Memorandum
City of Lawrence
City Attorney’s Office
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TO: |
Mayor and City Commissioners |
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FROM: |
Toni R. Wheeler, City Attorney |
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CC:
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David L. Corliss, City Manager Diane Stoddard, Cynthia Wagner and Casey Toomay |
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DATE: |
April 28, 2014 |
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RE: |
Police Facility Questions on the November 2014 General Election Ballot |
This memorandum describes two options the City Commission has available to it to place the issue of constructing a new police facility on a November election ballot for approval by the City’s electors. Both options have been used by previous city commissions in recent years. In 2008, the City asked the voters to approve special sales taxes to fund transit services and infrastructure and equipment in accordance with the Kansas Retailers’ Sales Tax Act. In 2010, the electors were asked to approve Charter Ordinance No. 40, which authorized the City to construct, furnish, and equip the public library renovation at a total cost not to exceed $18,000,000 and to fund the same through general obligation bonds and/or temporary notes.
It is important to note that a general obligation debt issuance backed by a property tax mill levy increase does not require an election. The library election method described in this memorandum was sought by the City Commission – it was not otherwise required by state law. The limit on general obligation debt issuance is 30% of assessed valuation (including motor vehicles). There is no election requirement for a police facility general obligation debt issuance. A sales tax increase must always be approved by voters pursuant to state law requirements discussed below.
The City Local Sales Tax Option
Article 12, Section 5(b) of the Kansas Constitution (the home rule amendment), authorizes cities to levy any tax, excise, fee, charge or other exaction except when the legislature has limited or prohibited such levy by (a) an enactment uniformly applicable to all cities; or, (b) an enactment uniformly applicable to all cities of the same class. Under current law, cities are permitted to levy up to 3% local sales tax. Of the 3% local sales tax, 2% may be for general purposes, and an additional 1% may be for special purposes. The special purpose sales tax must expire 10 years from the date of first collection. The sales tax act does not define “special purpose sales tax.” Cities may exercise discretion in designating the purpose(s) for which a special purpose tax will be used. In the past, cities have used the special purpose sales tax to finance new city buildings, improved public safety facilities, enhanced infrastructure and economic development projects.[1]
The state sales tax rate effective July 1, 2013 is 6.15%. The sales tax rate in Douglas County is 7.15%. The sales tax rate in the City of Lawrence is 8.7%. The City sales tax is comprised of the 6.15% state sales tax, the 1% Douglas County sales tax, a 1% City general sales tax, and a 0.55% City special sales tax. The City’s special sales tax in the amount of 0.55% was approved by the voters in 2008 and is for infrastructure and fire apparatus (0.3%), transit (0.2%), and transit enhancements (0.05%). The special sales tax terminates, or sunsets, in 2019 (10 years from the date the sales tax was first collected).
The City may levy up to an additional 1% in general sales tax and 0.45% in special sales tax before reaching the 3% cap set by state statute.
To call a referendum and to levy a sales tax, the governing body adopts a resolution calling the special election. The Resolution must contain the ballot question.
Several things are required to be included in the ballot question. First, the ballot question must contain the specific tax rate to be levied. A local sales tax may be levied in increments of 0.05%. As stated above, the City currently has authority to ask voters for approval for an additional 1% general sales tax (with no required sunset) and an additional 0.45% special sales tax (with a required 10 year sunset). Second, the purpose or purposes for use of sales tax proceeds must be specified. Third, if a special sales tax is proposed, the ballot question must specify a sunset that is 10 years or less from the date the tax begins. If a general sales tax is proposed, the ballot question does not need to contain a sunset. However, the ballot question may provide for a sunset on the general sales tax. Without a termination provision in a general purpose sales tax, the taxes continue until they are terminated by an action of the governing body to repeal the ordinance levying the taxes. Fourth, the ballot question must contain the proposed effective date of the sales tax. The collection of local sales taxes begins on the first day of a calendar quarter following the 90th day after the date the City provides written notice to the director of taxation of the election authorizing the levy of the tax.
After the resolution calling the election is approved by the Commission, a copy is delivered to the County Election Officer. Douglas County Clerk Jamie Shew advised staff his office must receive the special question ballot language in early September 2014. His office must have the ballots printed and available for advance voting.
A Special Question Election Notice is required to be published in the official city newspaper at least twice before the election. The Notice of Election must describe the expected revenues generated by the tax, and the expected uses of the sales tax revenue. If bonds are expected to be issued to finance the project, and then repaid from sales tax revenue, projected information about the bonds must be included in the Notice of Election.
If the electors approve the sales tax, after the election results are canvassed, the governing body must adopt and pass an ordinance levying the sales tax. A certified copy of the ordinance levying the tax will be sent to the Department of Revenue, Director of Taxation. If the electors do not approve the sales tax, it could be placed on the ballot at a future election.
Charter Ordinance That Is Effective Upon Approval of City Electors
The governing body may adopt a charter ordinance, amending Charter Ordinance 40, to provide the City with express authority to construct, furnish, and equip a police facility, and to finance it with general obligation bonds and/or temporary notes. To adopt and pass a charter ordinance requires four (4) city commissioners to vote in favor of it. After its adoption and passage, the charter ordinance is published once a week for two consecutive weeks in the official city newspaper. The City Commission could make the charter ordinance effective only if approved by a majority of the electors voting thereon.
To submit the Charter Ordinance to a vote, the City Commission adopts an ordinance calling an election for the purpose of voting on the charter ordinance. The ordinance calling the election must be published once each week for three consecutive weeks in the official city newspaper.
Once the ordinance calling the election is effective, a copy is delivered to the County Election Officer. A Notice of Election is required to be published in the official city newspaper at least twice before the election. The Notice of Election must describe the sources of funds to complete the project (i.e., general obligation bonds and any other funds), and the expected costs of the project. Projected information about the bonds must be included in the Notice of Election. This information includes the repayment term, expected interest rate, total interest cost, average annual payments on the bonds, and estimated mill levy impact. In 2010, the City Commission approved by resolution the form Notice of Election that was published.