Kansas City, Kansas Residents Want Tax Relief. The Pandemic May Give Them The Opposite
For Vic Allred, a local restaurateur, the coronavirus pandemic walloped sales at all three of the Jazz: A Louisiana Kitchen locations he owns across the Kansas City area.
None was hit harder than the Jazz at The Legends retail district in western Kansas City, Kansas.
“It was by far the store that was the most dramatically affected,” Allred said.
The KCK restaurant leads the Jazz concept in sales, typically reeling in about $3 million a year. For a restaurant situated in the middle of an entertainment district on the edge of town, one that fetches traffic from customers who have spent the day shopping or want a bite to eat before a Sporting Kansas City game, a near total-shut down in foot traffic in April and May from stay-at-home orders caused Jazz’s sales to plummet 80%.
“That’s a location that can pretty consistently run $15,000 on Saturdays,” Allred said. “It took us a while to get back to $3,000.”
Allred’s experience reflects a broader shock to The Legends, a retail environment that’s supported in no small part by three big draws: Sporting Kansas City, Kansas City T-Bones and Nebraska Furniture Mart. Nebraska Furniture Mart closed entirely for a portion of the pandemic. Sporting Kansas City halted play in March and may resume later this year. The Kansas City T-Bones abandoned their 2020 season.
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That spells trouble, too, for the Unified Government of Wyandotte County/Kansas City, Kansas, which runs on a nearly $400 million budget where more than a quarter of its tax revenue comes from sales tax. The Legends generates about $12 million of sales tax a year, making it a significant contributor to the $70 million in overall sales and use taxes that the UG budgeted for in 2020.
“If a tornado came through and demolished The Legends, that would really hurt us,” said Kathleen VonAchen, the chief financial officer for the UG.
And while a tornado that started last year in Lawrence just missed hitting The Legends, the UG faces a disaster of another kind.
Long-term financial reports were already painting a challenging picture of UG finances. One forecast published by the UG finance office last year predicted an economic downturn, one that would lead to $32 million in losses collectively over five years if the UG did nothing.
The pandemic dragged with it the worst economic downturn since the Great Depression, one in which the UG predicted that a worst-case scenario could result in a $40 million revenue shortfall during this year and next.
The shutdown of commercial activity and job losses, and the prospect of a second wave of infections, has amplified the difficulties facing the UG. It has lagged behind on infrastructure spending, has growing retirement obligations, shoulders a high debt load and a weak pension position and bears a tax burden that residents and businesses continually want lowered but may actually end up increasing.
UG Mayor David Alvey in an interview summed it up this way: “It’s ugly.”
Erin Stryka runs the Rosedale Development Association. RDA is one of eight neighborhood business and revitalization organizations under the Unified Government. NBRs, as they’re referred to in shorthand, serve as something of a bridge between the UG and its neighborhoods by providing certain services.
For example, RDA helped raise funds in 2018 for a new playground at Fisher Park in Rosedale.
RDA covers several neighborhoods in southeast KCK, including Rosedale, Hanover Heights and Spring Valley.
The eastern edge of RDA’s boundaries has benefited from development and investment near the University of Kansas Health System. The western edge has lagged behind with older streets that lack sidewalks and homes still on septic tanks.
Stryka would like to see west Rosedale, and other parts of KCK that have fallen behind on public investment, catch up with new infrastructure.
When asked about what investments she hopes the UG Board of Commissioners preserves as they face tough choices in building a budget, Stryka said she hopes KCK’s park system gets attention.
“We’re in this time where we really need to focus on our physical health,” Stryka said, noting that people have used parks more as the pandemic has limited most other activities. “We need ways to connect…For many years we’ve shortchanged parks, we’ve shortchanged infrastructure, sidewalks.”
Groundwork Northeast Revitalization Group, an NBR that includes predominantly Black northeast Kansas City, Kansas, is counting on the UG’s help, along with philanthropy, to help continue the progress of a master plan that was approved for the area in 2018.
One of the priorities in northeast KCK is money from the UG for the renovation of the Beatrice L. Lee Community Center at 10th and Washington.
