Welcome to the Kansas reflector Podcast. I'm editor Sherman Smith. Today we are diving into the exciting world of property taxes and specifically looking at a program that the legislature has at its disposal to lower your property tax bill, but it's a program that they have not funded or used in about 20 years. To talk about this. It's called the local ad valorem tax reduction fund. I'm joined today by Kansas Association of Counties Executive Director, Bruce Chladni. And Miami County Commissioner, Rob Roberts. Thank you for joining us.
Good morning. Thank you. Yeah.
Well, let's start by talking about this very cumbersome named program, the local ad valorem tax reduction fun. What is this?
Well, Sherman, this actually is a program that started way back during the dustbowl days back when Kansas was struggling, the economy was in the tank and and citizens were really having a hard time to make ends meet. Luckily, the state started to recover a little bit faster than the economy did. And so they actually had extra tax dollars that they purposefully pushed back up to the local governments to help lower property taxes for the struggling citizens. And that partnership went on all through the 40s 50s 60s, all the way up to the early 2000s. And finally, in the first part of 2000 2003, the Kansas legislature looked at that and said, Well, that might not be what we want to spend our money on. And by 2004, that partnership has had gone, but the law is still there, saying that the the state would share some of its resources with the counties. Rob, do
you want to give us a little overview of what what the law says about this? What is how's this supposed to happen?
Thank you, Sherman. Appreciate that. The there's two funds, I'd like to highlight ones local ad valorem tax reduction fund and the city county revenue sharing fund, these two funds are essentially sales tax. And in the early 2000s, there were two laws enacted these two, and essentially told that the state agreed with the local officials to share a portion a portion of the sales tax in order to offset local property taxes, it's $1 for dollar replacement of local property tax. If and when the state funds this, cities and counties are required required under state law to reduce their taxes dollar for dollar. And this essentially benefits. And you can ask yourself why why would the state do that? Virtually everything a county does is a is a requirement of the state of Kansas. So sometime in the past, the state recognized that they needed to help share the cost of that, from law enforcement to the county treasurer to register deeds, the appraisal process, the court system, each of these functions are necessary and needed by Kansas to access their state government through these entities that the county provides. So 105 counties have this what I call requirement to provide the services the state shows through a lot in negotiation with cities and counties will help pay for it. You collect the sales tax today, you chose, they chose to agree to share it. That's essentially what it is. The
revenue share is from excise tax, I believe it's on cigarettes, alcohol, that sort of thing.
It used to be collected locally, and it's no longer collect. It's all collected by the state. And there's just revenue shared back to the county or the city
for the local ad valorem tax reduction fund. This was in place from 1937 to 2003. Why did it go away and never come back?
Well, I will add in there to what Rob is saying is that currently the statute requires that the state shares with the counties 3.63% of those sales tax dollars that are collected that you just referenced chairman. And as we speak with legislators that were in the capital during that timeframe, when we lost those funds. It was a matter that the state was actually struggling themselves. It was tough economic times that the state was encountering. And so they were looking around trying to figure out how could they save money at the state level so that they could pay the bills that they had in front of them. And unfortunately, local ad valorem tax reduction, city county revenue sharing fund those those funds were on the chopping block and ended up getting unfunded if you will,
from 2004 to 2022, just the local ad valorem tax reduction fund, we're talking about $1.7 billion that would have been distributed among the counties in the state. Rub what would what would that money have meant to local county commissioners to local government,
it would have helped keep the property tax burden at bay is the cost of doing business for a local jurisdiction, county or city and I'll give you A prime example. In the budget year that just is approved by our local county, our county was due to receive roughly $1.7 million it against our taxes or against our revenue stream in the law is required for us to give to eliminate $1 For every dollar they give us, so our county had to raise property taxes by a little bit two mils, that would have been a revenue neutral day, our county would have been able to provide a revenue neutral budget would have been the second one in our history, just by paying that. And it would have been simple, it's legal and there's funds are available for the state to do. It would have been simple process. And we've talked our legislators via hero stand up fund to fund it, you have the funds to do it over $3 billion of excess funds in the in the state treasury. That's significant, it wouldn't have been a burden to the state whatsoever, and it'd be perfectly legal.
