7.4 Sales TaxCITY OF SALINA
REQUEST FOR CITY COMMISSION ACTION DATE TIME
1/25/16 4:00 P.M.
AGENDA SECTION ORIGINATING DEPARTMENT: FISCAL AL:
NO: 7
BY:
ITEM CITY MANAGER'S OFFICE FINAL APP VAL.
NO: 4
Page 1 BY: Jason A. Gage, City Manager B
ITEM: Ordinance No. 16-10819
Ordinance No. 16-10819 submitting to voters on May 10, 2016 by a special, question submitted
election utilizing a mail -in ballot the question of repealing the existing .40 percent (4/101hs cent)
retailers' special purpose sales tax and replacing it with a retailers' general purpose sales tax to
commence on October 1, 2016 and end on September 30, 2036; specifying the purpose for which the
revenue would be used and the specific sales tax rate.
BACKGROUND:
The City's current 4/10t"S cent special purpose sales tax will expire on March 31, 2019. This tax was
approved by the voters on November 4, 2008. The voters approved the sales tax with the following
specified purposes for its use:
• general capital improvements;
• major equipment;
• construction, operation and maintenance of a family aquatic park in the Kenwood Park area;
• debt service on bonds issued for the projects;
• property tax stabilization; and
• continuation of an economic development fund managed by the City
Since 2009, the current special purpose sales tax has generated approximately $25 million for
investment in the community. Major uses of the tax include approximately $7.9 million in streets; over
$10.3 million for Kenwood Cove and the North Ohio Overpass projects; $3.1 million to stabilize the
municipal property tax rate; $3.2 million for vehicles, major equipment and facility improvements; and
$2.3 million for economic development.
During a recent study session and regular meeting, the City Gommission discussed the -renewal of the
current special purpose sales tax. This conversation also focused on future community needs,
including a way to invest significantly more in street improvements -- with a special emphasis placed
on neighborhood streets. The renewal of the Smoky Hill River was also considered a priority project
due to the need to address channel restoration and provide a community amenity. Additional interest
was also communicated for continued property tax stabilization, park system rehabilitation and
improvement, future facility and equipment needs, strengthening of neighborhoods and a more
aggressive emphasis to attract quality jobs to Salina. A very rough, estimated yearly cost to address
these community needs ranged from $5.32 million to $9.35 million. The lower cost estimate range
was based on continuing a status quo approach to some, but not all of these needs.
Comparable Sales Tax Rates
Staff provided the governing body with the total sales tax rates of other Kansas communities. Of the
communities highlighted, Wichita and Derby are currently below Salina's total sales tax rate of 8.40%.
However, many of Salina's neighboring cities including Manhattan, Hutchinson, Hays, McPherson,
Topeka and Junction City have significantly higher sales tax rates than Salina. A list of sales tax rates
for these communities is provided below.
CITY OF SALINA
REQUEST FOR CITY COMMISSION ACTION DATE TIME
1125116 4:00 P.M.
AGENDA SECTION
NO:
ORIGINATING DEPARTMENT:
CITY MANAGER'S OFFICE
FISCAL APPROVAL:
BY:
ITEM
FINAL APPROVAL:
NO:
Page 2
BY:
Jason A. Gage, City Manager
BY:
Junction City
9.75%
McPherson
9.00%
Leavenworth
9.50%
Leawood
8.85%
Pittsburg
9.25%
Overland Park
8.85%
Dodge City
9.15%
Hays
8.75%
Topeka
9.15%
Manhattan
8.75%
Kansas City
9.925%
Garden City
8.65%
Abilene
9.10%
Salina
8.40%
Hutchinson
9.10%
Derby
8.00%
Lenexa
9.10%
Wichita
7.50%
Lawrence
9.05%
*Sales tax rates exclude special taxing districts such as community improvement districts and transportation
development districts.
Certainly, staff would agree that Salina should not get into a race to have the highest sales tax rate.
With that said, the aforementioned data indicates that communities competing with Salina for
residents, businesses and visitors appear to have been more aggressive than Salina in recent years
with regard to making community improvements using their sales tax as a resource. Staff does
believe that Salina can both retain and possibly enhance our community's competitive position within
the region by applying a sales tax rate that is within the middle range of the group.
Revenue Estimates for Various Sales Tax Rates
Recently, staff also provided the governing body with a list of revenue estimates based on various
sales tax rates. Additional sales tax revenue generated by rates between .25 percent (114th cent) and
.40 percent (4/10ths cent) is estimated as follows:
Total Sales Tax Rate
(base = .40 percent)
65% (+.25%
70% (+.30%
75% (+.35%
80% (+.40%
Total Estimated Revenue - 2017
(base = $4.9 million)
$8.0 million
$8.6 million
*Note: Revenue increment estimates are estimated for 2017.
$9.2 million
$9.8 million
At the last regular city commission meeting, the commission generally agreed that an additional sales
tax increment is necessary to address future, capital improvement needs of the community. They
agreed that a term of 20 years and an increased rate ranging between .25 percent and .40 percent are
needed to meet these needs. Please note that staff recently determined that a special purpose tax
term cannot exceed 10 years. However, bond counsel has advised us that cities can adopt a second
general purpose sales tax, with the same use restrictions as already proposed, and establish a 20 -
year sunset. This timeframe best allows us to load balance debt service payments for large capital
projects that may occur.
CITY OF SALINA
REQUEST FOR CITY COMMISSION ACTION DATE TIME
1125116 4:00 P.M.
