Memorandum

City of Lawrence

City Manager’s Office

 

To:

Dave Corliss

Interim City Manager

From:

Debbie Van Saun

Asst. City Manager

cc:

Casey Liebst, Budget Manager

Ed Mullins, Finance Director

Date:

June 28, 2006

Re:

Sales Tax Revenues

 

The General Fund relies on revenues from a variety of sources to provide for the operations of the twenty-six departments/divisions that are budgeted from this fund.  The 2007 recommended budget for the General Fund anticipates 41% of the revenues to come from two sources of sales tax: city-wide and the City’s share of a County-wide sales tax.  This compares with the 23% of revenue anticipated to come from ad valorem property taxes in 2007. 

 

City-wide Sales Tax

A city retailer’s sales tax of 0.5% was instituted July 1, 1971, followed by an additional 0.5% being approved and going into effect October 1, 1990.  All of this 1% City-wide sales tax is receipted revenue for the General Fund.  The County-wide sales tax of 1% was approved in November, 1994 and became effective in 1995.  The City of Lawrence receives a share of this County-wide sales tax, and that share is also receipted into the General Fund.

 

Anticipated revenue from the local sales tax is budgeted at $13,800,000 for 2007.  This revenue, along with the other revenue sources for the General Fund (property taxes, franchise fees, permits, fines and forfeits, etc.) provides a funding source for the operating budgets of the various General Fund departments.  The attached graph illustrates the ongoing upward swing in this revenue source for the past twenty years.  Note the significant increase in 1991 (when the additional 0.5% became effective) and the static level (lack of growth) in 2002.

 

City’s Share of County-wide Sales Tax

A portion of the City’s share of the County-wide sales tax is transferred to the Sales Tax Reserve Fund, primarily for funding parks/rec and health facility improvements as well as payment of debt service on sales tax bonds.   In 2007, the sales tax reserve fund will provide $867,000 in funding for street maintenance.

 

The remaining portion of this sales tax revenue will be used in 2007 to provide revenue for the following:

·       Property tax relief

·       Recreation Fund operating costs

·       City’s share (50%) of Lawrence/Douglas County Health Department facility operating costs

·       Estimated revenue loss from the motor vehicle tax due to previously noted property tax relief (the motor vehicle tax is calculated based on the property tax mill levy)

·       A $1,000,000 transfer (budgeted) to the Capital Improvement Reserve Fund in order to meet the statutory requirements for a fund balance not to exceed 5% of budgeted expenditures.  It is probably that this transfer will not be made in 2007 if our revenue estimates are accurate.  If the transfer is not made, the revenue (City’s share of County-wide sales tax) remains in the General Fund as part of the fund balance going into fiscal 2008.  In past budgets, we under-estimated sales tax revenue in order to meet the statutory requirements for the budgeted fund balance.