For us, I think we would be talking about about 128 million a year most recent year that if this was fully funded, and how is this money divided among the counties.
So if you go into the statute, it actually lays it out, line by line, how that money is to be accounted for, like Rob was saying, but then also how it's divided. And it is divided 65% Of that amount would be distributed based on population of the counties. And then 35% would be distributed based on the assessed value of tangible products or assets in the in the county. So it's a 6535 split, and then that money is calculated through a formula and then each county comes up with the amount of money that they would have received through the LA VTR fund.
Seemed mentioned earlier, the kind of the financial hardships the state had in the past and around 2003 was when they were dealing with school finance lawsuits and trying to get schools fully funded again. And then we had the economic downturn in 2008. The Brownback tax experiments, another round of school funding litigation. But we're at a point now where the financial health of the state is maybe as good as it's ever been. They're billions and billions of dollars in surplus right now is the time is right right to look at this
time is perfect local counties and cities need tax relief. The property tax system, the evaluation system is owned and operated by the state of Kansas, the laws are passed by incredibly great 165 legislators across our state, who draft and craft and vote and approve and then it's sent over whatever tax all sent over to Kansas Department of Revenue. And they make the regulations and how the counties are to administer this. Every county is required to be audited every year on its success or failure on evaluating property. You know, this the Kansas legislature the Kansas constitution clearly says that residential property is to be valued at market value and is supposed to be fair and equitable. That means if you have the similar home that I have, your home shouldn't be valued more, so you pay more taxes than I do. So there's quite a process to make sure that they are valuing it properly. Once that value is established, then of course it goes into the big picture, what's the valuation of the whole county, and then you look at just residential, so I have $100,000. Home, you're taxing on 11.5% of that home. So the mill levy is so misunderstood by people, when you think about a mill levy, it's just $1. Think about $1 in one mill, it's the same thing. So if I had $100,000, home, its value, its assessed at $11,500. And I set a tax at one mill that means $1, for every 1000 of assessed valuation. So what's my bill $10 or $20, or 40, depending on what that mill was set by who? Your city, your county, your school, your state, all of the taxing entities. We seem to be in Kansas, allowing that to be too confusing for citizens. So when you think about a fund that was established by the good men and women in 2003, to help offset those property taxes, fund it, simply put the money in the fund to fund it. You will be the biggest heroes in the state of Kansas. And you there's one other aspect and there's 2000 The sixth the legislature even though they're hurting for funds, the wisdom they had to eliminate taxes on machinery and equipment harmed their budget again, and it harmed local jurisdictions. Because up to that point, industries and especially railroads had to pay for what machinery and equipment. They allowed those to be phased out over a series of years, another hit to the local property tax. And if you look at the property tax burden on residential property in 1995, it was roughly 30 to 35% of the total budget. If you look at that property tax burden today on residential property in our county, it's 65%. How did that shift happen? That shift happened because of functions like this, you begin to take away the burden of taxes on industrial, commercial, machinery, equipment, anybody who's everybody comes to the table with a legislator and say, my business is hurting, would you give me a break? Do you know the only industry in Kansas this does not come to the legislature and ask for a break residential property? Who's the lobbyists for us homeowners who aren't they? There's no money. I've said it for 15 years. And why don't we all create this lobbyists to go, Hey, I own a home cook tax and me. That's the burden that's happened. And it didn't happen by your locals. It happened by the men and women. And I know they're good people, they got sold a bill of goods that this is what we do. Even the mortgage registration that I fought against in 2013, was led by the Kansas Realtors Association, who said that's a big burden on our taxpayer. No, it funded a big part of your local government. So each time the legislature decides to make a change in the taxes, you burden for property, or for commercial residential, or somebody better take a long, hard look at how it impacts the next generation. Because what we're looking at, and we look back, and we trusted the men and women of 2001, two and three, and for those men and women who were elected in the legislature, to represent the wants and wishes across Kansas, of all of our citizens, we trusted them, we negotiate it with good faith, you do this, you're going to do that you'll share this great, it just never happened.
