Parsons city commissioners have squashed any consideration of a property tax hike for the 2021 budget and instead will rely on a reserve fund to make it through a tough year.
City Manager Debbie Lamb had presented the commission three budget proposals. The one she preferred would raise the property tax levy by two mills. Another initially would raise the tax rate by one mill, but Lamb found additional savings and whittled it down to 0.80 of a mill increase, hoping it would appease the commissioners. The third scenario included no tax increase.
During a Thursday work session, the commissioners said they weren’t willing to vote for a tax increase at all, no matter how small.
Commissioner Tom Shaw said Parsons residents have been through a lot during the COVID-19 pandemic, “and adding a tax increase to that for the citizens of Parsons is just a pretty bitter pill.”
Shaw said the city should do all it can to avoid raising taxes. He noted that Labette County commissioners have ordered a 1% spending cut for all departments in order to avoid an increase. Businesses have responded to lost revenue by cutting back to avoid layoffs.
“This has hit everybody. This has hit everybody real hard … and we got to buckle down this year. We do,” Commissioner Kevin Cruse said.
Lamb said she would meet with staff again on Friday to “nickel and dime it some more” to find more savings. Commissioners went through the budget on Thursday and found some small budget cuts, but it’s been difficult to cut the general fund, which is where the property tax revenue goes. The commission plans to approve publication of the budget on Monday. Once the budget is published, it can be lowered but not increased.
Even if Lamb finds more savings, the commission will have to rely on a health insurance reserve fund that consists of money left over from when the city self-funded its insurance. Lamb will present a proposed budget on Monday that will include the transfer of $400,000 from the fund, which has been untouched for several years.
Shaw said the reserve fund should be used now because the nation has seen the worst economic downturn in its history because of the pandemic.
“If you’re ever going to have a reason to tap into it, that would probably one,” he said.
The proposed budget also will increase the amount of transfers from the water and wastewater departments to the general budget. Water and wastewater are funded by customer billing, so the tax levy doesn’t affect them. The city usually transfers $125,000 from water and $75,000 from sewer. The budget proposal will increase those amounts to $225,000 and $125,000 respectively.
Lamb and the commissioners are trying to get to a point where the cash carryover for the year is about $200,000. The city usually carries over $200,000 to $300,000.
Getting to that amount without raising taxes is difficult because of a loss in revenue caused by the COVID-19 pandemic. Collections from sales tax, property tax and special fuel tax are all projected to be lower than usual, and municipal court receipts are down about 36% because police officers have been making fewer traffic stops.
Additionally, the budget includes a 35% increase in worker’s compensation insurance and a 10% increase in health insurance premiums, although the city won’t know about health insurance costs for 2021 until after the budget is approved later this month.
The city commission has kept the mill levy steady for the last three budget years. The levy was raised from 53.638 mills in 2017 to 54.617 in 2018. The last significant raise was in 2015 when the rate went from 48.872 to 53.638. Shaw was on the commission then but couldn’t remember why the rate was hiked and asked Lamb about it. Lamb, who was the city clerk at the time, didn’t know either, but she planned to try to find an answer. This year’s budget used a tax rate of 54.604 mills. The last significant decrease came in 2007.
“We want to be really careful about increasing the mill levy because when it goes up, it very seldom ever comes back down,” Shaw said.
The city’s estimated assessed valuation is a little more than $1.5 million over last year’s valuation, meaning an even tax rate would bring in more money this year. One mill is projected to raise $55,464.
The city is making annual payments of over $600,000 on a 15-year bond that was issued for a major capital improvement and energy efficiency project. Those payments are set to expire in 2022, bringing some relief to future budgets.
“It is going to be a breath of fresh air for all of us. I don’t think we’ll be having this kind of discussion,” Cruse said.
The proposed 2021 budget includes no wage increases for city employees, and it also would rely on the city not filling some vacant jobs.