BY SCOTT AUST
Pieces of legislation moving through the state Legislature could mean higher property taxes and reduced services next year for Finney County.
Finney County Commissioner Larry Jones expressed concern this week about House Bill 2285, which would eliminate property taxes on certain industrial property by reclassifying some permanent fixtures as machinery and equipment — tax-exempt since 2006 — instead of real property.
Reclassifying machinery and equipment would remove the property from the tax rolls, leading to a loss of revenue for counties.
Jones said if the bill passes, it could cost the county $1.7 million in revenue. He said the reasoning behind the proposals is fuzzy, but it would affect the county's biggest employers like Tyson and Sunflower Electric.
"Stuff inside those buildings that could be moved would be taken off the tax rolls and basically what's going to happen, it's a killer to us out here," he said.
If the county tried to make up that amount through increased property taxes, it could mean nearly a 4-mill increase in the county's levy which is currently 37.12 mills.
Commissioner Dave Jones said a former county appraiser estimated the change in classification could take as much as $74 million worth of machinery off the books for tax purposes.
"About all we have to operate on is property tax. We can't raise income tax or those things that the state can. We could raise (the) sales tax, but that would have to be the will of the voters," he said.
Commissioners are also concerned about dual bills working their way through the state House and Senate that would eliminate an oil and gas trust fund set up as a safety net for counties in 2005 in case oil and gas values dropped.
House Bill 2262 and Senate Bill 206 both address the oil and gas valuation depletion trust fund. The House bill would abolish the trust fund and send all the money, nearly $34 million this year, $14.7 million in 2014, to the state general fund, including money already sent to the county. The Senate version also abolishes the fund, but counties get to keep money sent last year.
County Administrator Randy Partington said last year the legislature decided to send money back to the counties to use as an insurance policy in case a county's oil and gas valuation dropped significantly.
In that case, a county could dip into the set-aside trust fund money to help keep its mill levy flat and avoid raising property taxes on homeowners. Now it appears the legislature wants to reverse direction.
"If it does go away, and if there were a huge decrease in oil and gas values, the county would be faced with cutting services drastically or raising the mill levy," Partington said.
Partington estimated Finney County has about $1.5 million in the fund currently.
Commissioner Cliff Mayo said the trust fund affects smaller counties much more than Finney County. He said some of those counties that depend a lot on oil and gas revenue would be hit harder if oil and gas values drop.
"At least it's there if we need it. Topeka, if they get their hands on it, they'll use it wherever they want to," he said.
Dave Jones equated the situation to a person putting money in a bank to draw on someday for retirement or for Christmas, only to have the bank later decide because of mismanagement it doesn't have enough money of its own.
"So they sweep your account and spend your Christmas money on the bank. The only problem is we don't have FDIC insurance on this money," Jones said. "(The trust fund) is an insurance policy, but the fact is, it was an oil well or a gas well in Finney County that put money in that account, not an oil or gas well in Topeka."
Sen. Larry Powell sponsored the Senate version of the oil and gas bill, but said Friday it wasn't written the way he intended because as written it totally eliminates the fund. Powell said he does not support taking the money back from counties, but thinks Gov. Sam Brownback will be successful in putting future trust fund money back in the general fund.
"The governor seems to want that money to go to the general fund, so I think that's probably where it will be. If it's going to go back to the counties, I think the counties ought to be able to spend it," Powell said. "Since the governor has the line-item veto, if we put money back in, if he really wants to, he could line-item veto it. I'm not sure we can stop that bill."
Powell thinks counties should be able to keep the trust fund money they have received and would be opposed to requiring them to send any money back to the state. But future trust fund money is up in the air.
Rep. John Doll opposes both bills.
"I think those bills will be horrific for western Kansas and rural communities in general. I'm very concerned about them, and I strongly, strongly oppose both of them," he said.
Doll said a number of bills working through the legislature this year would be bad for local governments and taxpayers. Another bill says that if a property's value goes up, the mill levy must go down. County commissioners would then have to vote on it to keep their levy at the same level. Politically, it's a no-win situation that ties the hands of local elected officials.
"If a person raises the mill levy, their tenure for the most part would probably be short. I think you're going to lose a lot of good county commissioners and city commissioners because of something like that," Doll said. "What some people at the state level are trying to do is take more power away from local governments and give it to the state. To me, I think that's wrong-minded."
Mayo and Dave Jones both said legislative actions this year could make for hard decisions when preparing the 2014 budget. Commissioners have told department heads to get ready for potential increases in the mill levy and decreases in services, Mayo said.
"We'll do what we have to do," Mayo said. "I think it will be a real challenge."
The county will have a better idea of the impact after the legislature finishes its work, Dave Jones said. Things might not be as bad as they look right now, he said, but they could face some tough choices.
"Do we quit maintaining some roads? Do we quit staffing a crew on the ambulance? I mean it could substantially impact services," Jones said. "Either that or adversely impact the amount of property tax we would need to raise. The citizens in the county, I don't think, are going to be willing to sit still and see their taxes go up to that amount on their homes. It's going to be tough."