“Several community members expressed regret about the fact that has not yet been done,” said Elnora Tellis Jefferson, a board member for Groundwork NRG.
Stryka’s and Jefferson’s views may prove a tough sell for UG policymakers.
The UG made deep cuts in its parks system in the years that followed the 2008 economic recession. And the proposed budget for 2021 includes little in the way of new programs. UG administrator Doug Bach says next year’s budget includes funding for new restrooms in parks.
“Unfortunately, this amount is limited with the revenue shortfall we are facing,” Bach said. “However, we were able to direct some special funding to help us move forward with our work in this area.”
Major renovations to community centers are not in the 2021 budget, which was first proposed on Thursday, although it does include expenditures for new roofs and heating and air conditioning units.
Bach’s budget proposal balances the UG’s finances by deferring expenses, putting employees on furlough and dipping money out of its reserve fund, which is essentially a savings account for the UG.
In many ways, the UG economy entering 2020 had rebounded to pre-recession levels in recent years, opening the possibility that local government leaders could start offering more and better city services and invest in the KCK’s notoriously aging infrastructure.
But in the face of an economic shock, problems that lurked in the background of a record economic expansion during the last 10 years are coming to the fore.
Public safety costs
One of the biggest challenges: There’s not much flexibility in the UG’s budget.
Close to 70% of the UG’s combined city and county general fund is spent on personnel costs — salaries, benefits, retirement and such.
More than half — 59% — is spent on public safety: police and fire.
Public safety is a 24-hour, seven-day-a-week government service. And KCK isn’t alone in spending a large share of its revenue on its police and fire department.
But public safety in KCK carries political clout. A political drive by International Association of Fire Fighters Local No. 64, which represents KCK firefighters, was widely seen as part of the reason former UG Mayor Mark Holland failed to win a second term. Holland had scrutinized the spending and practices of the KCK fire department, finding what he called waste and abuse. The KCK fire union responded with protests of Holland in front of City Hall.
Public safety’s influence with UG policymakers and elected officials can still be seen after Holland’s departure.
At a recent UG special session, Bach outlined an employee furlough program that excluded police, firefighters, sheriff’s deputies and command staff.
Public safety isn’t being held completely harmless: 24 open police positions are being held open until next year.
Some in the community say the UG should re-examine its spending on public safety during a time when other departments that contribute to KCK’s quality of life face cuts and employee furloughs.
Edgar Galicia, director of the Central Avenue Betterment Association, an NBR that covers the Central Avenue corridor near downtown, is one of them.
“The fire department needs to renegotiate its stance and really sharpen the pencil to determine what is the best way to service the community and yet stay lean and strong,” Galicia said. “Let’s use this opportunity to do that. I’m not saying they are heavily overstaffed, I’m not even saying they need to get rid of people. I’m saying let’s do the analysis and be honest with it and be certain we are doing the best we can to be sure that the funding that exists is being utilized for the best of the community.”
Rachel Jefferson, the executive director of Groundwork NRG, said public safety spending should be reviewed in the context of cuts to the UG budget.
“If there are going to be cuts to the budget, no, public safety should not be excluded from that type of review, in my opinion,” Jefferson said. “I think that would be unfair to other programs facing cuts.”
It’s likely that funding public safety will be top of mind for UG commissioners as they assemble next year’s budget, which they will vote on in July.
In fact, on June 11 UG commissioners discussed the possibility of increasing the city property tax rate, in part to help fund personnel for a new fire station opening in Piper while also keeping open an existing and underutilized fire station in Fairfax. UG staff believe that the Fairfax area can be covered by Fire Station No. 5, which is in Quindaro.
A sales tax increase, which would require a public vote, is also being considered for the November ballot. Alvey said he would oppose a sales tax increase if it’s only for maintaining funding for the Fairfax fire station.
The UG Commission has to approve its budget for 2021 by July 16, the same time it has to set the property tax rate for the upcoming year. The UG Commission voted on June 11 to give itself room to increase the city property tax rate by two mills, which would raise about $2.2 million. That doesn’t mean the commission has settled on a higher property tax rate, just that it’s giving itself room to do it next month.
