Memorandum

City of Lawrence

City Manager’s Office

TO:	David L. Corliss, City Manager
CC:	Tarik Khatib, Chief of Police Diane Stoddard, Assistant City Manager
FROM:	Casey Toomay, Assistant City Manager
DATE:	July 18, 2014
RE:	Police Facility Funding Scenarios

Background

The model used to project the sales tax and/or property tax increases needed to fund the new police facility has been updated to reflect the assessed valuation estimate provided by the County in early July 2014 as well as current sales tax projections.  In addition, the size and cost of the facility have been reviewed and the price is now estimated at $25 million, excluding the cost of site acquisition.

The maximum amount of local sales tax a city is permitted to levy is three percent (3%), of which two percent (2%) may be for general purposes while one percent (1%) may be for special purposes.  The current total sales tax rate in the City of Lawrence is 8.7% comprised of the following:

State of Kansas	6.15%
City of Lawrence general purpose	1.00%
City of Lawrence special purpose	0.55%
Douglas County	1.00%
TOTAL	8.70%

The City has the ability to levy an additional 0.45% special purpose sales tax and 1% general purpose sales tax.  A special purpose sales tax must expire after ten years from the date of first collection.  While it is not required, the City may sunset a general purpose sales tax expire at any time.   

Funding Scenarios

New funding scenarios have been developed using the new assumptions previously discussed.  They all assume debt issuance of $25 million but vary in maximum maturities.  The model assumes an interest rate of three percent (3%) for 10-year debt and an interest rate of four percent (4%) for 20-year debt.  Other variables included the sales tax rate, the mill levy rate, and the number of years the sales tax would be in place before sun setting. 

The table below summarizes the scenarios that fund the cost of constructing a facility and some operation and maintenance costs with a sales tax only.  The 20-year projections for these scenarios are attached.

SALES TAX ONLY
Scenario	Sales Tax Rate*	Sunset year	Property Tax Mill Levy Rate	Term of Debt
A	.15%	17	None	20
B	.25%	9	None	10
C	.5%	5	None	10
D	1%	3	None	10
E	1.20%	2	None	10

*anything in excess of 1% would require a combination of a general purpose and special purpose sales tax. 

The table below summarizes scenarios that would use a combination of sales tax and property tax increases to fund construction and some operation and maintenance costs for a facility.  The 20-year projections for these scenarios are attached.    

SALES TAX AND PROPERTY TAX
Scenario	Sales Tax Rate	Sunset	Property Tax Mill Levy Rate	Term of Debt
F*	.1%	20	.35	20
G	.2%	10	.15	10

*this scenario would require another source of funds to temporarily cover the deficit until future revenues are collected.