provided almost $5 million for infrastructure projects.
But, as I’ve already noted, there are different types of street spending. There is spending on street maintenance and there is spending on rebuilding streets. The city has been spending more money on the high-profile street rebuilding projects — think Kasold Drive, think Iowa Street — but has been spending less on the more mundane street maintenance projects.
Does that, however, mean city commissioners are breaking a political promise? Well, some pretty specific things were said during the campaign to convince voters to approve this sales tax. I covered that campaign, and remember pretty well the environment we were in. A key talking point was that the city hadn’t spent enough money on street maintenance historically, and as a result we had lots of streets that needed to be rebuilt. We were behind the curve. The last thing politicians were telling voters is that they were going to spend less money on street maintenance.
Just to reconfirm my memory, I looked for a written statement on the subject. I went back to the documents from the City Commission’s Aug. 5, 2008, meeting, when commissioners agreed to put the sales tax issue on the ballot. There is a memo that explains how the infrastructure sales tax would be used. A reminder: It is used for more than just streets. The Burroughs Creek Trail received sales tax money, firetrucks have been purchased with it, a major drainage project in North Lawrence is being funded by the tax.
The memo explains all that, and then includes a paragraph that addresses a key point of philosophy: “Remaining funding is anticipated to provide new funds for street and storm water infrastructure which would enhance rather than supplant existing general fund, gas tax or storm water funding for these infrastructure projects.” Yes, city memo language can be a cure for insomnia. But let me translate for you: The key phrase is “enhance rather than supplant.” In other words, we are going to keep spending all that we spend today on streets, and this sales tax money will be new money that we’ll add on top of it. That sentiment was expressed many times on the campaign trail.
But that is not what is being proposed, and it is not what has happened the past few years. I’ve already told you the city’s contracted street maintenance fund is scheduled to receive $1.69 million less in funding in 2017 than it did in 2008 before the sales tax was approved.
But let’s take a look at the specifics. The street maintenance fund gets money from a variety of city sources.
— In 2017, it is proposed to get $2 million from the general fund, which is primarily property taxes. In 2008, it received at least $2.1 million in general fund dollars. (I think it is closer to $2.55 million, but the records are little difficult to understand on that point.)
— In 2017, it is proposed to receive $140,000 in storm water funds, which comes from a special fee on your utility bill. In 2008, it received $540,000 in storm water funds.
— In 2017, it is proposed to receive $200,000 in gas tax funds, which comes from a state-imposed tax on gasoline. In 2008, it received $690,000 in gas tax funds.
— In 2008, the street maintenance fund also received $850,000 from the countywide 1-cent sales tax, which is a different sales tax from the infrastructure sales tax approved by voters in 2008. As proposed for 2017, the street maintenance fund will receive no countywide sales tax dollars. Much of the countywide sales tax dollars that the city had available to it have now been committed to paying for Rock Chalk Park.
It is important to note that the city is proposing to use $800,000 in infrastructure sales tax money for the street maintenance fund. That is money that wasn’t available in 2008. But, as you can see, the city has reduced funding from other sources by an amount much greater than $800,000. Basically, for every new dollar the city has put into the fund, it has taken two old dollars out.
If you think this is something the new city manager has come up with, you are incorrect. The city started doing this well before Tom Markus arrived earlier this year. We reported last year that the 2015 contracted street maintenance budget had dropped to $2.8 million after city officials took money from the fund for other purposes.
So, are city commissioners breaking a political promise when it comes to streets? Honestly, I’m not that interested in answering the question. The answer will be subjective, and won’t have much bearing on what happens in the future. It certainly appears that street maintenance funding is different from what voters were told in 2008, but a lot of things have changed since 2008. The city has had financial issues it has had to address. The truth is, the folks who campaigned in 2008 for the sales tax had no way of promising what future city commissions would do with future budgets. That’s why when it comes to promises, there are many I would prefer rather than political ones.
What happens going forward, though, is important. City engineers say they ought to be spending about $6 million a year in contracted street maintenance to stay ahead of the curve. Whether that number is entirely accurate is probably debatable too.