Making a case for tax increase
Increasing property taxes in KCK is a big political lift. Residents frequently complain that property taxes are too high. And they’re right: At a combined 77 mills, property owners in KCK pay some of the highest property tax rates in Kansas.
“From an RDA perspective, from the perspective of a lot of people I talk to, a lot of people would feel frustrated by that,” Stryka said. “I feel, personally, I understand that. I guess if you ask most Wyandotte Countians, most people would feel anxious and frustrated by that.”
But political leaders in KCK weren’t ruling out the possibility this month.
“I have no problem, and I will say this now, I have no problem going out and telling the public that we need more revenue in order to provide quality services for our residents,” Alvey said. “I know there are people who say we cannot raise the mill levy because that’s fundamental. I am of the opinion our people are more interested in quality services ... If we can make the case to them, and I am willing to make the case that this has to happen, we’ll do it.”
Angela Markley, a 6th District UG commissioner, voted for property tax wiggle room, but would not commit to taking it when the final budget gets passed.
“I was already thinking we wanted to give ourselves a little air,” Markley said. “That being said, I really don’t have an appetite for increasing our mill levy. I feel like those mills were hard fought — hard fought — to lower to the levels we have today.”
Markley is referring to an effort by UG leaders, starting when Holland was mayor, to gradually reduce the city’s property tax rate over three years. The result was mixed. While the rate dropped by 6 mills, Wyandotte County property values have generally grown, meaning that most property owners are paying higher bills than they had been previously.
Brian McKiernan, a 1st District UG commissioner, doesn’t like the idea of a property tax. Higher property tax means owners pay more to the government just to remain on their property. At least with sales tax, a resident has a new flat-screen TV in their home with the sales tax they’ve paid.
“Let’s be very clear about this: Those two mills would be paid by households that have themselves suffered revenue losses over the course of this pandemic,” McKiernan said. “We can’t minimize the burden this would place on the citizens of Wyandotte County, Kansas City, Kansas. And we’re going to have to balance out the benefit against the cost of all of this.”
Since the pandemic started, Bach and his finance team have taken out the pruning shears to cut around the edges of the UG budget.
In most years, the UG has about 100 full-time positions that are kept open. Right now, that number is almost 300 and the UG is instituting a hiring freeze.
Bach said having that many positions unfilled “is impacting our service and service delivery.”
The UG originally planned to pay for some infrastructure projects with cash to avoid increasing the UG’s debt burden. It is now putting some of those projects on its credit card.
Some other costs like mowing grass on public rights-of-way and snow removal are being reduced.
Even after all that, the UG still faces a multimillion dollar deficit over the next three years. All from three months of slowed business activity in response to the pandemic.
‘KCK at a Crossroads’
Before the pandemic reached Kansas, Alvey had decided to go on something of a road show in the county to talk to residents about KCK’s financial picture.
Dubbed “KCK at a Crossroads,” Alvey had hoped to talk to crowds scattered around the community about how KCK could grow its economy.
The evening of March 5, Alvey visited the Joe E. Amayo Argentine Community Center for the first of his talks. Before a crowd of about 40, Alvey explained how Wyandotte County had hollowed out and lost residents for decades, resulting in swaths of abandoned property that caused the city and county to raise property taxes to continue functioning.
He touched on a vexing problem for the UG: People want better services — which costs money — but lower taxes — which reduces the amount of money to pay for those services.
Economic development, he said, would help grow KCK’s tax base. He talked about another idea: Trying to attract homebuilders to KCK to fix up houses in Wyandotte County’s land bank — properties in the UG’s ownership after people abandoned them — and sell them to homebuyers looking for affordable houses.
That March 5 talk was the only “KCK at a Crossroads” presentation Alvey was able to give before the coronavirus occupied his time. But in the midst of the pandemic and the economic consequences it brings, Alvey says he still wants to stick to that plan.
Alvey said there’s a demand for affordable housing in the Kansas City metro. If the UG can entice homebuilders and home buyers to take a chance on new or fixed up properties east of Interstate 635, a rough dividing line between the haves and have-nots in KCK, new residents could convert properties that pay no taxes to ones that do.
“I really think it’s time to double down on that strategy,” Alvey said.
Time will tell if it pays off.