As Merriam staff enters the 2018 budget planning season, a preliminary analysis of how the City would fund a new community center with indoor / outdoor aquatics amenities will begin. There are many options to consider when developing a funding strategy for a project of this scale. However, residents will ultimately decide how the City proceeds, as a public vote will be required to build a new recreation facility.
City sales tax collections fund more than half of the general fund operating expenses and capital improvement projects. City sales tax collections increased from $7.6 million in 2013 to $9.9 million in 2016 thanks to new retail and the state of our current economy. According to statistics from the Kansas Department of Revenue, the non-resident contribution to sales tax, also known as the pull factor, is at a rate of more than 4.67. This means that for every $1 a Merriam resident pays in sales tax here, a non-resident pays $4.67.
Residents seem to recognize the significance of Merriam’s sales tax revenue picture as it relates to providing high-quality City services and amenities. A citizen survey completed as part of the Recreational Facilities Master Plan in 2016, indicated that a ¼-cent sales tax would be residents’ most desired funding source if new facilities were built. A new ¼ cent sales tax could generate an estimated $2.05 million per year to pay for the new facility.
Building a new facility is estimated to cost $30 million, and Merriam City staff anticipates issuing bonds to fund up to $25 million of this amount. Annual debt service costs for 10-year or 20-year bonds, based on today’s rates, would be approximately $2.8 million for a 10-year bond, and $1.67 million for a 20-year bond. The 20-year bond would cost $5 million more in debt service over the life of the bond, but offers more affordable annual payments.
Revenue generated through a ¼-cent sales tax would cover the cost of 20-year debt service payments, but would be significantly short of the 10-year debt service payment by approximately $770,000 per year. However, funds from the City’s capital improvement program could be reprogrammed to support the debt service payments.
Lastly, the information used to study potential funding strategies is based on current retail figures, and does not take into consideration potential for new sales tax opportunities down the road, or other factors. Based on available information and these considerations, the City has the capacity to fund a new community center that includes indoor and outdoor aquatic features. Now the question is “should we pursue this endeavor?”