Government & Politics

Campaign flier on KC’s infrastructure proposal understates tax increase

Big-ticket KC projects: How today's election could impact you

Here are projects that both taxpayers and the private sector have taken on in the KC metro area. This video includes footage from the Kansas Department of Transportation.
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Here are projects that both taxpayers and the private sector have taken on in the KC metro area. This video includes footage from the Kansas Department of Transportation.

The main campaign flier for Kansas City’s $800 million infrastructure proposal says simply:

“Paying back $800 million over 20 years will result in a property tax increase of just $8 more on average each year for the typical homeowner.”

In other words, taxpayers might think that at the end of 20 years, they’ll have paid a total of $160.

Not so fast. The way the campaign for the April 4 election came up with that $8 number is a big oversimplification. Its use has handed bond proposal opponents a weapon.

What many people are missing is this: That $8 increase is cumulative and compounding for 20 years.

For the average homeowner with a $140,000 house and $15,000 car, that year-over-year bump means the property tax bill in the 20th year will be $160 higher.

Figured the more complete way, city spreadsheets show that as the year-over-year increases mount, the total 20-year cost for the average homeowner reaches $2,026.14. That’s about $100 a year.

This very issue came up Thursday night at a Northland forum on the infrastructure proposal, where Kansas City League of Women Voters President Linda Vogel Smith said some residents believe “the city has published confusing or misleading information about the taxpayer burden.”

Campaign spokesman Steve Glorioso was at Thursday’s forum and defended the flier, distributed to tens of thousands of voters. The campaign website is www.progresskc.com.

“A flier is not a treatise,” Glorioso said. “It’s not like we can be able to explain in a 4-by-8 square piece of paper, so we used the information that we got from the city, the summary that said they are averages.”

Glorioso insisted the flier is not misleading.

“Kansas City voters are smart enough to know what an average is, and anyone who thinks that they aren’t must have a pretty low opinion of KC voters,” he said. “We think they’re pretty smart, even if our critics don’t.”

City Manager Troy Schulte, also at Thursday night’s forum, quickly clarified that the $8 cost compounds each year. He agreed the total 20-year tax burden would be about $100 per year for the average homeowner. That’s because the city expects to issue about $40 million in bonds every year for 20 years, so the debt service adds up.

Schulte said the city was not responsible for the campaign materials.

“That’s why they hire the fancy campaign person,” Schulte said.

Critics of the city’s proposal are raising an outcry about the campaign downplaying the tax burden. They argue it just feeds persistent distrust over city promises and financial management at a time when the infrastructure ballot questions need 57 percent approval to pass.

“If voters feel that they’ve been hornswoggled, won’t they vote ‘no’?” asks Robert Suhre, a homeowner and retired IT professional who has lived in the Southwest Corridor for 32 years.

In response to taxpayer scrutiny, the city has updated its infrastructure tax information.

Chris Hernandez, communications director for Kansas City municipal government, said the city has provided comprehensive information for voters, about the total tax impact and the potential projects that would be funded, at kcmo.gov/infrastructure.

Glorioso said the campaign also refers people to kcmo.gov/infrastructure in its literature and news releases.

“We’ve been trying to make a complicated issue as simple as we can for people that just want the basics, while providing a deep dive for those who want more information,” Hernandez said.

In an email Wednesday to Suhre, Hernandez conceded some people may not understand the campaign flier.

“It is possible that some voters may conclude that the additional amount to be paid is as simple as taking the average annual increase and multiplying it by 20 years,” he wrote. “However, the 20 year amount is meant to reflect the amount over and above the resident’s current tax bill for that particular year. The total amount for the first 20 years for that particular taxpayer example is a little over $2,000.”

These official acknowledgments represent a change from the earliest presentations on this bond plan. When Schulte first spoke to a community meeting last Sept. 14 about the bond proposal, he suggested the one-year impact of the tax would be about the cost of a McDonald’s quarter-pounder with cheese, a large fry and a large Coke.