But it seems there is a reasonable question to ask at City Hall these days: Is the city going to fall behind on street maintenance again? If the answer is yes, you need to answer another question: What city spending are you going to cut, or what taxes are you going to raise?
Don’t ask me. I think it may be easier to figure out the tattoo.
The things I’ll do for this job. Last night, I bought a six-pack of beer in the name of journalism.
Before the folks from accounting come and revoke my expense account, let me explain. The idea of reducing the sales tax charged on groceries has been brought up recently in the Kansas Legislature, but as has been the case every other time the idea has been raised, it has gone nowhere. Kansas has the second highest sales tax on groceries in the country, and that has created an interesting situation: Most Kansas consumers pay less tax for liquor than they do for groceries.
Here’s how that works: When you go to a liquor store in Kansas, you don’t pay a sales tax at all. You pay a special tax called a “liquor enforcement tax.” It is an 8 percent tax. Every liquor store in the state charges it, regardless of its location. No local sales taxes are added to the price of your liquor purchase in a liquor store. In the name of good journalism, I went to the liquor store at 23rd and Harper last night and bought a six-pack of Miller High Life. The purchase price before tax was $4.69 — and I’ll remind the accountants that wasn’t for swill but rather was for The Champagne of Beers. I paid 38 cents in tax. That’s 8 percent.
But if I were to go to a Lawrence grocery store and buy a loaf of bread, or a bag of chips or this foreign substance that my wife keeps talking about called lettuce, I would pay 9.05 percent in sales tax. As I have been known to say before, it pays to buy beer over bread.
This situation isn’t exactly new. The 8 percent liquor enforcement tax has been around for a long time. But it hasn’t been increased since 1983. That’s not the case with state and local sales taxes. In 1983 and for many years afterwards, the 8 percent liquor enforcement tax was consistently higher than the sales tax rate in pretty much every community in the state. But now there are more than 300 jurisdictions in Kansas that have sales tax rates greater than 8 percent. In more densely populated areas, it is by far the norm.
Kansas has 23 cities with a population of 20,000 or more. Of those, 21 cities have sales tax rates greater than 8 percent. Only Wichita and Derby fall at or below the 8 percent mark. The median in Kansas’ largest cities, in case you are wondering, is 9.1 percent.
What does all this mean? That is probably for you to decide. Some may see this as the state sending an odd values message by taxing something that is clearly a luxury — liquor — at a rate that is lower than something that is clearly a necessity, like food. Others may believe the problem isn’t with the liquor tax but rather believe the culprit is general sales taxes have increased too much over the years.
That’s not for me to say. But as the state searches its couch cushions for money, and as communities continue to deal with some issues related to liquor consumption, it seems like it is a conversation worth having.
If such a conversation were to happen — and let me be clear that I’ve seen no signs that it will — cities and counties probably would like to have the conversation broadened a bit. There’s also one other important difference between the liquor enforcement tax and normal sales taxes. The state keeps all the liquor enforcement tax. Cities get none of those tax collections. In Lawrence, this is big business. In fiscal year 2015, there was just less than $50 million in liquor sales in Douglas County, according to state reports. The state collected $3.99 million in liquor enforcement tax revenue. (If $50 million sounds like a lot, remember that bars also pay the tax. If a bar buys its liquor from a liquor store it pays the 8 percent tax or it also pays the tax if it buys it directly from a distributor. Also, don’t confuse this tax with the 10 percent drink tax when you order a cocktail at a bar. That’s a separate tax, so consumers do pay quite a few taxes when they are ordering liquor by the drink.)
If Lawrence and Douglas County were allowed to charge their local sales taxes on those liquor sales, that would result in nearly $1.3 million in additional sales tax revenue for the city and the county. I’ve covered City Hall long enough to know that the fact the city gets shut out of those tax revenues is irksome.
But even if the state doesn’t want to let cities and counties get in on the action, an increase in the liquor enforcement tax rate could produce significant revenue for state coffers. According to a state report for fiscal year 2015, there were $823.3 million in liquor sales subject to the liquor enforcement tax. If the state decided that it wanted to return to the philosophy of old — where the liquor tax was significantly higher than the general sales tax — it could increase the liquor enforcement tax to 12 percent. That increase would produce about $33 million in new dollars for the state, assuming liquor sales held steady.