There's always a lot more enthusiasm for supporting big business, and there is for supporting individuals, this seems. And this is reflected in some of the tax proposals that that we're seeing that you guys are going to be competing with a flat tax idea. Maybe even lowering the sales tax. Some of the other ideas that are out there, also competing with people who want their share of this this revenue to to spend on some, you know, under underserved area of government's special education, or foster care or lowering the the unfunded liability in the pension system. How do you compete with with all those other interests? Bruce Make Your Pitch?
Well, my pitch Sherman, and I appreciate you bringing this up and kind of framing it the way you are is because when you start talking about the different special interest groups that that are all out there saying, hey, we need help to which, like Rob said, great organizations very worthy. Le VTR funding actually has the potential to impact every one of them Euro unilaterally across the board, businesses, homeowners, anybody that owns real property, you know, in the state would receive a benefit from lowering that property tax. So anybody that's paying a property tax bill, being a commercial business, being a private homeowner, would be seeing a reduction in that amount of money that is that they owe to the to the local governments. So I think that's probably where you started looking at this school. Why are they not funding this? This is when people talk about, hey, I want property tax relief. This is it. And it's already on the books and it's already been proven to work and be effective.
Robert, I mentioned that you're having conversations with lawmakers about this and trying to get them on board. What how are they reacting to it or what are you hearing from them?
We just need to lower our taxes. The response that we get from our local elected officials is your property taxes too high you need to find a way to cut it. Well, the bottom line for us in Miami County we're the first county south of Johnson County Wyandotte. County, Kansas City, Missouri Leavenworth County, one of the the economic engines of the state of Kansas. If you go to work in John's County for law enforcement, law enforcement, in some cases, they have eight to $10,000 a year more in in wages than our county can afford. So we had zero option in this calendar year budget was to decide are we going to have a law enforcement in Miami County Sheriff's Department. We are we were at that time over 20 deputy short. So with a full knowledge of our state legislators can They read our papers, they get all our documents, they get all of our agendas. We raise those those wages to that class of people by $2.50 an hour so we can be at the base pay of what our competition is just five miles northwest. And that has helped us gain five people. We're still 14 people short as of Wednesday. Those are dispatchers. Those are men and women who service or sit in your jail and take care of inmates. Those are those are people who walk in their car and patrol our city or our county area. And What choice does counties have the wage, the wage pressure that's put on local jurisdictions is right now tremendous. The county each of these functions that the county is required to put on, there is not one of them that we put on that has anything to do with social ills. People go, well, you're providing too much social services. It's a county appraiser. That's not social services. It's a County Sheriff's Department. When you call 911. What do you expect? You expect them to show up and provide? What's that level service police fire, or ambulance or whatever. Each of these individuals can gain a better wage just driving down the street to the industry. We're eight miles from the intermodal of or Johns County. There's over 5000 open jobs. And most of them start between 15 and and $25 in there. Now, how do I compete with that? So when you think about competing competing issues, under the the state law, I am required to provide the services. But I got to help people. And I think it's 92% of our tax increase went to wages or benefits. And why benefits were because health insurance goes up 20%. And I imagine it has for anybody that has health insurance. The capers contribution for this date went up again this year. Do you know the state of Kansas, when their responsibility to fund capers for school districts? Ask how many years they chose not to do it. Why? Because they're under a tax crunch. They didn't fund it. They didn't fund it. They didn't fund it. I mean, it went on for 1718 years. Then they chose to combine capers with all the other entities state school, City County, they pulled them all together, not kvnf, but the others. And then they changed the rate. And now counties got to pay more wide and make up for one done. Did you know that K p and f the contribution for counties is like 23% of your wages on Kansas police fire and ambulance service K PNF. Think about that. So if I hire you for $1, I got to add a quarter to it just to pay the the retirement not to mention all the other functions.