  

“So it’s the equivalent of one quarter-pounder value meal once per year, and we can fix a lot of infrastructure for the city,” Schulte told the crowd.

Suhre credits Schulte with now being candid about the full tax impact at public forums. But he finds the campaign literature mentioning only the $8 increase over time to be grossly misleading.

Patrick Tuohey, Western Missouri field manager of the Show-Me Institute, a libertarian think-tank that criticizes Kansas City as a high-tax city, calls the bond cost estimates “fuzzy math” and says taxpayers need to look at the cumulative impact over the life of the bonds.

“Anyone who talks about an $8 average annual increase is engaging in financial sleight-of-hand,” he said.

The tax derives from three separate ballot questions: $600 million for streets, bridges and sidewalks; $150 million for flood control; and $50 million for city buildings. The assumption is all three questions will pass. If only one or two pass, the tax impact is lessened.

In all the debates about the city’s proposal, the size of the tax increase has become the greatest source of confusion and criticism. And it could be the deciding factor April 4 on whether the bond authorization passes.

Will voters believe the improvements are worth the cost, or decide taxes have reached a tipping point? Will critics’ use of the problem with the campaign flier succeed in defeating the issue?

As voters consider the costs and benefits of the infrastructure improvements, key points should be considered:

▪ The tax increase builds over 20 years.

Now, the property tax on a $140,000 house in the Kansas City school district is about $2,500. That’s the city property tax plus library, county and school taxes.

So a $160 increase, added to that $2,500 bill at the end of 20 years, would be about 6 percent. The owner of a $200,000 house and a $35,000 car would see the tax increase peak at $250 at the end of 20 years. That’s assuming a 5 percent interest rate on the borrowing, although city officials point out interest rates are less than 3 percent now.

▪ The tax will fluctuate year to year.

The city’s calculations, assuming a 5 percent interest rate, show the projected annual increase is often more than $8. In the program’s first year, the tax for the owner of a $140,000 house and $15,000 car is expected to go up nearly $14. Then it goes up another $13 for two years. It finally tapers off in latter years, because the city expects to pay off other debt.

▪  The total tax adds up, peaking in 2037.

The annual tax increases for the first 20 years for the owner of a $100,000 house total about $1,540. For the owner of a $140,000 house, it’s more than $2,000. It totals about $3,185 for the owner of a $200,000 house.

At Thursday night’s forum, several people said they have trouble trusting the city to fulfill its promises. But Northland resident Dave Swiss said he had gained more insight into the tax burden. He said that even with the additional tax, he was leaning toward supporting the plan, to get needed improvements to North Brighton Avenue and other city roads.

Some neighborhood leaders agree the total tax impact has been explained at town halls, and they believe most people understand and support it.

“The question did come up (at several community meetings),” South Kansas City Alliance President Stacey Johnson-Cosby said, noting that Schulte and Finance Director Randy Landes have fully discussed the tax change over time.

Johnson-Cosby, a real estate agent, said she’s always concerned about anything that can drive up home prices, but she and other alliance members believe this tax is worth it.

City officials insist they have tailored this to be as affordable as possible, and the tax increase is a small price to pay for critical infrastructure upgrades.

Mayor Sly James says if there were any other way than a property tax increase to pay for $800 million worth of streets, bridges, flood control and buildings, he would go that route.

“Nobody likes to talk about the tax aspects, but the fact of the matter is there’s no way to do it other than that,” James told The Star’s editorial board. “We can’t just sit and ignore it.”

Big ticket taxpayer, private sector KC area projects

Kansas City’s $800 million infrastructure bond proposal seems like a big deal. And it is. But it's helpful to keep it in perspective by considering other huge projects that both taxpayers and the private sector have taken on in the KC metro area. Many of these other projects did not involve a public vote.

  

Lynn Horsley: 816-226-2058, @LynnHorsley

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