Calling it the most stable financial position the city has seen in years, Overland Park City Manager Bill Ebel proposed a city budget on Monday that prompted some council members to begin talking about rolling back the tax rate.
Ebel’s proposed 2018 budget would leave the city mill levy at 13.8 and would not change the stormwater utility fees, both of which increased last year.
The budget would also allow for the establishment of a round-the-clock emergency medical squad at the new Westgate police and fire station at 119th Street and Westgate Road and the addition of one mental health co-responder for police calls. Spending on maintenance would increase by $2.4 million. The budget also adds 11.5 full-time equivalent jobs, mostly to police, public works and planning departments.
The total proposed budget is for $293 million, which is an increase of 5.2 percent over the current budget. The general fund budget, which supports the city’s day-to-day operations, is $117.5 million, an increase of 3.6 percent.
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“We are now in a very stable financial situation,” Ebel said.
That is due to a generally good outlook in the money coming in. Revenues are trending upward, in part because of higher property values, he said. The city expects property valuation, on which taxes are based, to be 6.5 percent higher but eventually taper to 3 percent increases by the end of five years, he said.
Sales tax is still changeable as internet sales change the retail scene, but the modest projection of a 2.1 percent growth in sales tax is expected to remain stable for the time being, Ebel said.
Sales tax growth has been a worry in the past, because it has been unpredictable. Overland Park used to dominate the county’s retail scene, but that has been changing as other cities grow and on-line shopping increases. Now the city’s sales tax growth rate lags behind the county’s overall growth rate, and the city’s market share also has been declining. The city budget has been sales tax dependent, Ebel said, but has become more diversified.
The city will also get increased revenue from the special courthouse sales tax, but that money is only beginning to roll in.
The improvement in revenues means that the city is expected to end the budget year with more money in its pocket. Fund balance projections for five years out are for $46.4 million, which is 33.6 percent over the 2022 expenses. By contrast, the five-year outlook from last year was more grim, predicting that the city would fall short of its fund balance target of 30 percent of expenses by 2021.
Since the fund balance amounts are expected to increase, some council members said the city ought to explore the idea of reducing the mill levy rate.
“I would just propose we would at least consider reducing the mill levy by some amount,” Mayor Carl Gerlach said. “If it wasn’t so stable I might have some hesitation.”
However other council members were more cautious. Dave Janson worried that reductions would expose the city to budget problems in future years.
“Disaster is sometimes just around the corner,” he said, citing the October surprise snowstorm of 1996.
Ebel agreed that there is risk in reducing revenues by cutting the taxing rate. But he said the city already has contingency funds to deal with major unplanned expenses.
Council member Paul Lyons and Richard Collins also were cautious.
“If you cut the mill levy only to turn around and raise it by a larger amount later, I think that just has a negative public perception,” council member Dan Stock said.
Ebel noted that there are still some financial challenges ahead. The state and national economy could impact Overland Park. The city gets about $10 million a year indirectly from the state.
A higher employment rate also will affect the budget because it will drive up salaries, Ebel said.
The city manager’s budget is only the first step. City staff will weigh in before the council’s Committee of the Whole will recommend a final budget, followed by a public hearing later this summer.