Memorandum

City of Lawrence

City Manager’s Office

TO:	David L. Corliss, City Manager
CC:	Diane Stoddard, Assistant City Manager Brandon McGuire, Assistant to the City Manager Toni R. Wheeler, City Attorney Ed Mullins, Finance Director Tarik Khatib, Chief of Police
FROM:	Casey Toomay, Assistant City Manager
DATE:	August 7, 2014
RE:	Police Facility Sales Tax Options

Please place the following item on the agenda for consideration by the City Commission:

Consider adopting Resolution No. 7083-A or Resolution No. 7083-B, authorizing and calling a special question election submitting to the voters the proposition of levying a special city retailers sales tax to pay the cost of constructing and equipping a police facility and directing notice of special question election to be published.

Background

On August 5, 2014, the City Commission reached consensus on a project budget of $25.7 million for the construction of a new police facility (see 08/05/14 agenda materials.) The Commission also directed staff to analyze what sales tax rate would be required to generate sufficient revenue to support a principal amount of $24.2 million.

The remaining $1.5 million needed for the facility would come from general obligation debt to be paid from property taxes. The Commission previously adopted Resolution 7040, authorizing issuance of $1.5 million of debt for the acquisition, design, construction, and equipping of a public safety facility, however, this debt has yet to be issued.

Sales Tax Options

The annual debt service payment for $24.2 million of debt (including principal, interest, and issuance costs) is estimated to be $2.88 million per year for ten years. If approved by the voters, collections of the proposed sales tax would begin in April of 2015, meaning only nine months of collections in the first calendar year. Similarly, the final year of the sales tax would end in March meaning only three months of collections in the final calendar year. Sales tax revenues are expected to grow 2% each year.

As shown below, a 0.20% sales tax would generate sufficient revenue within nine years to fund the debt service payments.

Year	Sales Tax Collected	Debt Payment	Difference
2015*	$2,325,000	$0	$2,325,000
2016	$3,162,000	$2,880,000	$282,000
2017	$3,225,240	$2,880,000	$345,240
2018	$3,289,745	$2,880,000	$409,745
2019	$3,355,540	$2,880,000	$475,540
2020	$3,422,650	$2,880,000	$542,650
2021	$3,491,103	$2,880,000	$611,103
2022	$3,560,926	$2,880,000	$680,926
2023	$3,632,144	$2,880,000	$752,144
2024**	$926,197	$2,880,000	-$1,953,803
2025		$2,880,000	-$2,880,000
TOTAL	$30,390,545	$28,800,000	$1,590,545
*sales tax begins in April so only 9 months collected
**sales tax ends in March so only 3 months collected

Alternatively, a 0.25% sales tax would generate sufficient revenue within eight years to fund the debt service payments.

Year	Sales Tax Collected	Debt Payment	Difference
2015*	$2,906,250	$0	$2,906,250
2016	$3,952,500	$2,880,000	$1,072,500
2017	$4,031,550	$2,880,000	$1,151,550
2018	$4,112,181	$2,880,000	$1,232,181
2019	$4,194,425	$2,880,000	$1,314,425
2020	$4,278,313	$2,880,000	$1,398,313
2021	$4,363,879	$2,880,000	$1,483,879
2022	$4,451,157	$2,880,000	$1,571,157
2023**	$1,135,045	$2,880,000	-$1,744,955
2024		$2,880,000	-$2,880,000
2025		$2,880,000	-$2,880,000
TOTAL	$33,425,300	28,800,000	$4,625,300
*sales tax begins in April so only 9 months collected
**sales tax ends in March so only 3 months collected

Resolution 7083

Two versions of Ordinance 7083 are attached for consideration by the City Commission:

· Resolution 7083-A, which would levy a one-quarter of one percent (0.25%) city sales tax that terminates when the project is paid for or after eight years; and

· Resolution 7083-B, which would levy a two-tenths of one-percent (0.20%) city sales tax that terminates when the project is paid for or after nine years.

Action Requested