City of Lawrence

City Manager’s Office

MEMORANDUM

TO:	David Corliss, Interim City Manager
FROM:	Casey Liebst, Budget Manager
DATE:	7/7/06
CC:	Debbie Van Saun, Assistant City Manager Ed Mullins, Finance Director
RE:	Tax Rate Comparison Analysis

Pursuant to your direction, below is some additional analysis of the tax rate comparison provided by the League of Kansas Municipalities.

The Mean and Median

According to the data provided by the League, Lawrence is the 6^th largest city in Kansas. A review of the data related to the top ten largest cities in Kansas revealed that Lawrence is below the mean in all categories reported by the League. Considering the variation between the highest population (Wichita, pop. 353,878) and the lowest (Lenexa, pop. 42,548) however, it is more useful to compare the City of Lawrence to the median. The table below illustrates how the City compares to the median in all categories.

Category	Mean	Median	Lawrence Data	+/- median
2005 Population	116,488	95,084	81,854	(13,230)
Assessed Tangible Valuation	1,133,411,186	944,493,788	777,256,217	(167,237,571)
General Obligation Bonds	87,142,152	100,750,151	64,757,065	(35,993,086)
Special Assessment Bonds	30,302,301	5,103,558	10,127,935	5,024,378
Utility Revenue Bonds	38,607,449	7,914,500	8,935,000	1,020,500
Other Bonds	17,678,041	0	0	0
Total Bonded Indebtedness	180,427,476	108,325,001	83,820,000	(24,505,001)
Temporary Notes	22,646,673	14,865,000	15,745,000	880,000
No-Fund Warrants	0	0	0	0
Other Debt	121,688,264	6,801,132	0	(6,801,132)
Total City Levy	27.319	26.426	26.375	(0.051)
Total Mills Levied in City By All Units	124	118	111.515	(5.997)
Assessed Valuation per capita	11,376	8,766	9,496	730
General Obligation Bonded Debt per capita	880	822	791	(30)
Total Bonded Debt per capita	1,359	1,297	1,024	(273)
General Obligation Bonded Debt per valuation	8.26%	8.84%	8.33%	-0.51%

Assessed Valuation

Lawrence is below the median in assessed tangible valuation by more than 17%. One factor explaining the variation could be make-up of our tax base.

The table below shows the breakdown of the property tax bases for the ten largest cities in Kansas. (Data on the Unified Government was not available at the time of publication.) It does not include property that is exempt from taxation. Lawrence has the highest percentage of property assessed at the residential rate (68.6571%) and the lowest percentage of property assessed at a higher, non-residential rate.

	Assessment Rate
City	11.5%	12%	25%	30%	described as other
Wichita	61.208%	1.348%	37.417%	0.027%
Overland Park	54.897%		34.030%		11.072%
Unified Government	Information not available at time of publication
Topeka	58.365%	1.276%	40.176%	0.183%
Olathe	61.325%		22.437%		16.238%
Lawrence	68.671%	2.132%	29.186%	0.011%
Shawnee	66.999%		23.440%		9.561%
Manhattan	68.658%	0.805%	30.437%	0.099%
Salina	63.101%	0.482%	36.230%	0.187%
Lenexa	44.613%		48.486%		6.901%

Property is assessed based on use classification. Residential property, for instance, is assessed at 11.5% of market value while vacant land and property used by not for profits is assessed at 12% of market value. Commercial and improved agricultural land is assessed at 25% of market value. Unimproved agricultural land and all other property types are assessed at the highest rate, 30% of market value.

This might explain why Lenexa, the city with the smallest population, has the highest assessed valuation per capita and why Manhattan has the lowest assessed value per capita. In Lawrence, assessed valuation per capita is slightly ($730) above the median, ranking fifth on the list of ten largest cities.

Indebtedness

Lawrence is 22.62% below the median in total bonded indebtedness which ranks seventh on the list of the ten largest cities in Kansas. Per capita, Lawrence issued $1,024 of bonded debt. Only Overland Park and Salina issued less bonded debt per capita.

The amount of General Obligation Bonds issued by the city was 35% below the median amount issued. Only the cities of Manhattan and Salina issued less G.O. debt than Lawrence.

On a per capita basis, Lawrence issued $791 of G.O. debt. This ranks sixth on the list of the ten largest cities. Lenexa issued the most G.O. debt per capita ($1,999); Salina issued the least ($56).

The amount of General Obligation bonded debt represents 8.33% of the City’s assessed valuation. This is just .51% below the median and ranks Lawrence sixth on the list of the ten largest cities. The amount of G.O. debt issued by Topeka represents 13.64% of its assessed valuation, the highest percentage of the ten largest cities.

Lawrence did issue 98% more Special Assessment Bonds and 13% more Utility Revenue Bonds than the median amounts issued. This means more debt in Lawrence is being repaid by those who use the services or benefit from the improvements made.

Eight of the other ten cities listed significant amounts described as “other debt.” Additional research will be conducted to determine what types of debt these communities are issuing and if they would be viable options for the City of Lawrence to consider.

Mill Levy

The City levy was .051 mills below the median city levy which ranked Lawrence sixth on the list of ten largest cities.

City	Total City Levy	Total Mills Levied in City By All Units
Unified Government	42.742	160.997
Manhattan	36.235	Not reported
Wichita	31.898	115.950
Topeka	30.653	142.842
Lenexa	26.477	122.243
Lawrence	26.375	111.515
Olathe	24.923	125.872
Salina	23.999	112.202
Shawnee	20.847	117.512
Overland Park	9.037	107.579

The total mills levied in Lawrence ranked eighth on the list; only the city of Overland Park reported a lower total. (Manhattan did not report a total.)

Conclusion

The comparison of tax information provided by the League demonstrates that our citizens are being taxed at a rate lower than the majority of citizens in the ten largest cities in Kansas. Our total bonded indebtedness and the amount of bonded debt being supported by the City at large, as well as the amount of G.O. bonded debt as a percentage of assessed value, are also lower than a majority of the largest cities in the state.

While our assessed valuation in Lawrence per capita basis is higher than all but four of the ten largest cities in the state, our total assessed valuation is lower than all but three.

Of those cities with a higher assessed valuation than Lawrence, all have a larger percentage of their tax bases made up of non-residential property.

If a larger percentage of our property tax base was non-residential property, more revenue would be generated by annual increases in assessed valuation which would generate additional funds for infrastructure and City programs and alleviate the need for an increase in the tax levy.

For instance, applying the 2006 city mill rate of 26.362 mills to a residential property with a market value of $100,000 generates $303.16 of city property tax revenue. A commercial property with the same market value would generate $659.05 of city revenue. It would take increasing the city mill rate by more than double to generate that same amount of revenue from the residential property.

As the city continues to grow, it is important to balance residential and non-residential growth. However, provided the City can grow in such a way as to avoid hurting existing business, it may be more cost effective and efficient to grow the city’s tax base in areas, such as commercial and industrial properties, that are assessed at a higher rate.

Next Steps

Additional research and analysis will be conducted comparing Lawrence to the other nine largest cities in Kansas. Topics will include a comparison of sales tax and an inventory of the services these cities provide. For instance, in Johnson County, transit services, library services, and some of the larger parks are provided by the County rather than the individual cities. In some cities, solid waste services and/or other utilities are provided by private entities not the municipalities themselves.