Flat revenues from sales tax cloud budget picture in Overland Park

Overland Park shouldn’t have any problems making ends meet for 2017. But sales-tax receipts were almost flat in the first quarter of 2016, making the outlook beyond next year cloudy, at best.

That was the upshot of a special city council budget meeting held last week. A public hearing is set for Aug. 1, with adoption of a 2017 budget to follow Aug. 15.

The sales-tax revenue picture was so troubling that Council President Rick Collins even brought up the possibility of raising the property tax, which has traditionally been low in Overland Park, before new state-level restrictions kick in.

Mayor Carl Gerlach quickly quashed that idea, saying even a discussion of the possibility was premature.

City Manager Bill Ebel said that various factors have led to a flat sales-tax revenue picture the past few years, including the migration of some car dealerships from Metcalf Avenue to the area around Interstate 35 and Shawnee Mission Parkway.

But the biggest factor, Ebel said, was competition from other shopping centers around the county and around the area.

“Our market share — what we draw from outside the city — has been declining for 10 to 15 years,” he said. “We’re not the only retail center in Johnson County anymore. We’re still the largest city and we still have the most retail sales, but that adds to the flatness.

“We had projected a 2 percent growth (in sales tax revenue) this year, but it’s been flat through the first quarter. It’s too early to say there will be a sharp decline, but the 2 percent increase may not happen.”

Retail sales are actually up 3 percent over last year, but use taxes — the fees businesses pay on equipment purchases — are showing the greatest year-over-year decline, Ebel said.

The city manager said there were three looming needs that make the flat sales-tax revenue picture worrisome: the planned construction and staffing of a new fire station in the southwest part of the city, requests from the police chief for additional personnel and neighborhood street reconstruction.

“We’ve been spending $3 million a year on neighborhood street reconstruction, when, to keep pace, we need to spend $6 million,” Ebel said.

Many of the city’s neighborhood streets — as opposed to thoroughfares — are 50 to 60 years old, Ebel said, and it now costs more to repair them than it would to replace them.

“They deteriorate faster than you can maintain them,” Ebel said.

Ebel’s proposed budget also calls for imposing the first increase in its “stormwater utility,” a property tax instituted in 2001, to pay for $5.5 million worth of curb replacements. The average home in Overland Park is worth $250,000, and its stormwater utility would rise from $52 to $58 a year under the proposal.

The 2017 budget also calls for 13 new city positions. Nine of the jobs support “neighborhood stabilization efforts,” the city said, such as two full-time police officers who would work in community policing.

“Of the 13 new positions, about half are revenue supported. Those that are not are all in public safety,” Ebel said in a prepared statement. They include a police dispatcher, a police report technician.

Other new positions would be four code compliance officers for the city’s new rental licensing and inspection program passed this year. Inspection fees will pay for those jobs.

The city council last week also discussed what to do with the city’s share of a 10-year, quarter-cent sales tax that Johnson County has proposed to pay for a new courthouse. The tax is to be voted upon in November. State law requires the county to share a portion of the tax revenue with cities, and, if it passes, Overland Park’s share would be about $4 million a year.

Ebel cautioned the council members not to build that revenue into the budget for operations because it has a sunset clause. But he said it might make sense to use the funds to build the new fire station or buy new police cars, for example.

This story was originally published June 14, 2016 at 2:54 PM with the headline "Flat revenues from sales tax cloud budget picture in Overland Park."