Remembering when property tax rates actually fell in Douglas County; local leaders may want to study that period now
In my personal life, I spend a lot of time doing cost analysis. For the record, I have found a double cheeseburger always pays for itself. (It is double the meat and cheese, people.) But local governments currently are dealing with an even meatier question: Does growth pay for itself?
No, it doesn’t sound nearly as fun as finding the answer to the cheeseburger question. But if you care about how much houses will cost in Douglas County in the future, or how high your tax bills will be years from now, it is a really important question.
City commissioners will start debating it at their meeting on Tuesday. Specifically, they will consider approving Plan 2040, which is a new comprehensive plan for the city and the county. Basically, it provides a set of rules for how growth ought to happen in the future. Among the new rules is that the city would seek to limit growth near the edge of the city and instead force as much growth as possible into older, existing parts of the city. A major reason behind this rule is because there are concerns about whether growth — especially housing growth — pays for itself. In other words, does the cost of providing government services to new residents total more than what they are paying in taxes and other government fees?
When the Journal-World recently asked Mayor Lisa Larsen — one of the architects of Plan 2040 — what evidence she had that growth did or did not pay for itself, she acknowledged that such evidence was lacking. It’s unclear if city commissioners will delay a decision on Plan 2040 until they get such evidence. The plan is on Tuesday’s agenda for approval, but that doesn’t mean commissioners must approve it. They may simply debate it and determine what additional information they need. We’ll see what path they take.
But in the spirit of trying to make important decisions with data, I’ve dug some up. Spoiler alert: This isn’t going to settle the debate of whether growth pays for itself. That is a type of question that is particularly hard to answer: a politically loaded one.
I, however, have been covering local government in Douglas County since 1992, which gives a fellow a chance to amass some data. Here’s what I remember about the 1990s: An unfortunate mullet, Douglas County growth was very robust, and property tax rates actually declined.
Here’s what I remember about the first decade of the 2000s: Y2K will end the world (although we don’t know in what year yet), Douglas County growth slowed considerably, and property tax rates climbed significantly.
As for the current decade, I remember lots of chicken restaurants, Douglas County growth remaining below the 1990s mark, and property tax rates continuing to climb.
Again, this isn’t going to convince people who think growth doesn’t pay for itself, but it seems worth noting that the decade in which we grew the fastest is the only decade in the last 30 years that we’ve seen our property tax rates decline.
Let’s take a closer look at the three decades in question:
• From 1990 to 1999, the population of Douglas County grew by 22.2%. We were one of the fastest growing counties in the state, and a big debate was whether Kansas Highway 10 was going to be a constant stretch of urban development between Lawrence and Johnson County. Building more than 300 single-family homes per year was the norm in Lawrence.
During that time, the city’s property tax rate dropped from 26.42 mills to 24.35 mills. That is a decline of nearly 8%. The county’s mill levy dropped from 27.24 mills to 24.61 mills. That is a decline of nearly 10%.
The other significant tax event during that time period is the city added a half-cent sales tax for public safety in 1991, and the county added a 1% countywide sales tax. Part of that sales tax was used to pay for growth-related things, such as a new jail and a new home for the Lawrence-Douglas County Health Department. A large part also was used to pay for new recreation projects, like the Eagle Bend Golf Course and swimming pools. The third component of the sales tax was used to lower property taxes.
The other thing that helped lower the property tax rate is that home values grew significantly in Douglas County during that decade. People who think growth does pay for itself say property value is one of the ways it does so. Growth creates new wealth by raising property values, which ultimately improves the balance sheet of property owners.
Factoring out the impact of growing property values, here’s what happened to the owner of a $200,000 home during that decade. At the beginning of the decade, that owner paid $1,234 in city and county property taxes. By 1999, the tax bill had declined to $1,126 in taxes for a savings of $108 per year. But due to the new sales taxes of 1.5% added that decade, that owner would pay an extra $150 in sales taxes for every $10,000 worth of taxable goods purchased during the year. So, depending on whether you were buying $10,000 worth of stuff in a year, you may have come out a bit ahead or a bit behind that decade. But compared to what was to come, being close to breaking even was a pretty good deal.
(Note: I haven’t factored in school district taxes mainly because the school district isn’t being asked to approve Plan 2040, and generally hasn’t engaged in the debate of whether growth pays for itself. That may partially be because the state pays the district a flat fee for every new student it must serve.)
• In the first decade of the 2000s, Douglas County population growth slowed to just less than 11%. In other words, we grew about half as fast as we did the decade before.
During that time, the city’s property tax rate grew from 23.9 mills to 26.69 mills, an increase of about 12%. The county’s property tax rate grew a whopping 34%, rising from 24.32 mills to 32.8 mills. As for why the county’s rate increased so much, my recollection is that county officials constantly were talking about unfunded mandates from the state of Kansas, not that growth wasn’t paying for itself. The problem was a state — which has grown more slowly than the U.S. as a whole for every decade since 1890 — shifting more burdens to local government.
Also of note to taxpayers is that the city of Lawrence added three sales taxes during the decade totaling 0.55%. They were used to pay for street maintenance and other infrastructure needs, plus a public transit system. Unlike the 1990s sales tax, none of the new sales tax was committed to reducing property taxes.
Here’s what happened to an owner of a $200,000 home during that decade. In 2000, the owner paid $1,109 in property taxes to the city and county. By 2009, that amount had grown to $1,368. In addition, people were paying $55 in extra sales tax for every $10,000 worth of taxable items purchased in Lawrence.
• In the current decade, population growth has picked up some, but nothing like it was in the 1990s. We are on pace to finish the decade with about a 13% increase in population growth, according to the latest Census numbers.
Thus far, with just eight years in the books, the city’s property tax rate has increased by 24%, from 26.69 mills to 33.27 mills. The county’s mill levy has increased by about 29%, going from about 35 mills to 46 mills.
During the time period, voters renewed the three city sales taxes of 0.55% for another 10 years, and the county added a 0.25% sales tax to fund behavioral health care.
Here’s what happened to the owner of a $200,000 home thus far this decade. In 2010, the owner paid $1,435 in property taxes to the city and the county. By 2018, the amount had grown to $1,823. In addition, people pay $25 in extra sales taxes for every $10,000 worth of taxable goods purchased in Douglas County.
Again, this exercise isn’t meant to answer the question. Maybe the effects of growth not paying for itself are delayed. But let’s be honest — that is just a guess. What is clear is that the decade in which Douglas County grew the fastest is also the decade in which property tax rates declined. To reasonable people, that has to at least open the door to the possibility that growth not only pays for itself but also helps a community prosper.
If the latter proposition is true, Douglas County leaders could be on the verge of a huge mistake that will make it more difficult for us to keep housing affordable and pay for our desired quality of life in the future.
At this point, I’m only sure of two things: 1. Douglas County leaders need more information before they make a decision of this importance; 2. If double cheeseburgers pay for themselves, triple cheeseburgers are going to make me rich.