Staff Presents Mail Ballot Option

During the City Council meeting on Monday night, staff presented a information about the mail ballot election process as an option to explore as part of the recreation facilities conversation.  Although the City is still in the information gathering stage of this conversation, a public vote would be required to implement a sales tax and issue bonds for the construction of a new facility.  City Administrator Chris Engel explained to the Council during his presentation that because this issue is so important to our community, mailing a ballot to every registered voter often yields better turnout and participation in an election than holding a traditional vote at the polls.

Generally, a special election (like what would be required for this issue) has a 90-day time frame from when the City Council passes the ballot resolution to election day.  Mail ballots are distributed to all registered voters 20 days prior to the election and must be postmarked by noon on election day.  To trigger the collection of sales tax, the City Council must approve an ordinance certifying the election and submit it to the Department of Revenue by the end of the quarter.  Sales tax collection would begin the first day following the next full quarter.  This is just a general timeline provided to the Council for the purposes of this conversation – a formal timeline would be established if the Council decides to move forward with this issue and an election date is set.

Video of April 25 Meeting Available on YouTube

The video of the April 25 joint meeting about the future of our recreation facilities is now available on the City’s YouTube channel.  It has been broken into five parts for easier viewing:

April 25 Joint Meeting

On Tuesday, April 25, the City held a joint meeting with the City Council, Parks and Recreation Advisory Board, and the Parks Facilities Steering Committee to discuss the future of recreation facilities in Merriam.  City Administrator Chris Engel presented an overview on the topic, including information about the problem as it exists today, the process the City has gone through so far, and the options for moving forward.

2017-04-25 Facility Presentation – Final Blog

Issue Overview

Since 2014, the City of Merriam has been extensively studying the current status of our aging Parks and Recreation facilities and exploring what the future holds for recreation in our community.  Below are links to all of the posts, articles, and presentations we’ve done on the topic to make it easy for you to get up to speed on this issue.

Overview

Problem: Current State of Facilities

Solutions: The Process

Initial Studies

Steering Committee

Ability: Funding Strategies and Budget Implications

Maintaining a competitive sales tax advantage with a ¼-cent increase

In a recent City Council meeting, staff outlined options available for issuing bonds to build a new Community Center – if that is how the public decides to resolve the serious issues with current recreation facilities.

City Administrator Chris Engel followed up with a presentation to Council on March 27, which demonstrated that if bonds issued to fund a new community center are paid for with a new ¼-cent sales tax, the City will continue to maintain a competitive advantage in the retail marketplace. Essentially, he answered the question, “Will increasing the sales tax rate deter consumers and residents from making purchases in Merriam?”

One way to answer this question is by comparing Merriam’s sales tax rate with those of other Johnson County cities, plus neighboring Kansas City, Kansas. As of April 1, 2017, Merriam’s city sales tax rate is 9.225%. If you look at city sales tax rates from other neighboring cities and compare them, Merriam is right in the middle (see below). With the addition of a new ¼-cent city sales tax, the rate would rise to 9.480 – still lower than rates in nearby Shawnee, Fairway and Mission.

Sales Tax Capacity CE 32717 presentation

However, many retail centers in the cities with lower city sales tax rates than Merriam charge an extra sales tax at the point-of-sale (POS) — where you actually buy goods and services (hardware store, car dealership, barber shop, etc.). This additional sales tax is usually the result of a CID or TDD, tools used by cities to encourage economic development or fund transportation infrastructure projects.

A CID, or community improvement district, allows retail developments to charge an additional sales tax for a variety of site improvements. A TDD, or transportation development district, is similar to the CID except that the funds from the sales tax increase can only be used on streets and curbs.

For example, Olathe’s slightly lower city sales tax rate is 9.475%, but the consumer must also consider the many CID and TDD retail districts with additional sales taxes that increase rates paid at the point-of-sale (POS) from 10.475% up to 11.475%. Areas of Olathe that charge these sales tax rates include those located in the I-35 and 119th St. area; and the I-35 and 135th St. area. So, despite a lower city sales tax rate, many shopping destinations in Olathe actually charge a higher sales tax rate than Merriam.

Kansas City, Kansas’ sales tax rate is 9.375%. If shopping at the Legends, any place around the race track, and 39th and Rainbow, the rates increase to a range of 9.475% to 11.375% due to the TDD and CID taxes in those areas. These rates are all still higher than Merriam.

The same goes for Roeland Park and Lenexa. Roeland Park’s sales tax rate is 9.225%, but off Roe Avenue, the Lowe’s, Wal-Mart and Price Chopper shopping areas have sales tax rates between 9.72% to 10.225%, as many of these add CID and TDD sales taxes at the POS.

Lenexa’s sales tax rate for areas around Oak Park Mall, 87th and Renner, 87th and Rosehill, and 95th and Quivira all have sales tax rates of 10.350%, due to CID taxes. This is higher than the city rate of 9.35%.

While Overland Park has a comparatively low city sales tax rate of 9.10%, many of their shopping areas, including the 95th St. corridor, the 135th St. corridor, and the 119th St. corridor have rates of 10.10%. The 91st and Metcalf area, which has a CID tax for two car dealerships, also charges a 10.10% tax rate – higher than sales tax charged at any of Merriam’s car dealerships.

Leawood’s city sales tax rate is 9.100%, but prime retail centers at 119th and Roe, 119th and Nall and Town Center Plaza all have CD and TDD taxes, bringing sales tax up to 10.100%.

Prairie Village has two main shopping areas – The Village and Corinth Square. The city sales tax rates in these two shopping areas is 9.975% due to their CID tax, while all other retail areas of town have a 8.975% sales tax rate.

Merriam currently does not have any CID or TDD areas. If voters approved an additional ¼-cent tax to pay for new recreational facilities, consumers would only pay a 9.480% sales tax rate. When looking at city sales tax rates, then taking additional CID and TDD taxes into consideration, this is lower than nearly every comparable retail development in Johnson County cities.

In conclusion, Engel reported that an additional ¼-cent sales tax would NOT put Merriam at a competitive disadvantage with neighbor cities. He further commented that staff would not recommend a sales tax increase if they believed it would harm the City, its residents, or its strong retail economy.

“Most people who pay Merriam’s sales tax come from outside our community. Last thing we want is to have a sales tax increase that gives us a competitive disadvantage,” he said. “It doesn’t matter how strong our sales tax base is if we scare off all the people who come here to spend their hard-earned money; or the people who live here that spend their hard-earned money on the things that we offer in our community.”

Have you read the Recreation Facilities Update yet?

Facilities-Insert-CoverThe most recent issue of Merriam Highlights and Recreation should be in your mailbox any day now, and right in the center is a special publication dedicated solely to the City’s Recreational Facilities issue. It takes most of the information on this blog and condenses it into a simple, easy-to-read primer about the problems Merriam faces with its community center and aquatic center, and some possible solutions based on what residents have said they want.

Enjoy!

Funding options to consider if the City builds a new community center

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?”