It also would net state legislators a lot of political pain. The liquor lobby almost certainly would fight such a change. They would argue that liquor is already taxed at many different levels, and is more heavily taxed than most products, when you consider all the taxes paid from the beginning of production to the end cycle. I’m not here to debate that, and again, I’m not here to say what the right course is.
But I do think it is worth noting that at one point Kansans would go to a liquor store and pay quite a bit higher tax rate for their six-pack of beer than they would for their loaf of bread. For many Kansans, that is no longer the case.
Why is that?
Beats me, and the weekend is coming, so I’m not going to ponder it too long. I tell you one other thing I won’t ponder much this weekend: the debate between beer or bread.
The up and down trend of retail spending in Lawrence is continuing.
The latest sales tax report out of Lawrence City Hall shows retail spending for the period of mid-August to mid-September, about the time students returned to campus, was down about 1.6 percent compared to the same period a year ago.
The decline comes after a whopping 17 percent increase in the previous month's reporting period. The city has received 10 of its 12 sales tax checks from the state this year, and thus far retail sales have been up in five of those months and they have been down in five.
The forward steps, however, have been just a little bit bigger than the backwards steps. Through the first 10 reporting periods, retail spending is up about 2.5 percent compared to the same period a year ago.
The bottom-line is that retail sales in the city are still growing but not nearly at the rate they were in 2012. At this time in 2012, sales tax collections were up 6.1 percent compared to 2011 totals.
Looking at a little bit broader picture, the large increase in 2012 came after Lawrence consumer spending hit some pretty pitiful levels in 2009 and 2010. Consumers started to ramp up in 2011, but it appears that 2012 is when consumers unleashed their pent up demand. That period of pent-up demand, it appears, is now over. Once you adjust for inflation, consumer spending in Lawrence is up only about 0.6 percent for the year. This year's sales tax collections are on track to meet the city's budget estimates, but if this moderation continues, it will make 2014 an interesting year to watch.
It also is interesting to watch what is going on in other major retail markets in the state. Lawrence is faring slightly poorer than many of the major retail areas in the state, with a few notable exceptions. Lawrence's 2.5 percent growth rate thus far in 2013 is better than Topeka at 1.6 percent; Manhattan at 1.1 percent; and far better than Hays, where something is either amiss with the reports or else a significant spending slow down has occurred. Sales tax numbers in Hays are down 9.9 percent for the year.
Here's a look at other major retail areas in the state:
• Emporia: up 3.6 percent
• Johnson County: up 4.3 percent
• Kansas City: up 5.7 percent
• Lenexa: up 6 percent
• Olathe: up 4.7 percent
• Ottawa: up 6.7 percent
• Overland Park: up 3.1 percent
• Salina: up 2.5 percent
• City of Shawnee: up 4.9 percent
• Sedgwick County: up 3.6 percent
Here's one other piece of data for you. The state periodically provides statistics on the type of consumer spending taking place in the state. The latest report shows spending by industry through the first six months of 2013. I don't have access to numbers specifically or Lawrence, but these statewide numbers may give glimpse at what sectors of the market are rising of falling locally.
Sales tax collections for sporting goods, hobby, book and music stores were the largest gainer in the retail sector, by percentage increase. Sales in that sector were up 5.2 percent during the first six months of the year. Other retail categories included:
• Vehicle and parts sales: up 4.3 percent
• Furniture and home furnishing: up 1.8 percent
• Electronics and appliance stores: down 2.8 percent
• Building material and garden supply stores: down 2.7 percent
• Grocery and food and beverage stores: up 2.8 percent
• Drug stores and personal care stores: up 3.0 percent
• Gasoline stations: down 1.9 percent
• Clothing and clothing accessories: up 3.6 percent
• General merchandise stores: up 0.8 percent
• Miscellaneous retailers: down 6.4 percent
• Restaurant and drinking establishments: up 1.7 percent
• Hotels and accommodations: up 2.1 percent