Memorandum

City of Lawrence

City Manager’s Office

Date:	8/22/2007
To:	David Corliss, City Manager
CC:	Debbie Van Saun, Assistant City Manager
From:	Casey Liebst, Budget Manager
RE:	Local Sales Tax Comparison

Per your request, information about local sales tax, including a comparison of sales tax rates for the ten largest municipalities in Kansas, is provided below. 

Background

Municipalities across the state levy sales tax for a number of purposes.  For most communities, sales tax is levied for general purposes.  Some municipalities also levy sale taxes for special purposes.  For instance, the City of Lawrence passed a general purpose .50% sales tax in 1971 and a .50% sales tax intended for public safety in 1990. 

In addition to cities and counties, the State of Kansas also levies a 5.3% sales tax.  Cities do not receive any of the revenue generated by the state sales tax.  Cities do receive a portion of the sales tax revenue generated by the County in which they are located based on a population ratio.

Comparison of Sales Tax Rates

The chart below shows a breakdown of the city and county sale tax rates for the ten largest municipalities in Kansas, effective October 1, 2007.  The total combined sales tax rate, which includes the 5.3% sales tax levied by the State, is also shown for each.  Note:  Johnson County is currently exploring a ballot option to extend a one fourth (1/4) of one cent countywide sales tax, set to sunset in December of 2008, to fund capital and operating costs related to public safety and the administration of Justice.         

Municipality	City Sales Taxes	County Sales Taxes	Combined Sale Tax Rate
Wichita	None	0.50% property tax relief
		0.50% road and bridge projects	7.300%
		1.00% for downtown Wichita arena
Overland Park	1.00% general purpose	0.50% general purpose
	0.125% streets	0.25% public safety	7.525%
		0.25% economic development
		0.10% storm water
Unified Government	1.25% speedway debt	1.00% speedway debt	7.550%-
Kansas City Transportation Districts	0.11%-0.6% improvements at locations		8.150%
Olathe	1.00% general purpose	0.50% general purpose
	0.125% streets	0.25% public safety	7.525%-
		0.25%economic development	8.525%
		0.10% storm water
Olathe Transportation Districts	1.00% improvements at location
Topeka	1.00% general purpose	0.65% Washburn
		0.25% economic development	7.450%
		0.25% streets and bridges
Lawrence	0.50% public safety	1% property tax relief	7.300%
	0.50% general purpose	and public facilities
Shawnee	1.00% general purposes	0.50% general purpose
	0.125% public safety	0.25% public safety	7.650%
	0.125% parks and pipes	0.25%economic development
		0.10% storm water
Manhattan	1.00% general purpose	0.50% general purpose	7.300%-
		0.50% road and bridge projects	7.800%
Manhattan Transportation Districts	0.50% transportation district
Lenexa	1.00% general purpose	0.50% general purpose	7.525%
	0.125% storm water	0.25% public safety
		0.25%economic development
		0.10% storm water
Salina	0.5% general purpose	1.00% general purpose
	0.0625% economic development		7.050%
	0.4375% capital projects and human services

Comparison of Sales Tax Revenue

The table below compares the ten largest cities in Kansas in terms of their total city and county sales and use tax distributions for 2006, and the total city and county sales and use tax budgeted for 2007.  The table shows how some communities, like Lawrence, budget increases in sales tax while other cities budgeted below actual receipts. 

City	Combined State, City, County Sales Tax Rate	2006 Total Sales Tax Revenue^a,b	06 Sales Tax Revenues Per Capita	2007 Budgeted Sales Tax Revenue^b	07 Sales Tax Budgeted Per Capita
Unified Government	8.150% 7.650% 7.550%	$43,323,001	$300	$33,556,600	$233
Olathe	8.525% 7.525%	$39,084,109	$334	$36,512,274	$312
Manhattan	7.800% 7.300%	$15,882,815	$321	$  9,962,500	$201
Shawnee	7.650%	$19,906,731	$350	$19,021,215	$334
Overland Park	7.525%	$70,745,637	$421	$77,230,000	$460
Lenexa	7.525%	$22,681,510	$518	$21,866,736	$500
Topeka	7.450%	$33,804,251	$277	$35,840,000	$294
Wichita	7.300%	$47,704,545	$137	$48,405,920	$139
Lawrence	7.300%	$21,805,097	$246	$23,050,000	$260
Salina	7.050%	$13,554,130	$295	$13,915,000	$303
Average	7.600%	$32,849,183	$320	$31,936,025	$304
Median	7.525%	$28,242,880	$311	$28,303,300	$298
^a source: Kansas Dept. of Revenue Office of Policy and Research – Distributions for CY 2006
^b includes city sales and use taxes and the city's share of county sales and use taxes.

This table highlights the following:

• The combined sales tax rate in the City of Lawrence is among the lowest of the largest cities in the state.  Of the cities in this comparison, only the City of Salina has a lower sales tax rate.   Wichita and most of Manhattan have the same sales tax rate as Lawrence.  However, the 1% sales tax in Wichita for the construction of a downtown arena is scheduled to sunset no later than the end of 2007, bringing their sales tax rate to 6.3%. 

• The City of Lawrence ranks seventh in total sales tax revenues received in 2006.  Our sales tax rate is almost one-third of a percent (0.300%) below the average sales tax rate of the cities in this comparison.  Even if you remove the special taxing districts from the comparison, the sales tax rate in Lawrence is more than one-eighth of a percent (.13%) below the average. 

• When comparing sales tax revenues received in calendar year 2006 per capita, the City ranks next to last; receiving only $246 per capita.  This is more than 24% below the median.  The City of Lenexa received the most per capita sales tax - $518, almost 67% above the median.

• Sales tax revenues budgeted in Lawrence for 2007 ranks sixth among the ten largest cities.  We budgeted $3.25 million dollars less than the median, or eleven and one-half percent (11.5 %.)

• Budgeted sales tax per capita in Lawrence is seventh among the top ten largest cities for 2007.  Only the Unified Government, Manhattan, and Wichita budgeted less sales tax per capita.  At $260 per capita, sales tax per capita in Lawrence is almost thirteen percent (13%) below the median and more than fourteen percent (14%) below the average.  The City of Lenexa budgeted $500 per capita for 2007, the most of any city in this comparison. 

Conclusion

The City of Lawrence is the sixth largest city in the state.  When compared to the nine other largest cities in the state, our sales tax rate is among the lowest.