eNewsletter July 20, 2011

From City Council . . . to the Business Council

Prepared by Rich Groves, Executive Director, North Kansas City Business Council

---

Recent topics from City Hall as of July 20, 2011 . . .

Only two topics are covered in this e-Newsletter, but they are important for all residents and businesses in North Kansas City.

City Administrator’s View of North Kansas City Finances

An excellent description of North Kansas City’s current financial situation was provided at a special meeting of the City Council on July 12 in a presentation by City Administrator Matt Shatto and City Finance Manager Shirley Land. The entire presentation is available on www.nkc.org as part of the minutes of that meeting. Following is a brief summarization of key points that were covered.

Sources of income for the City are highly regulated and allow very little control by the City in the short-term. Like most other municipalities that are highly dependent on sales taxes, property taxes and the general state of the economy, income for the City has been declining. The largest source of income is from Harrah’s. Such a dependency is hazardous because there may come a day when Harrah’s North Kansas City’s parent company will decide that the operation in North Kansas City is no longer profitable enough. The challenges for North Kansas City staff and City Council are to find ways to have a balanced budget and to make sure there is an adequate reserve. An amount equivalent to 3 months operating expenses is considered a good level for the reserve.

The City is facing a $2.9 million deficit challenge. Staff initiatives as well as initiatives recommended by staff and approved by the City Council promise to reduce that deficit by almost half. These initiatives include a wage freeze, a hiring freeze, early retirement options and cost-cutting where ever possible in non-payroll expenses. As in most operations, payroll and payroll-related costs represent the largest portion of expenses.

City Staff and the City Council seem to be in agreement on the need to address this challenge and have committed to balance the budget within 12 to 24 months.

The presentation also addressed the City’s commitment to pursue re-development projects such as acquisition of land on the east side of I-35 and south of Armour Rd for a future mixed-use development. Re-development is considered essential to re-build the City’s tax base and to create a situation that developers will find attractive. Unlike some cities, North Kansas City is land-locked (as well as “river-locked”) and cannot expand into new territory. Ways need to be found to encourage re- use of existing land and buildings that are not currently productive in order to bring new businesses and residents into North Kansas City.

Resumption of Collecting Personal Property Tax

The City Council, on July 19, by a vote of 6 to 2, approved the resumption of collecting the General Fund portion of personal property taxes from businesses and residences at a rate not to exceed that which was in effect in 1980. These taxes have NOT been collected since 1995 when the City Council at that time opted to cease collecting these taxes for what was originally to be a “one year tax holiday” because of the influx of money from Harrah’s and other income sources.

This decision by the City Council is one of many steps considered necessary to eliminate the deficit situation described in the topic above. It is expected to yield approximately $301 thousand in additional revenue for 2011. The 15 year “holiday” from paying this portion of personal property taxes was a nice benefit of living and having a business in North Kansas City, but was considered no longer affordable because of the reduction in income sources.

There are three other components of personal property taxes which have not had tax relief: Parks, Library and Pension. The General Fund portion comprises approximately 42% of the total personal property tax bill. As an example of the impact of this action by the City Council, personal property with a depreciated market value of $10,000 will have personal property taxes of $31.14, of which $13.15 is for the General Fund portion and the remaining $17.99 is for the other three components combined

---

What is this?

This is the 10th in a series of e-newsletters that will bring to you, twice a month, any relevant news for the business community from the City Council meetings that I attend each week, as well as other happenings at City Hall.

Why do we do it?

This communication is intended to be an additional Benefit of Membership for members of the North Kansas City Business Council. If you know of other businesses who are NOT members – but who probably would benefit by being a member – please let them know this is one thing they are missing.

If you have good "leads" for prospective new members, please let me know. Call 472-7700 or e-mail richard@nkcbusinesscouncil.com.