Sales tax figures show city ends the year with a surplus; Lawrence City Commission may discuss using it to fund homeless shelter

photo by: Nick Krug

Lawrence City Hall, 6 E. Sixth St., is pictured on May 3, 2016.

It was a good — but not great — year for Lawrence sales tax collections, the year-end numbers from the state show.

Now, the question is: Was it good enough that the City of Lawrence will give some extra funding to the community’s homeless shelter?

After receiving its December sales tax check from the state, the figures show Lawrence received about $400,000 more in sales and use tax collections in 2019 than it budgeted to receive. So a bit of a windfall but not a huge one. The $400,000 represents about a 1% overage.

But the amount is definitely big enough to create questions about whether the city now can afford to fund a request from the Lawrence Community Shelter. When the city was creating the 2020 budget last summer, the homeless shelter asked the city to increase its funding from about $200,000 to $504,000 to boost the organization’s struggling finances.

City commissioners instead approved $296,000 for the shelter. But then-Mayor Lisa Larsen said she wanted to watch how city sales tax collections finished the year. If they came in better than expected, perhaps the city could modify its 2020 budget and give the shelter more money.

Today, Larsen told me she is still open to the idea, but stopped short of saying she was ready to provide more funding. Instead, she plans raise the issue at tonight’s Lawrence City Commission meeting. She said she particularly wanted to hear any thoughts City Manager Craig Owens has on the subject.

“I do want to touch base on it again and see where everybody is at with it,” said Larsen, who is no longer mayor but does hold one of the five commissioner seats.

She declined to say whether the $400,000 budget surplus is enough for the commission to consider spending. She wants to hear more from Owens on that front.

“Is that a cushion we still need?” she asked.

Commissioners meet at 5:45 p.m. today at City Hall. There is not a specific item on the agenda to discuss the Community Shelter situation. Larsen, though, said she planned to bring up the topic near the end of the meeting when the commission is scheduled to be briefed on the monthly sales tax report.

City Commission Meeting 01/07/20

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Let’s take a closer look at the year-end sales tax numbers. My family must not have been the only one to rent a U-Haul to stock up on the Halloween candy.

While the sales tax report represents the city’s December check from the state, the numbers were produced largely by October sales, due to the delay in reporting times with sales taxes. And maybe it wasn’t Halloween candy for everybody, but something had shoppers spending more in the month.

The city posted a 7.3% increase in sales tax collection compared with the same month a year ago. That was better than the statewide average of a 6.4% increase. It also marks the second month in a row that sales tax collections were really strong. The November report showed collections were up 6% in that month. The city is finishing the year strong after going through a bit of a spending lull in the middle part of the year.

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The late surge was enough to ensure that Lawrence continued its streak of posting an annual increase in sales tax collections. Lawrence has posted a year-over-year sales tax increase every year since 2010. For 2019, the increase was a modest 1.3%. That’s basically keeping up with inflation, but not everybody did that. Overland Park, Topeka and Lenexa, for example, all posted declines in sales tax collections for the year. Here’s a look at the full year performance for some of the largest retail markets in the state.

• Sedgwick County (Wichita): up 2.6%

• Kansas City: up 1.8%

• Olathe: up 1.7%

• Shawnee: up 1.4%

• Lawrence: up 1.3%

• Salina: up 1.2%

• Manhattan: up 0.9%

• Overland Park: down 1.8%

• Topeka: down 2.0%

• Lenexa: down 5.4%

Since this is the end of the year — and I know how much you look forward to it — I’ll pass along some of the growth rates for the smaller communities in our area.

• Baldwin City: up 0.3%

• De Soto: up 2.2%

• Eudora: down 0.4%

• Leavenworth: up 2.9%

• Lecompton: down 15.4%

• Oskaloosa: down 3.1%

• Ottawa: up 4.8%

• Perry: down 26%

• Tonganoxie: up 3.1%

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It sure looks like it was a busy year for online shopping in Lawrence. As we’ve been reporting most of 2019, the city’s collection of a special type of tax called a use tax has been soaring. A use tax is charged in a few different situations, but one of the most common is when you buy something online. It may say you are paying a sales tax, but the state actually counts it as a use tax.

Lawrence saw its use tax collections in 2019 increase by 17.6% compared with 2018 figures. That was the second highest growth rates of any major retail market in the state. So, to summarize, the tax charged to online shoppers was up nearly 18%, while the tax charged to people shopping in Lawrence was up just a little more than 1%. I suppose there may be some other explanation than an online shopping surge for the use tax spike. I’ve asked around, though, and haven’t yet heard it. Here’s a look at how Lawrence compared with other cities:

• Lenexa: up 19%

• Lawrence: up 17.6%

• Sedgwick County: up 13.9%

• Salina: up 10.4%

• Overland Park: up 9%

• Shawnee: up 6%

• Manhattan: up 4.1%

• Kansas City: down 1.6%

• Topeka: down 2.5%

• Olathe: down 28%

One other fun calculation I did — well, fun, if you are the type who got a slide rule in your stocking — looked at the prevalence of use taxes in certain cities. Basically, I compared how much a city collected in use taxes versus general city sales taxes. The rates are the same for both taxes, but the number of purchases that trigger a sales tax versus a use tax are different . The result is a ratio. For Lawrence it worked out this way: For every $1 the city collected in normal city sales taxes, it collected 12.5 cents in use taxes.

Some communities collected way more. Lenexa collected 37.9 cents in use taxes for every dollar it collected in city sales taxes. Overland Park was just over 20 cents and Shawnee was just under 20 cents. Lawrence was in the bottom half of the list, tied with Olathe, while Manhattan and Salina were a bit lower at about 10 to 11 cents.

What does it mean? I’m not sure, but perhaps it is a sign that the amount of online shopping in some communities is even more prevalent. It will be interesting to watch whether Lawrence’s use tax collections continue to grow in 2020. I’m sure budget-makers have mixed emotions on it. I’m sure they are glad to get the dollar, but all things being equal, a dollar spent locally is going to have a much greater economic impact than a dollar spent with an online retailer.

Given that, it may be one of the more important trends for the community to watch.

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