So when you lay this out for legislators, they say, Gosh, Rob, you're you're right about everything. Of course I'm gonna vote for this. How do they how do they respond? I mean, is it still difficult to get them on board, tighten your belt until they sell you tighten your belt? So purse, I know there are legislators who are on board with this or others who for philosophical reasons, maybe are very opposed to this funding this program. I mentioned that the other challenge you have though, are the legislators who say, I agree with you. But leadership says it's a non starter. I've got these special interest groups out there saying if I don't get with the program, I'm not going to get to be a legislator anymore. How do you get through to those legislators?
That's a great question. And that's what we're trying to do with our outreach campaign chairman. When the House Minority Leader, this last legislative session proposed an amendment on the floor during the debate of the 2024 budget. He proposed an amendment to fully fund la VTR for the first time in 20 years, and he actually received 83 votes on the floor in favor of that. So that's, you know, Republican, Democrat. That's rural. That's urban. That's everybody. It's a mix of Cosmopolitan mix.
This is a bill that also included the flat tax, and there's sort of to get it into conference committee, I think, yes,
ultimately, yes. But as the as the amendment made its way through, it was one of the first things to get axed during the conference committee, because leadership doesn't have an appetite for this. And so to answer your kind of to go back to your question, I think a lot of the legislators are new enough that they don't even know what this is. And so our goal is to raise an awareness through the educational materials that we have put together. There's a whole host of stuff on our website that's open and free as far as what that website is, people can So the website is So Kansas counties, which is all one word, Kansas counties.org. So if you google search KC, Kansas Association of Counties will pop up. And then there is a button there called legislative and then there's a toolbox and Le VTR toolbox that has videos, it's got frequently asked questions. It's got actually it even has, we've put on there a an Excel spreadsheet that calculates how much money both in dollars and in mils, your county would be owed, if the legislature did fund LGBT or funding fully. So we're trying to raise awareness with not only legislators but also citizens. So that they start asking those questions and saying, wait a minute, why am I paying this tax twice? How come I have to go to the store and pay a sales tax, but then also, I get my property tax bill that Rob sends to me and I have to pay that money again. So we're trying to get an awareness raise because most people don't even know what la VTR is. And so hopefully, by the end of this year, we've reached out to enough people and enough people have heard podcasts and news reports and, and TV reports that they say, Hey, this is something that we need to know more about and advocate for.
The topic of leadership resisting this, the House Speaker Dan Hawkins, a Republican from Wichita. He said recently that he's opposed to this because the ad valorem program, in his words failed miserably, and he referred to it as a great slush fund for counties. Thoughts on that?
Rob will talk about an issue the state of Kansas, when counties or cities and I'll particularly say counties, when we set our budget, a form that I brought for you today, the state of Kansas requires the county to fill this form out how much taxes What's your property valuation, all this? So I'll just be brief. It says, What's the total assessed valuation? Okay, $673 million? What's the revenue? What's the revenue neutral rate? So the County Clerk calculates that this is what rate would be revenue neutral. And then from the treasurer, these are elected officials who have to tell the state this is how much motor vehicle tax, recreation task, vehicle tax all of these different funds that come in. Right, the bottom of the list is local ad valorem tax reduction. How much money did the state send you? Well, we didn't get any. But it's going to it's going to account for it, in addition to that city county Revenue Fund. Now once I put in that money, I whatever I got any, it reduces the amount of taxes needed and necessary to operate your county budget. It's all done for you. The state accounts for it, it tells you upfront, you receive $100,000, you're going to ask for 100,000 less in property taxes, period. Unless you don't know how that becomes a slush fund. That becomes an accountability, Your Holiness, account accountable already. You said we're giving it to you, but we're going to hold you accountable. Mr. Hawkins or the other members of the legislature? How do we rebuild the trust that's needed for us to function and stay set at the same table together, negotiate, reasonably negotiate how we solve our problems? without throwing Barb's at the other elected official? I have no disrespect, and neither do we, with other elected officials. They they ran they sworn in they sworn to uphold the laws of the state of Kansas. So did I. And this law says, You shall fund this at these rates. And you shall use sales tax money to appropriate it. And you shall send it to the county or the city under the circumstances. And when you do, that state budget office will hold the county accountable for reducing the taxes needed to operate your local jurisdiction. That's called I trust you right, and what we're going to hold you accountable. I think the UFC argument is unfortunate.
