The Kansas Senate will consider a bill this session that will determine whether Finney County and the City of Garden City can move forward as planned with projects funded by a sales-tax increase that was passed by local voters in November 2017 but never received the prior legislative authorization that is required by state statute.
Finney County is the outlier among five counties mentioned in House Bill 2033, which the House passed in a 79-36 vote on Friday. While the other counties — Thomas, Russell, Jackson and Dickinson — are requesting authorization from the Legislature for upcoming sales tax votes, as required by state law, Finney County is requesting a similar authorization after already having been collecting on a sales-tax hike for over 10 months.
Though approved in the House by a wide margin, Finney County’s request drew criticism from Rep. John Carmichael, D-Wichita, who claimed Thursday that the county acted inappropriately and unlawfully.
Advocates of the county, however, disagree. The county did not seek authorization ahead because, in this case, local officials did not realize they had to, said Finney County Administrator Randy Partington. Finney County’s stake in the bill is a possible solution to an oversight that passed through multiple entities, which the county first noticed in mid-2018, he said.
"We did not have any intent to go around the law. It was a mistake…” Partington said. “But we also feel that the Finney County voters approved this. So, they saw the value in a sales tax versus other financing mechanisms for those projects the city and county are working on.”
In November 2017, in a 2,048-1,555 vote, Finney County voters approved a .3-cent sales tax increase expected to generate about $2.15 million a year towards certain city and county projects, including the reconstruction of Jennie Barker Road, a new fire station, an indoor gun range for local law enforcement and the public and renovated exhibits and facilities at Lee Richardson Zoo.
Since the tax, which will expire in about 14 years, took effect on April 1, 2018, Garden City and Finney County have received nearly $1.5 million in receipts, according to a breakdown from the Countywide Sales Tax Oversight Committee.
The measure is far from the county’s first sales tax, but the rate itself is at the root of the mix-up, Partington said. Under current state statute, a county can only issue countywide sales taxes up to 1 cent and can only present additional sales taxes to voters in increments of .25, unless it obtains special legislative authority to do otherwise. The .3-cent 2018 sales tax does not fit the increment parameters.
The county’s previous sales taxes include a .15-cent tax regarding Horsethief Reservoir that was given legislative authority under a different statute, a .5-cent tax that goes toward the General Fund and two .25-cent sales taxes that fund the bridges and road maintenance program and Community Services Center, Partington said.
City sales taxes also operate under different statute requirements, said Garden City City Manager Matt Allen.
“That’s probably why we had missed it. We haven’t been at a point where we needed special legislation to ask the voters for a sales tax,” Partington said.
The sales tax, which will fund what Partington called “quality of life improvements for the entire community,” was a joint project between Garden City and Finney County.
Staff, commissioners and legal counsel from both the city and county, as well as the city bond counsel, all were involved in the process and all missed the state authorization requirement, Allen said.
The Kansas Department of Revenue also overlooked the fact that Finney County had not received authorization before enacting its resolution regarding the sales tax, said KDOR Financial Economist Amy Kramer.
“No one entity specifically is to blame. There seems to be checks and balances, but for whatever reason, it slipped through those,” said Finney County Commissioner Lon Pishny.
Granting legislative authority for a sales-tax increase after a public vote is not unprecedented in Kansas, Kramer said. State statute references similar situations in other counties in 1988, 1994, 2004, 2008, 2009 and 2015.
KDOR will continue to collect the .3-cent Finney County sales tax until after the Legislature makes a decision, Kramer said.
When a decision is made, it will not just affect the status of the sales tax, but also the projects that rely on the tax revenue.
If the bill is approved, the sales tax will continue and the projects at Jennie Barker Road, the zoo, the gun range and the fire station will proceed as planned, Allen said.
If the Senate does not reach a decision this session, KDOR will work with Finney County to decide the next steps, but no plan has been decided so far, Kramer said.
If the current bill is denied, Finney County would have to once again seek legislative authority to retain the sales tax, this time before April 1, but would not have to hold another public vote, said Zach Fletcher, KDOR public information officer. If the county cannot put forward legislation by then, the department will again work with the county on the next steps, which would include a repeal process for the tax, he said. He said the repeal process will ultimately be a local issue, meaning Finney County will have to pass a measure repealing the tax. The next opportunity to pass legislation to collect the sales tax would be Oct. 1, he said.
Partington and Kansas Legislative Policy Group lobbyist Doug Smith, who has testified to legislators on behalf of the county, said they were not sure what would happen to the money already collected by the sales tax if the bill is denied. Money collected by locals and visitors alike on individual retail sales cannot feasibly be refunded, and Smith was not aware of a precedent.
And, while no local sales tax projects have begun construction, Garden City and Finney County already have spent $338,730 on planning and design phases of the Jennie Barker Road and zoo projects, Allen said.
Though the bill passed fairly easily in the House, it was not without controversy, said Rep. John Wheeler, R-Garden City. As representatives explained why they opposed it, about 20 representatives withdrew their yay votes, he said. Denial was a possibility, “maybe even a probability,” he said.
If that were to happen, the 2018 sales tax projects could be delayed or funded by other temporary financing strategies, both of which would increase project costs, Allen said. Regardless, the city and county would definitely seek legislative authority again, he said.
The timeline for the bill’s life in the Senate is uncertain, said Sen. John Doll, I-Garden City, but ideally it will go before the Senate Taxation Committee by the end of the week and hit the Senate floor by the end of the month. If the bill is unchanged and approved, it will go before the governor for approval, Doll said. If amended or changed, it will go to a conference committee, which could draw out and potentially complicate the process, he said.
“If I had to guess, I say it flies through…” Doll said of the bill as it stands now. “It needs to pass. That’s important that it passes, and I think my fellow legislators understand that.”
In the meantime, the city and county have worked with the Kansas Association of Counties and the KLPG to testify before legislators. Pishny, who also testified before the House, said the response has so far been favorable and several representatives have been supportive.
For several involved, lying beneath the bill is the question of whether the state should be involved in local sales taxes in the first place.
Wheeler argued that sales taxes are approved by local voters, and that local officials know their communities better than the state does. Partington said he hopes the state approves something voters supported. Pishny said the voice of the voters should be honored.
“The fact that (counties) even have a state statute that dictates increment (of sales tax rates) is bizarre and dated. That was news to me. The overall authority is one I can see being a statewide policy issue…” Allen said. “I wish we would have got this in 2018, but there’s nothing that prohibits us from asking to make it right in 2019.”
Contact Amber Friend at email@example.com.