They came with stark choices.
Cut police.
Cut fire.
Cut roads.
Cut employee benefits.
Or raise taxes.
Local government officials presented lawmakers with those untenable options as they implored them Monday to keep local sales taxes on groceries.
The House tax committee on Monday began debating a bill that was already passed in the Senate that eliminated state and local sales tax on groceries by next year.
As the bill originally came out of a Senate committee, it would have only exempted state and local sales taxes on healthy food products.
But the bill was amended on the Senate floor to exempt all groceries from state and local sales tax starting next year.
The exemption applies to all of the same food items that are now covered by the current law phasing out the state sales tax on groceries.
Local governments turned out Monday to keep the local portion of the sales tax, warning that they will lose millions of dollars that will mean choosing between raising property taxes or cutting services.
The issue was highlighted by Republican state Rep. Barb Wasinger of Hays during Monday’s tax committee hearing.
She noted how the city of Hays almost 20 years ago approved a sales tax increase to replace the property tax. She predicted that the law would pose problems for Hays.
“If this is allowed to happen for the local sales tax…it’s going to be devastating,” Wasinger told the committee.
The Senate president’s office said after the hearing late Monday night that there was a plan to make local governments whole.
“Given all the campaign rhetoric about axing the tax, Kansans are rightfully expecting sales taxes on food to go to zero – but they do not under the governor’s current plan,” Senate President Ty Masterson said in a statement.
“If we’re going to be serious about truth in taxation, we must match up our rhetoric with results by taking food taxes to true zero,” he said.
Masterson said that a bill has been drafted to alleviate any unanticipated impact on local budgets and ensure Kansans’ property taxes don’t increase.
The bill sets aside $220 million in funds to hold communities harmless. It was not immediately known how long that money would last.
To qualify, local governments have to show they lost revenue and are abiding by a state law that requires public disclosure and a vote when they collect extra tax dollars from rising property values.
Earlier in the day before details of Masterson’s plan became widely known, local governments lamented their revenue losses under the food tax bill.
Ottawa City Council member Sara Caylor called the bill potentially “catastrophic” as she held up pictures of the police and fire departments that would be hurt by revenue losses.
Caylor said the bill, as now proposed, would cost her city more than $3 million, which is equal to the annual budget of the city’s police department.
She pointed out that Ottawa voters have approved local sales taxes and that the bill would ignore the interest of the city’s taxpayers.
“Voters approved all of the local sales tax for the city of Ottawa,” Caylor said. “Ignoring the voice of the voters is simply unacceptable.”
Topeka City Manager Stephen Wade said the elimination of the sales tax on groceries in his city would cost $5 million to $6 million annually, which he said was equal to 25% of the city’s police department or an eight-mill property tax increase.
The city of Wichita’s finance director told the committee that his city would lose an estimated $11.1 million annually from its share of a 1% of a countywide tax that Sedgwick County levies.
Mark Manning told the tax committee that those funds are used to hold down property taxes and bankroll police, road maintenance and highway upgrades. The bill, he said, would jeopardize those efforts.
He said half the city’s sales tax dollars received from the countywide sales tax levy are credited to the city’s general fund, which finances community priorities including public safety, street maintenance and quality of life expenditures.
“While the City recognizes the benefits to local residents of reducing the state sales tax rate on food purchases, options for the city to replace lost revenue are very limited,” he said in written testimony.
He said the city lowered the property tax rate by nearly eight mills with local sales tax dollars in 1986, and since then the tax rate has remained lower than the pre-1986 level.
Manning said the city would lose revenue equal to nearly three mills, or close to 8%
of the current mill levy rate of 32.8 mills.
The city of Olathe estimated that the bill would cost the city about $8 million, which was equal to 3.3 mills of property taxes.
Tim Danneberg, the city’s director of external affairs and issues management, called the bill “highly problematic.”
The legislation, he said, would “all but eliminate Olathe’s ability to provide property tax relief in the upcoming budget.”
“In the cases of many other local Kansas communities, it could even eliminate their abilities to maintain current tax levels,” he said.
Mike Taylor, lobbyist from the Kansas County Commissioners Association, reminded lawmakers how they have taken funding sources away from local governments over many years and forced them to dig deeper to cover their expenses.
He pointed out how the state has siphoned away local revenue sharing dollars and ended the property tax on machinery and equipment.
“You can’t keep stealing our revenues and then complain about property taxes,” Taylor said at the hearing. “It’s just not fair. It’s the only place we have to go.”
