Memorandum

City of Lawrence

City Manager’s Office

 

DATE:

07/06/2012

TO:

David L. Corliss, City Manager

FROM:

Casey Toomay, Budget Manager

CC:

Cynthia Wagner, Assistant City Manager

Diane Stoddard, Assistant City Manager

Jonathan Douglass, Assistant to the City Manager / City Clerk

RE:

Additional options for funding multi-year plan for police resources

 

Pursuant to Commission request, additional options for addressing the staffing, equipment, and facility needs identified by the Police Department were analyzed and are summarized below.  The cost of the options varied  depending on factors such as the period of time over which the positions were added and the cost of the proposed facility.  The results of the analysis were that implementing the requested staffing increases over a longer period of time does not reduce the cost over time sufficiently to reduce the rate of the new sales tax that would be required.  However, using the city’s share of the existing countywide sales tax to pay for the construction of a new facility would reduce the rate of the new sales tax that would be required by one-tenth of one percent. 

 

Background

At their study session on May 1, 2012, the City Commission directed staff to develop a multi-year plan to address the staffing, equipment, and facility needs presented by the Police Department.  Pursuant to that request, staff provided a four year plan that included 46 new positions, $4.6 million of additional equipment and capital improvement projects, and the $30 million facility. 

 

Staff created a model to project the cost of the staffing, some of the equipment, and the facility over the next four years.  The model identified property tax and sales tax as potential funding sources and determined the mill levy increases and sales tax rates that would be required to fund the expenditures. 

 

Under the example provided to the Commission, the total projected cost of the scenario for the four years shown was $42,104,085.  Construction of the facility would occur in years three and four.  Property taxes would be increased each year in order to generate sufficient revenues to cover the projected personnel cost increases while the facility would be funded through a one percent public safety sales tax that would sunset once sufficient revenue for the facility was collected.  The table below shows the projected tax increases needed. 

 

Pay-as-you-go Scenario – Tax Rate Increases

 

Year One

Year Two

Year Three*

Year Four

Total Increase

Property Tax Levy Increase

1.9 mills

0.8 mill

1.0 mill

1.0 mill

4.7 mills

Additional Sales/Use Tax Rate

 

 

 

 

1.0%

*it is projected that the sales tax would sunset after two months of year three

 

The City Commission requested additional options that would look at phasing in the resources over a longer period of time, a less costly facility, and that took into consideration the state sales tax that is scheduled to be repealed effective July 1, 2013. 

 

Three additional scenarios have been considered.  The assumptions used and the result on staff analysis are summarized below. 

 

Assumptions

The keys assumptions used in the model are as follows:    

 

Possible Implementation Scenarios and Funding Options

Three scenarios were considered.  They varied in terms of length of implementation of the requested staffing increases and in the cost of the proposed new facility.  While the cost of personnel, equipment, and operation and maintenance costs are ongoing, only the costs over the twenty years of debt service payments were considered. 

 

Two funding options were considered for each scenario.  One uses a brand new sales tax to fully fund the scenario.  The other funding option using the city’s share of the existing county-wide sales tax to fund construction of the new facility and a brand new sales tax to fund the remaining staffing, equipment, and operation and maintenance costs of the new facility. 

 

The table below shows the three scenarios and the new sales tax rates required under each funding option.

 

Scenario and Funding Options

New Sales Tax Required

Scenario A.  One Year Staffing Plan and $30 Million Facility

 

Funding Option 1. New Sales Tax Only

0.40% sales tax

Funding Option 2. Combination of Existing and New Sales Taxes

0.30% sales tax

Scenario B.  Seven Year Staffing Plan and $24 Million Facility

 

Funding Option 1. New Sales Tax Only

0.35% sales tax

Funding Option 2. Combination of Existing and New Sales Taxes

0.25% sales tax

Scenario C.  Ten Year Staffing Plan and $24 Million Facility

 

Funding Option 1. New Sales Tax Only

0.35% sales tax

Funding Option 2. Combination of Existing and New Sales Taxes

0.25% sales tax

 

Additional information on each scenario, including the costs for the first ten years of each scenario, can be found below. 

 

Scenario A.  Full Funding Year One

Under this scenario, all 46 additional positions would be added in the first year.  The original $30 million dollar facility would be debt financed over twenty years.  The ten year cost of this scenario is shown below. 