AGENDA SECTION
ORIGINATING DEPARTMENT:
FISCAL APPROVAL:
NO:
BY:
CITY MANAGER'S OFFICE
ITEM
FINAL APPROVAL:
NO:
Page 3
BY: Jason A. Gage, City Manager
BY:
Finally, general agreement of commissioners was also reached to utilize a spring, special election with
a mail -in ballot and to immediately repeal the current sales tax and replace it with the new sales tax.
The mail -in ballot response expectations exceed 50% of registered voters, which is much higher than
the typical 10% to 15% turnout rate from most prior municipal elections. If approved, the accelerated
application of the new sales tax will provide additional financial resources to invest in pending
community improvements approximately 3 years earlier than waiting for the current sales tax to expire.
Ballot Question
The ballot question provided for in the attached ordinance will as the voters to adopt a retailers'
general purpose sales tax at a rate to be determined by the City Commission for a term of 20 years,
with the proceeds to pay the cost of:
Improving neighborhood streets and drainage; preserving a stable property tax rate, ensuring
a quality park system; constructing and maintaining capital improvements, funding
equipment; funding bonded debt issued for capital improvements; and continuing to support
a fund managed by the City to attract quality jobs.
FISCAL NOTE:
The cost impact of utilizing a special, mail -in ballot election is estimated to range from $35,000 to
$45,000. Use of a mail -in ballot appears to be a very effective approach to effectively utilizing the
democratic process. If approved and depending on the rate desired, the special purpose sales tax
could provide between $4.9 million and $9.8 million in 2017. A significant benefit of utilizing a sales
tax as the primary funding tool for capital improvements is that nearly 1/3 rd of the revenue is
generated by persons that shop in Salina, but reside outside Saline County.
This estimation of retail pull is determined based on an annual pull factor report created by Kansas
State University and published by the Kansas Department of Revenue. A pull factor is a general
means of measuring the strength of a community's retail draw. A pull factor of 1 would suggest that a
community's retail sales strength is equal to that expected for its population. A higher pull factor
denotes a stronger retail draw, while a pull factor less than 1 indicates a community may not be
meeting its retail trade potential. For 2014, the most recent data published, Salina has a trade factor
of 1.46. It would indicate that Salina's retail trade area is large and its retail draw is equivalent to a
community 46% larger in population. This pull factor is the third strongest in the state when
comparing all first class cities. The only two first class communities with a higher pull factor are
Lenexa at 1.55 and Garden City at 1.52.
CONFORMANCE WITH STRATEGIC PLAN:
While the Comprehensive Plan does not specifically address the use of specific revenues, it does
address infrastructure (i.e., streets, sidewalks, water, wastewater and related improvements) needs
as they relate to responding to current community demand, redevelopment and new development.
AGENDA SECTION
NO:
CITY OF SALINA
REQUEST FOR CITY COMMISSION ACTION DATE TIME
1125116 4:00 P.M.
ORIGINATING DEPARTMENT: ! FISCAL APPROVAL:
BY:
CITY MANAGER'S OFFICE FINAL APPROVAL:
ITEM
NO:
Page 4 BY: Jason A. Gage, City Manager BY:
Certainly, utilization of sales tax dollars is an effective way for the City to meet Comprehensive Plan
infrastructure expectations.
RECOMMENDED CITY COMMISSION ACTION:
The following alternatives are provided for the City Commission's consideration:
1) Adopt Ordinance No. 16-10819 on first reading as proposed;
2) Adopt Ordinance No. 16-10819 on first reading as modified; or
3) Do not adopt Ordinance No. 16-10819 at this time.
Staff does ask that a motion to adopt Ordinance No. 16-10819 include the agreed upon sales tax
rate.
Attachments: Ordinance No. 16-10819
RESOLUTION NUMBER 16-7317
A RESOLUTION SUBMITTING TO THE ELECTORS OF THE CITY OF
SALINA, KANSAS, THE QUESTION OF WHETHER THE CITY'S CURRENT 0.40
PERCENT (.40%) SPECIAL PURPOSE RETAILERS' SALES TAX SHOULD BE
REPEALED AND REPLACED WITH A 0._ PERCENT (0._%) GENERAL PURPOSE
RETAILERS' SALES TAX FOR A PERIOD OF TWENTY (20) YEARS AND
SPECIFYING THE PURPOSES FOR WHICH THE PRCiCEEIDS WOULD BE USED.
BE IT ORDAINED by the Governing Iludy of the Cialina, Kansas:
Section 1. Pursuant to I -S, A't. 12-187, thte °Cov6r ng°'apdy„ authorizes and
directs that a special question election be conducted under th, Kansas Mail Nal16 Election Act
(K.S.A. 25-431, et seq.) on May 10, 2016, at which tim,- lhej-i sha)) LQ submitted to the qualified
electors of the City the following propositi
Shall the following be ad
The vote at said special question election shall be by mail ballot,
and the proposition stated above shall be printed on the ballots, together with voting instructions
as provided by law. The City Clerk is directed to request that the County Election Officer give
notice of the special election as provided by law by publishing a Notice of Special Election once
each week for two (2) consecutive weeks in a newspaper of general circulation in the City, with the
first publication to be not less than twenty-one (21) days prior to the date of the special election,
and the last publication being not more than forty-five (45) days prior to the date of the special
election.
Section 3. This ordinance shall be in fxffl force and effect from and after its
adoption.
Adopted by the Board of Commissioners and �igti d by the Mayor this 25"' dad- of January, 2016.
[SEAL]
A"
Sh
Jon R. Blanchard. Mayor
2
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