The General Fund relies on revenues from a variety of sources to provide for the operations of the thirty departments/divisions that are budgeted from this fund.  Early in the budget process, revenues for the General Fund are analyzed based on the actual receipts from the previous year.  Adjustments then might be made to the current year’s revenue estimates, and projections are made for the next fiscal year.  The following revenue descriptions, assumptions, and trends are provided for some of the most significant revenue sources for the General Fund.

 

Sales Tax

The City of Lawrence General Fund receives forty-four percent (44%) of its revenue from sales tax.  The City receives revenue from two sources of sales tax: a City-wide sales tax of one percent, all of which goes to the City of Lawrence and a share of the one percent County-wide sales tax. 

 

A city retailer’s sales tax of 0.5% was instituted July 1, 1971, followed by an additional 0.5% that went into effect October 1, 1990.  This one percent city retailer’s sales tax has followed an upward swing throughout the last two decades (through 2001), as evidenced by the graph and chart following this report.  After a slight leveling off in 2002 followed by a slight increase in 2003, we are predicting a continued slow growth in sales tax for 2005.  Consumer confidence in the economy has been gradually increasing and consumer spending has rebounded recently.  With cautious optimism as our guide, our projections for 2005 ($11,800,000) predict slight growth over the actual 2003 receipts ($11,392,377). 

 

The County-wide sales tax of one percent was approved in a November, 1994 election and became effective in 1995.  We are projecting $8,000,000 in revenue for 2005 from the City’s share of the county-wide sales tax, which represents a slight increase over the $7,501,459 receipts for 2003.  Assumptions behind this projection are similar to those described above.

 

Property Tax

Twenty-five percent (25%) of the 2005 General Fund revenues are estimated to come from ad valorem property taxes.  To generate the $11,150,000 in property tax revenue needed for the 2005 budget, a mill levy of 15.796 is required.  This mill levy is a 0.135 mill decrease in comparison to the mill levy required for the 2004 budget.   The 2005 assessed valuation is $717,269,825, which represents a 6.36% increase over last year.  This increase is down from the 7-8% growth in the assessed valuation that Lawrence has experienced in previous years.  The increased mill levy for the General Fund will provide funding for one new position for the City (a staff attorney to assist the public safety departments).  A decision to postpone the hiring of staff for Fire Station #5 (to be constructed in 2005) until the 2006 budget contributed to the lower mill levy for the general fund in 2005.  A graph and chart depicting General Fund property tax revenue from 1983-2003 follows this report.

 

Franchise Fees

These fees, which the City charges to allow utilities to provide services within the city and to locate within the public right-of-way have shown gradual increases over the past two decades (see attached graph and chart).  The current rate for electricity is 4% of gross sales, cable is 3.25%, and telecommunications is 2%.  The natural gas franchise fee is a volumetric fee, based on customer class.  A modest increase in 2005 revenue ($3,737,732) over the 2003 actual ($3,660,488) is predicted based on a conservative approach to the gradual trend of modest increases experienced in this revenue source.  Both electric and natural gas franchise fee revenues are very dependent upon summer and winter temperatures, adding impetus to our conservative approach in making projections for this revenue source.

 

Fines and Forfeits

Since 1995, this revenue source has more than doubled from $707,562 in 1995 to $2,012,187 in 2003.  This recent history of steady increases has prompted projections for 2005 ($2,020,800) that are higher than 2004 ($1,500,000).  These predictions are based on the addition in 2002 of a KDOT grant funded traffic unit that has been added to the Police Department.  An increase in fines that was passed in 2001 coupled with an increase in court costs approved in 2002 appear also to have impacted the revenue for this fund in recent years.  A graph and chart of the last twenty years of receipts from this revenue source follows this report.

 

General Fund Interest on Investments

This revenue source has been impacted by the economic downturn of the past year.  As interest rates have fallen, so has the revenue generated from the City’s investments.  Short term interest rates have remained relatively low because the Federal Reserve remains concerned about the strength of the economy.  Since the City primarily invests in securities with three or six month maturities, our interest earnings continue to be lower than past years.  This pessimism is reflected in our projections for this revenue source, as we are estimating 2005 revenues ($400,000) that basically mirror 2003 actual receipts ($387,341).  There are predictions for an increase in interest rates for the last quarter of 2004.  The chart and graph that follows this report illustrates the up and down trend for the past twenty years and shows the relative volatility of this revenue source.

 

Licenses and Permits/Inspections Revenue

A fee increase for building permits was approved by the City Commission and was phased in over a three year period.  The third phase went into effect in 2004.  Our revenue projections for 2005 reflect a conservative approach, given the recent economic downturn and its potential effect on the building community.  Although the chart and graph that illustrates the trends for this revenue source over the past two decades indicates steady increases from 1983 through 1993, revenues have fluctuated considerably since 1993.  That fluctuation has prompted us to project a slight decrease in 2005 for business licenses and considerably lower revenue from permits in 2005 compared to the 2003 actual receipts. 

 

State Revenue Sharing

This revenue source has proven to be vulnerable the past year due to the State budget crisis.  We are projecting no revenue in 2004 due to the fact that the state eliminated demand transfers in 2003. Following this report is a chart and graph depicting modest growth over the past twenty years but the current State budget deficit lead to projections that do not include restoration of the state demand transfers.