I think the argument about the slush fund is that if you know you're gonna get this money from the state, then you would have an incentive to go ahead and raise taxes somewhere else. Because it's going to be offset.
Isn't that disappointing? When you think about the relationships that's necessary to operate under this, the each of these jurisdictions elect their own local men and women to operate or to run their government. When as a county commissioner in a city council, you usually have an administrative person, a professional that comes to you and said, Here's, here's what we believe needs to be appropriated in order to run this department. You work with other elected officials. This is by the time you've put all that together. You're not thinking about okay, how am I going to get some more No money from local ad valorem tax. And I know by this time I just know I need this much money to operate sheriff's department or this much money. You put it all together. That's the number. Now it was you go through this because we've gone through it from the referred march through the end of August, weekly talking about different budgets, which roads do we pay for? We don't know which, how can we possibly find the kind of money to raise wages? So we keep people we don't lose them? How can we how can we do this cheaper? How can we more effectively do this? There's there might be some elected officials out there that saying, Just wait, I've got this money coming. I'm gonna count on it. But I've never heard that. Doing this since 1988. I've never heard somebody say, got some money coming in baby. It's a slush fund. I just never had heard.
That's a local control shooter. If the people in your county thought that you were spending their money frivolously they would vote for somebody else.
Not only that, but they'll show up at your meetings and point their finger at you and tell you, they mix. They do not worry about the words they use at every Wednesday at one o'clock is open mic night for the county, and counties across cities across Kansas has that. You know, we recently have a former state legislator, who is now a county commissioner. He's my colleague, we're room buddies, right? And he's for the first time in his career, he is sitting in a room where 40 of his neighbors show up and say, I like I don't like you need you better. And they're not sitting across the room in some committee where you can leave it's it's face to face conversation, it's a day to day conversation, the emails, the phone calls the the opportunities to really hear what my neighbor wants, right? Is there every day? It's not third, 90 days in the statehouse. And I can go home? Because I'm probably frustrating you I'm just telling you, that's the life of a county commissioner, a city council person or mayor, how do I how do I hold on to people so I can provide this service? How do I pay them enough, so they don't go over here to somewhere else? There's no I track them
a backdrop here, which is the other property tax laws that the state has has passed in recent years, there was a tax lid for a while. And now there's this revenue neutral kind of system that they have in place. So not only are they withholding money from you, they're also telling you you can't raise money effectively at times.
Without a doubt that is exactly what is we feel like is what's going on and, and it's that old adage of we know how to do your job better than you know how to do your job for all the reasons that Rob was talking about. You know, I guarantee you there's probably not too many days when you're out and about in the community that somebody doesn't recognize who you are and talk to you about what's going on lunch or dinner. And I daresay state leaders probably don't get quite that much attention. Just because they just like Rob said they're they're not in the communities that they serve. They're represented by the communities are elected from the communities that they serve, but they don't necessarily live in every community that they represent. Sorry. That's
Sherman, I have a question for you, or anybody wants to answer of the services provided in this state who provides the majority of services for citizens?
This is where they say All politics is local on your local officials are going to have a bigger impact than the White House or the governor or Ludus. Precisely.
