In 2000, voters in the City of Great Bend approved a half-cent city sales tax, a tax that first bore fruit in 2001.
The purpose of the tax was three-fold, said City Administrator Howard Partington – to provide property tax reduction, infrastructure improvements and economic development incentives.
But, it expires in April 2015 and Partington said the city may take a renewal to the voters this coming April.
The tax has generated between $1.4 million and $1.9 million each year. Despite the 2008 recession, it has continued to dump money into the general fund coffers.
Of the total, 35 percent goes to property tax reduction. Over the years, it has been the equivalent of between five to seven mills.
As for the balance, 45 percent goes to infrastructure improvements (mostly streets and Fire Department equipment) and 20 percent goes to economic development incentives.
It is important, Partington said, to understand this tax is only a piece of the city’s budget pie. One must look at the big picture in order to see how it fits into the recipe.
It’s not that simple
When looking at the City of Great Bend’s sales tax figures since 2001, a number of things become clear.
First, sales taxes as a whole account for a quarter of the city’s revenue.
Second, whereas the city felt the impact of the economic downturn in 2008, it wasn’t hit as hard as some areas of the country. Despite the dip, numbers have remained relatively constant.
Third, since the recession, sales tax receipts have crept back upwards, although they have remained flat over the past three to four years.
And, lastly, putting sales tax numbers into the proper context is much more complicated than merely comparing numbers on a graph.
Recent totals have looked good, but“you have to look at sales tax numbers over time,” said Great Bend City Administrator Howard Partington. “You try not to get to excited looking at just one month.”
Comparing apples to apples
To get started, it is good to understand the city’s sales tax structure. The total sales tax revenue is made up of three pieces – a half-cent city tax (roughly 10 percent of the budget), a quarter-cent city tax (5 percent) and the city’s portion of the county-wide tax (11 percent) – that equals about 26 percent of the city’s $23.7 million 2013-14 budget.
For comparison, property taxes comprise 21 percent of the city budget.
The city has no control over the county portion, Partington said. Collected from businesses by the Kansas Department of Revenue, it is the state that dolls the money back to the cities based on what Partington says is an archaic formula using population and property tax collections.
So, for revenue trend-tracking purposes, Partington said city officials use the half-cent tax.
When one looks at the most recent sales tax totals, they are looking back in retail time. “There is actually a two-month delay,” Partington said.
Take September, for example.
Retailers had until Oct. 25 to submit their sales tax receipts to the Revenue Department. Then, it took until about Nov. 25 before the city got its money from the state.
This is normally the case – the city receives its share by the 25th of each month.
“This is about 80 percent correct,” Partington said. Some businesses pay early, some pay late and some pay for more than one month at a time
This all can skew the totals, making a monthly snapshot difficult. Because of the lag and the uneven payments, it is best to look at trends over at least a three-month period, Partington said.
In 2013, the half-cent tax has raked in between $139,250 (in the April report) and $188,602 (in July). Partington expects the December total (which is really for October) to be around $150,000, bringing the year-to-date total to within $3,000 of 2012’s $1,935,239.
It was at a City Council meeting this past summer that the jump in sales tax receipts in July became a topic of discussion. However, Partington said the numbers used didn’t paint an accurate picture.
The quarter-cent numbers are exactly half of the half-cent one. Put in place primarily for street upkeep, it was approved in 2008 and expires in 2018.
What does all this mean?
“We don’t follow the national economy as much,” Partington said. Where some parts of the country, and some parts of the state, saw wild swings, Great Bend stayed pretty constant.
Why? One of the area’s key industries didn’t feel the recession as much as others.
“The oil business helped soften the blow,” he said. “Oil kept us from dipping further and kept us stable.”
The half-cent tax raised $1,859,021 in 2008, $1,788,342 in 2009 and $1,726,796 in 2010.
This consistency has made budgeting for the city easier. Officials can just count on the sales tax revenue being about the same every year.
But, Partington said they don’t get complacent. “We budget low” in case the totals are lower than anticipated.