 

Scenario A.

Expenses

Ten Year Total

Debt payment

$22,000,000

O&M

$3,315,000

additional personnel

$37,670,000

Equipment

$3,905,000

Total Scenario A

$66,890,000

 

Funding Option 1.  A new 0.4% sales tax would be required in order to fully fund this scenario using a new sales tax.  (As shown below, a 0.35% sales tax would be sufficient for the first ten years but not over a twenty year period.) 

 

Scenario A. Funding Option 1.

sales tax rate

Revenue generated over ten years

Fund balance at the end of 20 years

0.35%

$59,536,820

($11,167,947)

0.40%

$68,042,080

$9,334,823

 

Funding Option 2.  If the city’s share of the existing county-wide sales tax was used for construction of the facility, a new sales tax of only 0.3% would be required.  (As shown below, a 0.20% sales tax would be insufficient.)

 

Scenario A. Funding Option 2.

sales tax rate

Revenue generated over ten years

Fund balance at the end of 20 years

0.25%

$42,526,300

($8,173,000)

0.30%

$51,031,560

$12,330,000

 

 

Scenario B – Seven Year Staffing Plan

Under Scenario B, the 46 positions would be added over a seven year period.  A smaller facility, costing $24 million, would be debt financed over twenty years.  The ten year cost of this scenario is shown below.

 

Scenario B.

Expenses

Ten Year Total

Debt payment

$17,660,000

O&M

$2,300,000

additional personnel

$27,440,000

Equipment

$3,240,0000

Total Scenario B

$50,640,000

 

Funding Option 1.  A sales tax of 0.35% would be necessary to fully fund this scenario using a new sales tax. (As shown below, a 0.30% sales tax would be sufficient for the first ten years but not over a twenty year period.) 

 

 Scenario B. Funding Option 1.

sales tax rate

Revenue generated over ten years

Fund balance at the end of 20 years

0.30%

$51,031,560

($9,600,000)

0.35%

$59,536,820

$10,900,000

 

Funding Option 2.  If the city’s share of the existing county-wide sales tax was used for construction of the facility, a new sales tax of only 0.25% would be required.  (As shown below, a 0.20% sales tax would be sufficient for the first ten years, but would not be sufficient over a twenty year period.)

 

sales tax rate

Revenue generated over ten years

Fund balance at the end of 20 years

0.20%

$34,021,040

($15,250,000)

0.25%

$42,526,300

$5,250,000

 

 

Scenario C.  Ten Year Staffing Plan

Under Scenario A, the 46 additional positions would be added over a ten year period.  A $24 million dollar facility would be debt financed over twenty years.  The costs for ten years are summarized below.

 

Expenses

Ten Year Total

Debt payment

$17,660,000

O&M

$2,300,000

additional personnel

$22,280,000

Equipment

$2,920,000

Total Scenario A.

$45, 160,000

 

Funding Option 1.  Like scenario B, a sales tax of 0.35% would be necessary to fully fund this scenario using a new sales tax. (As shown below, a 0.30% sales tax would be sufficient for the first ten years but not over a twenty year period.) 

 

sales tax rate

Revenue generated over ten years

Fund balance at the end of 20 years

0.30%

$51,031,560

($5,290,000)

0.35%

$59,536,820

$15,200,000

 

Funding Option 2.  Also like Scenario B, a new sales tax of only 0.25% would be required if the city’s share of the existing county-wide sales tax was used for construction of the facility.  (As shown below, a 0.20% sales tax would be sufficient for the first ten years, but would not be sufficient over a twenty year period.)

 

sales tax rate

Revenue generated over ten years

Fund balance at the end of 20 years

0.20%

$34,021,040

(10,980,000)

0.25%

$42,526,300

$9,500,000

 

 

Conclusion

There are many options for addressing the staffing, equipment, and facility needs identified by the Police Department.  The cost of addressing these needs depends on factors such as the period of time over which positions are added and the cost of the proposed facility. 

 

Implementing the requested staffing increases over a longer period of time does not reduce the rate of the new sales tax that would be required.  Using the city’s share of the existing countywide sales tax does reduce the rate of the new sales tax that would be required to fund the plan by one-tenth of one percent.