So why Pray tell? Do you not have 165 men and women in the legislature going? How do we help the locals be more successful? How do we do that? Why? Because if we're more successful, then that generates more businesses, more people who want to live here, more revenue and for the state your you become satisfied in your performance as a state as a local government. I mean, it seems like a simple way to go, how do we work together to solve these simple problems and not make it politically motivated? I'm not up for election. So I'm not up here trying to gain votes, I don't care. I just want our problems. I want reasonable people to come to a table and provide reasonable solutions that will help us function as a county or a city or school district, or whatever, because most of these men and women are your neighbors. Most of them don't have a political ambition. That's one know how to help get the road paved. They've they're mad because the ambulance didn't show up quick enough. Or they want to make sure that we have dog catchers because the dogs have been chewing up my garden. I mean, these are everyday issues and citizens and they're mad because the taxes are high. They think it ought to be cheaper. They're right. They shouldn't be but I don't make the laws, counties don't make it. cities don't make it. The legislature does. Go back and look at what you've done and go, Well, maybe we should rethink this. When the Brownback budget what might have been an incredibly great idea for the season? Because you had too much, he thought, well, we got all this extra revenue less than he should have stopped right there. And just like right now, Kansas has 3 billion in excess money, right? Republicans have super majority in both houses. Last session, they could have simply authorized to refund that money to Kansas, you can, you can said hey, we're gonna give this money back. If you're not gonna give it back through property tax relief, write them a check, send them to their home, they'll figure out how to spend it themselves.
This is a that's a that's a governor actually put out she said, Let's just take 500 million and Senate right back.
Why? Why is it all of a sudden, because you have a person in that party suggested it's a horrible idea why I don't, I don't get that. If my colleagues sitting at the other end of the room has a better idea than I do. Hey, let's embrace it. Let's figure out we can work together. That's America, folks. That's who we are. We're blended people. We want things to be done for us. And we want it done without the bickering and the hollering and the complaining, oh, Bruce, your sermon, you should stop it. Let's figure it out together. Nobody take blame or nobody take credit, just fix it, share the money. It's our money, give it back. And I was disappointed when I pulled this bill up to find out that our legislature wrote in this bill, these two the two bills we're talking about. So there will be no monies appropriated for this in the budget year of 2223. And 24. Why would you do that? That means they know the law exists, they know they have a requirement. So let's fix it. So we don't have to do it. Not till 2025. So our efforts, as as good as they may or may not be, we also have to get people to change the law again to fund it. But if you're not going to fund it, give the people back their money. You shouldn't be appropriate, sticking it in the bank somewhere.
Bruce, you have closing thoughts?
I can't top that, surely. But I can't say thank you so much, again, for allowing us to be here because this is an educational outreach. And this is going to be all of us working together, as Rob was saying, to figure out if it's not la VTR, maybe it is something else. But I think everybody can agree that we are lopsided, and where our tax dollars are coming from and where our tax dollars are going to, and what they're being used to fund. And I think the time is now to have those conversations to once again, look at property taxes in a meaningful way to lower the bills or give the money back or do whatever it is to make it a little bit more affordable for for Kansas citizens to live in their homes.
Thank you both for joining us today. I think this has been both informative and more
common Sherman. Yeah, go ahead. I want to call upon the leaders of the legislature, the leadership to contact Bruce, because there's leadership in place at the Kansas Association of Counties who would be glad to sit down and work across the table. There is a leadership. I'm a county commissioner, I'm not in the leadership for the Kansas Association of Counties. But there are great men and women who would love to sit down with this group. And one more, the League of Municipalities has an incredible group of leaders across the state and cities, who would absolutely enjoy sitting down in a summit with the legislators before you go into your session and talk across the table about how do we solve this problem. And let's leave the name calling and the politics outside the doors and figure out if we can come together because the Bible tell us is that we all come together, right? And read it oh my mind. Kind of put the ideas on the table. I bet we can come up with something that Kansas would be proud of. But can't do it by calling names and making accusations and creating static. That's not who we are. We're all leaders in our own rights. And I grew up I have great respect for the 165 and the buildings down the street. I really do. And the people of Kansas chose the governor. That's the people's choice. So sit in the same room and figure it out because Bruce would be glad to answer that call. And he would pull that together in a heartbeat.
I think we have to leave it there. Thank you so much.
