photo by: Mike Yoder

Lawrence City Hall, 6 E. Sixth St., Thursday, July 7, 2016

The Lawrence city manager’s recommended budget includes a 20% funding increase for economic development, which city leaders hope could ultimately help lighten the property tax burden on Lawrence residents.

City Manager Craig Owens’ recommended budget for 2023 calls for a flat property tax rate, increases in utility rates and other fees, and a $143,000, or 20%, increase to funding for economic development. In a recent discussion with the Journal-World about the recommendation, Owens said when he began his position with the city three years ago, one of the first things he observed was that commercial property in Lawrence pays a small percentage of the property taxes, leaving a large part of that burden on residents.

Owens said one of the factors contributing to that imbalance was that a lot of the city’s largest employers — the University of Kansas, the public hospital system, the city itself, and the Lawrence school district — are all exempt from paying property taxes. While he emphasized the value those employers bring to the community, he said the city needs more options, both in terms of the tax base and jobs for residents.

“While those are wonderful parts of what we have, we absolutely need to grow our private sector and retain a lot of the people, I think, who leave our city to go do amazing work in nearby cities, in office buildings that are paying property taxes in those places and not here,” Owens said. “So I think we have a huge capacity that’s untapped.”

Owens noted that Ernst & Young, the outside consultants the city hired in 2020 to conduct an economic analysis of the city and create its first economic development strategic plan, made the same observation. As the Journal-World reported, the consultants warned that if Lawrence doesn’t attract more kinds of businesses, it could become a bedroom community that’s not affordable for people who don’t commute elsewhere.

The property tax burden

Property taxes in Kansas are charged at a percentage of a property’s assessed value, with residential properties assessed taxes at 11.5% of that value and commercial and industrial properties assessed at 25%. Despite that significantly larger assessment rate, residential properties still bring in the vast majority of property tax revenue in Lawrence.

Based on the 2022 Douglas County Appraiser’s report of valuation, residential properties make up about 74% of the city’s taxable value, or property tax base, while commercial properties make up about 25%, according to information provided by Finance Director Jeremy Willmoth. All other property types make up the remaining 1%. Lawrence property owners are projected to pay about $42.9 million in property taxes to the city in total, with the residential properties accounting for about $31.6 million, commercial about $10.9 million, and all other property types about $429,000.

With residential property values rising at higher rates than commercial values, residents’ share of property taxes could continue to increase. In the last year, residential property values in Lawrence have increased by 15.6%, according to the Douglas County Appraiser’s Office. That means even if the city ends up keeping the rate flat as recommended, homeowners will still pay significantly more in taxes. For example, if the owner of a house valued at $250,000 sees a 15.6% increase in value, to $289,000, the amount owed to the city would increase by $149, from $957 to $1,106, just due to the increase in value.

In considering the city’s property tax rate, city commissioners have also noted the proportion paid by residents. That includes Commissioner Brad Finkeldei, who recently told the Journal-World he is still open to looking at ways to reduce the city’s tax rate for the 2023 budget. Finkeldei also said he thought he would be supportive of the increase in economic development funding.

“Because we need to change that ratio of residential to commercial, so that we can not put such a burden on the residential side of it,” Finkeldei said.

Finkeldei also said the recent announcement of the Panasonic battery plant in nearby De Soto will create more economic development opportunities for Lawrence. State officials expect the $4 billion plant, which will employ 4,000 people, will be a catalyst for the whole region due to the suppliers and other local businesses needed, which they expect will create up to 4,000 additional jobs. Finkeldei said those related economic opportunities are certainly ones he hopes the city will capitalize on.

The recommended budget came out before the official announcement about the Panasonic plant, but Willmoth said the city is excited about the plant and what it will mean for the region. He said the city’s economic goals align well with supporting future business growth.

How the money will be spent

The additional $143,000 in economic development funding will go specifically to agencies that partner with the city to draw new businesses and employers to the community, increasing the total allocation for that purpose to $715,000.

The agencies that will receive the additional funding include the chamber of commerce, Economic Development Corporation, University of Kansas Innovation Park and Peaslee Tech. It has not yet been decided how the additional funding will be distributed among the partner agencies. Willmoth said that should the increase be approved, staff involved with the city’s strategic plan goal of “prosperity and economic security” will work together to determine how to allocate the additional dollars.

The recommended budget states the additional resources will enable greater progress toward the goals outlined in the economic strategic plan created by Ernst & Young. Those goals include diversifying the city’s economy to strengthen the tax base, spur entrepreneurship and offer expanded career pathways. The budget also notes the city plans to complete its first-ever business survey later this year, and begin work on updating the city’s development code, “which is a key aspect to streamlining processes and ensuring a business-friendly environment.”

Owens said meeting the goals in the economic strategic plan will help decrease the burden on residents to fund the high level of services that people have been accustomed to in Lawrence.

“So economic development needs to be very high priority so we can get that slice of the pie proportionally much larger,” Owens said. “And those businesses can help carry a lot more of the weight of the infrastructure, the services, the social services and the things that Lawrence needs and wants to continue to have as a community.”

The recommended budget for 2023 totals about $436.8 million across all funds and keeps the city’s property tax rate flat at 33.29 mills. It also proposes new parks and recreation fees, utility rate increases and $936,000 in cuts to city services and positions, some of which are offset by other additions. The city is proposing $1.2 million in new parks and rec fees, potentially including new admission fees for recreation centers. There are $606,000 of proposed additions, including the increased funding for economic development, two new positions and additional funding for information technology. Another $4.2 million is proposed for employee raises.

Lawrence city commissioners are scheduled to continue their 2023 budget discussions on Tuesday, when they will discuss a recommendation to increase utility rates.